The presidential proclamation instituting a $100,000 fee for new H1B visa petitions represents a structural break in U.S. high-skilled immigration policy. This analysis concludes that the policy will effectively dismantle the H1B program in its current form, triggering significant negative consequences for U.S. economic growth, innovation, and global competitiveness.
Our bottom-up forecast projects a collapse in new H1B applications by over 90%, leading to a cumulative shortfall of approximately 154,000 high-skilled foreign workers over the next three fiscal years. U.S. corporations will rationally adopt a bifurcated strategy in response. Technology and finance majors will reserve the prohibitively expensive visa for a small cadre of indispensable "superstar" talent, while the business model for IT services firms, which relies on a high volume of onshore placements, will be rendered economically unviable. The dominant corporate response will be an aggressive and immediate acceleration of offshoring knowledge work.
The macroeconomic shockwave will be substantial. The direct and multiplier effects of this talent deficit we estimated to result in a cumulative GDP loss exceeding $100 billion over three years. This includes the loss of not only the high-skilled H1B positions but also an additional 385,000 local service jobs that depend on them. The corresponding reduction in federal, state, and local tax revenues is projected to be in excess of $13.5 billion.
Strategically, the policy will inadvertently trigger a major realignment of global talent supply chains. It will strengthen the technology and R&D hubs in India, Canada, and Eastern Europe at the direct expense of the United States. This will lead to a long-term erosion of the U.S. technology ecosystem's depth, dynamism, and global leadership, a far more damaging outcome than the immediate economic losses.
1. The new h1b paradigm is a fundamental recalculation of talent costs
1.1. Analyzing the shock of a 20-fold increase in the cost of entry
The H1B visa program has long served as a primary conduit for U.S. firms to access global high-skilled talent. Historically, the cost to an employer to sponsor a worker has been a manageable, albeit complex, business expense. Including government filing fees, anti-fraud fees, and associated legal costs, the total outlay typically ranges from $2,000 to $5,000, with some estimates reaching as high as $10,000 for expedited or complex cases. This cost structure positioned the visa fee as a marginal factor in the overall compensation and hiring calculus for a skilled professional.
The new policy introduces a shock of unprecedented magnitude. The proclamation mandates a $100,000 fee for each new H1B petition, which is nonrefundable and due at the time of application. This represents an increase of more than 2,100% over the previous high-end cost estimate of $4,500. Initial reports suggesting this would be an annual fee created significant market panic, as such a recurring cost would have been untenable even for the largest corporations. Subsequent clarification from the White House specified that the fee is a one-time charge applicable only to new petitions, exempting renewals and existing visa holders. This clarification is critical; it contains the immediate financial liability for the current H1B workforce of approximately 583,420 individuals, but it does not alter the fundamental nature of the new barrier to entry for future talent.
The $100,000 fee transcends a simple cost increase; it constitutes a major capital expenditure. For a worker earning the median H1B salary of approximately $118,000 or the average salary of $167,533, this fee represents between 60% and 85% of their first-year gross salary. The hiring decision is thus transformed from a standard talent acquisition process into a high-risk investment decision, with the full capital outlay at risk given the nonrefundable nature of the fee.
1.2. Deconstructing the policy's stated rationale vs. practical consequences
The administration's stated rationale for this policy is to curb perceived "abuse" of the H1B program, particularly by IT outsourcing firms accused of replacing U.S. workers with lower-paid foreign talent. The explicit goal is to compel companies to "train Americans" and ensure the H1B visa is used only for "very sophisticated," "impressively detailed," and uniquely "valuable people".
However, the policy's design as a blunt, flat fee is misaligned with this objective. It fails to differentiate based on salary, skill level, or industry. A software engineer at an IT services firm earning a prevailing wage of $60,000 faces the same $100,000 barrier as a specialized AI researcher at a major tech firm earning $250,000. This indiscriminate application acts as a universal deterrent, disproportionately impacting roles with salaries closer to the median.
