H1B Visa Applications Fall Sharply - Chart Of The Day 5 August 2017 - Equitymaster

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H1B Visa Applications Fall Sharply
Aug 5, 2017

IT stocks have been under the weather for a while. Donald Trump's anti-immigration rhetoric has had a lot to do with it.

Valuations of IT stocks have been the among cheapest over the last ten years. Growth in revenues and profits has fallen over the last three years. But Trump had no role in that. The global technological disruption, i.e. the digital revolution, was the main cause.

Indian IT firms were slow to react. But now things are completely different. All these firms have fully shifted focus to these new digital technologies. Revenues from such services are growing more than 30% annually!

All the talk of mass layoffs in the sector, even if some news reports are exaggerated, are a direct result of this change. These new technologies work on the principle of 'getting more done with less'. In other words, not as many man hours are needed for the same amount of work as before.

This means, on average, each project needs fewer workers. Hence, we are seeing slower hiring than ever before. In fact, net hiring for the sector may have turned negative.

This is true for 'on-site' employees as well. IT firms send their employees to the US on temporary H1B visas. Now, the long-term trend for sending employees abroad was down in any case. Trump has expedited the process.

The sharp fall in the H1B visas applications in 2017 was not surprising. We believe, the trend has turned down. This is good news for the profitability of IT firms. After all, salaries eat up about half of the revenues.

We are keeping a hawk eye on this trend. We believe readers should too.

Data Source: US Citizenship and Immigration services

This Chart Of The Day was published in The 5 Minute WrapUp - Ankit Shah's First Five Insider Recommendations

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