H-1B Prevailing Wage Claims vs. Reality:
What They Say, Versus What They Pay

By Robert Hill, CUNY, Murphy Institute for Worker Education

Arguments For And Against the H-1B Program

There is a long-running argument about whether the technology business community in the United States is justified in its practice of hiring “foreign guest-workers” via the H-1B program instead of domestic, “citizen” workers. Businesses have long claimed that they have jobs that must be filled immediately (or else, the U.S. will suffer significant economic demise), but they cannot find U.S. citizens with the required training and skills to fill these jobs. Therefore, they argue, Congress must allow business to bring in increasingly greater numbers of foreign “guest-workers” to work in the United States, or else the jobs will leave the U.S. and go to where the workers are. An article from the Wall Street Journal in 2007 is typical of the press coverage of the issue and refers to the Congressional testimony given by Bill Gates, Chairman of Microsoft, one of the largest consumers of H-1B visas.

“Congress is under pressure from employers’ groups to vastly expand the number of visas available each year, and is generally in favor of the idea. Employers say there aren’t enough visas to meet their needs, even though the visas are renewable, and Congress added 20,000 visas this year for foreigners who have at least a master’s degree from a U.S. college. Microsoft chairman Bill Gates testified on behalf of the program on Capitol Hill, warning of dangers to the economy if employers can’t import skilled workers to fill job gaps.”

A more recent article in Business Week magazine reports that the need for additional H-1B workers is growing ever-more acute and that the consequences for failing to increase the H-1B limits include the permanent loss of technology jobs to other countries. Writing in January 2011, Business Week columnist Frank Aquila claims:

“The U.S. Labor Department estimates that by 2014, 2 million high-tech jobs will go unfilled simply because the cap on H-1B visas has not been raised. Tech giants such as Google and Apple will no doubt move significant development projects out of the U.S. to places where these skilled workers are available. Smaller high-tech businesses, historically the engine of U.S. job growth and creation, will simply never get off the ground. The consequences are clear: the next generation of innovative companies will not likely be founded here. Instead, due to U.S. policy, these companies will most probably be created in places such as India, China, and Singapore.”

Critics of the practice have long claimed that domestic workers are readily available, but that businesses routinely hire foreign H-1B workers because they can and will do the same work for significantly lower wages than the “prevailing wages” that domestic workers expect. To protect against this possibility, H-1B visa legislation includes statutory requirements that compel businesses that hire H-1B guest workers to demonstrate that they are a) actively seeking (and not displacing) domestic workers, and b) paying H-1B guest workers “at or above” the so-called “prevailing wages” for domestic workers.

However, there is widespread suspicion that these statutory requirements are either ignored or manipulated so that their net effect is essentially meaningless. Writing in The Wall Street Journal, columnist Paul Donnelly (2002) even quoted Nobel Prize winning economist Milton Friedman as starting unequivocally that the H-1B system was a “subsidy.” 

“During the last H-1B debate, Harris Miller, the head of the ITAA, told an interviewer at the Chicago Tribune that the H-1B is a kind of ‘minor league,’ a farm team for the IT industry. This spring, I wrote to Nobel prize winning economist Milton Friedman, practically the patron saint of the free market, citing Miller’s quote and asking: “What is a subsidy?” This is his reply: “’The majority of H-1B immigrants do manage by hook or crook to get permanent residence and become citizens, so as a factual matter they are not a ‘farm team’ of indefinitely temporary workers. Yet, there is no doubt that the program is a benefit to their employers, enabling them to get workers at a lower wage and to that extent is a subsidy.’” 

Presumably, the late Milton Friedman knew a subsidy when he saw one.