June 1, 2021
Suzan G. LeVine
Principal Deputy Assistant Secretary for Employment and Training
U.S. Department of Labor
200 Constitution Avenue NW
Washington, DC 20210
Administrator, Office of Foreign Labor Certification
Employment and Training Administration
U.S. Department of Labor
200 Constitution Avenue NW
Washington, DC 20210
RE: Department of Labor, Employment and Training Administration, Request for Information on Data Sources and Methods for Determining Prevailing Wage Levels for the Temporary and Permanent Employment of Certain Immigrants and Non-Immigrants in the United States, Request for Information, DOL Docket No. ETA-2021-0003, RIN: 1205-AC00
Dear Suzan LeVine and Brian Pasternak:
Thank you for the opportunity to respond to Request for Information on Data Sources and Methods for Determining Prevailing Wage Levels for the Temporary and Permanent Employment of Certain Immigrants and Non-Immigrants in the United States.
We the two undersigned authors, have studied the H-1B program, immigration, and STEM labor markets for many years, and have published extensively about them, and have testified before Congress as experts on work visa programs: Ron Hira is an associate professor in the political science department at Howard University in Washington, D.C. Dr. Hira has published scholarly work, policy briefs, and in-depth reports, on high-skilled immigration policy.1 Daniel Costa is an attorney and researcher with the Economic Policy Institute (EPI) and is EPI’s director of immigration law and policy research. Costa has published numerous reports and commentary on work visa programs, including the H-1B program; his areas of research include a wide range of labor migration issues, including governance of temporary work visa programs, high-skilled migration, farm labor, worksite enforcement, and immigrant workers’ rights.
About EPI: EPI is a nonprofit, nonpartisan think tank established in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-income workers—regardless of immigration status—and assesses policies with respect to how well they further those goals. EPI has researched and commented extensively on the U.S. system for labor migration—through public comments, publications, and testimony—including in particular, with respect to the immigrant and nonimmigrant visas that the U.S. Department of Labor (DOL), the U.S. Department of Homeland Security, and the State Department are responsible for managing and overseeing. EPI submits these comments to DOL in response to their request for public input.
I. INTRODUCTION AND BACKGROUND ON THE PURPOSE OF THE H-1B PROGRAM AND THE ROLE OF PREVAILING WAGE RULES
DOL has issued this request for information (RFI) to all stakeholders to identify the best data sources and methods to use to set the required wage rates for H-1B workers and for DOL permanent labor certifications. Responding to this RFI effectively, however, first requires background about the current administration and outcomes of these programs. The fundamental problem with the H-1B program is not the data sources, instead it is the chasm between the program’s purpose and how it has been, and is being, administered. Sorely absent in the RFI is a clear description of the purpose of the H-1B program, and the decisive role that wage rules play in fulfilling its purpose.
DOL has profoundly failed in its administration of the H-1B and PERM programs across successive administrations.
For the past thirty years, DOL has made terrible regulatory choices with respect to the H-1B program rules that should protect labor standards. The purpose of the H-1B program is to fill jobs only when it is very difficult to find workers from the U.S. labor supply (i.e., U.S. citizens and lawful permanent residents, and other work permit holders). However, through its willful choices, with wage requirements being a central example, DOL has instead enabled employers to hire H-1B workers even when evidence suggests it is extremely easy to find workers from the U.S. labor supply. In practice, H-1B workers are commonly utilized by employers as substitutes, rather than complements, to U.S. workers. This outcome, antithetical to the H-1B program’s intent, is a direct result of DOL’s failed stewardship. DOL constructed a regime that allows U.S. employers to displace U.S. workers and undercut their wages and job opportunities. It results in H-1B and new employment-based immigrant workers being underpaid by billions of dollars each year, according to DOL’s own estimates. In choice after choice, DOL has undermined the integrity and accountability of the programs, badly distorting the U.S. labor market.
The exploitation of the H-1B program by U.S. employers hiring underpaid indentured workers is well understood by all stakeholders involved, including DOL, and has been documented in academic work, in the press, and in Congressional hearings. In numerous shocking cases, which have been widely reported in the news media, the program is being used to replace U.S. workers. There is only one reason an employer replaces a U.S. worker with an H-1B worker: because H-1B rules allow H-1B workers to be paid much less for the same work.
One such case is illustrative. In 2015, the Wage and Hour Division (WHD) investigated the case of Southern California Edison (SCE) replacing approximately 400 U.S. workers with H-1B workers who were hired by two outsourcing firms, which not coincidently have been two of the top ten H-1B employers for more than a decade. WHD concluded that no statutory requirements or administrative rules or regulations were violated.2 It was obvious the program was working against its purpose, however, DOL chose not to fix the administrative rules that permitted the practice. If DOL had set the wage requirement so H-1B workers were not paid less than their U.S. worker counterparts who were already employed at SCE, then the SCE case would never have happened. Clearly those workers’ wages and working conditions were adversely affected, a violation of the H-1B program’s statutory requirements.
By their nature, all temporary work visa programs are highly vulnerable to abuse,3 and as such, sufficient protections must be incorporated into the regulations. Recognizing this truth, Congress built into the H-1B program significant protections for U.S. and foreign workers alike, entrusting the DOL to implement and enforce them. Instead of fulfilling those aims, nearly every DOL choice having to do with upholding labor standards in H-1B has undermined critical protections for both U.S. and migrant workers, and DOL’s actions have failed to meet the H-1B statute’s requirement that the program not “adversely affect” wages and working conditions of similarly employed workers.
Those choices are generating extraordinary revenues and profits for: businesses that supply underpaid indentured workers; labor brokers and universities selling access to the U.S. labor market; and immigration attorneys processing large volumes of applications. In prior notices for this docket, DOL received thousands of comments supporting the status quo system. This is unsurprising because DOL rules have created a large clientele—employers, universities, labor brokers, and immigration attorneys—that directly profit from the current system that revolves around cheap, indentured labor. These groups have handsomely profited from the agency’s blunders and will fight to maintain it, which includes bringing frivolous litigation against DOL to keep H-1B and U.S. workers underpaid, despite DOL’s clear authority to require fair wages and labor standards and duty to uphold worker protections. Such comments should be seen in this light, and not prevail over the agency’s mission to ensure the programs meet their intended purpose of filling labor shortages and protecting both U.S. workers and migrant workers.
II. RESPONSES TO SPECIFIC QUESTIONS POSED BY DOL
1. What sources of data and methods are available that can be used alone, or in conjunction with other sources and methods, to approximate the wage level within an occupational wage distribution based on the OES wage survey and takes into account education, experience, and level of supervision for U.S. workers similarly employed across industries for specific occupation(s) and geographic area(s)?
While the American Community Survey (ACS) and the Current Population Survey (CPS) from the Census Bureau and the Bureau of Labor Statistics (BLS) are valuable sources of information on the wages earned and education levels of U.S. workers, in both cases the occupational classifications are not nearly as specific as those in the Occupational Employment Statistics (OES) survey, which is now known as the Occupational Employment and Wage Statistics (OEWS) survey. As a result, it would be difficult for DOL to incorporate data from the ACS or CPS to set H-1B wage rates that are narrowly tailored enough compared to the “nearly 800 occupations” covered by the OEWS (which are classified according to the occupational classifications in the Standard Occupational Classification (SOC) code system).4 By comparison, the Census Bureau’s occupational classification system does not use SOC codes, and consists of only 570 codes.
The foreseeable result of using a data set with fewer occupational classifications will be that H-1B employers will claim that the occupations they are hiring for do not fit within the codes used for classifying H-1B jobs, and as a result, will likely attempt to set H-1B wage rates with an “independent authoritative source” or “other legitimate source” of wage data,5 which in practice means employers can use private wage surveys, claiming that they correspond more closely to the work performed. DOL’s experience with private wage surveys in the H-2B context shows that private wage surveys are used almost exclusively to lower wage rates—and they are a viable option for doing so because employers can have a say in how the survey is constructed and who the subjects of the survey are.6 In the H-2B context, a recently filed lawsuit is now challenging the validity of private wages surveys.7
In 2020, according to DOL disclosure data, 8% of H-1B positions were set by an “independent authoritative source” or “other legitimate source” of wage data (hereinafter, private wage surveys).8 As we argue in a later section, we believe private wage surveys are not a legitimate method for setting H-1B wage rates and reducing the number and specificity of occupational categories will likely lead to more employers using private wages surveys.