A rational firm evaluates hiring decisions by comparing the marginal revenue product of labor (MRPL) against the marginal cost of labor (MCL). Previously, the MCL for an H1B worker was dominated by salary and benefits. The new MCL for a first-year H1B hire is now approximately Salary + Benefits + $100,000. For a standard software developer—the most common H1B occupation—the MRPL may justify a $130,000 salary but cannot support a first-year cost of $230,000. Consequently, only roles where the talent is so unique and productive that their MRPL is exceptionally high (e.g., exceeding $300,000) will clear this new hurdle. This effectively transforms the H1B program from a broad pipeline for filling systemic skills gaps into a niche "superstar" visa reserved for the top echelon of global talent. While this stabilizes the existing foreign workforce, it creates a demographic cliff, as the current H1B population will gradually attrit without a viable, broad-based replacement mechanism.
2. Rational firm-level responses to a new reality
The imposition of a $100,000 fee will compel U.S. businesses to fundamentally re-evaluate their talent acquisition strategies. The rational response will not be uniform but will diverge based on business model, capital structure, and global operational footprint.
2.1. Segmenting the impact by business model
Technology & Finance Majors (e.g., Amazon, Google, Microsoft, JPMorgan Chase): As the largest individual sponsors of H1B visas, these firms will adopt a highly selective, tiered approach. For indispensable "superstar" talent in mission-critical R&D fields such as artificial intelligence, machine learning, or quantum computing, they will absorb the $100,000 fee as a necessary strategic investment. The Commerce Secretary's assertion that "all the big companies are on board" likely reflects this sentiment for top-tier hires. However, for the vast majority of their traditional H1B roles—such as standard software development, business intelligence, and operations—they will cease using the H1B program. The rational alternative will be to pivot these functions to established global offices, leveraging their existing international infrastructure.
IT Services & Outsourcing Firms (e.g., TCS, Infosys, Cognizant): The business model of these firms, which relies on deploying a high volume of skilled professionals to client sites in the U.S., is fundamentally incompatible with a high-cost visa. The $100,000 fee represents an existential threat to their U.S. onshore staffing model, as it would obliterate the margins on projects staffed by employees often paid near the prevailing wage minimums. Their only rational response will be a near-total cessation of new H1B applications and an immediate, aggressive acceleration of shifting work to their offshore delivery centers in India and other global locations.
Startups and SMEs: These firms rely on H1B visas to access specialized talent that is often scarce or prohibitively expensive in the domestic market. Lacking the deep capital reserves of large corporations, they will be effectively priced out of the international talent market by the large, nonrefundable upfront fee. This will severely stifle their ability to scale, innovate, and compete with larger incumbents, likely leading to a higher failure rate or the relocation of core R&D functions outside the U.S.
Non-Tech Sectors (Healthcare, Higher Education, Manufacturing): These sectors utilize H1B visas to fill critical, non-outsourceable roles such as physicians, university professors, and specialized engineers. These organizations, particularly non-profits and universities (which are often cap-exempt but still face severe budget constraints), will face an acute crisis. They cannot offshore a surgeon's duties or a university researcher's lab work. They will be forced to leave critical positions unfilled for extended periods, reduce services, or lobby for exemptions under the vague "national interest" clause, which offers no predictable relief.
2.2. Evaluating alternatives and strategic options analysis
The Domestic Training Gambit: The policy's stated aim is to incentivize the training of American workers. However, this is not a viable short-term solution. The U.S. faces a persistent and widening skills gap in high-demand technology fields. While accelerated training programs like bootcamps can produce entry-level developers in 16-40 weeks at a cost of up to $20,000, they do not produce the experienced, specialized talent that companies seek via the H1B program. A traditional bachelor's degree requires four years, and for the advanced roles requiring Master's or PhD-level expertise that drive innovation, the domestic pipeline is heavily dependent on international students who themselves rely on programs like the H1B to remain in the U.S. post-graduation. Domestic training is a necessary long-term strategy but cannot fill the immediate, large-scale talent deficit created by the H1B program's collapse.
