H-1B Pay Drags Down All Salaries
H-1B Pay Drags Down All Salaries
Date: Wednesday, June 21, 2006 4:05 PM
<<<<< JOB DESTRUCTION NEWSLETTER No. 1507 -- 06/21/2006 >>>>>
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Dr. Norm Matloff was widely quoted in the EE Times article below, and he
had some great comments in two newsletters which I share with you following
the article.
Let me cover a couple of comments that Norm touched on but didn't go into
detail.
In the debate over wages, we often don't hear from the H-1Bs themselves. I
had the good fortune to meet Shahid Sheikh who came to the U.S. as an H-1B
and eventually earned a Green Card. The H-1B pundits can say all they want,
but Shahid knows what is really going on because he has been there.
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.
The following statement shows a degree of ignorance that only could be that
of an economist.
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.
As explained in my recent newsletter, "Negative Job Creation for
Computer-IT workers", the number of H-1Bs is huge, and definitely
significant enough to have major impacts on the salaries and unemployment
rate for IT pros. Either Leonard is shilling or he really has no idea of
what he is talking about.
This next one is by Stuart Anderson, the heir apparent to Harris Miller's
throne of thorns.
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.
As Matloff explains, LCAs are indeed a good way, but far from perfect, to
determine the salaries of H-1Bs. For years I have battled the DOJ and the
DOL to get the I-129 database which would give us very accurate data on
H-1Bs as well as other nonimmigrant visas such as the L-1 and TN. My
Freedom of Information Act request has been stonewalled by the DOJ and they
have denied my appeals. I suspect that lobbyists such as Stuart Anderson
have worked behind closed doors to make sure that the American public never
sees that data. They want to keep us in the dark on the sordid details of
the NIV programs that continue to destroy U.S. jobs.
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http://www.ddj.com/dept/global/189500374
H-1B Pay Drags Down All Salaries
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.
By David Roman, EE Times
Jun 19, 2006
URL:http://www.ddj.com/dept/global/189500374
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.
Prevailing wage
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."
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6/19/2006
Enclosed below is an interesting article from the Electronic Engineering
Times, different from most. I have a few comments.
First and foremost, the author here correctly notes that Stuart
Anderson, a pro-industry writer (more on him later), challenged John
Miano's published study on the LCA data, on the grounds that the "wage
rate" column in the data is not necessarily the wage paid. The author
also correctly quotes me as saying that statistically speaking, the LCA
data is in fact sound.
But the "So there!" tone in the final quote of me is taken a bit out of
context, and does not convey the point I was making, which was that the
percentiles one sees in the LCA data are reasonably close to those for
the BCIS (INS) and census data, both of which are based on actual wages.
The other important point is that the LCAs allow you can see what each
firm considers to be prevailing wage, often quite low. For instance,
one often sees firms in the LCA claiming that a programmer's prevailing
wage is $40,000, in spite of the fact that the average wage for even new
graduates is over $50,000, and much higher for experienced workers.
KEEP IN MIND THAT IN MOST CASES THIS IS PERFECTLY LEGAL, DUE TO THE HUGE
LOOPHOLES IN THE LAW. To me, this is one of the major values of the LCA
data, in that it shows how huge the loopholes are.
That's why the following passage is incorrect:
# 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
The key point is that the definition of prevailing wage in the law and
the regulations is quite different from what's in the BLS data that the
author refers to here, for various reasons.
First, the BLS data referred to here give the median wage for all people
in the given occupation, whereas the prevailing law and regulations
allow the employer to define prevailing wage according to experience
level. Since most H-1Bs have just a few years of experience, the
employer can get a prevailing wage level much lower than the BLS value.
This is one of the major ways in which employers save money by hiring
H-1Bs; recall that I call this Type II savings.
In addition, the employer can use a much finer occupational system than
the BLS uses. This gives rise to odd occupational titles, such as
Associate Software Engineer, which can be exploited by the employer.
There are many other things an employer can do. For example, prevailing
wage is defined in terms of the job, not the worker. So, if the
employer has a job which requires only a Bachelor's degree but hires an
H-1B with a Master's, the employer gets a Master's worker for the price
of a Bachelor's.
The author (or likely his editor) left out an important point in the
following passage:
# 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."
What I had pointed out was that starting salaries (adjusted for
inflation) for new graduates in the field have been flat since 1999,
counterindicating a shortage.
So, again, the underpayment of the H-1Bs is usually done in full
compliance with the law, as Intel points out:
# 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.
Hopefully you, the reader, immediately detected the deceit in Intel's
technically correct but highly misleading statement here. If not,
please reread what I wrote above.
