Skip to comments.H-1B Pay Drags Down All Salaries
Posted on 06/21/2006 7:34:30 AM PDT by SJackson
Analysis: H-1B Pay Drags Down All Salaries
In the engineering profession, pay for foreigners on H-1B visas is up to 23% lower than that for American workers, according to an analysis by Electronic Engineering Times.
By David Roman
Immigrant engineers with H-1B visas may be earning up to 23 percent less on average than American engineers with similar jobs, according to documents filed with the U.S. Department of Labor. Salary data from Labor Condition Applications (LCAs) lends credence to arguments that lower compensation paid to H-1B workers suppresses the wages of other electronics professionals.
The lower LCA-based pay rates, considered unreliable by some, raise questions about the value of H-1B workers--and of U.S. engineers in general--to their employers, and add fuel to the debate that has long swirled around the H-1B program.
LCA "wage rate" and "prevailing wage" data are not actual salaries. But the average salaries calculated by EE Times based on that data indicate that employers are paying H-1B workers less than Bureau of Labor Statistics wage estimates. That's illegal, according to the Department of Labor, which administers the H-1B program. The department requires an employer to pay H-1B workers the same as other workers with similar skills and qualifications, or the prevailing wage, whichever is higher.
"There are plenty of studies, including my own, that show this disparity in wages," said Norm Matloff, a professor of computer science at the University of California, Davis, who writes frequently on immigration employment and H-1B visa issues. Lower salaries undermine employers' contention that they need H-1B workers to fill jobs for which Americans can't be found, Matloff said. "Otherwise, salaries would be rising."
The average H-1B salaries calculated by EE Times are based on data from 459 of 65,536 LCA petitions filed by employers seeking permission to hire immigrant professionals in federal fiscal year 2005. Specifically, the data comes from LCAs naming one of three positions commonly held by engineers: electronics engineers, electrical engineers and computer hardware engineers.
The average salary cited in the LCAs for each of the three positions was below the mean annual salaries for those jobs in 2004 as determined by the U.S. Bureau of Labor Statistics' Occupational Employment Statistics survey of employers.
The average annual wage or salary for electronics engineers was $69,851 in the LCAs, or 9.8 percent less than the $77,450 mean annual-wage estimate determined by the BLS OES survey. The LCA average for electrical engineers was $63,268, or 14.7 percent less than the OES survey's $74,220 mean. And the LCA average for computer hardware engineers was $64,426, or 23.3 percent less than the $84,010 average found by the OES survey. (A detailed comparison of LCA-based and OES salaries can be found in this week's By the Numbers, page 26.)
Underpaid H-1B workers displace American information technology workers and put undue pressure on salaries, said Kim Berry, a software developer who serves as president of The Programmers Guild, an activist group for IT industry professionals. "This is happening under the radar across the country," he said.
Intel Corp. compensates its H-1B workers "under the same structure as our domestic employees," a company spokeswoman said. "It's actually illegal to pay less than the prevailing wage for any employee sponsored under the H-1B visa." Intel employs approximately 3,000 H-1Bs, a majority of whom work in VLSI design, device physics or optics, the spokeswoman said.
IBM Corp. takes guidance on salaries for its roughly 2,500 H-1B visa workers from BLS OES data. "We get our numbers from the OES page," an IBM spokesman said. "We do that every time." An overwhelming majority of those workers are engineers, and their benefits package is similar to what IBMers receive. IBM complies with all Department of Labor wage requirements, the spokesman added.
H-1B visas allow IBM to "tap into global sources of information," the spokesman said, echoing industry supporters of the H-1B visa program. Started in 1990, the program has polarized factions within the electronics industry. Employers say the visas allow them to hire needed talent; detractors say it puts U.S. citizens out of work, engenders fraud and promotes exploitation of immigrants.
"I work with those H-1Bs, and as far as I know they are getting half of what we get," said Shahid Sheikh, a senior software developer with TAC Worldwide in Jacksonville, Fla. "I get a normal salary. I get $80,000 a year. They get a maximum $40,000 a year." Sheikh, who worked under an H-1B visa when he emigrated from Bangladesh 12 years ago, said the program is "filled with fraud and cheating." He was naturalized about two years ago.
