Brian D. Pasternak,
Administrator, Office of Foreign Labor Certification
Employment and Training Administration
Department of Labor
Room N-5311
200 Constitution Avenue NW
Washington, DC 20210

RE: Department of Labor, Employment and Training Administration, Improving Wage Protections for the Temporary and Permanent Employment of Certain Foreign Nationals in the United States, Notice of Proposed Rulemaking, DOL Docket No. ETA-2026-0001, RIN 1205-AC30 (March 27, 2026)

Dear Brian Pasternak:

The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank established in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-income workers—regardless of immigration status—and assesses policies with respect to how well they further those goals. EPI submits these comments on the Department of Labor’s (DOL) Notice of Proposed Rulemaking (NPRM) regarding the updated four-tiered wage structure for H-1B, H-1B1, and E-3 nonimmigrant workers and DOL permanent labor certifications for employment-based permanent immigrant visas (i.e. green cards) in the second and third employment-based preference categories (EB-2 and EB-3). EPI has researched, written, and commented extensively on the U.S. system for labor migration, including in particular, the H-1B program and other temporary work visa programs and green cards. EPI has published extensively on H-1B wage levels and employer usage and abuse of H-1B and other visa programs.1

EPI generally supports the main substance of the NPRM and believes it is an improvement as compared to the status quo for the current four-tiered wage structure for H-1B, and will also improve H-1B1 and E-3 nonimmigrant visas, and permanent labor certifications in EB-2 and EB-3, because the NPRM will make incremental progress towards ensuring that the wages of U.S. workers are safeguarded and that the Labor Condition Application (LCA) and PERM programs are not hijacked by employers as a loophole to underpay migrant workers according to U.S. wage standards. The proposal will also help disincentivize firms from using H-1B visas as a primary tool to outsource professional jobs and send them overseas.

However, as we will detail in this comment, we believe DOL should go beyond what the NPRM proposes by setting the wage floor—i.e. the Level I wage—at the 50^th percentile so that no H-1B, H-1B1, E-3, EB-2, or EB-3 jobs are ever certified at a wage that is below the local median wage for the occupation. If DOL implements such a rule in the final version of the regulation, the rule would address a major critique EPI has long held about the program, and which Members of Congress from both major parties have attempted to address through repeatedly proposed legislation that was first introduced nearly two decades ago.

It must also be noted at the outset of these comments that recent actions taken by DOL with respect to wages for migrant workers in temporary work visa programs have been inconsistent and confusing. While DOL is considering action proposed in this NPRM that will raise wage rates closer to true market rates for migrant workers in the H-1B, H-1B1, and E-3 visa programs, as well as those with labor certifications for EB-2 and EB-3 green cards, it is important to note that in October of 2025, DOL issued a new wage rule for the H-2A program that will cut wages dramatically for the migrant farmworkers in that program and unfairly charge them for lodging2—which, as EPI has estimated—will lead to a pay cut of roughly $2 billion for H-2A farmworkers and $3 billion for U.S. farmworkers per year.3 DOL should issue regulations that lead to improved labor standards and fair wages for all work visa programs, and not treat workers differently based on their education levels, occupations, and nationalities. All temporary migrant workers deserve to be paid fairly for their work, and no work visa programs should operate as loopholes that allow employers to legally underpay migrant workers.

The NPRM is an improvement on the status quo but DOL should amend the proposal to better protect workers

In general, the NPRM improves upon the current wage structure but should be further enhanced to better protect workers and align the program with congressional intent and the goals of the H-1B statute. The principal change made by the NPRM is to update the four prevailing wage levels required in the H-1B, H-1B1, and E-3 visa programs—temporary work visa programs for college-educated migrant workers—setting levels at higher percentiles in the Occupational Employment and Wage Statistics (OEWS) survey distribution of wages, in order to more adequately reflect market wage rates in the U.S. labor market. The NPRM also applies the new wage rates/percentiles to the permanent labor certification requirements for employment-based (EB) green cards in the EB-2 and EB-3 preference categories (sometimes referred to as the PERM process).4

The current and newly proposed wage level percentiles are as follows:

Table 1

As we have detailed in published research,5 the two lowest wage levels in the current wage computation method are below the local median wage according to the occupation and local area based on DOL wage survey data in the OEWS, allowing employers to undercut U.S. wage standards. The NPRM sets the lowest wage level at the 34^th percentile, previously the Level II wage, thereby continuing to permit employers to pay H-1B workers at below-market wage rates—but not at the absurdly low levels allowed by the current Level I wage at the 17^th percentile.