The strength of the OEWS survey is that it has data on nearly 800 SOC occupations, and for all regions in the United States. It’s the only wage data source we know of that does so, and another benefit is that each year DOL calculates the mean and median wage for each occupation, as well as the 10th, 25th, 50th (i.e. median), 75th, and 90th percentile wages for each occupation at the national level—and the mean and median at the state level—publishing all of it on the BLS website in an easy to read and understand format.
However, the OEWS is far from perfect. The OEWS covers so many occupations and regions, that often the sample sizes are quite small, diminishing the validity of the result. And when employers fill out the OEWS survey form, rather than writing in the actual salaries of their employees, employers choose from a range of salaries (hourly and/or annually), which diminishes the accuracy of the results.9 And finally, the BLS conducts the OEWS survey every year but pools three years of data for its results, which as BLS notes, means there are “limitations associated with this estimation procedure in that it requires ‘updating’ for the earlier years of data and limits the usefulness of OEWS data for time series analysis.”10
We would urge the DOL conduct an audit of the OEWS data to ensure geographic and occupational sample sizes are sufficient to return valid wage data. There are many examples of OEWS-based wage data for high-skilled H-1B occupations on the website utilized by OFLC to set H-1B wages—the Foreign Labor Certification (FLC) Data Center website—that return implausibly low wages. For example, Level 1 wages for a Software Developers, Applications job (SOC 15-1132, retrieved from the 07/2020 – 06/2021 All Industries Database) in Northeast Minnesota are $9.87 per hour, 11 which is such a low wage that it is even less than even the Minnesota state minimum wage of $10 per hour.12 Similarly the Level 1 wage for Electrical Engineers (SOC 17-2071) is $10.43 for College Station Texas and the Level 4 wage is a meager $22.76.13 The Level 4 wage for Electrical Engineers reported by OFLC for College Station, Texas is less than half the national average hourly wage of $50.96 for SOC code 17-2071.14 Clearly there are significant methodological problems with the data being reported. We suggest that DOL identify reported FLC wages that are far below the national average and investigate such instances further to validate the data. If there are large inconsistencies then we suggest DOL aggregate its geographic, and/or occupational, data at higher levels to ensure required wages are appropriate to meet the purpose of the H-1B and PERM programs.
For high wage occupations, such as physicians, which are extensively used in both H-1B and PERM programs, the current OEWS survey is deficient because it does not capture sufficient granularity. The highest possible wage on the survey questionnaire is $115 per hour, which is at or below the mean wage for most physician occupations.
With nearly 600,000 workers in the H-1B program,15 the program is so large that its workers’ wages can significantly impact and bias OEWS results. According to the DOL final rule issued on January 14, 2021, H-1B workers account for approximately 10% of employment in all computer occupations, and in certain key occupations, like software developers, applications, they account for a remarkable 22% (more than one-in-five).16 The share is likely even much higher in certain geographies. The wages of H-1B workers create a significant bias, almost definitely downward in the OEWS data because of the lower prevailing wage levels that employers overwhelmingly select, and thus, the wages paid to H-1B workers should not be included in the survey data calculations that are used by OFLC to generate H-1B wage levels in the FLC database.
We recommend that DOL continue to use the OEWS to set H-1B wage rates, but that it invest significantly in improving the OEWS data set, and perhaps consider charging H-1B related fees that would help fund the additional work required to improve the OEWS. Further work is needed to validate the OEWS by comparing it against the actual wages and compensation of U.S. workers. This should be done to achieve the H-1B program’s intent of filling labor shortages in high-skilled occupations.
2. Besides the OES wage survey, what other sources of data and methods are available that can be used alone, or in conjunction with other sources and methods, to approximate wage levels, by occupation and geographic area, specifically for U.S. workers similarly employed at institutions of higher education, nonprofit entities related to or affiliated with such institutions, nonprofit research organizations and Governmental research organizations?
We are concerned about the validity of the ACWIA – Higher Education Database. The higher education labor market is small and is dominated by a small number of employers (sometimes just one) in many geographic and occupational markets. It is possible that higher education employers are essentially setting the prevailing wage on their own in many markets. Aggregating the data across multiple markets may mitigate such effects.
3. Should the Department continue to set wage levels at the same point within the OES distribution for all occupations and geographic areas or, alternatively, set wage levels at different points within the OES distribution for different groups of occupations and/or geographic areas? If the latter, what sources of data and methods are available that can be used alone, or in conjunction with other sources and methods, to approximate different wage levels for different groups of occupations, taking into account education, experience, and level of supervision for U.S. workers similarly employed across industries and geographic areas?
We believe that setting different wage percentiles for occupations and/or geographic areas would be overly complicated and burdensome on DOL and have limited value. Such fixed percentiles would not be stable over time. It is unclear how DOL would validate such an approach against a clear benchmark, and subsequently make adjustments in response to market dynamics. Instead—as we will argue further in later sections—DOL should focus on ensuring that the lowest wage level does not lead to “adverse affects” on the wages and working conditions of persons employed in H-1B occupations. To achieve that, the lowest wage level should never be lower than the local median wage. And in terms of the higher earners in each occupation, the higher wage levels should be set sufficiently high enough to prevent adverse impacts, which requires the highest (i.e. current Level 4 wage) being set above the 90th percentile.17
DOL should conduct a study to benchmark the actual wages and benefits H-1B and PERM workers receive—based on their education, experience, geographic location, and role with the employer—compared to an equivalent U.S. worker. Further, DOL should compare the characteristics and role of the H-1B worker to what employers entered on the Labor Condition Application (LCA) for the occupation, skill level, wages, and geographic location. This should be completed for several of the SOC codes.
These data would set an appropriate baseline, by which the OEWS and other data sources could be compared.
There is evidence that employers have systematically misclassified skill levels for their H-1B workers. Aggregate H-1B data reported by USCIS on experience and education do not match the skill level claims made by employers on the DOL’s LCA form. In fiscal year 2020, USCIS reports that nearly three-quarters, 72%, of approved H-1B beneficiaries were aged 30 years or older, and 40% of H-1B workers were 35 or older. Such ages indicate substantial experience warranting skill/wage levels of 3 and 4. USCIS also reports that a majority, 64%, of H-1B workers hold an advanced degree (Masters, Doctorate or Professional), again indicating high skill attainment that warrants skill/wage levels of 3 and 4.18 Yet, for fiscal 2020, DOL disclosure data show a mere 35% of all approved positions on LCAs were for skill levels 3 and 4.19 DOL must investigate the discrepancies between the skill levels reported on LCAs and the experience and education levels for actual workers approved on those LCAs. Otherwise, the entire of purpose of setting required wages is undermined.
In addition, DOL should be aware that thousands of positions with the descriptors “Senior” or “Lead” in the Job Title field have skill/wage level 1 in approved LCAs, and approximately 100,000 are classified as level 2.20 These substandard classifications, made by employers, directly contradict DOL guidance that such job titles indicate level 3 wages—which is described in DOL’s Prevailing Wage Determination Policy Guidance,21 issued in November 2009:
Level III (experienced) wage rates are assigned to job offers for experienced employees who have a sound understanding of the occupation and have attained, either through education or experience, special skills or knowledge. …Frequently, key words in the job title can be used as indicators that an employer’s job offer is for an experienced worker. Words such as ‘lead’ (lead analyst), ‘senior’ (senior programmer), ‘head’ (head nurse), ‘chief’ (crew chief), or ‘journeyman’ (journeyman plumber) would be indicators that a Level III wage should be considered.
DOL must immediately conduct an audit of the consistency between job title matches and wage levels.
4. Other than computation of an arithmetic mean or specific percentile within an occupational wage distribution based on the OES wage survey, are there any other statistical approaches or estimation techniques the Department should consider when computing the wage level(s) for occupation(s) and geographic area(s)?
While we believe utilizing the OEWS data set and wage percentiles within the distribution is reasonable and preferable to other data sources and methods, the OEWS falls very short in terms of providing a wholistic and realistic picture of what U.S. workers earn in H-1B occupations, by virtue of not including fringe benefits. We urge that DOL also calculate an additional amount of compensation based on available data on the cost of benefits for workers in private industry. If employers do not have to provide fringe benefits to H-1B workers or reasonable compensation that accounts for those fringe benefits, that will result in employers underpaying or undercompensating H-1B workers vis-à-vis their U.S. worker counterparts, thereby causing adverse effects on workers in H-1B occupations. The fissuring of the U.S. workforce has been abetted in part by employers practicing benefits’ arbitrage—in other words, employers seeking a workforce they do not need to provide benefits for—the H-1B program should not facilitate it.
