Monday Jan 17, 2022

Is the H-1B program reducing US wages?

Mention the H-1B visa program to a group of American programmers or engineers and you may hear a cry of outrage. H-1B visa holders, it is commonly said, are responsible for taking jobs away from American high-tech workers. Additionally, disgruntled American technicians often complain that H-1B workers are paid much less than their American counterparts. They claim that companies often use H-1B as cheap labor and that this results in lower wages for both Americans and foreigners. In response, proponents of the H-1B program argue that these foreign workers help the economy grow and that adequate safeguards are in place to ensure they earn comparable wages.

The truth, I think, lies somewhere in the middle.

The question of whether H-1B visa holders take jobs away from Americans is entirely legitimate, although it is rarely addressed in depth on either side of this debate. For now, however, I would like to focus on the second of these issues, namely, “Are H-1B workers being paid much less, and thus depressing the competitive wages of American workers?”

First, I think it’s fair to say that some H-1Bs are paid significantly less than their American counterparts. By law, companies are required to pay their H-1B employees according to the “prevailing wage” for that job; however, determining the prevailing wage can be highly subjective and fraught with loopholes. For example, a company may give its H-1B applicants a job title that does not accurately reflect their job duties. Furthermore, prevailing salary determinations (by necessity) are based on a rather crude means of classifying the level and classification of an applicant’s job position, which gives companies some leeway in deciding how to present their job descriptions. .

Additionally, stories abound within the high-tech industries of companies hiring foreign workers from so-called “job shops,” consulting firms that specialize in supplying low-paid H-1B workers, usually from India. Accurate figures can be difficult to find, as these reports often come from anecdotal sources or from a government audit that was conducted in 1996; however, these stories cannot be easily discounted either. I myself once worked with two programmers (one from India and one from Pakistan) who had been hired by such a team, where they were paid shamefully low salaries.

However, while such abuses do occur, I believe that the scope of this problem has been grossly exaggerated. Several studies indicate that H-1Bs are paid much less than American workers; however, these studies are often conducted by special interest groups who oppose the H-1B program. No definitive government investigation has yet proven these statistics to be true.

Furthermore, I would argue that such studies are based on questionable statistics and methodologies. In particular, they do not take into account that the typical H-1B visa holder will be a recent college graduate and therefore relatively young. So it should come as no surprise that they earn less than many Americans working in the same field. In fact, the National Science Foundation (NSF) reports that foreign-born professionals actually earn more than their American counterparts when comparing people of equivalent ages and grade levels, and when considering the year these degrees were awarded. .

Additionally, when critics allege that H-1B holders are grossly underpaid, these complaints are generally based on anecdotal evidence or the prevailing wage statements that were filed for those H-1B applications. However, the anecdotal evidence only refers to individual cases and is silent about H-1B cases in general. Regarding current wage statements, these figures only indicate the minimum wages that employers can pay; they do not indicate the salary levels that are actually paid.

Not surprisingly, the US Citizenship and Immigration Services (USCIS) does not make H-1B salary levels publicly available, making it impossible to compare actual salaries. However, the National Foundation for American Politics asked a leading law firm to select 100 randomly selected H-1B cases from its client files. These files contained both the prevailing salary level and the actual salary levels as reported to the USCIS. The result? On average, the median wage was more than 22% higher than the prevailing wage. Furthermore, this figure does not consider possible salary increases after the applicant is hired. While we cannot conclude that these cases are representative of H-1B wage levels in general, this informal study illustrates the problem of drawing hasty conclusions based solely on current wage statements.

In fact, hiring H-1B applicants can be decidedly more expensive than hiring a native-born worker. When hiring a US citizen, the costs generally end with the job offer; not so with H-1B visa applicants. Hiring with an H-1B generally requires nearly $ 6,000 in additional legal and government fees, and that doesn’t even include the cost of additional work required by internal human resources staff. If the employee seeks green card sponsorship, this may require an additional $ 10,000, maybe more. On top of that, sponsoring an H-1B visa or green card can be a risky proposition with no guarantee of success. Some companies may sponsor H-1B holders to save money, but if so, these savings are largely outweighed by the additional expenses and legal headaches involved.

Additionally, other figures contradict the claim that foreign high-tech workers earn much less than Americans. Similarly, a study from Northeastern University’s Center for Labor Market Studies reports that native-born and foreign-born professionals in math and science earn nearly identical salaries. The same study showed that in computer science and mathematics, salaries were roughly the same for master’s degree holders, and were actually higher for bachelor’s and doctoral holders. Salary levels were comparable at all three levels within the life sciences. Native American engineers with bachelor’s or master’s degrees earned more than their foreign-born counterparts; however, the situation was reversed as regards doctors.

So in summary, is it true that H-1B visa holders are paid much less than American workers? Sometimes that is true. However, overall, I think this alarmist claim is grossly overstated, and we have good reason to believe that they are generally well paid. For this reason, I think we should not be too quick to conclude that this influx of H-1B workers is dragging wage levels down.

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