Drawing a Link Between Guest-Worker Programs and Depressed Wages

Experts debunk flawed H-1B visa study, conclude 'not worthy' of Pew Research Center

Reviewing data released by the federal government, the Pew Research Center last week concluded that U.S. companies planned in fiscal year 2016 to pay high-end guest workers salaries that exceed those earned by comparable American workers.

The median salary stated on applications for H-1B visas was $80,000, up 15 percent from the $69,445 median in fiscal year 2007. For all U.S. workers in math and computer fields, the median salary — which 10 years ago was higher than the pledged pay to H-1B recipients — was $75,036 last year.

The Pew report pointing to rising salaries for H-1B workers bolsters the argument of technology firms that more H-1B visas are needed to meet a critical shortage of workers and undercuts the contention by critics that companies use the guest-worker program to drive down wages.

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But several experts faulted the Pew report on a number of grounds. Measuring H-1B workers against all U.S. math and science workers is an apples-to-oranges comparison, they said. Some job positions in math and science are not eligible to be filled by H-1B workers. Companies also must pay H-1B workers at least $60,000 a year for many occupations. But a number of low-level information technology jobs held by Americans pay less than that, which lowers the average income for all U.S. workers in math and science fields.

Experts said Pew should have controlled for those factors, as well as age, since H-1B workers tend to be younger.

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“They ought to know better,” said Hal Salzman, a professor of planning and public policy at Rutgers University in New Jersey. “I’m really thinking about why these experienced researchers wouldn’t have done a more careful analysis … It’s not worthy of Pew or experienced researchers to put out.”

Created by Congress in 1990, the H-1B visa is the primary way that high-skilled foreigners come into the United States for jobs. The government awards 85,000 of the visas each year to companies. They are good for up to six years and can be extended for H-1B workers with pending green card applications.

[lz_table title=”Guest-Worker Demand” source=”U.S. Citizenship and Immigration Services”]H-1B Petitions
|Fiscal Year,Filed,Approved*
*Total approved even if petition was filed in previous year.

Salzman said companies could hire Americans for low-level jobs such as technology writer and use H-1B workers for higher-level jobs such as software developers and computer programmers. Under that scenario, the H-1B workers would make more than the American workers but still command less money than Americans would in the positions they occupy.

A real-world example of this occurred in 2015 when Southern California Edison laid off about 400 American employees and replaced them with H-1B workers employed by a pair of outsourcing firms based in India, Infosys and Tata Consultancy Services.

According to a compensation study by the consulting firm Aon-Hewitt, Southern California Edison was paying an average annual base salary of $110,446 to its American information technology employees in fiscal year 2013. The average H-1B worker from Infosys that year made $70,882, while the average Tata H-1B worker made $65,565.

“That’s a huge discount,” said Ron Hira, a Howard University professor and research associate at the liberal-leaning Economic Policy Institute.

‘This is the Whole Business Model’
Hira pointed to a string of news stories over the past couple of years highlighting the same practice — big corporation fires high-wage American tech workers and replaces them with cheaper guest workers from outsourcing firms. Recent examples include Disney, Toys ‘R’ Us, Abbott Labs and EmblemHealth. Even public sector workers are not immune. The University of California, San Francisco, laid off 80 tech employees last year after signing a contract with the same outsourcing firm that Disney hired.

“This is the whole business model,” Hira said. “Everybody knows this.”

Steven Camarota, director of research at the Center for Immigration Studies, raised another flaw with the Pew report: It does not account for wide variation of salaries by geography. The government reports H-1B data by the location of the company that applies for the visa and not where the employees actually work. So breaking out precise comparisons within a specific region is not possible.

But Camarota said it is well-known that H-1B workers tend to be heavily concentrated in the Silicon Valley of California, Northern Virginia in the Washington suburbs and other areas where the cost of living — and, therefore, salaries — is extremely high. But that is not where most U.S. math and science workers live. They are more spread out across the country.