Further discussion on fringe benefits and OEWS wage data
Davis Bacon and Service Contract Act wage determinations—which are both valid wage sources for determining H-1B wage rates under current H-1B rules—include an additional hourly monetary value that is owed to the worker in “fringe benefits.” Under both Acts, the employer must pay the fringe benefits either in the form of a permissible fringe benefit listed by the applicable Act, or any combination of benefits thereof, or with an equivalent cash payment.22 The lack of any fringe benefits in OEWS prevailing wage determinations23 constitutes a severe deficiency in the OEWS wage data that conflicts with and undermines the statutory requirement that the H-1B prevailing wage will not adversely affect the wages and working conditions of similarly employed U.S. workers.
Reliance on the OEWS to determine prevailing wages—without an adjustment for fringe benefits—is not an adequate method to set H-1B prevailing wages. If the prevailing wages and benefits for a particular occupation in a particular MSA are, for example, $30 per hour plus $9 per hour in leave, pension, and health benefit costs, but DOL determines the prevailing wage to be simply $30, U.S. workers will be adversely impacted. Employers will be encouraged to hire H-1B workers instead of U.S. workers, saving themselves $9 in benefit costs per hour and putting downward pressure on the locally prevailing compensation. Hiring H-1B workers at $30 an hour for example, with no benefits, would allow employers to underprice labor by 31%–which is the average benefit share of total compensation costs for private industry workers24—and it could encourage employers to replace U.S. workers with H-1B workers, or hire H-1B workers instead of U.S. workers, since employers are not required to recruit and hire U.S. workers before hiring H-1B workers. H-1B workers cannot be expected to complain about this or have the bargaining power to negotiate adequate fringe benefits, because their employers control and have near-total power over their immigration status, and some workers will be also willing to accept the lower compensation, because it will likely be far more than they could earn in their country of origin.
BLS already collects the necessary data to determine the appropriate amount of fringe benefits that should be required as a supplement to the OEWS wages used to set a prevailing wage. The Employer Costs for Employee Compensation (ECEC) report from the BLS “provides the average employer cost for wages and salaries as well as benefits per employee hour worked” for workers in the civilian economy.25 The ECEC reports the total average wages and benefits paid by employers and lists these data as they correspond to broad occupational employment categories. These data are also differentiated according to the average amount paid for the major categories of fringe benefits: paid leave, supplemental pay, insurance, retirement and savings and legally required benefits. The ECEC also reports the average total compensation, wages and salaries, and total costs of fringe benefits paid by employers, broken down by geographic region, census division, and locality.26
Using the aforementioned data sets from the ECEC, DOL can determine the appropriate level of fringe benefits that must be offered and paid to H-1B workers. The ECEC provides data on health and retirement benefits, and wages and wage-related pay such as paid leave and supplemental pay. The wages reflected in the OEWS survey capture the wages and wage-related parts of total compensation. Employers paying wages will already be paying the ‘legally required’ payroll taxes. Therefore, the compensation missing from the OEWS wage rates is the cost of retirement and health benefits, which are about 11% of private sector compensation. The amount of pay reflecting these benefits that employers of H-1B workers should pay can easily be determined by taking the ratio of the sum of health and retirement benefits to the wages paid (the sum of wages, paid leave and supplemental pay). This can be determined for a broad occupational grouping and perhaps done at a regional level as well. This ratio when multiplied by the OEWS wage shows the amount of benefits that would be comparable to that earned in the private sector or civilian sector.
Although the occupational groups and geographic areas listed and reported in the ECEC are not as numerous and detailed as those in the OEWS’s occupational categories and geographical areas, this should not deter the DOL from utilizing these data to calculate the percentage of wages that should be added on as fringe benefits to the OEWS wage. Only a percentage to be added on must be determined – not an exact dollar amount.
Thus, the ECEC data are sufficient to provide DOL–by region and broad occupational group–an average level of insurance and retirement benefits received by employees in that job and in that area. Following precedent from the DBA and SCA, the fringe benefits could be paid by the employer through any combination of a variety of options, such as paid leave, health and life insurance, retirement and savings accounts, etc., or the employer could simply pay the benefits in cash.
A requirement that these fringe benefits be offered to H-1B workers would ensure that the wages and working conditions of similarly employed workers are not adversely affected.
The current DOL compliance guidance on benefits for H-1B workers encourages benefits arbitrage through outsourcing and fissuring. The Wage and Hour Division fact sheet on the subject (#62L) reads, “The employer must offer benefits to H-1B workers on the same basis, and in accordance with the same criteria, as the benefits the employer provides to similarly employed U.S. workers.”27 By defining similarly employed workers as only those directly employed by the H-1B employer, DOL is encouraging benefits arbitrage by outsourcing firms, which can offer substandard benefits to all its employees and still comply with this interpretation of the H-1B rules.
III. ADDITIONAL COMMENTS AND SUGGESTIONS ON SETTING H-1B PREVAILING WAGE RATES
In addition to our responses to DOL’s specific questions, below we discuss additional evidence and analysis that we recommend DOL consider when determining how to update the H-1B prevailing wage.
- The purpose of the H-1B program is to fill labor shortages.
The purpose of the H-1B program is to grant U.S. employers the ability to hire workers from abroad when there are labor shortages in positions that require at least a college degree. DOL describes the purpose of the program this way: “The intent of the H-1B provisions is to help employers who cannot otherwise obtain needed business skills and abilities from the U.S. workforce by authorizing the temporary employment of qualified individuals who are not otherwise authorized to work in the United States.”28
Employers and policymakers, and even U.S. presidents have discussed and promoted the H-1B program in these terms for decades. If the H-1B program was functioning as intended, it would be a valuable tool for complementing the U.S. workforce in H-1B occupations. However, the current administrative framework—and especially the low wages that DOL prevailing wage rules permit employers to pay H-1B workers—have allowed the program to be hijacked by employers who can undercut U.S. wage and labor standards. The countless news reports and government audits about workers being replaced and employers paying low wages, as well as litigation seeking to defend the rights of H-1B workers, are a testament to that.
There is nothing in the H-1B statute or regulations that requires DOL to ensure that employers are able to pay H-1B workers at wages that are far below the local median or average wage. Instead, DOL should pursue an H-1B policy that ensures that the H-1B program does not put downward pressure on wages and labor standards in H-1B occupations; the only way to do that, as we will argue, is to set the Level 1 wage at the 75th percentile, but at the very least, no lower than the local median or average wage for each occupation. And wages in H-1B occupations at the national level should also be considered, to prevent downward pressure on wages nationwide: no H-1B wage should be certified it if it lower than the national average wage for the occupation.
- Definition of “prevailing wage” from the Davis-Bacon Act and Service Contract Act should inform DOL’s crafting of a new H-1B prevailing wage rule.
The two most common understandings of what constitutes a prevailing wage at the federal level come from the Davis-Bacon Act (DBA) and Service Contract Act (SCA). (The current H-1B prevailing wage rule permits H-1B wage rates to be set using prevailing wages from the DBA and SCA wage data sets, if applicable, which makes this a useful and valid comparison.) The DOL website hosts FAQs explaining how DOL determines a prevailing wage for both the DBA and SCA.29 The relevant section from the FAQ on the DBA reads almost identically to the corresponding regulation at 29 C.F.R. § 1.2(a)(1):
23. How are prevailing wage rates calculated?
The following basic rules apply to calculation of prevailing wage rates:
Basic hourly rate. The prevailing wage is the wage paid to the majority (greater than 50 percent) of the workers in the classification on similar projects in the area during the relevant period. If the same wage is not paid to a majority of workers in the classification, then the prevailing wage is the weighted average wage rate.
The relevant section from the DOL FAQ on the SCA reads:
How are prevailing wage determinations developed?
Wage determinations are developed based on available data showing the rates that are prevailing in a specific locality. Where a single rate is paid to a majority (more than 50%) of the workers in a classification of service employees engaged in similar work in a particular locality, that rate is determined to prevail. When information is used from the Bureau of Labor Statistics (BLS) or other surveys, statistical measurements of central tendency (median) and the average (mean) are considered reliable indicators of the prevailing rate. Which of these statistical measurements will be applied in a given case will be determined after a careful analysis of the overall survey, separate classification data, patterns existing between survey periods, and the way separate classification data interrelate. Use of the median is the general rule. However, the mean may be used in situations where, after analysis, it is determined that the median is not a reliable indicator.