President Bush weighed in on H-1B visas in February, when he called the current annual limit of 65,000 visas a "problem" and urged Congress to "raise that cap." The U.S. Senate voted in March to increase the annual limit to 115,000 for fiscal 2007. The House hasn't taken up the issue. Employer applications for H-1Bs reached the fiscal 2006 cap of 65,000 last August, two months before the current fiscal year began on Oct. 1. Applications for fiscal 2007 have already maxed out the 65,000-visa allotment.
Current limits on H-1B visas essentially promote a nonimmigration policy for the United States and endanger the competitiveness of U.S. industry, said Stuart Anderson, executive director of the National Foundation for American Policy, a think tank that "pursue[s] and promote[s] debate consistent with an American entrepreneurial spirit that is welcoming to new people, ideas and innovation," according to the group's Web site. "Except for a short window of time, no one can hire a new H-1B because the cap keeps getting hit before the experiment's even started," Anderson said.
Anderson said employers don't use H-1B visas to lower wages and decried the "myth" that each H-1B worker replaces a U.S. worker. Immigrants help create jobs and innovation, he said. Rather than preserving U.S. jobs, H-1B visa caps drive companies to expand overseas to preserve flexibility, in Anderson's view. "The more we continue current policy, the more this will happen," he said.
H-1B visas account for a fraction of the work forces of multinational employers like Intel and IBM. Less than 3 percent of Intel's employees hold H-1B visas, and more than 50 percent of its 99,000 workers worldwide are in the United States. IBM's total of 2,500 H-1Bs pales next to the company's 43,000 employees in India.
The number of H-1B visas issued for high-tech occupations is too few to affect the salaries of the larger U.S. labor force, according to Jeremy Leonard, chief economist at American Sentinel University. By 2004, a total of 139,000 H-1B visas were issued for information technology professionals, a broad classification that includes computer occupations and engineers. "In comparison, the U.S. IT labor force, using a relatively narrow definition, numbers about 3 million," Leonard said. In 2003, 12 percent of H-1B holders were in engineering occupations and 28 percent were in computer jobs, Leonard said.
While U.S. electronics industry employment levels and pay increases both trail boom-year levels (see "Jobs data spurs debate" in By the Numbers, June 12, page 30), H-1B visas are not to blame, Leonard said. BLS data shows a 23.3 percent increase in hardware engineering jobs from 2000 to 2005, and a 5.1 percent increase in electronics engineering jobs over that span. "So employment in these occupations certainly hasn't declined due to H-1B visas," he said.
Nigel Brent, president of Nigel B. Design Inc., an amplifier manufacturer based in California, said he's fed up with engineers complaining about immigrants taking American jobs. "This is so bogus," he said. "The truth is that people are lured to come here from many different countries with the promise of higher salaries, better lifestyle and standard of living than their home countries can provide."
The United States has grown strong with the constant influx of immigrants, said Brent, who emigrated from Britain almost 30 years ago and became a U.S. citizen in the 1980s. "The upside with the present H-1B system is that jobs stay in America. Every H-1B who comes here supports the economy with the food they buy, the cars they buy, the house they buy. I could go on with the many benefits that the trickle effects of being here bring to the economy."
Writing in the June 12 issue of the Financial Times, IBM chairman and chief executive officer Sam Palmisano said that a modern company must resist anti-globalization fervor and become a "globally integrated enterprise." The alternative is grim, he wrote. "Left unaddressed, the issues surrounding globalization will only grow. People may ultimately choose to elect governments that impose strict regulations on trade or labor, perhaps of a highly protectionist sort," said Palmisano.
NFAP's Anderson criticized what he called basic flaws in using LCA wage data as a stand-in for H-1B salaries. "One is that you're comparing the prevailing wage, basically the minimum an employer would have to pay others similarly employed at the firm," he said. Second, LCA minimums wouldn't approach average salaries of all U.S. professionals, some with decades of job experience, he said.
The tactic of presenting LCA wages as salaries was used in "The Bottom of the Pay Scale," a report on the salaries of computer programmers published last December by the Center for Immigration Studies, a nonprofit research organization "animated by a . . . vision which seeks fewer immigrants but a warmer welcome for those admitted," according to the CIS Web site.
