The H-1B Equation

Salary data shows split with wages of U.S. workers

H-1B Salary Interactive Tool

Next week, the U.S. government will begin accepting H-1B applications from companies that want to take advantage of an increase in the fiscal 2005 visa cap to hire foreign workers who have advanced degrees from U.S. universities.

Up to 20,000 new H-1B visa slots are becoming available. Opponents of the cap increase say the graduates being hired will take jobs from U.S. workers, including IT staffers. Supporters argue that foreign workers are important to the country's economic health. At the core of the debate lies a question that's likely to re-emerge as the application process begins again: Do H-1B visa holders help or hurt the U.S. workforce?

A Computerworld analysis of wage data from approximately 290,000 H-1B applications filed with the U.S. Department of Labor shows that H-1B salaries declined across the board between the 2001 and 2003 federal fiscal years in a number of IT job categories. They include programming, systems analysis, networking, end-user support and quality assurance (see interactive database tool). The wage decline mirrored what was happening to the pay of U.S. IT workers—at least until 2003, when the salary trends diverged, according to research firm Foote Partners LLC.

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The government's Labor Condition Application database provides data only on new H-1B visa applicants and visa holders seeking a change of status. In addition, the Labor Department lumps the information into job categories that don't easily match with jobs in the private sector. Moreover, the government doesn't track visa holders and doesn't know the rate at which H-1B visa holders lost jobs in proportion to U.S. workers.

But David Foote, president and chief research officer at Foote Partners, said there was a split in 2003: The salaries of U.S. workers increased, while H-1B wages continued downward. That finding comes from comparing the H-1B data compiled by Computerworld and processed by Eastland Data Systems Inc. with salary information that New Canaan, Conn.-based Foote Partners collected through surveys of about 46,000 private-sector and government IT professionals.

In the category covering data communications and networking jobs, for instance, U.S. salaries rose 6.2% in fiscal 2003, Foote said. H-1B salaries declined 2% during that period, according to the Labor Department data. Foote said U.S. salaries in other IT job categories grew at rates ranging from 1.5% to more than 6%, while H-1B salaries saw declines of 1% to 5%.

In 2003, "the economic recovery began in earnest," Foote said. Salaries for U.S. workers increased because companies were trying to hold on to IT staffers who hadn't been laid off during the technology spending downturn, he noted. Meanwhile, offshore outsourcing increased, as did the use of contract companies that rely on H-1B visa workers.

Because clients didn't want contract-labor costs to eat into their offshore savings, contractors had to be competitive, according to Foote. "If they can't convince the client of theirs to pay more for the talent, then they just have to get the talent cheaper," he said.

The fight over H-1B visas ultimately revolves around the opinions and experiences of IT managers and workers.

Jesus Arriaga, CIO at Keystone Automotive Industries Inc., an auto parts distributor in Pomona, Calif., is among those questioning the need for more H-1B visas. In prior jobs in California in the late 1990s, he worked at companies that used H-1B workers, who were typically paid less than their U.S. counterparts. "It's just like offshoring," he said. "You're probably going to get similar skills at a lesser cost."

Nonetheless, Arriaga said that at Keystone, he's more interested in hiring U.S. workers, "especially when you have colleagues that have not found work." When U.S. workers "get bypassed because other foreign workers are coming in and taking their jobs, I don't think that's right," he said.

Russell Lewis, CIO at GFI Group Inc.
Russell Lewis, CIO at GFI Group Inc.

Russell Lewis, CIO at GFI Group Inc., a New York-based financial services firm, has hired H-1B workers as full-time employees and has sponsored them for permanent residency green cards. Lewis said that his goal is to hire the best person for a particular job and that he has seen no savings in hiring H-1B workers full time.

"By saying, 'Well, the H-1B workers bring a cheaper labor force to the U.S.,' typically, our experience is that it doesn't do that," Lewis said.

Some H-1B workers attribute wage problems to IT contractors—sometimes called "body shops."

A Labor Department employee who works in the H-1B program and asked that his name be withheld said most complaints concern contractors who either paid H-1B employees below the prevailing wage or "benched" them, meaning they weren't paid between contracts.

Rajiv Dabhadkar, a former H-1B visa holder and IT programmer who returned to India last year, said he was always paid below prevailing wage levels by contractors. In addition, he once found out that he wasn't receiving medical insurance even though there was a paycheck deduction for the benefit.

"I've been really hurt by the visa system," said Dabhadkar, who formed a group in Mumbai, India, called NoStops.Org that provides call center support to H-1B and other tech workers.

The 20,000 additional H-1B visas will become available on March 8. Other changes to the H-1B program will also go into effect in the next few weeks, including a revamping of the government-mandated two-tiered prevailing wage system under which visa holders are paid.

H-1B workers are supposed to be paid a prevailing wage, based on state, federal or private-survey employment data. Most companies use federal or state salary data, according to immigration attorneys, who said the current system doesn't give employers much flexibility—often forcing them to pay a wage that is higher than an employee's skills and training warrant.

On March 8, the law will be changed to allow four tiers of pay in each prevailing wage category, enabling companies to pay H-1B visa holders something between the top and bottom levels of the prevailing wage scale.

"It has been a virtual nightmare dealing with a two-tier system," said David Nachman, an immigration attorney in Saddle River, N.J. "What we're seeing now is [that] finally the Department of Labor is coming to an understanding of what the real world is."

But Ron Hira, an assistant professor of public policy at the Rochester Institute of Technology in New York, said the four-tier system "will only push wages down ... for many of those workers that were probably in between the two [tiers]."

Another change next month requires employers to pay 100% of a prevailing wage for new and extended H-1B petitions. That rate is now 95% of the prevailing wage. Also, the fees for an H-1B application, including the cost of accelerated processing, will rise from $185 to $3,185.

Frida Glucoft, a partner at Mitchell Silberberg & Knupp LLP in Los Angeles and chair of the law firm's immigration department, said the prevailing wage and application fee increases will likely discourage some companies from hiring H-1B workers.

Still, Glucoft expects the 20,000 new visas approved by Congress last fall to be gone in a week.


IT WAGE DATA 2001-2003

JOB CODE FY 2001 AVERAGE H-1B FY 2002 AVERAGE H-1B FY 2003 AVERAGE H-1B % CHANGE '01-'02 H-1B % CHANGE '01-'02 U.S. IT % CHANGE '02-'03 H-1B % CHANGE '02-'03 U.S. IT
030 $60,357 $60,554 $59,701 -2.8% -1% +1.8%
031 $60,234 $57,041 $56,136 -5% -7% -2% +6.2%
032 $53,024 $48,062 $46,882 -9% -7% -2% +4%
033 $58,933 $54,415 $51,947 -8% +0.8% -5% +1.8%
039 $66,763 $64,883 $64,247 -3% -3.4% -1% +1.5%


The H-1B data includes information only on new visa applicants. It doesn't include wage information on all H-1B visa workers in the U.S. at that time.

The U.S. IT data comes from Foote Partners LLC in New Canaan, Conn., which matched its own salary survey data on about 46,000 IT professionals against the government data.


030: Software engineer, computer programmer, programmer analyst, engineer and scientific programmer, systems programmer, chief computer programmer, ystems analyst

031: Network control operators supervisor, data communications analyst, network control operator

032: User support analyst supervisor, user support analyst

033: Computer security coordinator, data recovery planner, technical support specialist, computer systems hardware analyst, quality assurance analyst, computer security specialist

039: Database administrator, database design analyst, microcomputer support specialist

Copyright © 2005 IDG Communications, Inc.

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