DOL’s faulty prevailing wage computation has cost foreign-born workers at least $6.56 billion annually (see NPRM Exhibit 1). Even that is likely to be a serious underestimate for two reasons. First, it does not account for the losses suffered by U.S. workers and students who have had their wages, job opportunities, and career development suppressed and undermined as a result of the current wage methodology. Second, it does not estimate the costs incurred due to foreign-born workers’ weakened bargaining power vis-à-vis their employment through nonimmigrant visa programs. Employers exert much more control over visa workers than U.S. workers and permanent residents. Foreign-born workers on nonimmigrant visas have less opportunity to, and are far less likely to, switch jobs. Switching jobs, or the threat of switching jobs, is fundamental to any worker’s ability to demand higher wages and better working conditions. Professor George Borjas estimates that, in fiscal year (FY) 2024, visa holders had an annual separation rate of 9.4%, less than half of comparable U.S. workers.6 Workers also face dire circumstances should they be terminated. They must find a new job within 60 days or else leave the United States. All these conditions place foreign-born workers in the H-1B, H-1B1, and E-3 visa programs in a much weaker position than similarly situated U.S. counterparts when bargaining for wages and working conditions. Simply put, foreign-born visa workers have fewer employment rights than U.S. citizens and permanent residents, and employers rationally take advantage of their relatively weak position when setting employment terms. Further, the agency has never enforced the Labor Condition Application’s (LCA) Working Conditions attestation, where employers promise to “not adversely affect the working conditions of workers similarly employed,” so employers disregard it.

In addition, the ability of H-1B workers to become lawful permanent residents and remain in the United States is entirely up to the whims of their employers. Even after working for an employer for six years in H-1B status, the employer has the power to decide if an H-1B worker can remain in the country—in many cases after an H-1B worker has established firm roots in the United States. That power keeps H-1B workers from complaining and asserting their employment rights. That leaves H-1B workers in a difficult position where they might decide, rationally, to abandon any demands for higher wages and better working conditions in exchange for the possibility of being sponsored for lawful permanent residence.

Prevailing wages must be raised sufficiently to compensate for this government-created labor market distortion, to protect both foreign-born workers with nonimmigrant visas and U.S. workers who already reside in the United States. 

DOL’s proposal to increase the wage-level percentiles is the best approach. It is straightforward and understandable to implement. The effects are easily modeled. Employers can respond to it predictably and effectively. It will improve the quality and skill mix of the pool of workers who are issued visas, pay those workers fairer salaries, and have fewer adverse impacts on the domestic workforce and labor supply. Recent results reported by United States Citizenship and Immigration Services (USCIS), from the fiscal year (FY) 2027 H-1B lottery, the first to use the new wage-level weighting process, show that a large majority of H-1B registrations selected met at least the 34th percentile threshold, 82%, while also increasing the share of F-1 advanced degree graduates selected from 57% to 71.5%.7 The latter demonstrates that concerns about this proposal shutting off the foreign student pipeline are overblown and misguided.

However, as noted above, the increases don’t go far enough. We believe that the Level I wage should be set no lower than the median (50th percentile) to effectively adjust for the non-compensated effects of limited job-switching, an absent or ineffective labor market test, weaker bargaining position, and non-enforcement of the actual wage requirement. Recent college graduates, especially those earning degrees in computer science and computer engineering, are facing the highest unemployment rates amongst all majors according to analysis by the New York Federal Reserve Bank, and the worst job market in recent memory according to dozens of media accounts.89 Most analysts and executives predict that artificial intelligence (AI) will only make that labor market segment even worse. Major firms have laid off thousands of workers, citing AI the reason they need fewer workers. Many of those same firms employ thousands of H-1B workers. AI is predicted to reduce labor demand especially of recent graduates, the very U.S. workers competing for Level I jobs. The rules should ensure that workers assigned at Level I wages have truly special skills and will not undercut opportunities for recent university graduates.

