How Companies Provide a False Prevailing Wage in H1-B Applications to the Department of Labor

Executive Summary

• Companies as a standard practice provide false prevailing wages to the Department of Labor.
• This is configured in a premeditated manner to provide no protection against paying below-market wages to H1-Bs.

Introduction

The H1-B lobby has crafted the H1-B legislation so that it is child’s play for any company to provide false claims around the prevailing wage to the Department of Labor. This is yet another faux protection that is touted by the H1-B lobby, but which results in zero protection for US workers.

The Department of Labor’s Fake Prevailing Wage (Non) Verification Process

Under the first “prevailing wage” definition, employers can either request a prevailing wage determination from the government or they can make the determination for themselves. Those that make the determination themselves can use effectively any source.(emphasis added)

More than seventy five different data sources, many of which use entry level wage surveys to conjure up extremely low prevailing wages, appear each year in LCAs.

The Labor Department is required to approve LCAs within seven days of their filing and can only review them “for completeness and obvious accuracies” so whatever the employer puts down becomes the prevailing wage. Got it? The objective is to push paper, not protect workers. – Sold Out

Research into the H1-B Visa and Prevailing Wages

A study published by Daniel Costa and Ron Hira in the Economic Policy Institute titled H-1B visas and prevailing wage levels found the following.

Sixty percent of H-1B positions certified by the U.S. Department of Labor are assigned wage levels well below the local median wage for the occupation. While H-1B program rules allow this, DOL has the authority to change it—but hasn’t.

This is consistent with our article How the US Department of Labor is Useless in Policing The H1-B Program.

While over 53,000 employers used the H-1B program in 2019, the top 30 H-1B employers accounted for more than one in four of all 389,000 H-1B petitions approved by U.S. Citizenship and Immigration Services in 2019.

This is indicative that large entities disproportionately control the H1-B open slots.

Among the top 30 H-1B employers are major U.S. firms including Amazon, Microsoft, Walmart, Google, Apple, and Facebook. All of them take advantage of program rules in order to legally pay many of their H-1B workers below the local median wage for the jobs they fill.

All of the companies that use H1-B workers deny that they pay H1-B workers less than US domestic workers. In fact, this is a reason given by the United States Customs and Immigration Service states is a reason for reporting fraud to them as we cover in the article Is the Way to Report H1-B Fraud or Abuse to the US Government for Real?

How the Department of Labor Actively Encourages Displacing US Workers

However, it is clear that the US government is not spending very much time enforcing the rules of the H1-B program.

By setting two of the four wage levels below the median—and thereby not requiring that firms pay market wages to H-1B workers—DOL has in effect made wage arbitrage a feature of the H-1B program. Changing program rules to require and enforce 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—to bring in workers who have special skills—instead of using the H-1B as a way to fill entry-level positions at a discount.

This means that the way the DOL sets wages creates a built-in incentive to pay less than the prevailing wage. This goes on to illustrate how complicit the DOL is with the H1-B lobby. While the companies that hire H1-Bs deny the lower wages that come with H1-B workers, they have the DOL set low minimum wages for the H1-B roles.

our analysis of H-1B prevailing wage levels raises serious doubts about whether H-1B employers, including the top 30 H-1B employers and major U.S. technology firms, use the program solely, or even mostly, to hire workers with truly specialized skills.

This means the researchers question if the reasons given for the H1-B hires are the actual reasons. The employers that use the H1-B program make the argument about skills — however, these researchers point to lower wages as a prime motivating factor, with the skills argument being a smokescreen.

The Reality of the H1-B Program

The data in this report show the top 30 H-1B employers are in fact hiring H-1B workers to fill a very large number of routine (Levels 1 and 2) positions that require relatively little experience and ordinary skills. H-1B proponents might argue that the H-1B workers they are hiring for these routine positions are recent graduates with little experience, and therefore it is appropriate to pay them prevailing wages set far below the median. There are two problems with this proposal.

First, there is a large existing U.S. labor pool for Level 1 and 2 types of positions that could be expanded even further through private investments in training. U.S. citizens and lawful permanent residents have been graduating in record numbers with bachelor’s degrees in computer science and engineering over the past five years;29 these recent graduates can and should be filling most positions that H-1B employers have assigned as Levels 1 and 2, and they should be prioritized for those positions. But since most H-1B employers are not required to advertise H-1B positions to U.S. workers before hiring H-1B workers,30 it is unclear whether very many U.S. workers are ever afforded an opportunity to apply for these positions.

What the H1-B Program is Really Used For Versus its Advertised Use

The data presented in this report indicate 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.

What Percentage of H1-B Workers are in the Lowest Prevailing Wage Levels?

Not surprisingly, three-fifths of all H-1B jobs were certified at the two lowest prevailing wage levels in 2019. In fiscal 2019, a total of 60% of H-1B positions certified by DOL had been assigned wage levels well below the local median wage for the occupation: 14% were at H-1B Level 1 (the 17th percentile) and 46% were at H-1B Level 2 (34th percentile).

