Tightening H-1B regulations does not make 'economic sense'; here's why

Protectionism in the US visa system

The U.S. Citizenship and Immigration Services on Monday will start accepting petitions for the fiscal year 2018 to allow companies in the United States to temporarily employ skilled foreign workers, amid an ongoing debate among lawmakers to either tighten or reform existing regulations governing this process.

But clamping down on the so-called H-1B program and tightening U.S. companies' access to a skilled labor pool may not be beneficial, according to James Crabtree, a visiting senior research fellow at the Lee Kuan Yew School of Public Policy in Singapore.

"It doesn't make a lot of economic sense to deny companies the ability to do this," he told CNBC's "Squawk Box" on Monday.

The program caters to specialty fields such as science, engineering and information technology, where there tend to be a shortage of skilled domestic workers. As a result companies tend to look globally in order to bring in talented employees into their ranks.

The U.S. government awards 65,000 regular H-1B visas every year through a lottery system, and another 20,000 visa to those holding a U.S. master's degree or higher qualifications.

An Infosys employee sports a t-shirt featuring a U.S. flag as he buys coupons for lunch while others wait for their turn at company’s headquarters in Bangalore, India.
Aijaz Rahi | AP

A sizable number of these visas tend to go to the technology sector, where many tech companies hire Indian nationals in a range of technical roles either directly or through outsourcing firms such as Infosys or Tata Consultancy Services. Critics of the H-1B system have said that the system is set up for some companies to exploit and hire low-wage foreign workers in place of Americans.

"Domestic workers (in the U.S.) think what the Indian companies, in particular, are doing is what's called body shopping — they're taking in Indian workers and giving them jobs that should be given to American workers," Crabtree said.

He explained that the way the H-1B visa system is being used has changed over time. It was originally designed to attract foreigners who could set up big, innovative companies. "(The program) has morphed into a system where (it is bringing in) the people who are installing software packages," said Crabtree.

Given President Donald Trump has adopted an 'America First' stance, Crabtree expects changes to the H-1B program are now inevitable, but he cautioned anything drastic could have a knock-on effect on sectors crucial for the growth of the U.S. economy. The U.S. has already announced a temporary suspension of the expedited processing service for H-1B petitions for up to six months.

"What they are doing today is just a tiny tweak that isn't really going to affect anyone very much. The risk is that coming down the tracks are much, much bigger changes to the system which will be much more damaging," he said.

While tighter H-1B regulations could affect the U.S. adversely through skill shortages, Asia, in particular, could stand to benefit from an influx of skilled individuals either returning or emigrating to places like Singapore, China and India.