I made an analysis of Intel's wages in
http://heather.cs.ucdavis.edu/Archive/IntelH1BWages.txt
Basically, Intel was $20-40K below the medians.
# IBM complies with all Department of Labor wage requirements, the
# spokesman added.
Again, hopefully the reader sees the deceit in IBM's statement as well.
# 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
Virtually Anderson's entire career has been devoted to promoting H-1B
and offshoring. He wrote pro-H-1B reports for a group called Empower
America and for the ITAA, one of the main industry groups lobbying for
expansion of the H-1B program since 1997. He went to work for
then-Senate Spencer Abraham and was the author of Abraham's H-1B
expansion bill which was enacted in 2000. He then went to work for the
BCIS (INS), and now has again formed his own think tank to promulgate
the industry's views.
# 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.
It's hardly a myth when major employers such as the Bank of America and
Siemens admit to doing it.
# Rather than preserving U.S. jobs, H-1B visa caps drive companies to
# expand overseas
Actually, H-1B is used to FACILITATE offshoring. The typical ratio in
an offshored project is one H-1B onshore for every two offshore workers.
In addition, here is a great rejoinder (Searching for Skills, Lorraine
Ash, Gannett News Service, in the Asbury Park Press, August 15, 2005):
% But Eileen Appelbaum, an economist and member of a National Research
% Council committee that studied the impact of H-1Bs on the U.S.
% economy, does not accept the way the H-1B option is typically framed:
% One can have an H-1B worker in an American job, or lose that job to
% exportation.
% "Industry said in 2001, "Let us have the H-1B visas and we'll do the
% work here, or you can say no and we'll just move the work offshore,'
% " she said. "Well, they got all the H-1Bs they wanted, and they
% still moved work offshore. In 2005, that's an argument industry can't
% make with a straight face."
Another industry line:
# 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.
That 3 percent figure includes all their nontechnical people, i.e. the
clerks, the bookkeepers, the sales and marketing people, etc. If you
look only at engineers, the figure is considerably higher.
# IBM's total of 2,500 H-1Bs pales next to the company's 43,000
# employees in India.
Again, those are not 43,000 engineers in India. The number of engineers
in India is probably comparable to the number of H-1Bs in the U.S.
The author and EE Times are to be commended for doing their own
analysis of the H-1B data.
Norm
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6/20/2006
In my posting yesterday, I forgot to comment on the section of the
article which cited Jeremy Leonard. Leonard's analysis here is odd, to
say the least.
> 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.
The word "by" here apparently means that by 2004 the number of visas had
declined to 139,000. But the H-1B visa is good for six years (or more,
under exceptions), so large numbers of workers who had been issued visas
earlier were still in the workforce in 2004. For example, just in
fiscal year 2001 alone, visas were issued to 191,397 workers in the
Computer-Related Applications category, and to 40,388 workers in the
Architecture, Engineering and Surveying category. That's just 2001.
One must then add the figures for the years 2000 and 2002-2005 in order
to compare to Leonard's jobs figure for 2005 (see below). Of course,
there are other issues here, e.g. the possible exit of some of the H-1Bs
and the fact that the Architecture, Engineering and Surveying is not
just engineering and a lot of engineering should not be considered IT.
But it is certainly clear that Leonard's 139,000 is way, way too low.
And keep in mind that then there are lots of L-1 visa holders on top of
that.
> "In comparison, the U.S. IT labor force, using a relatively narrow
> definition, numbers about 3 million," Leonard said. In
That's not narrow at all; it's too broad. The 2005 OES data that he
uses, for instance, gives 79K computer hardware engineers, 275K EEs,
776K software engineers, 99K database administrators, 492K system
administrators, 26K computer scientists and 389K programmers, for a
total of 2.1 million. He's including all the technicians, call center
workers and so on, which are jobs which are ineligible for the H-1B
program because they don't normally require a Bachelor's degree.
> 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.
That 23.3% figure is very misleading, as it is for a small category. In
2000, there were 64K computer hardware engineer jobs but 286K EEs, while
in 2005 those numbers were 79K and 275K. The totals were 350K and 354K,
essentially the same.
> "So employment in these occupations certainly hasn't declined
> due to H-1B visas," he said.
Leonard appears not to realize that these jobs numbers he's quoting
INCLUDE jobs held by H-1Bs and L-1s. One can't tell anything at all
about the impact of H-1B by looking at numbers of jobs.
The fact is that we had about the same numbers of jobs in 2005 as in 2000
(see above), while the numbers of H-1Bs in the country has increased by
an estimated 26%, with an even greater increase in L-1. (See my recent
CIS article, at http://www.cis.org/articles/2006/back506.html)
Norm
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