Professor Norm Matloff's H-1B Web Page

Overview:

The H-1B work visa is fundamentally about cheap labor.

Though the tech industry lobbyists portray H-1B as a remedy for labor shortages and as a means of hiring "the best and the brightest" from around the world, the vast majority are ordinary people doing ordinary work. Instead of being about talent, H-1B is about cheap labor.

The underpayment of H-1Bs is well-established fact, not rumor or anecdote. It has been confirmed by two congressionally-commissioned reports, and a number of academic studies. Even former software industry entrepreneur CEO Vivek Wadhwa, now a defender of foreign worker programs, has confessed,

I know from my experience as a tech CEO that H-1Bs are cheaper than domestic hires. Technically, these workers are supposed to be paid a "prevailing wage," but this mechanism is riddled with loopholes.

Wadhwa has also stated

I was one of the first [CEOs] to use H-1B visas to bring workers to the U.S.A. Why did I do that? Because it was cheaper.

Note Wadhwa's point about the loopholes. It is perfectly LEGAL to underpay H-1Bs, due to gaping loopholes. Most of the abuse is NOT fraud, but instead is skillful use of loopholes, just like using loopholes in the tax code. Stiffening enforcement would NOT address the cheap labor problem.

Note too that the abuse of H-1B extends across the industry including the large mainstream firms such as Intel, Cisco, Westinghouse, the Bank of America etc., facilitated by the nation's top immigration law firms. It does NOT occur primarily in the Indian "body shops."

Five-minute summary:

• Two congressional reports and a number of academic studies have shown that H-1Bs are often paid less than Americans.
• Underpayment of H-1Bs is usually done in full compliance with the law. The problem is primarily NOT one of lack of enforcement or fraud. Instead, the problem is gaping loopholes in the law.

  For example: The law and regulations do not require that the prevailing wage account for "hot" technical skills. These command a premium of 15-25% in the open market. Thus one can see immediately that the legal prevailing wage is typically lower than the true market wage. Thus the legal prevailing wage law is no protection for U.S. workers, and since the DOL PERM data show that most employers pay only the prevailing wage or very near it, it is clear tha most employers are underpaying their H-1Bs.

• The use of foreign workers for cheap labor pervades the entire tech industry, INCLUDING the large, mainstream firms, and INCLUDING the foreign workers hired from U.S. universities. It is NOT limited to the "bodyshops."
• Age is a core H-1B issue. Most H-1Bs are under 30, and since younger workers are cheaper than older ones in both wages and health care costs, employers use the H-1B program to avoid hiring older (i.e. 35+) Americans.
• There is no tech labor shortage. No study, other than those sponsored by the industry, has ever shown a shortage. HR departments routinely exclude CVs of applicants they deem "too expensive"--those that are over age 35. (So managers never see these CVs, and mistakenly believe there are no applicants.)
• Shortage arguments based on comparison of American K-12 math/science scores to those of other nations are red herrings, based on misleading averages. It is also rank hypocrisy, since the same employers who claim that "Johnnie can't do math" are laying off tens of thousands of Americans who had been top math/science students when they were kids.
• The world's "best and brightest" should be welcomed, but only a tiny percentage of H-1Bs are in that league. Meanwhile, the H-1B program results in many of our own best and brightest U.S. citizens and permanent residents being squeezed out of the market once they accumulate 10 years or so of experience, and worse, many top college students are discouraged by H-1B and offshoring from pursuing the field in the first place. In other words, H-1B is causing an internal brain drain of American talents.
• Though the industry lobbyists claim that the importation of H-1Bs avoids the offshoring of work, the visa is actually used to facilitate shipping the work abroad.
• The National Science Foundation, a key government agency, actually advocated the use of the H-1B program as a means of holding down PhD salaries, by flooding the job market with foreign students. The NSF added that the stagnation of salaries would push domestic students away from PhD study, which is exactly what has happened. Former Fed chair Alan Greenspan has also explicitly advocated the use of H-1B to hold down tech salaries.
• The per-capita rates of entrepreneurship and patents among immigrant engineers have been similar to, or lower than, those of natives. Indeed, Prof. Jennifer Hunt, much cited by the industry, found that

  After I control for field of study, in the middle graph, and education, in the bottom graph, both main work visa groups [i.e. H-1Bs who came directly to the U.S.] and student/trainee visa holders [H-1Bs who first came to the U.S. as students and later entered the job market under the visa] have statistically significantly lower patenting probabilities than natives...

  Thus the displacement of the American workers has not produced a net positive effect.

• Proposals to establish fast-track green card programs to retain the foreign workers are misguided. First, in the EB-1 green card category, which is for outstanding talents, waits are short. Second, and more importantly, the foreign workers are mostly young, and would still crowd out American workers of age 35+ even with green cards.
• Other than a minuscule exceptional category, H-1B employers are NOT required to try to fill the jobs with Americans before hiring the foreign workers.
• The claims that each H-1B creates four new jobs are based on faulty statistical analysis and are obviously fallacious anyway. Filling the jobs with qualified Americans would have the same job-generating effects.
• WHAT SHOULD BE DONE: The bipartisan Durbin/Grassley bill in the Senate is an excellent bill. However, note that some parts are extremely useful while others are rather useless. The most useful provision would redefine the legal term prevailing wage so that it would reflect the true market wage, which is NOT the case currently. The provision extending the H-1B-dependency restrictions to all employers would also be of value. By contrast, the portions of the bill dealing with fraud and enforcement are NOT useful, since (as stated earlier), the problems with H-1B are loopholes, not enforcement. In addition, for reasons give above, green card programs should NOT be expanded or liberalized.