Pivoting to Alternative Visas:
- L-1 (Intra-company Transferee): This visa will become the primary alternative for large multinational corporations. It allows for the transfer of existing employees who have worked at a foreign office for at least one year and is not subject to an annual cap. Large tech firms will increasingly hire top global talent directly into their Canadian, European, or Indian offices, creating a "farm system." After the mandatory one-year period, the most valuable employees will be transferred to the U.S. via the L-1 visa. This pathway, however, is inaccessible to startups and domestic-only firms, creating a significant competitive disadvantage in the war for global talent.
- O-1 (Extraordinary Ability): This visa is reserved for individuals at the absolute pinnacle of their fields and has an exceptionally high evidentiary bar. While it has no cap and offers flexibility, it is not a scalable solution for the tens of thousands of "skilled" but not "extraordinary" professionals hired annually via H1B. With higher legal costs and stringent requirements, it remains a niche solution for the same "superstar" talent that might still qualify for a high-fee H1B.
3. Forecasting the H1B trajectory and the three-year outlook
The new fee structure will not merely reduce H1B demand; it will cause a fundamental collapse of the application pipeline. Our forecast models this shock and the subsequent stabilization at a drastically lower equilibrium.
3.1. Baseline (year 0 / FY2025) is the final year of the old paradigm
To contextualize the change, we establish a baseline using the most recent available data. In FY2024, there were approximately 759,000 eligible electronic registrations for the H1B lottery. This overwhelming demand was for a statutory annual supply of 85,000 visas (65,000 for the regular cap and 20,000 for the U.S. Master's degree exemption). To meet this target, USCIS selected 110,791 registrants to account for subsequent denials and petitions that are never filed. For our baseline, we assume a steady state of 85,000 new H1B workers entering the U.S. economy annually under the old rules.
3.2. Year 1-3 projections (FY2026-FY2028) and the collapse of the pipeline
- Year 1 (FY2026): The Immediate Shock. We project a 90-95% collapse in applications. IT services firms will virtually cease filings (~98% reduction). Tech and finance majors will curtail applications by ~80%, reserving them for only the most critical roles. SMEs and other sectors will reduce filings by ~95%. This leads to a forecast of approximately 50,000 applications. With applications falling far below the 85,000 cap, the lottery system will become obsolete. Applying a standard denial rate of ~3.5%, we forecast ~48,250 new H1B visas will be issued.
- Year 2 (FY2027): Stabilization at a New Equilibrium. As firms fully implement their alternative strategies (offshoring, L-1 transfers), applications will decline further. We project ~30,000 applications, resulting in approximately ~29,000 visas issued.
- Year 3 (FY2028): The New Steady State. The program will settle into its new role as a niche visa for top-tier talent. We project ~25,000 applications, resulting in approximately ~24,000 visas issued.
3.3. Quantifying the delta and the cumulative talent deficit
The following tables illustrate the dramatic shift in the H1B landscape and quantify the resulting shortfall in high-skilled labor.
Table 1: H1B application & issuance forecast (fy2026-fy2028)
The gap between the baseline and the forecast represents a significant, compounding loss of human capital for the U.S. economy.
Table 2: Cumulative delta of new h1b workers vs. baseline
Over three years, the U.S. economy will be deprived of nearly 154,000 high-skilled workers who would have entered under the previous policy framework.
4. The macroeconomic shockwave and the bottom-up impact assessment
The abrupt halt in the inflow of high-skilled talent will generate significant negative ripple effects throughout the U.S. economy. This impact can be quantified through direct, indirect, and induced effects, as well as a less tangible but critical deficit in innovation.
4.1. Direct economic losses
Lost Compensation: The cumulative shortfall of approximately 154,000 workers over three years translates directly into lost economic activity. Based on an average annual salary for H1B workers of $167,533, this represents a substantial loss in wages that would have been paid, spent, and invested within the U.S. economy.