Both descriptions from the DBA and SCA prevailing wage methodologies require that if a single rate is used to pay more than half of the workers in an occupation, then that rate is the prevailing wage, and in the alternative, the prevailing wage should be the median wage, or the mean, weighted by the number of workers. It is unlikely that there will be cases where more than half of H-1B workers in an occupation will be paid a single wage, thus the prevailing wage should be the mean or median. But since the H-1B statute requires that DOL generate four wage levels that correspond to experience and education, the H-1B minimum prevailing wage (i.e. Level 1) should not be lower than the mean or median, and Levels 2-4 should be set at higher percentiles in the distribution to account for higher levels of education and experience.
Both the DBA and SCA definitions of prevailing wage include fringe benefits. For example, the definitions section in the DBA defines it to include payment for “medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the forgoing, for unemployment benefits, life insurance, disability and sickness insurance, or accident insurance, for vacation and holiday pay.”30 As discussed above, DOL should also calculate the appropriate rates of fringe benefits and add it to H-1B the prevailing wage salaries that employers must pay to H-1B workers.
- The H-1B statute at 8 U.S.C. 1182(n)(1)(A) requires DOL to set a prevailing wage level that is “based on the best information available” and “will not adversely affect the working conditions of workers similarly employed,” thus DOL must set the prevailing wage no lower than the median and preferably higher to account for downward pressure caused by the H-1B program’s flawed legal framework.
The statute creating the H-1B visa contains language requiring that employers offer to pay their H-1B employees at wage rates that are at least “the actual wage level paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question,” or the “prevailing wage” based on occupation and area of employment that is “based on the best information available,” whichever is higher. And further, the employer must provide the H-1B worker with working conditions that “will not adversely affect the working conditions of workers similarly employed.”31
As far as we know, the language in the statute and the labor condition application (LCA) that requires employers to pay H-1B workers the “actual wage” rate paid by the employer to other employees with similar experience and qualifications,32 has never been enforced. We urge DOL to begin enforcing this provision, as we have urged in earlier publications and public comments we’ve submitted. But until DOL does enforce it, the prevailing wage rules are the only mechanism with which to prevent adverse effects. Getting these rules right is critically important because H-1B workers are at a disadvantage in the workplace vis-à-vis their U.S. counterparts, since H-1B workers have significantly less job mobility based on their temporary and precarious immigration status.
While the prevailing wage requirement is intended to protect the wages of U.S. workers in occupations requiring a college degree from adverse impacts and to prevent college-educated migrant workers from being underpaid and exploited, there is ample evidence to prove that it has fallen short in preventing adverse effects on the working conditions of workers in H-1B occupations, especially with respect to salaries and wages. Corporate lobbyists and other H-1B proponents often cite this prevailing wage requirement in the H-1B law as evidence that H-1B workers cannot be paid less than U.S. workers. However, the reality is that the H-1B statute, regulations, and administrative guidance allow employers wide latitude in setting wage levels,33 and employers are able to game the system with impunity, including by misclassifying workers at inappropriate wage levels.
In order to comply with the statutory requirement that prohibits “adversely affecting” the working conditions of workers in H-1B occupations, the lowest permissible wage in H-1B must be set high enough to avoid downward pressure on wages. By definition, any wage paid to an H-1B worker that is lower than the local median wage will put downward pressure on workers in a specific area and occupation. But the DOL prevailing wage rule allows employers to pay at the 17th and 34rd percentiles, both of which are far below the local median wage. Thanks to data from USCIS in the preamble to the final regulation published in November 2020, we know that at the petition level, 85% of new petitions went to employers paying at wage Level 1 or 2, and 90% of petitions for the advanced degree exemption were awarded to employers paying at wage levels 1 and 2. 34 Since H-1B wage Level 3 is set at the local median wage, and Level 4 is set at the 67th percentile, this means that nearly all new H-1Bs during the past two years were issued to workers being paid at wage levels that are below the local median wage for the occupation (i.e., Levels 1 and 2).
The current DOL prevailing wage rule therefore adversely affects the wages and working conditions of other workers who are similarly employed to H-1B workers.
There are other factors at play that function to adversely impact wages and working conditions, and which DOL must account for in its prevailing wage rule, but until now, has not.
As early as the drafting of the Immigration Act of 1990, Congress was worried about “the problem of H-visa abuse.”35 Subsequently in 1992, the U.S. Government Accountability Office published a report highlighting concerns that the H-1B program was adversely affecting wages and working conditions, and later published reports with similar findings in 2000, 2003, 2006, and 2011,36 also including findings that H-1B workers were victims of wage theft and that many complaints about proper wages being paid were received about companies with an outsourcing business model.
The H-1B program’s legal framework also does not make it easy enough for H-1B workers to switch employers, which causes a power imbalance between employers and workers that can create adverse effects on wages and working conditions. H-1B workers have good reason to fear retaliation and deportation if they speak up about wage theft, workplace abuses, or other working conditions like substandard health and safety procedures on the job because their visa is tied to one employer that owns and controls their visa status. That visa status is what determines the worker’s right to remain in the country; if an H-1B worker loses their job, they lose their visa and become deportable. This arrangement results in a form of indentured servitude where employers can punish H-1B migrant workers for speaking out by firing them or not renewing their visa status, and/or not sponsoring them for permanent residence. Immigration Voice, an advocacy group representing H-1B workers who have approved permanent labor certification (PERM) applications for employment-based green cards, but who still have pending green card petitions, describe their own work status as “indentured servitude.” The group, which submitted a written statement for the record at a recent U.S. House of Representatives hearing, said, “the current system is a legalized form of indentured servitude that promotes the interest of a handful of employers and perpetrates an industrialized process of mass exploitation of skilled Indian immigrants. Such a glorified system of indentured servitude cannot be called a just immigration system.”37
On paper, H-1B workers can change employers, and about 50,000 H-1B workers change jobs every year, according to petition data (approximately 8% of H-1B workers). However, under current regulations an H-1B worker has only 60 days to find a new employer, but that employer must also be willing to sponsor the worker by filing a new H-1B petition with USCIS—which has associated costs in terms of fees and staff time to prepare paperwork, which may also include legal fees—and which may ultimately discourage many employers from hiring H-1B workers. While the portability provisions may be good for H-1B workers seeking new employment while they are still employed, H-1B workers who seek employment after being fired or retaliated against are in a much more precarious position. The specter of being fired or retaliated against then makes it understandably difficult for H-1B workers to complain to their employers and to government agencies about unpaid wages, inappropriately low salaries, and other substandard working conditions.
News reports have also highlighted how the H-1B’s legal framework does not adequately protect H-1B workers, revealing that many in computer occupations, as well as teachers and nurses, have been victimized and put in “financial bondage” by shady recruiters and staffing firms that steal wages, forbid workers from switching jobs or taking jobs the recruiters don’t financially benefit from, and file lawsuits against workers if they try to change jobs or quit.38
Another aspect of the H-1B program’s legal framework that can create adverse effects on wages and working conditions is the fact that H-1B, like other temporary work visa programs, in essence operate in practice to create a labor market monopsony for employers—awarding employers greater leverage over their workers39—and growing research has shown that even modest amounts of employer monopsony power are corrosive to workers’ ability to bargain for better wages.40 In fact, a number of economists have recently described how rising monopsony power in the labor market is an important factor in explaining U.S. wage stagnation. One of those economists, the late Alan Krueger, a professor at Princeton University who served as chairman of the Council of Economic Advisors in the Barack Obama White House, described how the executives of Silicon Valley technology firms were especially eager to use their monopsony power to keep their engineers’ wages low by limiting their opportunities to leave.41 Some of those executives—including Google’s Eric Schmidt, a vocal advocate of H-1B expansion—went so far as to collude with one another by agreeing not to poach each other’s engineers.42 So, especially in the technology industry, employers see limiting worker mobility as an important human resource strategy to keep wages low.43
And finally—as DOL and USCIS have known for well over a decade now—the biggest users of the H-1B program are companies that have an outsourcing business model. These companies exploit the H-1B program’s weaknesses to facilitate the transfer of U.S. jobs offshore as a lower cost alternative to hiring U.S. workers, and sometimes to replace incumbent U.S. workers with H-1B workers who are paid wages that are far below market wage rates. The latest data—for fiscal year 2020—show that of the top 30 H-1B employers, 17 of them were outsourcing firms. Those 17 outsourcing firms alone were issued 20,000 H-1B visas, nearly one-quarter of the total 85,000 annual H-1B limit.44
Outsourcing companies exploit the H-1B program’s weaknesses, which DOL has created, to build and expand a business model based on outsourcing jobs from other companies. In this arrangement, rather than being employed directly by the outsourcing company that hired them, the outsourcer sends its H-1B workers to work for third-party clients, either on- or off-site. The aim of the outsourcing company is ultimately to move as much work as possible abroad to countries where labor costs are lower and profit margins are higher. The H-1B workers serve three purposes in this business model: to facilitate the transfer of jobs and tasks offshore; to coordinate offshore teams; and to serve as a lower cost alternative to hiring U.S. workers for on-site jobs. H-1B outsourcing companies also replace incumbent U.S. workers45 with H-1B workers and typically pay their H-1B workers the lowest wages permitted by law, far below market wage rates.46 As a result, it is obvious that the outsourcing firms utilizing the H-1B program are adversely affecting wages and working conditions in H-1B occupations, which is also why numerous legislators have proposed fixes targeting the use of the program by those firms.