Professor Matloff rebuffed Anderson's criticism and raised questions about his objectivity. "He's a lobbyist," Matloff said.
Using LCA data to reflect salaries is sound methodology, Matloff said, because the data "tracks very well" with H-1B compensation data in an annual report published by U.S. Citizenship and Immigration Services, a bureau of the U.S. Department of Homeland Security. "I have confidence the LCA data is reliable," Matloff said. "And I'm a former statistics professor."
It they're jobs "Americans won't do" or "Americans are too stupid to do", that's one thing, reducing labor costs is another.
The Programmers Guild, an IT worker interest group, has filed 300 discrimination complaints so far this year against companies alleged to have posted "H-1B visa holders only" ads on job boards.
The house they buy??? Obviously, he doesn't know too many H1B visa workers. They don't buy houses, they live in apartments, or rental houses, and pack them with their friends/or family that are also here on H1B status. They send the money back home, just like the Mexican immigrants do.
After all, those who PAY TAXES AND VOTE FOUGHT for our country and SERVED in the military services of this country are just TOO STUPID TO COMPETE WITH THOSE THIRD WORLD GENIUS'!!
YES THE SAME CRUMMY THIRD WORLDERS WHO HATE AMERICA AND WOULD KICK US OUT OF OWN COUNTRY IF THEY COULD!!
The ones around here are packed into TWO bedroom apartments by the TENS!!
I had to laugh at Linda Chavez when she tried to make the point that they "paid" realestate taxes in their rent. When you "pack" a house, it does not translate to taxes to support the school system they overuse.
All have served now in Iraq, Korea and Afganistan.. and temporaily, in NEW ORLEANS!!!
Funny, thing there are NO H1-Bs in the military.... guess ONLY Americans can carry that HEAVY LOAD!!
My husband made the acquaintance of some H1B folks that worked in a building hear him. We visited their apartment once, there were at least 8 people living in an 800 sq ft 2 bedroom apartment. Don't get me wrong, the apartment was in a nice complex and clean, just crowded. They split the rent 8 ways, so they each were paying around 100 bucks a month for rent/etc.
re my last post.... should have said.... and one served temporaily in New Orleans too.
I used to work as a desktop support/network engineer for a large Wall Street brokerage firm. When downsizing occurred during the 2002 recession, the company used that opportunity to release American workers, while retaining foreign workers on the H-1B visa program. When I left, the bulk of engineers remaining were foreigners, which provided the company with cheap, easy to exploit labor.
Qualified American engineers need not apply.
We were overrun by these guys at my old job (financial services, automotive loans) ... they could code (badly) but had troubles with the toilets. Seems they stood on the rim, squated and did their business. I've never seen janitors ready to kill people before, but I did there.
We were considering making a series of quick reference technical guides for them covering bathings, toilet and deoderant usage.
This was years ago, but my BIL actually enlisted in the USNavy, and he was Canadian at the time. He has since been naturalized, as has my husband. But I think there are many "immigrants" that enroll in the service as a legal way to gain citizenship. H1B folks, do not because they're brought over to work specifically for a certain job or company.
They lower our standards and they take AMERICANS jobs. THEY NEED TO GO @#$@$#$$ AWAY!
A major reason for the wage disparity is the fact that many H-1B workers are Indian whose standard of living and COL factors are substantially different from those of their American counterparts.
No. They do not drive down the salaries of CEOs.
It is great that some folks become citizens after being our military..my buddy, "Hunkie" as he called himself, did it and he had been wounded slightly too.
But,gee whizzzzzzz, AMERICA should show some loyalty to its OWN ... JUST AS THEY EXPECT AMERICANS TO SHOW LOYALTY TO AMERICA AND HER MILITARY.
Oh, yeah, I am old fashioned, so what?
I'll go you one better....the Fortune 500 firm I work for now had a significant downsizing effort over five years that made no apologies for releasing over 10,000 domestic employees. In fact, while the layoffs were hitting every day, job descriptions and paper-titles were being changed to accommodate the "new" workforce of H1B's. It was all completely legal and I'm sure we're saving a ton on payroll.
