The Bottom of the Pay Scale

John Miano, Center for Immigration Studies, Dec. 2005

The temporary visa program known as H-1B enables U.S. employers to hire professional-level foreign workers for a period of up to six years. According to the law (8 U.S.C. § 1182(n)), employers must pay H-1B workers either the same rate as other employees with similar skills and qualifications or the “prevailing wage” for that occupation and location, whichever is higher. This is to prevent the hiring of foreign workers from depressing U.S. wages and to protect foreign workers from exploitation.

This report examines the wage data in Labor Department records for Fiscal Year 2004. It compares wages in approved Labor Condition Applications (LCAs) for H-1B workers in computer programming occupations to wage levels of U.S. workers in the same occupation and location. The analysis demonstrates that, despite the H-1B prevailing-wage requirement, actual pay rates reported by employers of H-1B workers were significantly lower than those of American workers. These findings show that the implementation of the prevailing-wage requirement in the H-1B program does not ensure that H-1B workers are paid comparably to U.S. workers. Moreover, the data suggest that, rather than helping employers meet labor shortages or bring in workers with needed skills, as is often claimed by program users, the H-1B program is instead more often used by employers to import cheaper labor.

Key Findings

  • In spite of the requirement that H-1B workers be paid the prevailing wage, H-1B workers earn significantly less than their American counterparts. On average, applications for H-1B workers in computer occupations were for wages $13,000 less than Americans in the same occupation and state.
  • Wages for H-1B workers in computer programming occupations are overwhelmingly concentrated at the bottom of the U.S. pay scale. Wages on LCAs for 85 percent of H-1B workers were for less than the median U.S. wage in the same occupations and state.
  • Applications for 47 percent of H-1B computer programming workers were for wages below even the prevailing wage claimed by their employers.
  • Very few H-1B workers earned high wages by U.S. standards. Applications for only 4 percent of H-1B workers were among the top 25 percent of wages for U.S. workers in the same state and occupation.
  • Many employers use their own salary surveys and wage surveys for entry-level workers, rather than more relevant and objective data sources, to make prevailing-wage claims when hiring H-1B workers.
  • Employers of large numbers of H-1B workers tend to pay those workers less than those who hire a few. Employers making applications for more than 100 H-1B workers had wages averaging $9,000 less than employers of one to 10 H-1B workers.
  • The problem of low wages for H-1B workers could be addressed with a few relatively simple changes to the law.

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If there is any correlation between wages and skills, it is clear the H-1B program is rarely being used to import “highly skilled” workers. While the wage data do suggest a few employers use the H-1B program to import a small number of highly skilled workers, these are clearly exceptional cases.

Overwhelmingly, the H-1B program is used to import workers at the very bottom of the wage scale. The wide gap between wages for U.S. workers and H-1B workers helps explain why industry demand for H-1B workers is so high and why the annual visa quotas are being exhausted.

Many in industry have called for an increase in the number of H-1B visas, citing the early exhaustion of the cap as reflective of widespread need for skilled workers. However, the fact that very few H-1B workers are earning salaries as high as U.S. workers in the same profession would seem to refute that claim, and should make lawmakers wary of increasing the H-1B quota. The exhaustion of the H-1B quota may reflect employers’ interest in lowering labor costs or widespread fraud rather than an insufficient number of visas.

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