H-1B visa pay boost: Win for workers, or doomed ‘mess’?

Critics of the controversial H-1B foreign-worker program are applauding a new Trump Administration rule significantly boosting required pay, but a Bay Area member of Congress says the change is an unworkable mess and won’t survive legal challenge.

Under the rule issued and effective last week, H-1B workers in jobs at the lowest of four skills levels must receive the 45th percentile of the wages for their job type and location. Previously, they could be paid 17th percentile. Under the new rule, the higher the skills level, the higher the wage point is on the wage distribution. Workers at the highest skills level must be paid at the 95th percentile on the wage distribution, up from 67th percentile.

The pay boost is the first substantive reform in the visa program’s 30-year history, said Ron Hira, a Howard University professor whose H-1B research was cited in the government’s rule-making.

“If you had to ask for one single change that would be the most important one to change it would be the wages because you want to take away the incentive to hire people because they’re cheaper,” Hira said.

The administration of President Donald Trump has cracked down on the H-1B program, dramatically increasing visa denials for staffing companies and outsourcers that contract out foreign workers. Critics have argued that these companies and their client firms use the H-1B to supplant U.S. workers, drive down wages and send work overseas.

Supporters, including Silicon Valley’s technology giants, contend that the program should be expanded to ensure access to the world’s top talent, and that the administration’s crackdown is pushing skilled foreign workers toward more welcoming nations such as Canada. That country’s government has sought — successfully, say critics of Trump administration immigration policy — to lure skilled workers away from Silicon Valley. The Bay Area Council has called the recent changes that included the wage hike a “gift” to Canada.

Silicon Valley Congresswoman Zoe Lofgren, a Democrat who has sponsored bills to increase wages for H-1B workers, said pay increases such as those required in the new rule are necessary, but the administration’s rushed approach is doomed to fail. “It’s going to be struck down because it didn’t follow the rules and also it’s a mess,” Lofgren said. “It’s all about the re-election, it’s not about the policy. They don’t care whether this gets into effect or not. They just wanted a bumper sticker.”

In a document explaining the wage change, the U.S. Department of Labor noted that the previous minimum pay levels had been in place for 20 years. The old wage levels suppressed U.S. workers’ pay, the department asserted, adding that it expects the new wages “will induce some employers to employ U.S. workers instead of foreign workers from the H-1B program.”

The National Foundation for American Policy, which supports expanding the H-1B program’s current 85,000 cap on new visas, said its calculations showed that for computer-related jobs in Silicon Valley, minimum required pay will go up by about 35% to 40% across all skill levels. The foundation compared private wage-survey data to the new minimums, and found that, for example, minimum required pay for an H-1B electrical engineer in Silicon Valley is now $42,000 to $85,000 a year higher than the actual prevailing wage, said Stuart Anderson, executive director of the foundation.

The administration claims the wage changes will lead to a transfer from employers to employees of about $23 billion per year over the next decade. “Their analysis doesn’t make any sense,” Anderson said. “To order a vastly inflated wage assumes that companies have unlimited amounts of money.”

Hiking the cost of employing H-1B workers will likely push companies to reduce overall jobs, and possibly move work outside the country, Anderson argued. The foundation, he said, also found that for thousands of combinations of jobs and geographic regions, including in the Bay Area, wage levels were set arbitrarily at $208,000 a year or more. Systems software developers in Silicon Valley, according to the new rule, must be paid at least at that level. But private survey data from advisory firm Willis Towers Watson shows actual wages range from $71,000 to $192,000, Anderson said. The Labor Department did not answer questions from this news organization.

“The only reason for this rule is to try to price highly skilled foreign workers and students out of the labor force,” Anderson said.

A report published earlier this year by Hira and Daniel Costa, an immigration law expert at the left-leaning Economic Policy Institute, concluded that major U.S. firms, including Silicon Valley technology giants, “take advantage of program rules in order to legally pay many of their H-1B workers below the local median wage.”

Some H-1B workers receive more than the minimums, Hira noted. Hardest hit by the new rules will be firms that pay H-1B employees at or near the minimums, he said. Hira expects the wage change to usher in a higher-skilled H-1B workforce that will complement American workers without pushing compensation down.

The Cato Institute, a libertarian think tank, said in an Oct. 9 report that the Labor Department used a “fundamentally flawed methodology” and “wildly inaccurate” wage estimates. The rule’s text significantly understates the pay the rule actually requires, according to Cato.

Friday evening, the ITServe Alliance, which represents American firms that place foreign tech workers at U.S. companies, sued the government in U.S. District Court in New Jersey arguing that the Trump administration had, while “dramatically” changing how H-1B prevailing wages are calculated, engaged in “reasoning that conflicts with basic economic theory,” Law360 reported. The Labor Department did not immediately respond to a request for comment. The Mercury New