An employment-based immigration visa program for highly skilled international workers, historically in high demand, has seen a statistical decline. This is the conclusion of a recent report by Bloomberg. The report found that in the fiscal year ending in September, the number of initial H-1B visa applications submitted by U.S. employers decreased compared to the previous year, with notable declines in some occupational categories.

For example, Bloomberg data shows that H-1B applications for engineering and mathematics positions fell by 12.6% year-over-year. 2021 marked the second consecutive year of decline for this metric.

This trend may surprise employers who have long followed immigration policy, but sources interviewed by HR Dive believe the decline may be more related to administrative and logistical challenges stemming from the COVID-19 pandemic than to a weakening demand for talent in these roles.

What is behind the decline?

For years, employer H-1B visa applications have exceeded the annual quota cap set by the U.S. Department of Homeland Security. Scott Bettridge, chair of the immigration practice at Cozen O'Connor, noted that even with the decrease in applications, employers still use up the entire quota, which in itself indicates that demand remains strong.

Dick Burke, CEO of immigration services provider Envoy Global, also acknowledged the importance of the H-1B visa to employer hiring goals. "So many employers rely on the tech sector, and the STEM talent shortage is still pervasive," he said in an interview.

Burke instead pointed to the federal government's insufficient immigration processing capacity, which he attributes partly to the pandemic and partly to "the turbulence of the previous administration."

Jorge Lopez, a shareholder at Littler Mendelson and chair of its global mobility and immigration practice group, believes that the U.S. education system's failure to produce enough STEM graduates is also part of the problem.

Bettridge said that overall, the pandemic has affected international travel and relocation plans for employers across all industries. He noted that as COVID-19 spread, U.S. embassies and consulates in some cases closed for over a year. The State Department also temporarily suspended routine visa services at embassies and consulates.

Meanwhile, processing times vary by country and consulate, Bettridge added. Embassies and consulates in countries like Australia may have resumed services, but those in countries like Colombia may not schedule visa interviews until next year or have indefinitely suspended the process.

The expansion of remote work capabilities may have somewhat dampened visa demand, but sources disagree on this point. Bettridge said that companies with sufficient international presence and coverage might consider setting up offices overseas and having highly skilled employees work there.

Lopez said, "Some of my clients may have remote work arrangements outside the U.S., but there's a complication there—the company may not have a business entity in that country." He noted that if employers are concerned about being subject to other countries' labor laws, setting up remote positions overseas may not be cost-effective.

Although Envoy considers remote work factors when analyzing H-1B trends, Burke said the company generally does not view it as a significant factor. "What we've seen in practice and in surveys is that the shift to remote work hasn't fully extended to the point of 'working remotely from one's home country,'" he added. Instead, U.S. employers surveyed by Envoy emphasized that international employees, including H-1B visa holders, need to be in the same time zone as team members and maintain geographic proximity.

Strategies for navigating the slowdown

Bettridge said that delays in the submission and receipt of responses for H-1B visa applications have created significant difficulties for employers who rely on the program. As a result, some employers are adopting different strategies to ensure their international talent pipeline remains open.

"Some of these companies have more urgent needs," Bettridge continued. He mentioned seeing clients open offices in other countries, such as Mexico, to place highly skilled international employees there while awaiting responses to H-1B applications.

Lopez also said that some of his clients have considered similar approaches, especially for STEM employees awaiting responses to visa applications.

Bettridge believes this strategy reflects not only the logistical challenges of the pandemic but also the fact that the employment landscape is no longer as U.S.-centric as it once was. However, he added that he does not think employers will abandon the H-1B visa for this strategy in the long term. "It depends on the nature of the business and its clients," he said.

On one hand, training is a barrier to implementing this strategy. Bettridge cited the financial services industry as an example, where international employees may need to undergo intensive training programs lasting up to 18 months.

"A lot of this training can't be done overseas," he said. "It's not just 'we want you here.'"

The future of the H-1B program

Despite the fluctuations, sources largely said they expect demand for H-1B visas to persist for some time.

"I think the pandemic has permanently changed the competitive landscape in many ways, but the H-1B program is still active and will continue to be," Bettridge said. "I don't see it going away."

Burke said that given domestic talent shortages in certain fields, demand for STEM-related H-1B applications will be particularly strong. An August 2021 report by the nonprofit National Foundation for American Policy found that in professional fields, foreign nationals make up the majority of full-time graduate students, including 82% of petroleum engineering students, 74% of electrical engineering students, and 72% of computer and information science students.

"As we learn to live with COVID, if the current administration can bring everything back to normal levels, we very much expect this fluctuation in H-1B applications to disappear and return to growth," Burke said.

However, due to the emergence of the Omicron variant, the situation may be more complicated in the short term. Burke said he believes it is too early to determine the specific impact of the variant on the H-1B visa program, but he did note that the U.S. and other countries have partially responded by implementing some travel restrictions.

Lopez believes any resulting surge in cases could bring additional slowdowns, but it is currently uncertain. "My experience is that when there have been previous surges, you see immigration policy tighten slightly," he said. "Read the newspapers, and you'll see where policy might be headed."

Beyond the pandemic, the change in presidential administration may also benefit employers, as there has been a reduction in Requests for Evidence (RFEs) for certain H-1B occupations—a requirement that increased during the Trump administration, Burke said.

"We're seeing RFE issuance returning to historical levels, and employers are responding well to that," he said. "We're also seeing a decrease in denial rates under the current administration."

The Biden administration has also rolled back Trump-era restrictions on the program, including a temporary ban on visa holders. Earlier this week, the Department of Homeland Security announced a final rule withdrawing another Trump administration regulatory effort aimed at modifying the agency's process for screening cap-subject H-1B applications.

"The current administration is trying to return the regulatory environment to its previous state: more predictable, more stable, fewer new rules, fewer evidence requirements," Burke said. "Businesses like certainty, and the current administration is indeed moving toward a more predictable immigration regulatory environment."