One would therefore expect most H-1B positions to be assigned as Level 4 (the only wage level above the median), but as the data presented in this report show, H-1B employers as a whole assign only a very small minority of H-1B positions as Level 4—just 12%—and the top 30 H-1B employers assign even fewer H-1B positions as Level 4, just one in nine (11%).

This math can’t be contradicted. This is the math that the H1-B lobby does not want US domestic workers to know and about which they actively provide false information to the public.

In each case, the companies that hire H1-B workers are paying in the lowest possible wage levels. All of this would have to be entirely obvious to the DOL, yet they continue to allow it to happen. This is a primary problem with the H1-B program, that in aspect after aspect, the specifics of how the program is administered is being rigged by the US government and by the employers to reduce the costs of the employers. Cognizant, for example, has a specific business model called outsourcing, where they convince companies to fire much of their IT workforce and replace them with Cognizant — largely H1-B labor.

The DOL has to know this and allows Cognizant to continue to bring over H1-B labor in the tens of thousands.

These lower wages create an incentive to apply for even more H1-B visas. The best way to make it so that the companies hiring H1-B visa workers are hiring them for skills is to not allow H1-B workers to be paid less than the prevailing wage.

This is addressed by the study authors in the following quotation.

DOL should act. The H-1B prevailing wage should reflect realistic market wage levels and help prevent downward pressure on U.S. wage rates in H-1B occupations. To accomplish this, we recommend that DOL use its existing authority to set the lowest (Level 1) wage to the 75th percentile for the occupation and local area and also require that wage offers to H-1B workers never be lower than the national median wage for the occupation.

Exactly. However, the DOL is allowing the H1-B program to be a source of lower-cost labor for US companies.

Displacing US Domestic IT Workers Through the Movement of the Indian Worker Back to India

Once the worker is trained and learns the job in the US, some of them are sent back to India to continue their work. This means that the outsourcing firm can pay even less. So the company continues to charge the same rate but then pays far less to the Indian employee.

In some cases the work is later moved abroad to the H-1B worker’s country of origin once the worker has become proficient enough in the job to perform it remotely from abroad.

As we cover in the article How Infosys Violated B-1 Visa Law and Charged Clients a 98.6% Margin, some companies, skip the step of applying for an H1-B visa and have brought over Indians on a B-1 visa, which does not allow the individual to work. They then charged them at US rates, while they were in the US. This is how Infosys was able to achieve close to a 100% margin.

H1-B as a Machine of US Worker Displacement

Half of the top 30 H-1B employers use an outsourcing business model.(emphasis added)

Fifteen of the companies listed in the top 30 H-1B employers have a business model based on outsourcing jobs; these companies place their H-1B hires at third-party client sites. These companies rely on the H-1B program to build and expand their business, which sometimes includes sending U.S. jobs overseas.

This means that the 1/2 of the largest H1-B employers often use their H1-Bs to displace US workers. In other cases, they are placed on consulting projects.

All of the major IT consulting firms now have substantial outsourcing businesses, which means that increasingly, the IT consulting business and outsourcing business go together. This is true of even the “top end” IT firms like Capgemini, which we cover in the article How US IT Consulting Companies Acquire Indian IT Outsourcing Companies.

Many of the firms that receive the most H1-B visas, perform outsourcing, and it means that they are paying significantly less for their workers. Each of these companies can be considered managers of large H1-B workforces. When they meet with their customers and prospects, they never bring up the fact that so many of their employees are H1-B visa holders. I worked for a consulting firm as a contractor that had no US domestic workers as consultants. They were all Indian, all on H1-B, all being paid below-market rates. None of those employees were chosen because they were particularly skilled, but because they provided the highest possible margins. The H1-B employees would put anything on their resume that was asked. 

This table shows exactly how many H1-B visa holders fell into which wage level category. 

Constant Lying on the Part of the H1-B Lobby on Wage Levels

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.

Rigging the Wages Against the H1-B Worker

Hiring an H-1B worker is an action that occurs outside of the normal operation of the labor market,(empahsis added) with the government setting key hiring and employment rules. As such, setting an appropriate wage level is critical to ensure the program operates in a way that is fair to both U.S. workers in major H-1B occupations and the migrant workers who are hired through the H-1B program.

This is not something that is sufficiently explained or understood. The H1-B visa holder is not trying to work temporarily, they are, in the case of almost all IT workers, trying to exit India and enter the US and become a US citizen. Therefore, not only are US workers paid substantially more than workers in India, but any H1-B visa holder can easily rationalize taking a below-market wage because they are “paying their dues” to get out of India.

Furthermore, as explained by the following quotation, the H1-B worker has little recourse.

As noted above, employers have four wage levels to choose from: They may pay the Level 1 “entry-level” prevailing wage, which DOL sets at the 17th percentile of wages surveyed for the occupation in the local area. This is clearly the bottom of the distribution, with 83% of workers in that occupation being paid more than the Level 1 H-1B worker. Employers may also opt to pay the Level 2 wage, which is at the 34th percentile. The Level 3 wage is at the 50th percentile—the median wage—and Level 4 is at the 67th percentile, the only wage level that is higher than the median.9 While the 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 the government doesn’t verify that a prevailing wage is appropriate unless a lawsuit or a complaint is filed by a worker.(emphasis added) 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 immigration status and ability to remain in the United States. We know of no cases in which DOL has investigated an LCA-stage misclassification of an H-1B wage level.