The statutory requirement for DOL to set a prevailing wage level that is “based on the best information available” and “will not adversely affect the working conditions of workers similarly employed,” requires DOL to take into account how skewed the H-1B program has been towards the lowest wage rates, as well as the vulnerabilities of H-1B workers that have allowed H-1B employers to use the program in ways that adversely affect wages and working conditions, as well as the outsourcing and offshoring of jobs in major H-1B occupations that the H-1B program has facilitated. As a result, DOL must set the H-1B prevailing wage at a level that is high enough to account for the downward pressure on wages and labor standards caused by the H-1B program’s flawed legal framework and wage rules and use by outsourcing firms.
- DOL and USCIS data suggests wage level misclassification is a major problem and neither DOL nor USCIS are working to resolve it.
Our report in May 2020 found that, according to of DOL disclosure data, 60% of H-1B positions certified by DOL were assigned at wage levels 1 and 2, both of which are well below the local median wage for the occupation. Our unpublished analysis of 2020 data found that the total at wage levels 1 and 2 was 57%, virtually unchanged from the previous year.47 As mentioned earlier, data from USCIS in the preamble to their final regulation on allocating petitions by wage level, published in November 2020, showed that at the petition level, the number of approved H-1B workers at the two lowest wage levels is even higher, with 85% of new petitions were awarded to employers paying at wage Level 1 or 2—and 90% of petitions for the advanced degree exemption awarded to employers paying at wage levels 1 and 2.48 Since H-1B wage Level 3 is set at the local median wage, and Level 4 is set at the 67th percentile, this means that nearly all new H-1Bs during the past two years were issued to workers being paid at wage levels that are below the local median wage for the occupation (i.e., Levels 1 and 2).
This means that 85% to 90% of H-1B workers are “entry-level” workers according to DOL’s definition, or at the next skill and wage level just above that. But data on the characteristics of H-1B workers suggest that many of those workers assigned at low wage levels actually possess skills and experience that would require them to be assigned wages higher than Levels 1 and 2. In fact, as noted earlier, there is evidence that employers have systematically misclassified skill levels for their H-1B workers.
It’s worth reiterating that aggregate H-1B data reported by USCIS on experience and education do not match the skill level claims made by employers on the DOL’s LCA. In fiscal year 2020, USCIS reports that nearly three-quarters, 72%, of approved H-1B beneficiaries were aged 30 years or older, and 40% of H-1B workers were 35 or older—a significant indicator that those workers already possess at least six to eight years of experience. Such ages indicate substantial experience warranting skill/wage levels of 3 and 4. Further, H-1B workers’ educational levels, which are an important determinant of skills, indicate they should be filling higher-skilled positions. USCIS also reports that a majority, 64%, of H-1B workers hold an advanced degree (Masters, Doctorate or Professional), which indicate that a majority (more than three-fifths) of H-1B workers have the educational attainment and/or years of experience to fill positions at wage Levels 3 and 4.49 Yet, for fiscal 2020, DOL disclosure data show a mere 35% of all approved positions on LCAs were for skill/wage levels 3 and 4.50
The fact that, as just noted above, 90% of petitions for the 20,000 H-1B visas awarded under the advanced degree exemption were awarded to employers paying at wage levels 1 and 2, is shocking. By definition, 100% of H-1B workers who had a petition approved under that part of the H-1B cap possess at least a Master’s degree—and therefore close to 100% of those H-1B workers should be classified at skill and wage levels 3 and 4.
These data suggest it is likely that H-1B employers are underpaying many, if not most, workers relative to their skill levels, and since DOL’s guidance lacks in details—and in any case DOL conducts no oversight into whether or not H-1B positions are assigned at the correct wage levels at the LCA stage—employers are able to misclassify H-1B workers at inappropriate wage levels with impunity. As a result, DOL must investigate the discrepancies between the skill levels reported on LCAs and the experience and education levels for actual workers approved on those LCAs. Otherwise, the entire of process of setting required wages to protect labor standards is undermined. An audit should therefore be conducted using the methodology described in the Prevailing Wage Determination Policy Guidance, which was issued in November 2009.51
We offer one recent real-world example as evidence of how the current system is failing. Uber, the 29th-ranked H-1B employer in 2019, had 5,708 H-1B positions certified by DOL. Less than 1% were assigned as Level 1 and just over half (53%) as Level 2. Just over one-third were assigned as Level 3 and 13% as Level 4. While Uber had 5,708 H-1B positions certified by DOL and hired 1,160 H-1B workers in 2019, in the same year Uber made headlines by laying off 400 employees, including 125 software engineers, nearly half of whom were “senior” software engineers. The firm was hiring H-1B workers for the same types of positions it was conducting mass layoffs of. According to analysis by Ron Hira reported in The Mercury News, 1,800 of the certified H-1B positions were for “new software engineer jobs and about 1,500 for new senior software engineer jobs.” Uber’s wage-level classification for positions the firm identified as senior is questionable. The Mercury News article reported that “Uber’s applications put nearly half the senior software engineer positions at the Labor Department’s ‘Level 2’ wages, the same level it listed for more than half of the non-senior jobs.”52 The DOL’s prevailing wage guidance clearly states that, “Frequently, key words in the job title can be used as indicators that an employer’s job offer is for an experienced worker. Words such as ‘lead’ (lead analyst), ‘senior’ (senior programmer) … would be indicators that a Level  wage should be considered.”53 This illustrates the major weaknesses in the LCA. The employer has discretion over picking the wage level and DOL does not ensure compliance.
- DOL must put measures in place that would prevent employer misclassification of H-1B workers at the wrong wage levels.
While each skill/wage level is intended to correspond to the H-1B worker’s education and experience, in practice the employer gets to choose the wage level and DOL does not verify that a prevailing wage is appropriate unless a lawsuit or a complaint is filed by a worker. Such complaints are unlikely since it would require an H-1B worker to blow the whistle on their own employer, the same employer that controls the H-1B worker’s visa status and ability to remain in the United States. We are unaware of any cases in which DOL has investigated an LCA-stage misclassification of an H-1B wage level, but—as just discussed above—there have been reports of H-1B employers receiving approval for LCAs that certify they will pay employees at the same prevailing wage level despite having job titles that clearly warrant different wage levels.
In the example of Uber in the previous section, Uber received approval for two different LCAs at the same wage level (Level 2) even though one LCA had the job title Senior Software Engineer and the other had the job title Software Engineer.54 The fact that Uber, which is a major employer of H-1B workers, is not accounting for differences in skill levels is evident from its own job titles when selecting the LCA wage level. Both engineers and senior engineers are receiving the exact same salary and wage level, and they are approved by DOL with apparently little scrutiny. Using the DOL Prevailing Wage Determination Policy Guidance, the LCAs in this case should be instantly flagged by identifying keywords like senior, head, chief, and lead within job titles, and should be checked to determine if the prevailing wage levels are appropriate. This example points to a larger need for DOL to create a more robust compliance system to ensure that employers do not misclassify workers at inappropriate wage levels.
As a result, the H-1B application and petition process should be updated so that DOL reviews the qualifications of individual workers before USCIS approves an H-1B petition, to ensure that wage levels match up with the age, education, and experience of H-1B workers. While USCIS currently performs this role to some extent, USCIS adjudicators lack expertise in wage and hour issues and do not have the same mandate to protect labor standards as DOL staff, and USCIS staff did not craft DOL’s Prevailing Wage Determination Policy Guidance. Therefore, these functions should be undertaken by the proper agency. DOL and USCIS already have a mandate to cooperate on H-1B applications and enforcement; a memorandum of understanding between the Secretaries of Homeland Security and Labor could detail a process where DOL plays a prominent role in ensuring that H-1B workers are classified at the appropriate wage levels. Updating DOL’s published guidance on H-1B skill levels so that it is more detailed, clearer, and more realistic, would also be helpful for everyone involved—employers and adjudicators alike.