I'm still here, but the last time I worked a project with another "domestic" employee was many years ago. I call all the H1B's "Corky" just to have a laugh at their expense. My number could be up any day.
In a similar vein, the Wall St Journal ran an interesting article (didn't post it, pay site) on the CPA shortage that's developed over the past few years. Among the points, some usage was being made of CPAs from India, particularly outsourcing, but more importantly the number of college accounting majors has tripled over the last 5 years. The market will solve the shortage. But only if allowed to. Another problem with H1-Bs which the article allude to is that if generously available, they essentially define compensation in a particular industry to entry level status.
Substantially lower than migrants from south of the border as well. As are education costs.
I would have helped the janitors kick their assetts if given a HALF chance.
Poor AMERICAN WORKERS CLEANING UP THE CRAP OF UNCIVILIZED THIRD WORLDERS WHO WERE PROBABLY MAKING TRIPLE WHAT THOSE JANITORS WERE PAID, HOW DISGUSTING!!!!!!!!
PING! Of course they do! Only the computer industry has been targeted, and maybe nurses. Target lawyers (who make a lot more per how then software engineers and have a lot less training, in general) and you will see this program ended as fast as a new Air America show.
DUH!!!! Anyone that works in a tech industry knows that the H1B program is nothing more than a scam... Congress sold out the skilled american workers with this fraud the same way open borders sells out unskilled workers.
No maybe about it, the Senate bill offered unlimited entry to foreign-trained nurses until 2014. Quite an incentive to those contemplating nursing school.
The janitors have to learn to apprecriate our guests culture. Or import janitors.
In other news, water is wet, the Pope is Catholic, and bears poop in the woods. Anybody who's in engineering or IT knows this. It's the worst-kept secret in the industry. My prior employer (a small company) was masterful at paying Indian body shops $50,000 a year to put a $30,000 a year programmer into a $65,000 a year job. Everybody wins except poor Sanjay who's making less money than the assistant manager down at Papa John's...but it's still six times what he'd be making in Bangalore.
I mean, I'm sitting at my job, literally surrounded by hundreds of folks here on H-1Bs, wondering when my contracting company is going to decide that not only are they moving all the coding jobs to Hyderabad, but they really don't even need QA testers like me in the States either and they can do it all by remote control. The joys of things when your company's new boss is a hardcore move-it-to-India-to-stay-competitive guy.
On the upside, I've gotten to watch a lot of World Cup highlights in the breakroom.
I had worked at a Fortune 500 company and many of us were laid off while the H1-Bs remained.
Been there, done that.
we were told it was part of a business unit re-alignment.
Hope you're doing OK now.
"It was all completely legal and I'm sure we're saving a ton on payroll"
I could imagine a good portion of the savings goes into a large bonus for the CEO.
The article is mainly about the electronics sector. I am on an H1B visa and my pay is about 25% more than the average wage for my occupation and about 50% more than the prevailing wage. But then again, I'm a research scientist. I believe the large corporations do follow their standard hiring practices, at least the one I work for, but these guys from India probably never thought to make a counter offer for their proposed salaries. And they are probably right out of school so they would be offered wages with that experience level. That being said, there are some serious abuses in the electronics/software areas that are disgusting - both for the foreign worker and for the treatment of the American worker.
Companies that hire H1-B's as a way to cut costs are a huge problem. I also think the youth of America is to be blamed as well. A degree in Computer Science is just too difficult for the current "me" generation. Their self-absorbance, their need for instant gratification, and their overall laziness appall me.
I'm on an H1B and bought my own home. And I pay more in property taxes since I'm ineligeible for the homestead excemption and save-our-homes cap. All of the H1B's I know don't rent. They buy. And they don't lived packed in their abodes. But then again, they are from Canada or western Europe where living standards are comparable with the U.S. And we don't send money back home. We use it to live here. Please do not make such blanket generalizations when there are a lot of H1B's who are not being exploited by an employer or are hired to displace U.S. workers. The IT sector is giving a very bad reputation to this program.
You are quite right. PhD research scientists with necessary qualifiactions in a desired field, or combination of fields, are hard to find. I'm on an H1B while waiting for permanent residency and I'm aware of the employment situation. There might only be a handful of such experts in the world for a given type of research position and the H1B program is a good way to bring them in when U.S. recruiting comes up empty. But when companies sponsor mass groups of people just to cut labor costs, that is a big problem.
