Do H-1B workers drag US salary levels down?

First, I think it's obvious that some H-1Bs are being paid much less than their American counterparts.  By law, companies are required to pay their H-1B employees in accordance with the "prevailing wage" for that job; however, determining the prevailing wage can be highly subjective and rife with loopholes. For example, a company can give its H-1B applicants a job title that does not accurately reflect his job duties.  In addition, prevaling wage determinations (by necessity) rely on a fairly coarse means of classifying an applicant's job level and classification, which gives companies some leeway in deciding how to file their job descriptions.

Furthermore, stories abound of high-tech companies that hire foreigners from so-called "job shops" – consulting firms that specialize in supplying low-paid H-1B workers, typically from India.  Accurate figures can be difficult to find, as these reports typically come from either anecdotal sources or a government audit that was performed in 1996; however, these stories cannot be easily discounted either. I myself once worked with two programmers (one Indian, one Pakistani) who had been recruited by such an outfit, where they had been paid embarassingly low wages.

Nevertheless, while such exploitative acts do occur, I think that the extent of this problem has been vastly overblown.  Various studies indicate that H-1Bs are paid much less than American workers are; however, these studies are typically conducted by special interest groups that oppose the H-1B program.  No definitive governmental investigation has yet proven these statistics to be true.

In addition, I think it's clear that such studies are based on questionable statistics and a grave midunderstanding of the H-1B laws.  Most notably, they fail to consider that your typical H-1B visa holder will be a recent graduate, and thus, relatively young.  It should therefore be no surprise that they will earn less than many Americans who work in the same field.  In fact, the National Science Foundation (NSF) reports that foreign-born professionals actually earn more than their American counterparts when one compares individuals with the same ages and degree levels, and when one considers the year in which these degrees were granted.

Additionally, when critics complain that H-1B laborers are underpaid, these allegations are typically based on either anecdotal evidence or the prevailing wage declarations that were filed for those H-1B applications.  Anecdotal evidence only pertains to individual cases though, and is notoriously unreliable.  It also says nothing about H-1B cases on the whole.  As for prevailing wage declarations, these figures only indicate the minimum wages that employers are allowed to pay; they don't indicate the salary levels that are actually paid.

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

In fact, hiring H-1B applicants can be much more expensive than hiring a native-born worker.  When hiring a US citizen, the costs generally stop with the job offer; not so with H-1B visa applicants.  Hiring on an H-1B basis typically requires nearly $6000 in additional legal and government fees – and that doesn't even include the cost of the extra work required from in-house human resource personnel.  If the employee seeks green card sponsorship, this can require an additional $10,000-or more, if it requires continuous H-1B extension beyond the standard six years.  On top of that, sponsoring for an H-1B visa or a green card can be a risky proposition with no guarantee of success.  Perhaps some companies do sponsor H-1B holders in order to save money, but if so, these savings are greatly offset by the additional expenses and legal headaches involved.

Additionally, other statistics contradict the claim that foreigner high-tech workers earn much less than Americans do.  Similarly, a study by Center for Labor Market Studies at Northeastern University reports that foreign-born and native professionals in math and the sciences earn virtually identical salaries.  The same study showed that in mathematics and computer science, salary levels were roughly the same for master's degree holders, and were actually higher for the bachelor's degree and doctorate holders. Salary levels were comparable for at all three levels within the life sciences.  Native-born American engineers with bachelor's or master's degrees admitedly earned more than than their foreign-born counterparts; however, the situation was reversed when it came to doctorate holders. 

So are H-1B visa holders paid much less than US workers?  Sometimes, that is indeed true.  On the whole though, I think that this alarmist claim is greatly overblown, and we have good reason to believe that they are generally paid well.  For this reason, I think we should not be quick to conclude that this influx of H-1B workers is dragging salary levels down.

About the Author:

V B Velasco Jr works for a small biotechnology firm that provides ELISPOT readers, ELISPOT assay services, and CEF peptide pools.