DOL should promulgate a new H-1B wage rule that sets Level 1 at the 75th percentile and Level 4 above the 90th percentile and prohibit certification of any H-1B wage that is lower than the national average for the occupation.
The purpose of the H-1B program is to allow employers to hire workers with specialized skills that are not available in the existing local workforce.55 Specialized skills should command high wages; such skills are typically a function of inherent capability, education level, and experience. It would be reasonable to expect that these workers should receive wages higher than the median wage. One would therefore expect most H-1B positions to be assigned as Level 4 (the only wage level above the median), but as DOL and USCIS data show, H-1B employers as a whole assign only a very small minority of H-1B positions as Level 4: just 12% of positions in 2019 and 13% in 2020 were assigned at Level 4,56 and in 2019 and 2020, only 4% of approved petitions for new employment under the regular cap were assigned at Level 4 and only 2% of approved new H-1B petitions under the advanced degree exemption cap were assigned at Level 4.57
The data presented in our reports over the past decade and more recently, the data reported by USCIS on the distribution of H-1B petitions by wage level, all point to the obvious fact that all H-1B employers, but especially the largest employers, use the H-1B program either to hire relatively lower-wage workers (relative to the wages paid to other workers in their occupation) who possess ordinary skills or to hire skilled workers and pay them less than the true market value of their work. Either possibility raises important policy questions about the use and allocation of H-1B visas.
By setting two of the H-1B prevailing wage levels so low relative to the median and not requiring that firms pay at least market wages to H-1B workers, DOL has incentivized firms to earn extraordinary profits by legally hiring much-lower-paid H-1B workers instead of workers earning the local median wage. The fact that firms earn those profits through poorly crafted wage rules and by underpaying H-1B workers—instead of by offering a better or more innovative product or service—means DOL has in effect made wage arbitrage a feature of the H-1B program. And as the wage-level data we have reported on and cite here clearly shows, nearly all H-1B employers are exploiting these H-1B wage rules in order to pay below-median wages.58 We believe that the evidence is clear that these firms are not using the H-1B program sparingly to hire truly specialized workers and they are not using it only when U.S. workers are unavailable.
So how should DOL set a wage rule that guards against this and complies with the statutory requirement to prevent adverse affects on wages and working conditions?
The existing statutory language that sets out the H-1B prevailing wage requires that there be four H-1B wage levels, but it does not prescribe specific percentiles, and no law requires DOL to set any of these prevailing wage levels below the local median wage. To ensure that H-1B workers possess specialized skills and are fairly paid, and to protect local wage standards and eliminate wage arbitrage as a feature of the H-1B program, DOL should promulgate new regulations and issue administrative guidance that sets the lowest (Level 1) wage to the 75th percentile for the occupation and local area, and require that wage offers to H-1B workers never be lower than the national median wage for the occupation, in order to prevent downward pressure on wages nationwide.
Requiring and enforcing above-median wages for H-1B workers would disincentivize the hiring of H-1B workers as a money-saving exercise, ensuring that companies will use the program as intended—i.e., to bring in workers who have special skills—instead of using H-1B as a way to hire underpaid indentured workers for jobs that require at least a college degree.
The highest H-1B wage level (Level 4) should be set somewhere above the 90th percentile, to protect higher wage earners in H-1B occupations from the downward pressure and adverse effects that would result if the highest skilled H-1B workers are paid below that. (The formula that DOL is required to use may determine the exact percentile required at Level 4, which is why we do not recommend an exact percentile, just that it be above the 90th.)
And as discussed above, DOL should develop a methodology for calculating and adding additional salary to account for fringe benefits, which are not currently included in the OEWS wage data that are used to set H-1B wage rates. Using the Employer Costs of Employee Compensation (ECEC) reports, DOL can easily calculate a percentage or set of percentages that correspond to the appropriate fringe benefits that should be offered to workers in major occupational classifications or industries. As we discussed above, based on the latest ECEC report, adding 11% of salary for insurance and retirement benefits would be a good starting point for H-1B workers in the private sector. Adding fringe benefits or the equivalent in salary is also important from an equity standpoint, because under current law many H-1B workers will never be able to draw any benefit from the taxes that they pay into the Social Security program.
- DOL should end the practice of allowing the use of alternative sources of wage data, including private wage surveys, to set H-1B prevailing wages.
Under the main prevailing wage regulation language at 20 C.F.R. §655.731, an employer has several options at their disposal to determine a prevailing wage for an LCA—which, as we discussed above—permit employers to use a wage set by an independent authoritative source or another legitimate source of wage data.
Therefore, employers do not need to use the OFLC’s calculations of OEWS data in the Foreign Labor Certification Data Center database to determine a prevailing wage for an LCA. Setting the Level 1 wage at the 75th percentile and Level 4 at above the 90th percentile would fix the longstanding problems of how the prevailing wage was determined using the OFLC-generated OEWS wage rates, but such a rule would remain silent on an employer using an independent authoritative source or another legitimate source of wage data, which include private wage surveys accepted by DOL. Standards for such alternative sources of wage data are described in 20 CFR § 655.731, but it remains unclear how such sources compare to OFLC-generated OEWS prevailing wages. In 2019, at least 9% of all certified wages for H-1B positions on LCAs were set by a private wage survey or other source accepted by the OFLC as legitimate.
In order to comport with the statutory requirement that H-1B employers “will provide working conditions for [H-1B workers] that will not adversely affect the working conditions of workers similarly employed,”59 DOL should promulgate new rules to ensure that the alternative wage sources are no longer used to set H-1B wage rates and undermine U.S. wage standards. If DOL decides against immediately eliminating the ability of employers to use alternative wage sources like private wage surveys to set H-1B wages, then at the very least, DOL should conduct a study to benchmark the use of alternative wage data and private wage surveys against the OFLC-generated OEWS prevailing wages, to identify whether there are any systematic biases in such sources. The results should be published to promote transparency, and if such biases are found—which we believe is a likely outcome—DOL should take the appropriate step of eliminating what amounts to a low-wage loophole in the H-1B prevailing wage rule.
The recent history of the use of private wage surveys to set wages in the H-2B visa program—a temporary work visa program for jobs outside of agriculture including in landscaping, forestry, hospitality, and construction—is instructive and should inform DOL’s review of wage surveys and other sources of wage data for setting H-1B wages. The evidence is clear in the H-2B context that when employers use private wages surveys, they primarily use them to pay lower wages than would otherwise be required.
In 2013 when DOL raised the minimum H-2B prevailing wage from the 17th wage percentile to the mean wage for the occupation and local area, H-2B employers, immediately and en masse, shifted their business model to use private wage surveys to set H-2B wage rates at below-average wage rates. Evidence revealed in federal litigation clearly suggests that the shift to the use of private wage surveys was a systematic response to higher wage rates, and one that was clearly successful. Specifically, in the nine months beginning soon after the H-2B wage rule was updated—between July 1, 2013, and March 31, 2014—employers increased their submissions of private wage surveys for H-2B prevailing wage determinations by 3,182%, as compared with the 12 months leading up to the federal court decision that invalidated the previous H-2B wage rule. In 21.1% of those prevailing wage determinations set by private wage surveys, the certified H-2B wage was lower than the previous prevailing wage system where the Level 1 H-2B prevailing wage was set at the 17th percentile wage by occupation and local area, according to OFLC-generated OES wage survey data, and 94.4% of the determinations were for a wage that was lower than the Level 2 wage, at the 34th percentile.60
Despite the fact that the H-2B prevailing wage has been set at the local average wage and DOL restricted the use of private wage surveys in 2015, they are still commonly used and successful at lowering wages for H-2B workers. One clear example of this which has been detailed, is a group of H-2B workers employed as crabpickers in Maryland—they earned roughly 25% less per hour than they should have been paid according to the local corresponding OES wage.61 As noted above, the similar private wage survey component of the H-2B wage rule was recently challenged in court,62 and it’s possible that the rule could be subject to challenge in the H-1B program if private wage surveys are found to be undercutting U.S. wage standards.
- DOL has failed to enforce the “actual wage” component of the H-1B prevailing wage rule and should begin enforcing it immediately.
Under the prevailing wage statute, although an employer has several options at their disposal to determine a prevailing wage for an LCA, they must offer the higher of either the prevailing wage or the “actual wage,” which the corresponding regulation at 20 C.F.R. §655.731 defines as “the wage rate paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question.”
