H-1B visa use cuts U.S. programmer, software engineer wages by up to 6%

Researchers say new study 'dispels the myth that globalization generates no losers'

The use of H-1B workers by U.S. companies is decreasing wages for computer programmers, system analysts and software engineers by as much as 6%, according to a study released this week by researchers at New York University's Stern School of Business and the Wharton School of the University of Pennsylvania.

The researchers said they found evidence that the wages are falling by accessing tens of thousands of resumes provided by a "leading online job search site" they wouldn't identify, to gain demographic and wage data of individual companies. They took all that information and combined it with government and other public data sources, including H-1B visa use and outsourcing, to get what they termed a "micro-data" view of what is going on in public companies that hire visa holders and offshore work.

The report's authors said that they are not using the study to take a position on H-1B visa use and do not discount other research that has found that H-1B visa-holders are helping U.S. competitiveness.

"In this paper, we simply sought to dispel the myth that globalization generates no losers," wrote Prasanna Tambe, an assistant professor of information, operations and management sciences at the Stern School, and Lorin Hitt, a professor of operations and information management at Wharton. The authors said that it's important that policy-makers understand the wage impact of the H-1B visa program.

Their access to resume data is one of the things that makes the study unique, the authors said. That combined with other public sources of data, gave them a sample number of IT workers in each firm, which they coupled with the number of H-1B workers these firms reported hiring. In total, the study was based on information the researchers compiled on 156,000 IT workers employed at nearly 7,500 publicly held U.S. firms.

"The relationship I'm investigating here is how compensation looked for domestic workers, depending on whether or not their employers are using offshore and H-1B employment," said Tambe.

What they found is that H-1B admissions at current levels are associated with a 5% to 6% drop in wages for computer programmers, systems analysts and software engineer categories. Offshore outsourcing also decreases wages for a broader category, including IT managers, by 2% to 3%, the study found.

The IT workers most likely to be affected by the downward pressure on wages are recent college graduates and people changing jobs, the researchers said.

A draft of the 32-page paper was posted this week on the Social Science Research Network. A study released last year by Tambe and Hitt found that as many as 8% of IT workers have been displaced by offshore outsourcing, either through job loss or job transfer.

The debate over the impact of H-1B workers on existing IT workers is contentious, particularly on how the foreign workers impact wages.

In 2004, the then Information Technology Association of America (now called the Technology Association of America), an industry group that supports offshore outsourcing and increasing the H-1B cap, hired IHS Global Insight to study the issue. IHS Global, an independent economic forecasting firm, found that offshore outsourcing could cause some workers to take a job that pays less, which would result in "wage compression."

Tambe said the goal of the new report is to look "precisely look at how domestic workers are being affected by globalization -- I'm not really making a judgment on whether that is good or bad."

"Although our findings suggest that the negative effects of globalization may be substantial for some workers, it is critical that policy-makers weigh these effects carefully against the macro-level economic effects," said Tambe and Hitt in the report. "Offshoring will most likely remain a necessary and important part of the global economy, and there is substantial evidence that H-1B admissions appear to directly improve levels of innovation and entrepreneurship, which in the long term should create new jobs and raise demand for technology workers in other areas.

"In this paper, we simply sought to dispel the myth that globalization generates no losers, and we begin to identify how the global migration of jobs and workers is affecting some high-skill workers in the U.S. Globalization does appear to have a negative wage effect on workers in some occupations, and as business and labor continue to become increasingly global, any discussions should include how best to prepare the vulnerable members of the U.S. workforce for global competition," they added.

Copyright © 2009 IDG Communications, Inc.

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