In October 2020, DOL issued an “interim final rule” effective immediately that inflated the “prevailing wage”—or minimum wage—that employers must offer and pay under the H-1B temporary and permanent employment‐based immigration programs. As I explained at the time, the rule was deeply flawed. It misrepresented how high wages would rise under the rule and so also miscalculated the rule’s costs.
Businesses commenting on the rule change through the official regulatory process cited my analysis, and in January 2021—just before the change in administrations—DOL issued a final rule that admitted these mistakes, and to address them, the final rule increases the prevailing wage by much less than the interim final rule (though still very significantly). DOL’s final rule, however, still failed to rectify another error that I noted in the October interim final rule. In its justification for raising the prevailing wage, DOL made the following finding:
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).
In other words, DOL admits that most major companies are already offering wages higher than the existing prevailing wage and offering similar amounts to the “actual wages” that their other U.S. workers are making, and so its decision to raise the prevailing wage should have only a relatively small effect for those other companies “abusing” the process. It reiterated these points in the final rule, stating that “the actual wage clause and the prevailing wage clause of the INA are designed to achieve similar outcomes.”
Yet DOL’s data show that once the rule is fully implemented, this will definitely not the case: the prevailing wage will affect 100 percent of the top 50 H-1B employers and impact 73 percent of their H-1B job offers. The average prevailing wage increase will be about $20,000 higher than their actual wage offers, which DOL says are based on what other U.S. workers are making.
The impact for the top H-1B employers that DOL insists have nothing to fear from raising the minimum wage are actually greater than the overall averages for other employers. Altogether, the rule would have required H-1B employers to offer wages of about $7.6 billion in a single year more than under the existing prevailing wages. These inflated wages will make it very difficult or impossible for many companies to hire these important foreign workers at all.
DOL has not published exactly what the new prevailing wages will be, so this analysis used the Bureau of Labor Statistics Occupational Employment Statistics survey data—on which the prevailing wages are based—and interpolated them to identify the new prevailing wage for each H-1B offer recorded in the H-1B disclosure data published by DOL. Some data were not available for certain areas of the country.
Ultimately, the data show that DOL has not implemented a rule in accordance with its own findings that most employer’s H-1B job offers should be similar to the new prevailing wage rates. I’ve already shown that DOL also misrepresented the private wage data that it received from employers commenting on the rule that show the same thing. The new prevailing wage rates are inflated. The reason is obvious: DOL doesn’t want employers to be able to legally hire foreign workers.