A VC explains why the new H-1B system is rigged and who’s about to get wiped out

A sweeping change to the H-1B visa system could dramatically reshape who gets to work in the U.S.—and who doesn’t. Under a new wage-weighted lottery proposal set to take effect as early as FY2026, foreign workers will no longer have equal odds. Instead, their chances will be tied to salary level—putting startups, recent grads, and international students at a severe disadvantage.

The Department of Homeland Security is preparing to publish a proposed rule that replaces the current random H-1B lottery with a wage-tiered system. Every job will be classified into four wage levels—based on location and role—corresponding to percentiles in the Department of Labor’s wage database. Level IV (67th percentile and above) will get 4x the lottery entries, while Level III gets 3x, Level II gets 2x, and Level I only one.
 
Debarghya 'Deedy' Das, a Kolkata-born technologist and VC, broke down the implications on X: “It’s really bad for startups, early employees, helps IT consulting shops and can be easily gamed.”

The biggest losers? International new grads, who make up 90% of Level I and II wage groups. They will now face drastically higher odds, especially those entering master’s or engineering programs in the U.S. For instance, software engineers in the Bay Area will now need to make $149K just to qualify as Level I.

On the flip side, outsourcing giants like Wipro, Infosys, and TCS—often accused of abusing the H-1B system—stand to benefit. These firms already use lower-cost regions and job codes (like “Computer Programmer” instead of “Software Developer”) to keep wages low and now have even more reason to game the system.

Startups will be hit hardest. Without the option to offer equity in place of high base salaries, early-stage companies in cities like San Francisco will need to pay at least $188K to hire an H-1B engineer at Level III.

Even the most lucrative professions like investment banking, consulting, and medicine could suffer. Entry-level salaries in those fields often fall short of high wage percentiles, effectively closing the door to foreign junior talent.

And it’s not just immigrants who lose. Mid-career American employees may feel pressure as employers shift hiring preferences toward high-cost foreign workers to meet the new selection criteria.

As Deedy warns, this system may create more problems than it solves—"easily gamed," heavily biased toward big tech and consultancies, and yet again, brutal on the underdog