It's about to become a lot more expensive for banks to hire technologists
Donald Trump has already given financial services organisations a big headache when it comes to hiring tech professionals.
The House of Representatives has proposed to more than double the minimum wage for H-1B visa-holders from $60k to $130k. Banks, hedge funds, buy-side and outsourcing firms servicing the finance sector employ legions of foreign technology works on H1-B visas, and pay the vast majority considerably less than $130k. Our own database suggests that 33% of H1-B visas in the financial sector are held by people working in technology.
Last March, Trump described H1-B visas as "very, very bad for workers" and said that "we should end it."
Bob Pozen, a senior lecturer at MIT Sloan School of Management and the former chairman of MFS Investment Management, said that asset managers, banks and transfer agencies were all concerned about big changes to H1-B visas.
“If the H-1B visa program were substantially limited by another executive order, then that could very well jeopardize the ability of these custodians and transfer agencies to continue providing asset managers and their clients with services of the highest quality,” he said.
The original intention of the H-1B visa program was to allow American companies to hire specialized talent outside the U.S. to plug skills gaps, typically at a premium level of compensation. However, a report commissioned by Congress found that H-1B workers “received lower wages, less senior job titles, smaller signing bonuses and smaller pay and compensation increases than would be typical for the work they actually did.”
Not only are financial services organisations reliant on H1-B visas for a large proportion of their technology workforce, but Indian software companies are using them to augment their teams in the U.S., says Shawn Banerji, managing director and the head of the digital and global technology officers practice at Russell Reynolds.
"But the Indian companies were not paying the workers at the same pay grade that companies were typically paying their workers in the U.S., a $70k salary for H-1B holders versus an American getting paying $90k or $100k," he says.
“What’s happened, as the larger Wall Street firms have become increasingly reliant on service providers, if you look at the size, scope and scale of a lot of in-house IT resources in Wall Street firms, they’ve shrunk dramatically due to the increased prominence of service providers," Banerji says.
Wall Street firms typically reserve H-1B sponsorship for software developers and roles that are more highly compensated compared to service providers. If the latter fail to offer the same types of cost advantage as previously, perhaps more banks and other financial services firms will start hiring more American IT workers, as well as H-1B visa-holders, in-house, despite having to pay six-figure salaries.
There are other possibilities as well.
“Financial service providers might start doing more work offshore and leverage the fact that the technology is in place to host more work from abroad,” Banerji said.
There's an upside, however.
If the H-1B min wage is raised, that would eliminate the quota being used up as cheap labor, freeing up many slots for use by employers needing top skilled workers that they have trouble recruiting in the U.S., according to Kim Berry, the president of the Programmers Guild, which advocates for raising the H-1B minimum wage to $100k.
“That also helps new U.S. graduates and re-entry workers fill the less skill-intensive STEM jobs, and provides a supply chain of American STEM workers moving up the skill ladder,” Berry said. “While [H-1B visa-holders are] disproportionately Indian computer programmers doing contract work – typically winning bids based only on the lowest bid rather than skill, and many projects failing – the use is broad."
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