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 (which I strongly support), the vast majority are ordinary people doing ordinary work. Instead of being about talent, H-1B is about cheap labor.

• Employers accrue Type I wage savings by paying H-1Bs less than comparable Americans (U.S. citizens and permanent residents).
• Employers accrue Type II wage savings by hiring younger, thus cheaper, H-1Bs in lieu of older, thus more expensive (age 35+) Americans.
• Both types of wage savings are fully LEGAL, due to loopholes in the law and regulations. The problem is NOT one of lack of enforcement.
• Use of H-1B for cheap labor extends across the industry including the large U.S. mainstream firms., facilitated by the nation's top immigration law firms. It does NOT occur primarily in the Indian " body shops," and it DOES occur in the hiring of international students from U.S. university campuses.

The underpayment of H-1Bs is well-established fact, not rumor, anecdote or ideology. It has been confirmed by two congressionally-commissioned reports, and a number of academic studies, in both statistical and qualitative analyses.

Even former software industry entrepreneur CEO Vivek Wadhwa, now a defender of foreign worker programs who is quoted often in the press, 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.

Even Rep. Zoe Lofgren, the most strident advocate of the H-1B program Congress has ever had, now realizes that H-1B is used for cheap labor, in full compliance with the law. She says the program is undercutting American workers:

U.S. Rep. Zoe Lofgren, a Democrat whose Congressional district includes Silicon Valley, framed the wage issue at the hearing, sharing the response to her request for some wage numbers from the U.S. Department of Labor.

Lofgren said that the average wage for computer systems analysts in her district is $92,000, but the U.S. government prevailing wage rate for H-1B workers in the same job currently stands at $52,000, or $40,000 less.

"Small wonder there's a problem here," said Lofgren. "We can't have people coming in and undercutting the American educated workforce."

(Lofgren's 2011 reform bill, however, would not fix the situation, and would add an equally-harmful automatic green card program.)

Contents of this site:

• Five-minute summary.
• Click here to search this site.
• Click here to view my major writings on these topics. These range from short newspaper op-eds to lengthy articles in academic journals.
• Click here for my biography.

Five-minute summary:

• Age is THE 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.
• In addition, two congressional reports and a number of academic studies have shown that H-1Bs are often paid less than comparable Americans, i.e. those of the same age, education and so on.

  Some other studies claim to show that the H-1Bs are not underpaid, but they suffer from methodological problems. But in any case, one can readily see the underpayment, by noting that the H-1Bs are largely unable to move freely in the labor market--if one can move, one cannot find the best salary among competing employers. Note also the material on prevailing wage below.

  As mentioned above, even H-1B advocate and former tech CEO Vivek Wadhwa has admitted underpaying H-1Bs himself.
• 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.

• Recall from above that even Vivek Wadhwa and Rep. Zoe Lofgren--two extremely vociferous suppporters of foreign worker programs--admit that the law is abused because of the gaping loopholes.

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. This is what Rep. Lofgren was referring to in the above quote (though her numbers are not quite correct).

The law also requires the employer to pay the "actual wage," a misnamed term that refers to the wage earned by other "similar" workers employed at the firm, in the same job. Clearly this is rife with loopholes too. The employer can claim the foreign worker is unique in terms of skills, experience and job (Dept. of Labor written policy recognizes this), and of course if most or all of the "similar" workers are foreign too, the statute loses all meaning.

Furthermore, since the DOL PERM data (for green card applications, which operate with the same wage rules as H-1B) show that most employers pay only the prevailing wage or very near it, and the legal prevailing wage is below market rates, it is clear that most employers are underpaying their H-1Bs.

• The use of foreign workers for cheap labor pervades the entire tech industry, INCLUDING the large, mainstream U.S. firms, and INCLUDING the foreign workers hired from U.S. universities. It is NOT limited to the Indian "bodyshops."
• There is no tech labor shortage.
  • No study, other than those sponsored by the industry, has ever shown a shortage.
  • Wages, both for new graduates and established professionals, have been stable in the engineering and programming fields. Starting salaries for new computer science graduates were up about 3% in Spring 2011, according to NACE; a 2011 DICE report, in spite of claiming a shortage, concedes that overall tech salaries are up 1%; a San Jose Mercury News article in July 2011 reports a strong job market in Silicon Valley, but also states that wages are up only 3% since 2009. None of these figures indicates a labor shortage.
  • Beware of statements by those with a vested interest in cheap labor via H-1B--the business community, universities, immigration lawyers etc.--claiming a shortage. This is calculated PR hype.
  • Low unemployment figures are not good measures of a shortage. The real issue is underemployment, occurring for instance (a) when an engineer or programmer is forced to leave the field, becoming "employed" elsewhere or (b) when those who work as independent consultants (a large chunk of the programming profession) find contracts hard to get and rates lower than before.

• Employers hire only a tiny fraction of those who apply. 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.

  Indeed, in a rare moment of candor, Texas Instruments, in a rare moment of candor, stated that there is no shortage of engineers at the Bachelor's degree level. (For a point about the graduate level, see NSF material below.)

• 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. Moreover, many types of work cannot be offshored well; employers still want to save money, though, so they fill these kinds of jobs with H-1Bs, who are cheaper to hire than the Americans.
• The industry lobbyists claim that the industry needs H-1Bs because 50% of engineering doctorates in the U.S. are awarded to foreign students. But almost no jobs in the computer industry need a PhD; even Intel recruiters have told me that their firm has very little interest in hiring PhDs. (Journalists: Try asking these firms making the "PhD shortage" argument what percentage of their H-1Bs have a doctorate; they won't answer.)

  Moreover, an internal report in 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 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...

  This is directly contrary to the industry lobbyists' claim that the H-1B program is needed for innovation. On the contrary, the displacement of the American workers has produced a net loss in innovation.

• 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 already 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 fallacious statistical analysis (exposed by the Wall Street Journal ), and are obviously invalid 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; the IDEA Act by Rep. Lofgren would be a step backwards, not forwards.