Underpayment of H-1Bs Is Fact, Not Anecdote

I was disturbed to read the following passage in Friday’s Wall Street Journal:

One complaint critics have against the program is that foreign employees allegedly work for less pay, pulling down American wages.

That may be true in some instances—the Economic Policy Institute, a Washington, D.C., think tank, says it has anecdotal evidence of this—but when they apply for the visas, employers agree to pay foreign employees the same wage as other workers with similar qualifications or the prevailing wage for the occupation, whichever is higher.

This is a settled issue, folks. H-1Bs are indeed cheaper. It’s not just anecdotal, but demonstrated in hard data. I’ll refer the hard core policy wonks among you to my Migration Letters paper for extensive details, but here is a quick excerpt:

An employer survey conducted by the GAO (GAO, 2003) found that
some employers readily admitted to paying H-1Bs less than comparable
Americans, but noted that they were nevertheless paying the legally required wage, thereby illustrating that the latter is indeed below the market wage.

No fancy statistical methodology here, just the stark admission of employers that the pay their-H-1Bs less than comparable Americans. This echoes a previous employer survey, commissioned by Congress (though of course ignored by the latter), that found

…H-1B workers in jobs requiring lower levels of IT skill received lower wages, less senior job titles, smaller signing bonuses, and smaller pay and compensation increases than would be typical for the work they actually did.

So two employer surveys, one by the government and the other commissioned by the government, had employers actually ADMITTING to underpaying their H-1Bs. And the GAO quote shows that the employers admit that the prevailing wage, the legal wage floor for H-1Bs, is a joke. The data in the paper shows the underpayment statistically as well.

The above WSJ passage notes that the law requires that an employer pay an H-1B the higher of the prevailing wage and the actual wage, the latter legal term meaning the wage paid to Americans doing the same work at the firm. Requiring employers to pay at least the actual wage would seem to remedy the problem that the prevailing wage is a lowball, below-market figure. But of course the actual wage is just as loophole-riddled as the prevailing wage; again, see the paper for details. And at any rate, the data I present in the paper show that the vast majority of the H-1Bs are paid the prevailing wage, so the issue of the actual wage is moot.

“Anecdotal”? Read the paper, which establishes the underpayment six ways to Sunday.

And on top of all this is the issue that the law doesn’t even pretend to address: Employers hire younger, thus  CHEAPER H-1Bs in lieu of the older, thus more expensive Americans.

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21 thoughts on “Underpayment of H-1Bs Is Fact, Not Anecdote

  1. It seems like “prevailing wage” is a self-fulfilling prophecy in action. Pay people less, and the prevailing level of wages is lower. That means the next round of replacements can be hired even cheaper, which forces the prevailing level even lower. When a small number of “gatekeepers” collude or cooperate to keep wages down, the prevailing level stays low.

    Wasn’t there a big lawsuit a few years ago about Apple, Intel, and a few of these “gatekeepers” colluding to keep tech wages down? Whatever happened with that?

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  2. Here I can and will speak from personal experience. My wife and I worked in the very same laboratory for the same employer. I have a B.S. degree from Purdue University. My wife has a PhD from a very good Turkish University and a Masters from Zurich Technical University (Albert Einstein’s Alma mater). We were working and doing the same jobs, but she was never paid more than half my salary! She was on an H1-b visa at that time and working with me at The University of Chicago. Since it’s enactment, I have worked alongside H1-b visa holders and never were they paid as much as me. In my line of work, medical research, wages are depressed for everyone, U.S. citizens included. In my humble opinion, it is because we can’t negotiate for higher salary because employers can and do point to more highly educated foreign workers who make much less.

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  3. The assertion “…when they apply for the visas, employers agree to pay foreign employees the same wage as other workers with similar qualifications or the prevailing wage for the occupation, whichever is higher” got me thinking.

    The use of the word “prevailing” is surely meant to borrow the sense of “prevailing wage” as used in federal and state contracting, defined in the Davis-Bacon Act etc. In which case the prevailing wage is supported from below… Unions play a big role in organizing the formal challenges to wages that contractors pay to their employees, as being too low. Davis-Bacon was meant to prevent a race to the bottom. I’ll note that it is a constant sore point for the WSJ editorial board that prevailing wage laws subvert a free market in labor, artificially raising the cost of public works.

    Anyways, the average reader of good will assumes that the word “prevailing” means some group of employees somewhere is watching and pushing. But is there a comparable union of programmers? No, nothing.

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  4. H1Bs begun in the 90’s map perfectly to the drop of women working in technology. Yet nearly every women-in-tech ignores their members who want the group to take a stand against H1Bs because they are afraid of alienating corporations. These groups are for hiring with bias when it is foreign men, even 100% of a department. H1Bs can be hired without interviewing a single US citizen so how do we know that there is a shortage of talent when they are hired without citizen competition? They can also hire 100% one race, one gender because they don’t have to follow diversity laws when it is for an H1B.