As far as we know, to date, this key provision of the H-1B wage rule has never been enforced. In order to ensure that H-1B employers are not undercutting the wage rates they pay H-1B workers, DOL should immediately begin enforcing this requirement. DOL could easily do so by requiring H-1B applicants to submit evidence documenting the wage rates paid to U.S. workers who are similarly employed in occupations for which the employer is also hiring H-1B workers. Secondary employers should also have to submit LCAs and evidence documenting the wage rates paid to U.S. workers in the occupations that H-1B workers will be hired for through an outsourcing firm. Otherwise, H-1B outsourcing firms—which almost exclusively pay H-1B workers at the two lowest wage level, and employ H-1B and L-1 workers almost exclusively—will be able to game the system by using the actual wage paid to their own employees to meet the requirement, and not the employees of the secondary employer, where the H-1B workers will be placed—and where wages paid to the U.S. workforce are likely to be higher.
- DOL should require secondary employers of H-1B workers to attest that they will not adversely affect wages and working conditions.
Outsourcing companies are using the H-1B program to underpay H-1B workers, replace U.S. workers, and send tech jobs abroad. Typically in this scenario, H-1B workers do computer and engineering work at the office of a U.S. employer but are employed by an outsourcing company, some of which are based abroad or have major operations abroad.63 The many reported cases of U.S. workers being laid off and replaced by H-1B workers have all been facilitated by this arrangement. In multiple incidents, the H-1B workers have been hired with annual wages of around $30,000 to $40,000 less than the workers they have replaced. Before they are laid off, the U.S. workers are often forced to train their own H-1B replacements as a condition of their severance packages; this is euphemistically known as “knowledge transfer.” Major, profitable U.S. employers like Disney and Toys “R” Us—as well as public employers and institutions like the University of California and Southern California Edison—have laid off thousands of U.S. workers who were forced to train their own replacements. Eventually, many of the outsourced jobs filled by H-1B workers get moved offshore.64
Contrary to the popular narrative proffered by corporations that support expanding and deregulating the H-1B visa program—the staffing firms that use H-1B visas are not using them to keep technology jobs in the United States—instead they are using them precisely to facilitate the offshoring of as many of those jobs as they can. That is in fact, the business model of those firms. News reports, including from the New York Times, have shown that outsourcing companies “game the system” in order to obtain a high share of H-1B visas, which leaves fewer available for the firms that directly employ H-1B workers.65
The outsourcing/staffing model of employment generally may increase the incidence of labor law violations by separating the main beneficiary of the labor provided by H-1B workers—the third-party firm that hires the outsourcing firm, i.e. the “lead” employer—from the H-1B workers who perform the work. Firms that rely on outsourced H-1B workers are a textbook (if extreme) example of what former DOL Wage and Hour administrator (and now current WHD administrator nominee) David Weil calls a “fissured” workplace, where the relationship between the worker and the lead employer is fissured, or broken, via the use of a temp agency or subcontractor66 (in this case the temp agency or subcontractors are the H-1B outsourcing firms). Research shows that fissuring leads to a wage penalty for workers who are subcontracted, employed as temps, and work for staffing firms,67 in part because the subcontractor keeps a percentage of the wages earned by the workers. It is also common knowledge that employers use this model to avoid paying for benefits like health care, retirement funds, and to avoid liability for labor violations. Because the staffing and outsourcing model contributes to the fissuring of the labor market, it should not be allowed as part of the U.S. immigration system—not in H-1B or in any other temporary or permanent immigration programs.
One way to address the abuses of the outsourcing/staffing firms, which operate as secondary employers, would be to issue policy guidance and update the appropriate DOL ETA application forms so that secondary employers to which H-1B workers are outsourced will be required to file Labor Condition Applications with DOL. Such guidance, which was recently considered but then abandoned,68 would close the loophole that allows firms like Disney and Southern California Edison to replace its U.S. employees with H-1B workers by employing them through an outsourcing firm.69 Using Disney as an example, implementing this rule would require client firms like Disney —that benefit and profit from hiring outsourcers—to acknowledge their employment relationship with H-1B workers who are employed by outsourcers like Infosys and Tata, by requiring Disney to file its own LCA. By doing so, Disney would attest that hiring the H-1B worker through the outsourcer is not adversely affecting the wages and working conditions of the Disney workforce.
- Because no labor market test exists and employers can easily misclassify H-1B workers at inappropriately lower wage levels, the prevailing wage rule is the only real protection available against adverse effects on wages and working conditions.
Unlike some other temporary work visa programs, the H-1B does not have a key labor force protection: a labor market test that requires employers to advertise and offer jobs to U.S. workers. Employers need not recruit from the U.S. labor force at all, nor demonstrate that a labor shortage exists, before hiring an H-1B worker—in fact, they can ignore the U.S. workforce altogether. Absent a labor market test, the H-1B program is defenseless to abuse unless the required minimum wage rates that must be paid to H-1B workers are set sufficiently high to ensure H-1B workers are complements to, rather than substitutes for, workers in the U.S. labor force. Setting the required wages at a sufficiently high enough level to prevent adverse effects on wages and working conditions is the only mechanism to ensure program accountability and fidelity to the program’s purpose of filling labor shortages. Thus, we urge DOL to issue a new H-1B wage methodology rule that adequately, and finally, protects both U.S. and migrant workers.
We again wish to thank DOL for considering our comments. We also wish to remind DOL that before winning the presidency, candidate Biden was explicit about his support for reforming work visa programs and “strong safeguards that require employers to pay a fair calculation of the prevailing wage.”70 If President Biden is committed to fixing the U.S.’s largest temporary work visa program—to ensure that the program is used to fill labor shortages instead of offshore jobs, and that 600,000 skilled migrant workers are treated and paid fairly—there are a number of actions his administration can take immediately that do not require Congressional approval or new legislation. Promulgating a new H-1B wage rule, with updated wage levels, is the most important action the administration could take to improve the program. We have outlined many of the best ways to do that in this comment, and we would be happy to discuss these proposals further.
Daniel Costa, Esq.
Director of Immigration Law and Policy
Economic Policy Institute
Ron Hira, Ph.D., P.E.
Research Associate Professor, Political Science
2. See for example, Sarah Lynch, “Infosys says cleared in U.S. visa probe by Labor Department,” Reuters, September 8, 2015.
3. See for example, Daniel Costa, Temporary work visa programs and the need for reform: A briefing on program frameworks, policy issues and fixes, and the impact of COVID-19, Economic Policy Institute, February 3, 2021.
5. See 20 CFR § 655.731
6. Daniel Costa, “H-2B crabpickers are so important to the Maryland seafood industry that they get paid $3 less per hour than the state or local average wage,” Working Economics Blog (Economic Policy Institute), May 26, 2017; The H-2B temporary foreign worker program: For labor shortages or cheap, temporary labor? Economic Policy Institute, January 19, 2016.
7. See, Mark Ballard, “Louisiana crawfish workers claim they’re underpaid in suit; they say this labor rule allows it,” The Advocate, April 28, 2021; Texas RioGrande Legal Aid, “Louisiana Seafood Workers Sue to Invalidate U.S. Labor Rule That Allows Employers to Pay Rock-Bottom Wages,” Press Release, April 28, 2021.
8. Authors’ analysis of full year, fiscal year 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal year 2020 (Disclosure Data).
10. See Section A, Question 4 in Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment and Wage Statistics, Frequently Asked Questions.
11. Retrieved May 30, 2021: https://www.flcdatacenter.com/OesQuickResults.aspx?code=15-1132&area=2700002&year=21&source=1
12. Minnesota Department of Labor and Industry, “New Year, New Minimum-Wage Rate as of Jan. 1, 2020,” December 17, 2019.
13. Retrieved May 30, 2021: https://www.flcdatacenter.com/OesQuickResults.aspx?code=17-2071&area=17780&year=21&source=1
16. Employment and Training Administration, U.S. Department of Labor, Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States, Final Rule, 86 Fed. Reg. 3608, January 14, 2021.
17. Since the OEWS survey results already calculate the 90th percentile, we presume it may be less burdensome for DOL to begin using the 90th percentile. But in any case the Level 4 wage should be set no lower than the 90th percentile.
18. USCIS, Characteristics of H-1B Specialty Occupation Workers: Fiscal Year 2020 Annual Report to Congress, U.S. Department of Homeland Security, February 17, 2021.
19. Authors’ analysis of full year, fiscal year 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal year 2020 (Disclosure Data).
20. Authors’ analysis of full year, fiscal year 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal year 2020 (Disclosure Data).