Just imagine how much more would trickle down if the H-1Bs weren't depressing salaries.
H-1Bs have their uses.
I have to chime in with a first-hand observation. Physicians come to the US on H1B visa's from a number of nations. One whom I know immigrated from the Philippines and obtained a job at a clinic run by another immigrant Phillipino physician. The clinic owner requires the new immigrant physician to pay back a cash fee of many thousands of dollars for the privilege of working for him. This reduces her salary greatly but if she alerts the US government, she is afraid that she will be deported because she has signed papers saying she will not work for less than the prevailing wage in her profession. The responsibility is on her and she will put up with the cash payback so she can remain employed in the US. I was told this is not a unique occurrence.
I have also noted recently that some physician clinics have raised their "partnership buy-in" fees from nothing or a few thousand dollars to hundreds of thousands of dollars. I spoke with another immigrant physician (probably on H1B but not confirmed) who is in this position and looking for another job. I don't know if the intent is to exploit immigrants but it in effect greatly reduces the salary paid to young physicians in their first few years of practics, many of whom are immigrants but all of whom make a large salary only for tax purposes and in effect must change jobs (and face the same situation again) or pay back a big percentage of the salary they are paid.
I could not agree with you more.
It's just supply and demand at work here (and of course the supply is elevated by the H1Bs) - if salaries for CS majors were higher, i.e., less supply and/or more demand, you'd see a lot more people investing the effort to enter the field.
Personally I'm wondering why I worked my @$$ of in engineering school to watch teachers make more than me for 3/4 of a year's work.
As I noted earlier, I think one of the unintended effects is locking certain professions at an essentially entry level compensation structure. Thats not uncommon in unskilled and skilled trades. Clearly its a disincentive to education and innovation, note my next comment. My impression is that those issues werent addressed by government in the creation of the H1B program, that many of the "shortages" result from an unwillingness by employees to revert to entry level compensation, and that the real incentive is largely cost savings.
I don't think it's laziness. The threat from outsourcing and H1Bs has been covered on the thread. In posts 18 and 23 I noted similar situations in accounting and potentially nursing. If I'm a college student with thoughts of earning a living, the H1B program would discourage me from IT, discourage me from nursing, and perhaps convince me to become a CPA. And in a few years employers would be complaining about the shortage of IT workers and nurses. Even higher education doesn't operate in an economic vacumn.
It's amazing that whenever you scratch the surface of these programs, you confront illegality. In the case of MDs I doubt the taxpayer is bearing many costs, but clearly the employee is being abused, to the benefit of the employer. Not the way we should encourage our economy to work.
For experience, I can tell you that there is a serious nursing shortage in the U.S. Nursing schools have waiting lists for students who get accepted. One of the reasons is that there is a shortage of nursing teachers. There are lots of opportunities for nurses, or for any health care provider in this country. Also, for certain types of health care workers, physical therapists I believe, are on a green card short list. These professionals are considered to be in critical short supply and don't have to go through the labor certification process - they practically get green cards right away! Also, Canada supplies a lot of nurses to the U.S. they only need a NAFTA TN visa. Those are easy to get, and unlimited in the number issued and in the number of times it can be renewed, so employment in the U.S. is easy for Canadian nurses. Heck, on the college campuses there, most of the recruiters are from U.S. hospitals.
If you want real H1B reform, then limit the number of employees that can be hired by a given company so they cannot become H1B dependent. Or break it down by sector or professional requirements like the different EB classes for employment based green cards.
It's important to remember that the H1B is a 6 year visa (last I checked); so take 65k or 115k and multiply it by 6 to get a rolling number of H1Bs that can be here at any given time.
Note that now, finally, the flood that was opened during the Clinton years is winding down, so the exploiters are frantic to get a new batch of cheap indentured servants.
That's the real kicker about H1B tech workers. They're brought over here at whatever wage, and then *unlike* regular employees they're basically stuck with the employer and client they've signed on with. Any change is cause to go home. So, the employer can insist on long hours, weekends, any conditions they want and the H1B has no choice but to say 'yes.'