[lz_table title=”Top H-1B Countries” source=”U.S. Citizenship and Immigration Services”]Birth country of petitioner*
|Country,FY 2015,FY 2016
South Korea,3.5K,3.6K
United Kingdom,2.2K,2.1K
*Includes new petitions and renewals.

Camarota said a comparison of salaries between American workers and H-1B employees would be more meaningful if they worked in the same metro area.

Camarota also pointed to another apples-to-oranges problem. The H-1B data represent salaries companies say on visa applications that they will pay, while the data for all U.S. math and science workers comes from the Current Population Survey, conducted by the Census Bureau for the Labor Department.

“I have lots of questions, but those are my immediate thoughts,” Camarota said.

[lz_table title=”Guest-Worker Salaries” source=”U.S. Citizenship and Immigration Services”]Top-paid H-1B Occupations
|Occupation,Median Salary*
Law & Jurisprudence,$115K
Life Sciences,$106K
Social Sciences,$100K
Arch. & engineering,$87K
Medicine & Health,$86K
All Occupations,$82K
*What employers planned to pay in FY 2016.

Salzman pointed to what he regards as the definitive H-1B study that does make an apples-to-apples comparison. That study, updated last year by a tax analyst at the Treasury Department and two other researchers, examines IRS tax data of firms that obtained H-1B workers through the lottery selection run by the government and similar companies that applied for H-1B visas but did not get them.

Salzman said the study is superior to others because it includes actual salary data reported to the IRS — and not figures derived from surveys — and compares workers with similar job descriptions employed by similar companies in fiscal years 2006 and 2007.

Lower Salaries, Higher Profits
The study concluded that winning additional H-1B visas led to a modest increase in overall employment at a company, crowding out employment of other workers. Winning firms had an insignificantly better performance in the number of patents won and in use of a research and experimentation credit. That suggests that the argument that foreign workers are top talents that fuel innovation is, at best, exaggerated.

There is additional evidence that additional H-1B visas lead to lower average earnings by employees and higher profits for the firms, according to the study.

Salzman said those results are exactly what one would expect if the goal of companies was to cut costs and boost profits. Rather than fuel innovation and spark a surge in additional hiring, he said, the evidence is that H-1B visas serve as a wealth transfer from employees to business owners.

Hira said the most significant part of the Pew report is that wages for all U.S. math and science workers have barely budged in a decade. It mirrors wage stagnation for the U.S. economy overall — despite the fact that the official unemployment rate is just 4.3 percent.

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“As far as I can tell, U.S. workers haven’t gotten a raise in over a decade,” he said. “How can there be a shortage [of workers] and no raise? That’s simple supply and demand … I think the biggest headline that everybody is missing is that U.S. workers have’t gotten a raise.”

While the debate over the impact of H-1B visas on wages and jobs rages on, one conclusion from the U.S. Citizenship and Immigration Services is undeniable — demand for guest workers has never been higher. Applications by businesses for H-1B visas jumped from 246,126 in fiscal year 2009 to 399,349 in fiscal year 2016. Employers have applied for a total of 3.4 million visas from fiscal year 2007 through the first three months of this year.

Donna Conroy, founder of the advocacy group Bright Future Jobs, said it is irrelevant what H-1B salaries are if companies use the program to avoid hiring Americans. She noted that the salaries of white men were high when discrimination erected barriers against women and minorities in previous decades. Hiring guest workers without considering American applicants is ‘straight-up national-origin discrimination,” she said.

“I don’t care if it’s cheap foreign labor or expensive foreign labor, a rollercoaster or pink shoes,” she said. “And neither does the EEOC.”

President Donald Trump’s administration has committed to greater transparency regarding H-1B visas. John Miano, a labor lawyer who co-wrote a 2015 best-selling book on immigration abuses, predicted that the U.S. Citizenship and Immigration Services eventually will release more detailed statistics that will break income data down by age, specific occupation, and location.

“When that comes out, it won’t be pretty,” he said.

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