The article doesn't seem to point out the obvious explanation, ie that H1B applications contain personal data (of the type Slashdotters are usually passionate about protecting), and that it is good practice not to keep such information hanging around once it has served its primary purpose.
Given the recent reports of how H1B workers are treated as slaves in abuses reminicent of human trafficking, the timing of this seems more than a bit suspicious. And at least one source has the DOL saying "will no longer respond to inquiries to search for records in response to FOIA requests". Explicitly pre-empting the FOIA process without even the suggestion that the data might be anonymized to allay privacy concerns is, again, more than a little suspicious.
There are presumably solutions to the research concerns, such as aggregating the data before it is deleted or collecting the specific data necessary before the records are deleted.
Yes, there are solutions, but will they be implemented? And is the Dept. of Labor so tone-deaf, and so ignorant of the controversial nature of this decision, that they didn't think to put an anonymization program in place in advance of this announcement? Somehow I doubt it.