Lost Tax Revenue: H1B workers are treated as U.S. residents for tax purposes, contributing to federal, state, local, and FICA (Social Security and Medicare) tax bases. For an individual earning the average H1B salary, the federal marginal tax rate is 24%. A conservative blended effective tax rate, including all forms of taxation, is estimated at 30%. The loss of these workers will create a significant hole in public revenues. This bottom-up calculation aligns with top-down estimates that the total H1B population contributes approximately $24 billion in federal/payroll taxes and $11 billion in state/local taxes annually.
4.2. Indirect and induced effects and the negative multiplier
The economic impact of high-skilled jobs extends far beyond their direct compensation. These positions, particularly in the tradable tech sector, have a powerful local multiplier effect. Research indicates that for each additional skilled job in a city's tradable sector, approximately 2.5 additional jobs are created in the local non-tradable service sector (e.g., retail, restaurants, construction, healthcare). While some studies cite even higher multipliers, we utilize this more conservative figure for our analysis. Therefore, the loss of 154,000 high-skilled H1B workers will trigger a corresponding, and much larger, loss of local service jobs that support them and their consumption.
4.3. The innovation deficit is a long-term drag on growth
Perhaps the most damaging long-term consequence is the erosion of the U.S. innovation engine. Immigrants are disproportionately responsible for innovation. While representing approximately 16% of U.S.-based inventors, they are credited with authoring 23-24% of all U.S. patents. Given that H1B workers are heavily concentrated in STEM fields, a sharp reduction in their inflow will directly translate into a lower rate of patent filing, new company formation, and overall productivity growth. This represents a direct threat to the ecosystem of talent density and knowledge spillovers that has cemented U.S. economic leadership for decades.
Table 3: Estimated total economic impact (3-year cumulative)
5. The future of work is an accelerated pivot to global talent hubs
The policy's long-term impact will be a structural reshaping of how U.S. companies access and deploy high-skilled talent, with profound implications for the domestic labor market and the nation's standing as the world's preeminent technology hub.
5.1. The offshoring imperative is the only rational path
Faced with a functionally closed H1B pipeline, an inadequate domestic training capacity for specialized roles, and limited scalable visa alternatives, U.S. firms will rationally choose to move the work to the talent rather than moving the talent to the work. Offshoring will shift from being a cost-saving tactic to a core business continuity imperative. The policy will supercharge existing trends toward global, distributed teams, forcing even companies that previously preferred onshore talent to adopt these models to remain competitive.
5.2. Mapping the talent exodus and the rise of global capability centers (GCCs)
A massive expansion of GCCs by U.S. corporations is the most likely outcome. These centers, particularly in talent-rich regions like India, as well as in Canada (which offers more favorable immigration policies) and Eastern Europe, will evolve rapidly. They will transition from back-office support functions to front-line R&D, product development, and innovation hubs. This pivot is made more seamless by modern remote collaboration tools and a strategic shift in the outsourcing industry towards long-term partnerships over transactional engagements. The policy effectively forces U.S. firms to build their future innovation capacity outside of the U.S.
5.3. The bifurcation of the U.S. tech labor market
The policy assumes a zero-sum game where a job not taken by an H1B worker becomes available for an American. This ignores the reality of a persistent domestic skills gap and the globalized nature of modern business. The result will not be a renaissance of U.S. tech jobs but a "hollowing out" of the U.S. as the central hub for technology execution. The U.S. labor market will bifurcate into a two-tiered system:
- Onshore: A hyper-elite, highly-paid cadre of "superstar" researchers, strategic architects, and executives, composed of native-born talent and the few remaining immigrants on O-1 or high-fee H1B visas.
- Offshore: A vast, globally distributed workforce performing the bulk of the software development, data analysis, and IT operations that currently form the backbone of the U.S. tech industry.
This dynamic removes the broad middle-tier of the U.S. tech talent pool—the skilled engineers who execute most projects and represent the next generation of innovators. By physically dispersing the teams that would otherwise collaborate in U.S. tech hubs, the policy dismantles the very engine of talent density and knowledge spillover that drives innovation. While the three-year GDP impact is significant, the long-term erosion of the U.S.'s position as the world's undisputed innovation leader is a far more profound and potentially irreversible consequence.