21. U.S. Department of Labor, Employment and Training Administration, Prevailing Wage Determination Policy Guidance, Nonagricultural Immigration Programs, revised November 2009.
22. For the Davis-Bacon Act, see 40 USC §3141(2); and the Service Contract Act at 41 USC §351(a)(2).
23. Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment Wage Statistics, Frequently Asked Questions, at Section C, Number 8.
24. Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2020, March 18, 2021.
25. Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2020, March 18, 2021.
26. See tables, Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2020, March 18, 2021.
27. Wage and Hour Division, “Fact Sheet #62L: What benefits must be offered to H-1B workers,” U.s. Department of Labor, Revised July 2008.
29. Wage and Hour Division, “Davis-Bacon and Related Acts (DBRA): Frequently Asked Questions” and “Frequently Asked Questions Pertaining to the Issuance of Wage Determinations Under the McNamara-O’Hara Service Contract Act (SCA) of 1965, as Amended,” U.S. Department of Labor.
30. Davis-Bacon Act, Section 3141(2)(B).
31. 8 U.S.C. 1182 (n)(1)(A)(i) and (ii).
32. Wage and Hour Division, “Fact Sheet #62G: Must an H-1B worker be paid a guaranteed wage?” U.S. Department of Labor, Revised July 2008.
33. See Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 4, 2020.
34. This includes H-1B petitions set by other sources including private wage surveys which are likely to be even lower than what Levels 1 or 2 require. U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services, Modification of Registration Requirement for Petitioners Seeking To File Cap-Subject H-1B Petitions, 86 Fed. Reg. 1676, at 1720, Table 7, https://www.federalregister.gov/documents/2021/01/08/2021-00183/modification-of-registration-requirement-for-petitioners-seeking-to-file-cap-subject-h-1b-petitions.
35. 1990 U.S.C.C.A.N. 6710, 6724
36. U.S. Government Accountability Office, Immigration and the Labor Market: Nonimmigrant Alien Workers in the United States, GAO/PEMD-92-17, 1992; H-1B Foreign Workers: Better Controls Needed to Help Employers and Protect Workers, GAO/HEHS-00-157, 2000; H-1B Visa Program: More Oversight by Labor can Improve Compliance with Program Requirements, GAO-06-901T, 2006; Reforms are Needed to Minimize the Risks and Costs of Current Program, GAO-11-26, 2011; H-1B Visa Program: Multifaceted Challenges Warrant Re-examination of Key Provisions, GAO-11-505T, 2011.
37. Immigration Voice, Statement for record for the House hearing “Why Dont They Just Get in Line? Barriers to Legal Immigration,” April 27, 2021.
38. See for example, Matt Smith, Jennifer Gollan, and Adithya Sambamurthy, “Job Brokers Steal Wages, Entrap Indian Tech Workers in US,” Reveal News, Oct. 27, 2014; Farah Stockman, “Teacher Trafficking: The Strange Saga of Filipino Workers, American Schools, and H-1B Visas,” Boston Globe, June 12, 2013
39. Bivens and Shierholz broadly define “monopsony power” as “the leverage enjoyed by employers to set their workers’ pay.” See Josh Bivens and Heidi Shierholz, What Labor Market Changes Have Generated Inequality and Wage Suppression?: Employer Power Is Significant but Largely Constant, Whereas Workers’ Power Has Been Eroded by Policy Actions, Economic Policy Institute, Dec. 12, 2018.
42. Mark Ames, “The Techtopus: How Silicon Valley’s Most Celebrated CEOs Conspired to Drive Down 100,000 Tech Engineers’ Wages,” Pando, January 23, 2014.
44. Ron Hira and Daniel Costa, “The H-1B visa program remains the “outsourcing visa”: More than half of the top 30 H-1B employers were outsourcing firms,” Working Economics Blog (Economic Policy Institute), March 31, 2021.
45. See for example, 60 Minutes, “Are U.S. Jobs Vulnerable to Workers with H-1B Visas?” CBS Nes, August 13, 2017.
46. Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 4, 2020.
47. Authors’ analysis of full year, fiscal year 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal year 2020 (Disclosure Data).
48. U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services, Modification of Registration Requirement for Petitioners Seeking To File Cap-Subject H-1B Petitions, 86 Fed. Reg. 1676, at 1720, Table 7, January 8, 2021. This includes H-1B petitions set by other sources including private wage surveys which are likely to be even lower than what Levels 1 or 2 require.
49. USCIS, Characteristics of H-1B Specialty Occupation Workers: Fiscal Year 2020 Annual Report to Congress, U.S. Department of Homeland Security, February 17, 2021.
50. Authors’ analysis of full year, fiscal year 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal year 2020 (Disclosure Data).
51. U.S. Department of Labor, Employment and Training Administration, Prevailing Wage Determination Policy Guidance, Nonagricultural Immigration Programs, revised November 2009.
52. Ethan Baron, “H-1B: Uber Snatches Up More Foreign-Worker Visas as It Lays Off Hundreds of Employees,” Mercury News, October 17, 2019.
53. U.S. Department of Labor, Employment and Training Administration, Prevailing Wage Determination Policy Guidance, Nonagricultural Immigration Programs, revised November 2009.
54. Ethan Baron, “H-1B: Uber snatches up more foreign-worker visas as it lays off hundreds of employees,” Mercury News, October 17, 2019.
56. Authors’ analysis of full year, fiscal year 2019 and 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal years 2019 and 2020 (Disclosure Data). Analysis of fiscal 2019 data available in Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 4, 2020.
57. U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services, Modification of Registration Requirement for Petitioners Seeking To File Cap-Subject H-1B Petitions, 86 Fed. Reg. 1676, at 1720, Table 7, June 8, 2021.
58. See for example, Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 4, 2020.
60. See discussion of the 2013 Interim Final Rule setting the H-2B prevailing wage methodology in Daniel Costa, The H-2B temporary foreign worker program: For labor shortages or cheap, temporary labor? Economic Policy Institute, January 19, 2016.
61. Daniel Costa, “H-2B crabpickers are so important to the Maryland seafood industry that they get paid $3 less per hour than the state or local average wage,” Working Economics (Economic Policy Institute blog), May 26, 2017.
62. See, Mark Ballard, “Louisiana crawfish workers claim they’re underpaid in suit; they say this labor rule allows it,” The Advocate, April 28, 2021; Texas RioGrande Legal Aid, “Louisiana Seafood Workers Sue to Invalidate U.S. Labor Rule That Allows Employers to Pay Rock-Bottom Wages,” Press Release, April 28, 2021.
64. See for example, Stef Kight, “U.S. companies are forcing workers to train their own foreign replacements,” Axios, December 29, 2019; Julia Preston, “Pink Slips at Disney. But First, Training Foreign Replacements,” New York Times, June 3, 2015; Julia Preston, “Toys ‘R’ Us Brings Temporary Foreign Workers to U.S. to Move Jobs Overseas,” New York Times, September 29, 2015; Michael Hiltzik, “How the University of California Exploited a Visa Loophole to Move Tech Jobs to India,” Los Angeles Times, January 6, 2017; Patrick Thibodeau, “Southern California Edison IT Workers ‘Beyond Furious’ over H-1B Replacements,” Computerworld, February 5, 2015.
65. Julia Preston, “Large Companies Game H-1B Visa Program, Costing the U.S. Jobs,” New York Times, November 10, 2015.
66. David Weil, The Fissured Workplace: How Work Became So Bad for So Many and What Can Be Done to Improve It, Harvard, 2014.
67. A number of studies show a wage penalty for subcontracted/outsourced workers. For example, see Arindrajit Dube and Ethan Kaplan, “Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards,” Cornell University ILR Review. January 1, 2010); Deborah Goldschmidt and Johannes Schmieder, “The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure,” The Quarterly Journal of Economics, Oxford University Press, vol. 132(3), 2017, pages 1165-1217; Andres Drenik, Simon Jäger, Pascuel Plotkin, and Benjamin Schoefer “Paying Outsourced Labor: Direct Evidence from Linked Temp Agency-Worker-Client Data,” Econometrics Laboratory, University of California, Berkeley, September 2020.
68. Employment and Training Administration, U.S. Department of Labor, “U.S. Department of Labor revises interpretation, issues new guidance clarifying filing, compliance requirements in H-1B visa program,” Press Release Number 21-97-NAT, January 15, 2021.
69. Julia Preston, “Pink Slips at Disney. But First, Training Foreign Replacements,” New York Times, June 3, 2015.
70. Biden-Harris campaign website, “The Biden plan for securing our values as a nation of immigrants.”