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."
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.
My solution would be to offer fewer H1B visas and more visas on a naturalization track (sorry, don't recall the exact name for those) for skilled workers.
After all, what we ideally want is for skilled people to come here and stay, not come here, endure abuse, trash wages for Americans, and then bolt for home with what money they've saved and a bad opinion about America; right?
Thanks for putting flesh and bones on the issue.
I wouldn't call an engineering degree useless - it is an education, and a pretty good one in most cases. It's just that by itself it qualifies the recipient for a relatively risky and low-stakes career. It's no surprise to me that American kids are staying away from engineering in droves - if you're going to kill yourself in school, do it in a field that's going to make you some money over the long term.
I try to talk younger people out of going into engineering when I can, except in cases where the student is clearly never going to be anything but an engineer, I mean there are people who are just born engineers, so they wouldn't be happy with anything else. It's hard to convince young people that they're going to care about more than their starting salaries a few years after they've been on the job. Basically my schtick is that real success in engineering is when you get out of engineering.
I agree with you on how you speak with American kids about degrees in engineering.
But, at least my relatives do have jobs at his point and they are apparently good teachers.... pocket protectors notwithstanding.LOL
See one of my previous posts. H1B visas are dual purpose. They are both immigrant and non-immigrant visas. When I first came to the U.S. from Canada, it was on an TN visa. But to be eligeible to *apply* for permanent residence, I had to be switched to the H1B. The H1B was designed as a gateway visa to permanent residency via employment sponsorship. The visas you are refering to are the EB class for permanent residency. The hard part is that there are fewer of those than there are H1Bs and the wait is years longer to bring someone in under an EB visa. It's easier to recruit them under an H1B (even easier for a TN), then adjust status while already working in the U.S. from H1B to EB. It's so long that there are people who need 7th and 8th year extensions on their H1Bs (a 6 year max visa) to get an EB visa.
Thank you. I just think it's good info for people on FR to hear what the immigraiton experience is like from someone enduring the gauntlet.