Just imagine if your present employer could choose the prevailing wage that is appropriate for your skills and experience?

What would you bet that your employer would set a lower wage than what you are currently being paid if that was the case? However, this is what happens with the H1-B program. The companies decide what to pay — and for Indians, their option is to stay in India, or find another employer who will sponsor an H1-B visa — who will also pay them less than the prevailing wage.

Also, there were no cases where the DOL investigated the LCA stage misclassification of an H1-B wage level.

Hiding the Wage Level Paid to H1-B Visa Holders

Three-fifths of all H-1B jobs were certified at the two lowest prevailing wage levels in 2019 (emphasis added)

Although salary information that corresponds to requested positions on LCAs has been made available by DOL for a number of years through the Office of Foreign Labor Certification’s LCA disclosure data, until recently the prevailing wage levels selected by employers were not readily available. In 2011, the Government Accountability Office (GAO) for the first time (emphasis added) reported what some had suspected and speculated about but to that point were not able to officially confirm: The vast majority of H-1B jobs were being certified by DOL at the two lowest wage levels.

Isn’t it curious that this was hidden from public view for so long? It is almost as if the H1-B lobby did not what the public to know that companies that employ H1-B workers were getting a very substantial price break on wages.

The percentage of each group assigned to each pay category is shown in the article below.

It does appear that the wages are rising. However, one has to wonder why this change happened between 2010 and 2019.

But the wage levels paid by H1-B employers to H1-B visa holders is worse than what this table shows.

The two lowest permissible H-1B wage levels are significantly lower than the median of salaries surveyed for the occupation in the local area

In order to understand the differences among salary amounts that correspond to prevailing wage levels, we provide an example in Table 2 that comes from the Foreign Labor Certification (FLC) Data Center’s Online Wage Library. The Online Wage Library lists prevailing wage levels for every available occupation and geographic area, based on DOL’s OES survey data, and employers visit this site to find the appropriate wage levels for the vast majority of H-1B positions they list on LCAs. (Employers used alternative wage surveys to set the prevailing wage for 9% of positions certified in 2019; see Table 1.)

Through categorization, the DOL is able to make low wages look higher than they are.

How Much of a Discount?

Employers hiring at Level 1 receive a discount of 36%, or $41,746, versus paying the median wage for the job in the region—represented by Level 3—and those hiring at Level 2 receive a discount of 18%, or $20,863.

(Notice this is for jobs in Washington DC which is one of the more expensive places to live)

And yet, the H1-lobby and corporations that hire H1-B visa holders state that lower wages are never the motivation, its only about skills.

The H1-B Program Should Be for Only Specialized Skills

The H1-B program was placed into law to allow only those people for which there were no suitable US candidates to be allowed to apply for the visa.

The following quotations explains this.

The migrant workers hired through the H-1B program should possess specialized skills and fill genuine shortages in the U.S. labor pool. The shortages should be significant enough that they cannot easily be filled by standard market mechanisms such as: increasing offered wages to the existing U.S. labor pool, training and developing the skills of U.S. workers, or expanding recruitment to find new employees from the U.S. labor pool.

Obviously, this is not adhered to.

Outsourcing firms displace already existing US domestic workers with Indian H1-B workers that the US domestic workers need to train, or they won’t receive their severance. So just the fact that this is such a massive business model that is in part supports enormous companies like Infosys, WiPro, etc.. tells us that this quote, which describes the H1-B program original intent is being violated while the US Government does nothing.

As for training, as is just explained, often the displaced US domestic worker is training their replacement.

H1-B Employers, Typically Do Not Pay the Median Wage

We believe that the most reasonable and closest proxy for a market wage is the median wage for an occupation in a local area.(emphasis added)

However, employers seeking to hire workers through the H-1B program may select from among four permissible “prevailing” wage levels—the two lowest of which the U.S. Department of Labor (DOL) sets significantly below the local median wage.

DOL has yet to explain its reasoning and justification for setting the two lowest levels below the local median wage.

The explanation is simple — the DOL leadership is in the pocket of the H1-B lobby.

Conclusion

The prevailing wage requirement is an example of faux protection written by an H1-B lobbyist. This allows the H1-B lobby to claim that there are protections against wages paid to H1-B visa holders when, in fact, there are no protections. Research shows that H1-B visa holders are not paid the prevailing wage, and in fact, not paying prevailing wages is a primary motivation for the application for H1-B visas as we cover in the article How Low Hire Rates Disprove the IT Labor Shortage Used to Justify H1-Bs.

References

*https://www.amazon.com/Sold-Out-Billionaires-Bipartisan-Crapweasels/dp/1501115944/

*https://www.epi.org/publication/h-1b-visas-and-prevailing-wage-levels/