DOL Said Its H-1B Wage Rule Should Cost Many Employers $0 But It Imposed Billions in Costs Anyway

The Department of Labor (DOL) released a rule last week that raised the “prevailing wage”—the minimum wage that employers must pay to H-1B and other foreign workers. In justifying the rule, DOL claimed that most employers were paying more than the current prevailing wage, so raising it shouldn’t affect them. Indeed, DOL said that the prevailing wage should approximate the wages that many H-1B employers were already paying to their workers. But it then went ahead and imposed prevailing wage rates that are far higher than the wages that H-1B workers are now receiving.

DOL summarizes its logic for raising the prevailing wage as follows:

the Department’s data show that many of the largest users of the H–1B program pay in many cases wages well over 20 percent in excess of the prevailing wage rate set by the Department for the workers in question.… Employers must pay the higher of the actual wage they pay to similarly employed workers or the prevailing wage rate set by the Department. Both possible wage rates generally should approximate the going wage for workers with similar qualifications and performing the same types of job duties in a given labor market as H–1B workers. It is therefore a reasonable assumption that … the wage rates they produce would, at least in many cases, be similar.

Where the Department’s otherwise applicable wage rate is significantly below the rates actually being paid by employers in a given labor market, it gives rise to an inference that the Department’s current wage rates … are not reflective of the types of wages that workers similarly employed to H–1B workers can and likely do command in a given labor market.… Put another way, when many of the heaviest users of the H–1B program pay wages well above the prevailing wage, it suggests that the prevailing wages are too low, and thus can be abused by other firms. (85 FR 63872, 63886).

To hear DOL tell it, then, most H-1B companies are already complying with both the letter and intent of the law and should have no problem with this new rule because the higher wages will only affect a few low‐​paying employers. It concludes that the prevailing wage rate “should approximate” the actual wage being paid for the “largest users of the H-1B program” and that the actual wage and prevailing wage should “at least in many cases, be similar.” But the prevailing wage rates that the rule actually adopted completely contradict these agency findings.

DOL produced wage rates that are almost entirely dissimilar from the actual wages offered to H-1B workers overall as well as among the top users in 2020. Table 1 shows the new hourly prevailing wage rates compared to the actual hourly wage offers in 2020. Overall, 94 percent of H-1B job offers were below the prevailing wage rates under the IFR. The new IFR prevailing wage rate is 20 percent more or higher than the actual wage offers for 88 percent of H-1B jobs in 2020. Overall, the average H-1B employer will have to increase actual wage offers by more than 30 percent. Among the top H-1B employers that DOL specifically indicates its findings should apply to, the new prevailing wages average 31 percent above, and again, the new prevailing wages are 20 percent above for 89 percent of H-1B jobs among the top users.

Notice that DOL claimed that a 20 percent difference was “significant” and proved the the prevailing wage rates were wrong, but now it has moved the wages more than 20 percent higher than actual wages, despite its clear statements. Far from costing employers nothing, the 30 percent wage hike will cost employers tens of billions of dollars in additional wages.

This is the second way in which DOL has fundamentally misrepresented its rule to the public. I previously noted that DOL made a massive error in its assumptions about where wages would fall under its new methodology. It’s possible that the one bad assumption explains why the prevailing wages are so far from the actual wage offers. Either way, DOL’s rule directly contradicts the agency’s own findings. Hopefully, a court will find that any agency action that contradicts its own findings is arbitrary and capricious and stop the rule.