If you or I are subjected to those demands, we ask for compensation, expect it to be reflected in our career growth, or get out. The people who hire H1Bs don't have to consider such mundane things as their employees' well-being. In my experience, where I'm able to demand overtime from a client, the H1Bs are on-site 6 days or 7 days a week, well into the evening, but lo and behold their timesheet always reads 40 hours. All those extra hours are free labor to the employer. (Fortunately, my work doing 40 real hours a week is better than their work doing 70 hours a week).
So, even where the base wage is equivalent (I've never seen it) the effective wage is FAR lower than for a U.S. worker because the H1B is indentured and has no choice but to do his master's bidding.
I am retired and kinda old. Worked as long as I could and actually retired a little late. Would have worked longer, part-time, but the wife got real sick and that was that.
So, now I have to tell you, I feel so bad for young American workers and the middle aged ones too who have lost their jobs...NO CAREERS... because they are not given an even chance against foreigners brought here to our soil JUST TO TAKE THEIR jobs, their livihood.
OUR government should be for OUR citizens, OUR children and OUR jobs!
The govt wants loyality from US... WHERE IS THEIRS to US?? H1-B is not a good idea at all.
Course, I am justOLD and OLD FASHIONED. SO many dismiss my opinions, ya know.
Thank you for your candor. You sound like a very reasonable person.
Good luck to you and I mean that very sincerely. With highest regards,LION.
Now,they live in Georgia and qualified for some sort of educational assistance so that did help them egt back to college.
Now one of them has two engineering degrees and his wife was already her own business.
The other relative, a younger gal was single at the time so she moved back in with mama and papa. It worked out after a LONGER time because she had to work part-time as a temp. at an office to met expenses.
All in all, their engineering degrees were actually useless and a BIG waste of money. What a shame.
doc30: For experience, I can tell you that there is a serious nursing shortage in the U.S. Nursing schools have waiting lists for students who get accepted. One of the reasons is that there is a shortage of nursing teachers. There are lots of opportunities for nurses, or for any health care provider in this country.
No question of that which is why I raised it.
In the CPA/accounting example I alluded to earlier, though there has been some outsourcing, foreign workers havent been used to any large extent. Ironically the shortage is blamed on interest in investment banking and .com jobs during the late 90s, exacerbated by the passage of Sarbanes-Oxley in 2002. The market has been dealing with it. Per the Wall St Journal, accounting majors are at 7% of vocational majors, vs 2% in 2000. More accountants. And yes, its because compensation for grads has gone up. About 30% since 2003 per the WSJ. And yes, that costs the accounting firms more. This is where someone jumps in and tells me it will raise the price of tomatoes.
Nursing. The Senate attempted to deal with that problem by offering an unlimited visas to nurses until 2014. Thats a different approach, but Id suggest one that provides no incentive for students to enter nursing, nor for heavily pressed schools to expand capacity. Id prefer to let the market solve the problem. And if migrant labor is truly necessary, allow it for a distinct period of time only. And allow job mobility.
doc30: I see your point. For some employers, the H1B lets them treat employees like commodities If you want real H1B reform, then limit the number of employees that can be hired by a given company so they cannot become H1B dependent. Or break it down by sector or professional requirements like the different EB classes for employment based green cards.
No.6 : That's the real kicker about H1B tech workers. They're brought over here at whatever wage, and then *unlike* regular employees they're basically stuck with the employer and client they've signed on with. Any change is cause to go home. So, the employer can insist on long hours, weekends, any conditions they want and the H1B has no choice but to say 'yes.' my experience, where I'm able to demand overtime from a client, the H1Bs are on-site 6 days or 7 days a week, well into the evening, but lo and behold their timesheet always reads 40 hours.
IMO the system as it exists abuses employees. And abuses like the ones you describe are precisely why a migrant laborer is more attractive, cheaper, to an employer. I think the visa has to be issued contingent on a job in a particular industry, but I see no solution to the problems No.6 describes other than allowing the visa holder employment mobility. Let employers within a given industry compete for his services as they would a citizen. That would go a long way to reducing wage disparities.
As to H1B workers essentially locking workers at entry level wages, thats a problem. Clearly some industries may move toward compensation plans less dependent on seniority.