Analysis of the NPRM: “Improving Wage Protections for the Temporary and Permanent Employment of Certain Foreign Nationals in the United States”

1. Raising wages for H-1B workers and permanent labor certifications will benefit migrant workers and protect wage standards for U.S. workers

For years, H-1B employers have been allowed to pay their H-1B workers at wage rates that do not reflect local market rates, by having an option to pay them at the two lowest permitted wage levels. Our 2020 report discusses the available data, the mechanics of the current rule, and why it is important to modify the H-1B wage levels to adequately reflect market wages and ensure that H-1B workers are paid fairly, and to preserve U.S. wage standards.10 In the report, we recommend that DOL prohibit any H-1B job from being certified at a wage that is below the local median for the occupation and region. In that respect, by proposing to set the lowest wage level (Level I) at the 34^th percentile, DOL’s NPRM fails to do enough to protect wage standards in H-1B jobs. In the report we also recommend that DOL prohibit downward pressure on wages at the national level by requiring that every H-1B job be certified at a wage that is no lower than the national median wage for the occupation.

Many commentators on this NPRM, especially from the business community, including universities, are likely to claim that raising wages for migrant workers and safeguarding U.S. wage standards will harm the U.S. economy. When the misleading rhetoric is stripped away, the employers who oppose higher wage percentiles for H-1B, H-1B1, and E-3 visas, and EB-2 and EB-3 green cards, are simply claiming, in essence, that employers will only hire workers in the LCA and PERM programs if they are underpaid relative to similarly situated U.S. workers, and portray higher wages as an obstacle to migration or to the hiring of adequate talent that will prevent them from being successful and innovating.

Accepting this argument leads to a race to the bottom in terms of labor standards and excuses the co-optation of the immigration system in order to pad corporate profits. And such a line of argumentation is not supported by the available evidence. In fact, many advocates on all sides of the current H-1B debate now agree that the current H-1B wage rules are undercutting U.S. wage standards and should be updated. Even previous staunch defenders of the status quo, such as those representing or funded by the tech industry, as well as representatives of major employer associations, now admit that U.S. wages and U.S. workers are being undercut via the current prevailing wage rule.11

Adequate labor standards are never a barrier to migration or economic success—instead, they are a prerequisite to fair treatment for the migrant workers who are recruited by employers into the U.S. labor market and similarly situated U.S. workers.

Under the current rule, the wages of H-1B workers are being kept artificially low. The higher wage levels in DOL’s NPRM are more reasonable and closer to reflecting market wages in particular occupations and specific geographic regions. In other words, DOL’s proposal will push wage levels toward market wages, meaning it will increase labor market efficiency. It will also improve the quality and skill mix of the pool of foreign-born workers who are hired, increasing the productivity and innovation spillovers that skilled immigration promises.

2. DOL should raise the wage percentiles so that Level I is set no lower than the 50^th percentile of total wages surveyed in an occupation and region and prohibit any LCA or PERM approval for a wage that is lower than the national average for the occupation

The purpose of the H-1B and related programs is to “help employers who cannot otherwise obtain needed business skills and abilities from the U.S. workforce.”12 Specialized skills should command high wages; such skills are typically a function of inherent capability, education level, and experience. It would be reasonable to expect that these workers should receive wages higher than the local median wage. One would therefore expect most H-1B positions to be assigned as Level IV (the only current wage level above the median), but as DOL and USCIS data show, H-1B employers as a whole assign only a very small minority of H-1B positions as Level IV, usually roughly 15% or less in recent fiscal years, while as DOL notes in the NPRM, 63% of H-1B positions were assigned at Levels I and II. For all LCA programs, DOL notes in the NPRM that in FY 2024, 16% of all LCA positions were certified at Level IV. At the USCIS petition level, Level IV wages are even less common: data disclosed by USCIS shows that in 2019 and 2020, only 4% of approved petitions for new employment under the regular cap were assigned at Level IV and only 2% of approved new H-1B petitions under the advanced degree exemption cap were assigned at Level IV.13 We also know from more recent data from DHS that the five-year average of H-1B registrations at Level IV was just 5% over the FY 2020 to 2024 period.14

The data presented in our reports over the past decade and a half and more recently, the data reported by USCIS on the distribution of H-1B petitions by wage level, all point to the obvious fact that nearly all H-1B employers, but especially the largest employers, use the H-1B program either to hire relatively lower-wage workers (relative to the wages paid to other workers in their occupation) who possess ordinary skills or to hire skilled workers and pay them less than the true market value of their work. Either possibility raises important policy questions about the use and allocation of H-1B visas.