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    • I submit that the Chinese and Indian immigrants are on average more willing to hire women than are their white U.S. native counterparts. But let’s put that aside, and focus on your comment, “H1Bs begun in the 90’s map perfectly to the drop of women working in technology. Yet nearly every women-in-tech ignores their members who want the group to take a stand against H1Bs because they are afraid of alienating corporations.”

      In that last sentence, the first half is right but the second half is wrong. The biggest reason they stay mum is that the support immigration at all costs.

      And I have an interesting example of this. About 10 years ago a colleague introduced me to a friend of his, female, who at the time was the president of a major technical professional organization who was working as a researcher at a major Silicon Valley firm at the time. My colleague, knowing that I am very concerned about age discrimination in tech and know that Ms. President had the same deep concern, said that the president and I should get together.

      So the president and I exchanged e-mail, in preparation to meet in person. But when I mentioned that what is fueling age discrimination is the H-1B program, the conversation came to a screeching halt. Ms. President said she is a strong supporter of immigration and would not to anything that criticized ANY KIND of immigration.

      This is typical. Women’s rights activists believe they must stand in solidarity with minority groups, and that solidarity is interpreted as unwavering support of immigration.

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  5. A startup in Silicon Valley that I worked for wanted to hire an H1B worker who had a Masters Degree in Economics. They wanted to hire him for a Market Research position. The going rate for that position according the BLS Job Handbook was in the $90,000 – $110,000 salary range. Unable to make that salary work because it was deemed “too expensive”, what the company did with the help of an immigration lawyer was to hire the foreign worker as Part Time. What they did was pay the worker on an hourly basis that met the required wage rate according to the BLS Job Handbook, designated that the worker would be working only 20 hours a week, so essentially would be making HALF the amount had they been working full time. All of a sudden, the salary range falls between $45,000 – $55,000. Now that’s a salary the startup founders can work with. The foreign worker was disguised as working Part Time, but ended up really working full time. The foreign worker did not complain about this because at the end of the day, he wanted a visa to remain in the country. Everyone was happy. This is an interesting loophole that I am surprised is even available for H1b workers – part time work?

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  6. One has to ask, what caused the EB 3 category backlog for Indians, if what you claim are the Intels and not the Infosys are the ones sponsoring the green cards. Most of the Indians in the Intels first come to an American university for a Masters degree (usually in Electrical Engineering), and then get recruited by Intel. That means, most of those folks would apply under the EB 2 category (Advanced degree or 5 years work experience). So if the Infosys are not sponsoring the folks that they directly recruit and bring from India, and who have a Bachelors degree at the most, who is sponsoring EB 3 green cards and creating the backlogs?

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    • Very good question.

      First, as I have explained before, I use the term “Intels” to refer to firms that hire H-1Bs as foreign students at U.S. universities, as opposed to the “Infosyses,” who hire directly from abroad. So this doesn’t mean only Intel Corp.

      Second, the laws requiring prevailing wage and so on apply to the JOB, not the WORKER. So, if the employer specifies that the job requires only a bachelor’s degree but the foreign worker has a master’s, the employer can sponsor the worker for EB-3.

      Third, even the wait for EB-2 has become quite long for Indian and Chinese nationals.

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      • This tells me that (a) getting a Masters degree is quite pointless for Indian students, (b) the Indian students are not the best and brightest doing advanced specialized work since they are doing a job that really requires only a bachelors degree even though they have a Masters degree. In other words, their advanced college degree is not worth the jobs that they are actually being hired for. It’s amazing that the Department of Labor or USCIS does not see this discrepancy.

        Question: If the foreign worker has an approved I-140, regardless of a backlog or not, are they pretty much guaranteed a green card after that point? I mean, does the USCIS do any further scrutiny to ensure that this person actually deserves the green card based on their skills and education and the job that they are being sponsored for?

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        • It’s really unclear whether a job requires a Master’s degree. What about all those famous guys who don’t even have a Bachelor’s? That gives the employer a lot of wiggle room, and the DOL/USCIS are really powerless to question it.

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        • >> their advanced college degree is not worth the jobs that they are actually being hired for

          it’s about the job, not what the applicant has. a foreign worker may have a PhD and have a couple of ACM dissertation awards, but if the JOB requires a Bachelors, that worker MUST put be in EB3. In other words, if Einstein was to be brought in today and his potential employer wants to tether him for life, his job requirement could be specified such that he qualifies only for EB3. Worse, if he was born in India, his wait time to get LPR would be north of ~70 years. (He qualifies for EB1 is a different discussion, but where the employer perceives value for maximizing returns to their shareholders is very important)

          Again, all this discussion about EB 1/2/3/..n is totally irrelevant for any non-backlogged country. No matter which queue the worker is sponsored in, they become LPRs in 1-2 years.

          Remember, the system is designed (by the cartel) to (NOT) protect the very workforce its supposed to be protecting. At that time, what does it matter if its EB2 or 3.

          >> are they pretty much guaranteed a green card after that point?

          No.

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