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A Price Tag Too High: Why the New H-1B Fee Could Break U.S. Innovation

  • Writer: Akul Bhambhani
    Akul Bhambhani
  • Feb 3
  • 7 min read

On September 19th, President Donald Trump signed another one of his 217 executive orders in his new presidential term (“2025 Donald J. Trump Executive Orders”). But unlike his typical focus on security and illegal immigration, this order took aim at something different: legal immigration, specifically with the H-1B visa program. The order introduced a $100,000 fee for every new H-1B visa petition, an increase from the previous average of approximately $3,500, and signified one of the most dramatic shifts in 21st-century immigration policy. (Cruz)

The reaction from employers was immediate and loud. CEOs of major tech giants, like Nvidia and OpenAI, cautioned that the fee would make it economically impossible to recruit high-skilled labor, pushing research and innovation abroad (Elias). Medical associations argued that the cost could drastically reduce access to qualified physicians, further burdening an industry already filled with shortages. (Zionts and Reese) Small businesses corroborated that the policy would disproportionately burden them, especially ones that rely heavily on international workers but can’t absorb costs. Each industry has its individual worries, but across every sector, the problem’s largely the same: without access to high-skilled global talent, companies risk losing their competitive edge, slowing innovation, and falling behind foreign counterparts.


Put together, these reactions reveal a policy that’s sparked concern not just because of its price tag, but also its impact on America's workforce. While the $100,000 H-1B fee was created to protect US labor, its economic burden on startups, harm to critical industries, and threat to innovation suggest the fee may undermine the very economic goals it chiefly claims to protect.




Policy Overview

For many Americans, “immigration policy” in political discourse means border security, asylum, and undocumented immigration. Due to this, many overlook the legal, employment-based system that fuels much of the country’s innovation, especially H-1B visas. Yet, as Forbes explains, the H-1B is “the only practical way for a high-skilled foreign national to work in the United States long term.” (Anderson) In fields like computer science, engineering, or artificial intelligence, the H-1B serves as the primary means for US employers to hire experts from international channels that are often scarce domestically. Without the H-1B program, many companies simply wouldn’t have access to the high-skilled workforce needed to keep up in a hypercompetitive global market. The importance of the H1-B is exactly why the new fee has caused so much alarm, as while the policy doesn't get rid of the visa, it increases the monetary barrier to utilize it. Under the new executive order, employers must pay a mandatory $100,000 fee for each new H-1B petition filed, roughly a 25x increase. This fee applies to all employers, regardless of industry, and requires that they bear the entire cost of the fee.


The Trump administration proposed the policy as a measure to “prioritize American workers over foreign labor” and make firms think twice about hiring international workers when a domestic labor force is available and stop them from “undercutting American wages” (Fong and Roy). But aside from the policy’s admirable goals, critics argue that there are equal tradeoffs. Analysts for the Atlantic Immigration Council note that the policy acts as a near-ban on new H-1B sponsorship for all but the wealthiest corporations, as the majority of businesses aren’t able to absorb the immense costs that now come with the visa. Further, the policy’s been criticized for a lack of clarity, as initial explanations were unclear about exemptions, timing, and implementation (Alexander). At the center of this controversy is a fundamental tension: the policy aims to protect the American economy and its workers, yet it restricts the very pipeline that brings in high-skilled talent that’s at the heart of the economic structure itself. What results is two competing visions of bolstering long-term economic growth, either expanding domestic opportunity or recognizing global talent as the cornerstone to innovation and productivity.


Outsourcing

One of the most immediate consequences of the H-1B fee is the increase in outsourcing for large corporations, as they are likely to move work overseas. For companies that have historically sponsored substantial numbers of H-1B workers, the impact of the new $100,000 fee is enormous. Analysts estimate that if firms file the same number of petitions as they did in 2025, the policy would create an additional $2 billion in costs, amounting to roughly a 3% hit to profit margins (Sharma and Schadler). However, firms aren’t likely to simply absorb these costs but create structural changes in their business strategy. Instead, it’s expected that they follow the ongoing trend: shifting work offshore. Companies can already save up to 70% of their costs by outsourcing their IT functions, and the new visa regulations make this cost-minimizing path even more attractive. (Zoolatech Team) Instead of bringing in high-skilled workers from abroad at a now significantly higher cost, companies are likely to simply expand to offshore and nearshore locations that are a fraction of the cost, reducing their dependence on the now inefficient H-1B.


In effect, the policy that’s supposed to help American workers risks doing the exact opposite: pushing more high-skill jobs entirely out of the country. Instead of companies opening up local positions and hiring domestic workers, companies facing steep H-1B costs are likely to increasingly invest in areas like India, Brazil, Eastern Europe as replacements for workers who previously were in the US, unintentionally deepening the outsourcing issue it claims to reduce.