6. The impact to U.S. startups
The new $100,000 H1B visa fee will have a disproportionately severe and potentially crippling impact on U.S. startup companies. While large corporations possess the capital and global footprint to partially mitigate the policy's effects, startups lack these buffers. The fee structure effectively erects an insurmountable barrier, cutting off the flow of essential international talent that fuels early-stage innovation and growth.
For a startup, the $100,000 fee is not a simple business expense but a major, high-risk capital expenditure. This single, nonrefundable cost could represent a significant portion of a seed-stage company's entire funding round. Unlike established tech giants that may choose to absorb this cost for indispensable, top-tier talent, startups operate on lean budgets where every dollar is allocated to product development, engineering, and market entry. The prospect of risking such a substantial sum on a visa application, with no guarantee of success, is financially untenable and will deter virtually all early-stage companies from even attempting to sponsor new H1B applicants.
Startups have historically relied on the H1B program to access specialized talent in fields like AI, machine learning, and software engineering—skills that are in high demand and short supply domestically. This access to a global talent pool allows them to build innovative products and compete with larger incumbents. The new policy effectively severs this lifeline. Priced out of the market for new H1B visas, startups will be unable to fill critical technical roles, leading to significant slowdowns in research, development, and product launches. This directly threatens their ability to scale and innovate, weakening the entire U.S. technology ecosystem.
Takeaway: The policy creates a starkly uneven playing field that heavily favors large, multinational corporations over domestic startups. While large firms can pivot to alternative strategies, these options are largely unavailable to startups.
Sources
| Claim / Data Point | Category | Source / Citation |
|---|---|---|
| H1B employer fees: $2,000–$5,000, up to $10,000 | Fact | NNU Immigration; Immi-USA |
| New $100,000 H1B fee (one-time, new petitions) | Fact | White House; BBC; Reuters |
| H1B cap is 85,000/year | Fact | USCIS annual report (PDF) |
| H1B applications FY2024: ~759,000 | Fact | WSM Immigration |
| Current H1B population: ~583,420 | Fact | Pew Research |
| Median H1B salary: ~$118,000; Average ~$167,533 | Fact | Visa USA salary data; Pew Research |
| Minimum H1B wage $60,000 | Fact | NNU Immigration |
| Immigrants ~16% inventors, 23–24% patents | Fact | NBER Working Paper; ITIF Analysis |
| Each tech job creates 2–2.5 local jobs | Fact | Bay Area Council Study |
| Fee is 60–85% of typical first-year salary | Estimate | Arithmetic calculated using cited values |
| Total direct H1B lost compensation over 3 yrs: $45B | Forecast | 154,000 x $167,533 (report calculation) |
| Total lost tax revenue: $13.5B (3 yrs) | Forecast | 30% of compensation (report, IRS estimates) |
| H1B filings to collapse 90–95%, 50k applications FY2026 | Forecast | Analyst extrapolation, no precedent (report logic) |
| FY2028 steady-state: 25,000 H1B applications | Forecast | Analyst extrapolation, economic modeling (report logic) |
| Total US jobs lost: ~539,000 (direct + multiplier) | Forecast | 154,000 x 2.5 multiplier (Bay Area report logic) |
| GDP impact: $100–120B loss over 3 yrs | Forecast | Compensation, multiplier, innovation effect (report modeling) |
| Startups will be priced out of H1B market | Forecast | Venture/startup finance analysis (NPF, report logic) |
| Firms will pivot to offshore/global talent hubs | Forecast | Strategic business precedent, offshoring trends (industry observations) |
About the Author
James Thomason is a Silicon Valley technologist, entrepreneur, and investor with 25+ years building startups. He is co-founder and Chief Investment Officer of Next Wave Partners (VC/venture studio), Chief Analyst and PM of Thomason Capital (long/short equity), and holds 14 patents in AI, blockchain, cloud, and edge computing. James writes for Information Week and VentureBeat, and has been featured in Forbes, Network World, VMBlog, ZDNet and many others as a thought leader.