By setting two of the H-1B prevailing wage levels so low relative to the median and not requiring that firms pay at least market wages to H-1B workers, DOL has incentivized firms to earn extraordinary profits by legally hiring much-lower-paid H-1B workers instead of workers earning at least the local median wage. The fact that firms earn those profits through poorly crafted wage rules and by underpaying H-1B workers—instead of by offering a better or more innovative product or service—means DOL has, in effect, made wage arbitrage a feature of the H-1B program. And as the wage-level data we have reported on and cited here clearly shows, nearly all H-1B employers are exploiting these H-1B wage rules in order to pay below-median wages.15 We believe the evidence is clear that these firms are not using the H-1B program sparingly to hire truly specialized workers, nor are they using it only when U.S. workers are unavailable. Given the business models and occupations, it is likely that the H-1B1 and E-3 programs are being abused similarly.

So how should DOL set a wage rule that guards against this and complies with the statutory requirement to prevent adverse effects on wages and working conditions?

The existing statutory language that sets out the H-1B prevailing wage requires four H-1B wage levels, but it does not prescribe specific percentiles, and no law requires DOL to set any of these prevailing wage levels below the local median wage. To ensure that H-1B workers possess specialized skills and are fairly paid, and to protect local wage standards and eliminate wage arbitrage as a feature of the H-1B program, DOL should issue a final rule that sets the lowest (Level I) wage for the LCA programs and EB-2 and EB-3 green cards at the 50th percentile for the occupation and local area, at least, and require that wage offers to workers in the LCA and EB-2 and EB-3 programs never be lower than the national median wage for the occupation, in order to prevent downward pressure on wages nationwide.

Requiring and enforcing above-median wages for H-1B and other LCA and PERM program workers would disincentivize the hiring of workers with nonimmigrant visas and green cards as a money-saving exercise, ensuring that companies will use the program as intended—i.e., to bring in workers who have special skills—instead of using them as a way to hire underpaid indentured workers for jobs that require at least a college degree.

3. DOL should set the updated wage percentiles at the 50^th, 62^nd, 75^th, and 90^th percentiles according to the total surveyed wages for the occupation and local area in the OEWS

As noted and discussed above, the lowest wage level, Level I, should be set no lower than at the 50^th percentile. Instead of the proposed four wage levels in the NPRM, DOL should set the lowest wage level, Level I, at the median wage (at the 50^th percentile), Level II at the 62^nd percentile, Level III at the 75^th percentile, and Level IV at the 90^th percentile—according to the overall distribution of OEWS wages for each occupation and region. (See table below.)

Table 2

These levels would ensure that no LCA or EB-2 or EB-3 positions are certified at a wage that is below the overall local median wage for an occupation, which in turn will prevent downward pressure on U.S. wage rates in such occupations. An additional benefit of using the 50^th, 62^nd, 75^th, and 90^th percentiles, as DOL points out, is “that they are close to dividing the upper half of the distribution equally.”16

4. DOL’s experience benchmarking proposal is inferior to the NPRM’s core proposal on wage levels and should not be implemented