Innovation

The new policy is also one that’s likely to stifle something at the heart of the American economy, innovation. High-skilled immigration is central to the innovation ecosystem in the US, as Forbes reports that they is responsible for 32% of aggregate innovation. This is especially true in the scientific industry, as while the US produced 20% of the world’s PhDs, half of them are immigrants. They continue to conclude that because of this, “we now need access to global STEM talent even more than we did in the 1950s.” (Anderson) However, when the costs of hiring such individuals suddenly spike to an unsustainable level, the research slows. For larger organizations that may be able to absorb costs, Steptoe argues that “the higher fee will likely lead to a more selective approach” and only allow in exceptional workers. While these firms will be better off compared to their ill-funded counterparts, overall innovation is still likely to decrease, and thousands of positions could be unfilled in the future. (Dembinski). Further, for smaller organizations, the cost is even worse. Take the example of startups, where H-1B visas are critical, as those immigrants “don’t just work at startups; sometimes they found them.” Due to this fee, these companies that already have a tight cash flow are likely to be priced out entirely from hiring internationally, even if that talent is essential to future innovation. (Kapen) This not only undermines the success of startups, a major engine of innovation, but also gives disproportionate power to large corporations that can afford the fee. The likely result is further consolidation, fewer new entrants, and a less dynamic and innovative American economy.


Alternative View: Domestic Jobs

Supporters of the policy argue that the H-1B fee is a necessary corrective measure to protect American workers and domestic jobs. Historically, critics have claimed that the existence of the H-1B program allows companies to use the visa to replace domestic workers with low-wage foreign workers, undermining domestic employment opportunities. The Trump administration echoed these concerns when signing the executive order, as the White House claims that companies “have abused the H-1B… to artificially suppress wages” for US workers (Trump). In theory, disincentivizing the H-1B could encourage expansion of domestic labor.


Unfortunately, economists continually find that this argument oversimplifies the complexity of labor markets. The vast majority of these fields are in highly technical fields (including AI, software development, engineering, etc) where domestic labor shortages are well documented (Shivakumar and Heng). In most of these cases, it’s not the low wages of the H-1B that appeal to organizations, but the abundance of expertise the international market offers. Thus, the new fees’ constraints on access to high-skilled talent likely won’t bolster domestic employment but create more unfilled jobs. Further, high-skilled workers aren’t likely to displace American workers but instead generate employment opportunities. As established earlier, firms are more likely to innovate and compete when high-skilled H-1B workers are in the market. This is critical as innovation bolsters employment by creating new roles in management, operations, sales, marketing, and more. By constraining access to high-skilled labor, the opportunity for innovation decreases (due to the inhibition of startups), thus creating significantly more jobs and a significant risk that the policy diminishes the very employment ecosystem that it claims to bolster. Overall, the H-1B fee is likely to only reduce job creation, competitiveness, and growth.


Takeaways

The new $100,00 H-1B fee was introduced as a tool to protect American workers. But a closer examination reveals that the real-world impacts of the policy may be counterproductive to its initial goals. While in theory, there’s some promise that the fee could incentivize firms to hire domestically, the fee creates too many risks in outsourcing, labor shortages, and stifling innovation, constraining the backbone of the US economy. Ultimately, the policy illustrates a wider tension in US immigration policy, the desire to protect domestic unemployment prospects, while the need to compete in the global economy. What’s crucially overlooked, however, is that a more globally competitive US only helps domestic workers. Even if there’s some short-term downside in wages, giving firms the talent they have to innovate, grow, and create new jobs is essential for their economic future. At the end of the day, it’s important to recognize that immigrants and natives aren’t enemies; they’re two sides of the same coin of economic growth.



References:


Alexander, Robert. “America’s Largest Lobbying Group Turns on Trump Admin Over H-1B Visas.” Newsweek, 28 Oct. 2025,


Anderson, Stuart. “U.S. Immigration Service Issues Guidance on Who Pays the $100,000 H-1B Fee.” Forbes, 20 Oct. 2025,


Cruz, Melissa. “Trump’s $100,000 Fee for H-1B Visas: What You Need to Know.” American Immigration Council, 24 Sept. 2025,


Dembinski, Zayna. “How Trump’s H‑1B Fee Could Reshape Global Innovation.” Steptoe, 24 Sept. 2025,


Elias, Jennifer. “‘We Need the Smartest People’: Nvidia, OpenAI CEOs React to Trump’s H-1B Visa Fee.” CNBC, 22 Sept. 2025,


Fong, Clara, and Diana Roy. “Trump’s H-1B Visa Change: What to Know.” Council on Foreign Relations, 21 Oct. 2025, https://www.cfr.org/article/trumps-h-1b-visa-change-what-know.


Sharma, Ashutosh, and Ted Schadler. “The Long-Term Impact of the $100,000 H-1B Fee? Higher IT Service Prices and More Offshore.” Forrester, 23 Sept. 2025,


Shivakumar, Sujai, and Julie Heng. “Renewing the United States’ Skilled Technical Workforce.” Center for Strategic and International Studies, 9 July 2025,


Trump, Donald. Restriction on Entry of Certain Nonimmigrant Workers. White House, 19 Sept. 2025,


“2025 Donald J. Trump Executive Orders.” Federal Register, National Archives and Records Administration,


Zionts, Arielle, and Phillip Reese. “Trump Administration’s New $100,000 H1-B Visa Fees Could Leave Rural Health Care as Collateral Damage.” CBS News, 8 Dec. 2025, https://www.cbsnews.com/news/trump-h1-b-visa-fees-rural-health-care-hospitals/.


Zoolatech Team. “How IT Outsourcing Helps You Save Costs: Stats, Facts, Infographics.” Zoolatech, 26 Aug. 2025,

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