January 6, 2025
By JB Ferguson, Head of Capstone’s Tech, Media, and Telecom Team
Capstone believes Trump will pursue his illegal immigration agenda immediately after taking office, leading to underappreciated labor availability woes and wage pressure challenges for the construction and services industries. However, reforms to the specialty occupation (H1-B) visa program will notably widen the foreign talent pool for Big Tech companies.
Outlook at a Glance:
Construction and Service Industries will be Hit hardest by the Trump Administration’s Immigration Policies, Despite Deportation Capacity Ceiling
| Winners | N/A |
| Losers | Construction companies like D.R. Horton (DHI), Toll Brothers (TOL), and NVR (NVR), Hospitality companies like Marriott (MAR), Hyatt (H), and other Personal Services |
Capstone believes that Trump’s threats to accelerate detentions and deportations on Day 1 of his next presidency are credible and will depress labor availability and increase costs in industries with high rates of undocumented workers, such as construction, hospitality, and personal services. This effort will likely be augmented by state and local law enforcement in pro-Trump states like Texas and Arizona.
Vulnerable industries include building trades, services, and agriculture, among others, all of which have high levels of participation by undocumented immigrants. Undocumented labor makes up over 20% of the labor force in each of those industries. Agriculture is the only industry in which undocumented labor has an outright majority share. It is a small (4%) portion of the overall labor force, and intervention would carry a significant risk of disruption to the country’s food supply chain.
We expect Trump to start with deportations of immigrants with existing deportation orders, focused on those with criminal convictions. There are about 1.2 million deportation orders in force. Broader efforts at mass deportation will require significant coordination with the states and lead time to build and staff appropriate detention facilities.
From existing deportation orders, we expect the effort to expand in two directions: immigrants with Temporary Protected Status (TPS, 863k persons) or Deferred Action for Childhood Arrivals (DACA, 530k persons) could have their status revoked and be eligible for deportation. DACA participants are somewhat less likely to be targeted, given greater public sympathy for that population and Trump’s recent comments on leaving the program in place. While these populations are not in line with Trump’s expressed concerns about immigrants who have committed crimes, they are large populations from whom it is administratively straightforward to remove protections.
Trump has named Tom Homan as his “border czar.” Homan headed ICE’s deportation branch under Obama and was Acting Director of ICE in Trump’s first term. In addition to the priorities discussed above, Homan has expressed an interest in expanding work-site enforcement actions. Homan successfully ramped deportations to a standing record of over 400,000 persons per year under Obama. ICE currently only deports about 250,000 persons per year.
We believe the deportation figures point to a capacity issue and militate against the likelihood of mass detainment and deportation efforts. Taking existing deportations and TPS holders (2 million total), ICE would require at least 5 years to effectuate their removals extending beyond Trump’s term.
Estimates of the economic impacts of mass deportation are difficult to make. There is evidence of increased wages for authorized workers in immigrant-dependent areas during the first Trump administration. In a macro view, removing productive workers and their associated spending is net negative unless offset by returns to the labor force in authorized populations. One recent estimate puts the long-run GDP reduction at -1% (for 1.3m deportations) to -6% (7.5m deportations).
Greater Availability of H1-B visas for Higher-skilled Tech Workers a Positive for Big Tech, with Headwinds for Lower-value IT Contracting.
| Winners | Alphabet (GOOGL), Apple (AAPL), Meta (META), Microsoft (MSFT) |
| Losers | Cognizant (CTSH), Infosys (INFY), Tata Consultancy Services (NSE: TCS) |
Capstone believes Trump’s position on skilled tech immigration (e.g., H1-B visa program) is somewhat nuanced, despite his aggressive campaign stances on immigration reform more broadly and previous criticism of the H-1B program. We expect the lower-skilled part of the H1-B labor population to be disadvantaged, allowing additional visa awards to the higher-skilled candidates preferred by the large tech companies.
Prevailing Wage Rule
Capstone believes the second Trump administration will reinstate a 2020 Department of Labor (DOL) rulemaking increasing minimum prevailing wage levels for H-1B visa holders. Though the rule was vacated on procedural grounds (direct final rule without comment), we believe it would now survive potential legal challenges, assuming the DOL follows the typical notice-and-comment rulemaking process.
The rule was intended to price foreign workers out of the US labor market, and estimates at the time suggested it would reduce H1-B applications by over 30%. Depending on job category and wage level, the rule would have required wage hikes ranging from 24% (chemical engineers) to 41% (computer science teachers) at the lowest wage level. While this may increase costs for Big Tech firms at the margin, median firm salaries for H-1B employees generally exceed the heightened prevailing minimum wage levels under the rule. We also expect that the increased availability of H-1B visas for these companies will offset the increase in labor costs.
We think it would take the Trump administration until at least the first quarter of 2026 to complete a rulemaking. Roughly 1/3rd of the H1-B population requires reauthorization every year, and the new requirements would be applied to reauthorization requests rather than changing the requirements for all positions at once. Full impacts would not be felt until the first quarter of 2029 at the earliest.
H1-B Reforms
We also expect the Trump administration to continue with Biden-era reforms to the H1-B program. The application process was re-centered on applicants and away from open positions earlier this year to cut down on multiple application fraud and simplify screening procedures. This reform finalized part of a proposed rule issued in October 2023 and impacts alleged system abuses by IT contractors like Infosys and Tata for lower-wage IT roles like systems and network administration.
On December 18th, the Department of Homeland Security’s (DHS) U.S. Citizenship and Immigration Services (USCIS) finalized a rule implementing the remaining parts of the October 2023 proposal. This final rule clarifies that there must be a “logical connection between the degree…and the duties of the position.” We anticipate some negative impacts for larger contractors, as close to 20% of temporary visa holders in IT professions have degrees other than computer science or electrical engineering.
That said, the final rule walks back significantly from the proposal’s text, which had a higher “direct connection” threshold for specialty occupations and specifically called out business administration and other generalist degrees as below the standard.
The final rule’s reinstitution of the prior deference standard around H-1B petitions for continuing employment is likely a temporary tailwind for employers. The first Trump administration rescinded prior deference, which caused the denial rate for H-1B petitions to more than double. Companies whose H-1B petitions for continued employment were disproportionately denied include Cognizant (25%), Amazon (19%), Tata Consultancy Services (19%) and Infosys (31%). We expect the next Trump administration to rescind the prior deference standard again.
Other notable provisions expanded eligibility criteria for H-1B cap exemptions and heightened USCIS authority to conduct workplace site visits. We expect the Trump administration to use cap exemptions to augment priority occupations (e.g., AI engineering) and use workplace site visits to further incentivize compliance.
JB Ferguson, Head of Capstone’s Tech, Media, and Telecom Team
Read more from JB:
The AI Safety Mirage
Harris’ Vision for Tech Policy
The Coming Tech Policy Escalation and Questions for the Balance of 2024
