DOL Inflates H‑1B Wages to Force Out Skilled Foreign Workers

On May 26, we submitted comments on a proposed rule by the Department of Labor (DOL) intended to increase the mandatory minimum wage—known as the prevailing wage—for employer-sponsored immigrants and H‑1B nonimmigrants. Our comments were unique in demonstrating that the rule change is unlawful and unnecessary.

DOL claims that H‑1B and other employer-sponsored foreign workers are paid “below market” wages and that its rule fixes this problem. But the proposed rule only inflates wages to restrict the supply of skilled foreign workers beyond what the law allows and will force existing H‑1B workers to leave the country. H‑1B workers are objectively among the highest paid in America, earning wages in the top 10 percent nationally. It would be disastrous to exclude them.

Background

DOL’s proposed rule:

• provides no empirical basis for raising the prevailing wage;
• rejects 80 percent of current wage offers to H‑1B and other skilled foreign workers, even among the highest skill level;
• forces out hundreds of thousands of H‑1B workers who have lived and worked in the United States under the current system for many years; and
• cuts visa issuances, particularly for researchers, professors, scientists, and workers in health care and universities because these workers are commonly not subject to the cap.

The upshot of reducing the number of H‑1B workers is less business investment, less US job growth, less innovation, and more outsourcing.

The current prevailing wage is usually calculated using the Occupational Employment and Wage Statistics (OEWS) survey, which surveys employers to collect information on employee wages. The law (Immigration and Nationality Act 212(p), 8 U.S.C. 1182(p)) requires DOL to take those survey results and create at least four wage levels for each occupational classification “commensurate with experience, education, and the level of supervision.” Jobs with higher requirements must pay higher wages.

DOL plans to raise the four wage levels from the 17th to 34th percentile for level 1 (entry-level workers), from the 34th to 52nd percentile for level 2, from the 50th to 70th percentile for level 3, and from the 67th to 88th percentile for level 4, the highest wage level for “fully competent” workers. The average H‑1B prevailing wage would rise about $26,000 annually.

As seen below, over 80 percent of H‑1B job offers would be disqualified under the proposed rule, including the vast majority of the highest-skilled workers (level 4). The same is true for, by far, the most common H‑1B occupation: software developers.

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DOL’s proposal first estimates the age-education specific wage and then assigns the four wage levels based on level of supervision. The highest wage level is arbitrarily set at the 90th percentile for the occupation. DOL presents no data or argument that the 90th percentile represents the wages of US workers with jobs requiring similar levels of supervision. This arbitrary threshold results in about 16 percent of wages being set above the estimated 100th percentile (the highest wage) for the occupation.[2]

Part of the problem is that DOL refuses to set any wages below the age-education median, even though workers in jobs requiring the most supervision are precisely those with below-median wages. Even in its main proposal, level 1 wage is set below the median based on this insight, but for experience benchmarking, it arbitrarily decides to exclude all wages below the median and, therefore, disconnects the wages from the level of supervision.

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Conclusion

The rule rests on no identified market failure. DOL’s own data show that H‑1B workers receive wages averaging $10,191 above the current prevailing wage—evidence that competitive market forces are already working as intended, not evidence that the floor must be raised. The rule would disqualify over 80 percent of current wage offers without producing even the average wage DOL claims is appropriate.

The alternative proposal would also exclude over 80 percent of wage offers, and its procedures set wages at levels no comparable US workers are paid. DOL has offered the regulated community an arbitrary benchmark, reverse-engineered percentiles, and a self-defeating methodology in place of the reasoned analysis the statute requires and the Administrative Procedure Act demands. The current prevailing wage methodology, grounded in decades of administrative experience and confirmed by independent empirical analysis, should be retained.