The NPRM requests comments on ‘experience benchmarking’ as an alternative computational method to the core proposal of Level I at the 34^th percentile, Level II at the 52^nd, Level III at the 70^th, and Level IV at the 88^th percentile, based on the overall OEWS wages by occupation and region. We believe that this experience benchmarking alternative is significantly inferior to the core proposal and urge DOL to reject it for four main reasons. First, the methodological description is insufficient to evaluate, with just two pages of text. This is especially troublesome since it is an entirely novel method of setting prevailing wages that has never been rigorously tested or examined. It will impact literally millions of workers and hundreds of thousands of employers. To our knowledge, Mincer equations have never been used to this large an extent for setting wages in any government program. Second, the data necessary to calculate prevailing wages do not exist; they must be synthesized through estimation procedures after marrying two distinct surveys that were never designed for these purposes. Are the sample sizes sufficient? There’s no exploration of these potential flaws in the NPRM. Third, the method biases against women. The method does not directly measure experience; instead, it estimates experience by the age of the candidate. Women are more likely than men to have gaps in their labor force participation. The agency does not provide a method for adjusting the calculations based on gender. Fourth, this method would surely fuel age discrimination by allowing firms to legally pay younger H-1B workers less than U.S. workers doing the same job. Professor Norman Matloff, one of the leading scholars of the H-1B program, has repeatedly expressed concerns that firms prefer to hire H-1B workers because they are younger, and therefore lower-paid, than equivalent Americans.17 The government would be endorsing such behavior by adopting experience benchmarking.

More broadly, adopting benchmarking to set prevailing wages rests on the assumption that labor markets are highly segregated by age and educational attainment. Is it true that a 28-year-old does not compete with a 35-year-old? Is it true that someone with a master’s degree does not compete with someone with a bachelor’s degree? The DOL provides no evidence to test this hypothesis with a single occupation or example, let alone whether it would hold across the roughly 400 occupations eligible for visa programs covered by this NPRM.

The example provided in the NPRM, of an accountant working in Dayton, Ohio, illustrates the difficulty for anyone to assess the accuracy of the procedure.

If ACS data and Mincer wage equation estimated that U.S. accountants with 10 years of experience and a master’s degree typically earn 20 percent more than the median accountant nationwide, the Experienced Benchmarked ratio for that education-experience combination in accounting would be expressed as a wage premia factor of 1.2. Then, to compute the Level I prevailing wage for an employer seeking visa labor certification to employ an alien worker as an accountant in Dayton, Ohio, with 10 years of experience and a master’s degree, the Department would take the OEWS 50th percentile for accountants in the Dayton MSA (currently $78,710) and multiply it by 1.2, yielding an experience-benchmarked Level I prevailing wage of $94,452. The Level II prevailing wage would apply the same 1.2 ratio to the OEWS 62nd percentile; Level III to the 75th percentile; and Level IV to the 90th percentile.18

This hypothetical example presents several shortcomings.

First, we encounter problems with identifying the data. The NPRM reports the OEWS 50^th percentile wage in Dayton MSA of $78,710. We are unable to validate this wage using the OFLC Wage Search page.19 The OEWS 50^th percentile wage (current Level III) for the occupation is shown below, with the results listed for three different years of data available in the database:

Occupations: SOC 13-2011.00 – Accountants and Auditors
Location: Dayton OH BLS Areas Montgomery County
Series: All Industries

7/2023-6/2024 Level III Wage: $77,251.00
7/2024-6/2025 Level III Wage: $82,576.00
7/2025-6/2026 Level III Wage: $86,403.00

Further, based on the absence of data and sparse description of the methodology, there’s no way for us, or anyone else, to test or examine the method used to calculate the wage premia/discount using the Mincer equations. The “hypothetical” example claims a premia of 20%, but it is unclear whether this result comes from real calculation or if it’s a fabrication created to illustrate a point. If it is the latter, that raises serious questions about the agency’s ability to implement experience benchmarking across hundreds of occupations, thousands of locations, four skill levels, and a half-dozen educational levels.

More importantly, is the example, and its wage outcomes, representative of the universe of covered workers and the U.S. workers they compete with? The evidence shows that this hypothetical example is neither typical of H-1B workers nor their U.S. counterparts. The description of experience benchmarking does not investigate its implications, but such testing is fundamental to validating the method across occupations, locations, and skill levels. The hypothetical worker has 10 years of experience, which, if they had no gaps in labor force participation, would put them at 34 years old. A 34-year-old worker is older than most new H-1B workers approved for initial employment, ranking near the 68^th percentile by age.20 We also know that this worker is not typical of U.S. accountants. Most practicing accountants hold no more than a bachelor’s degree, 59%, and are older—with a median age of 45—than this candidate.21 The example raises many more questions than it answers.

The median age of all H-1B workers approved for initial employment is approximately 31, whereas the median age of an American worker in an H-1B eligible occupation is approximately 40, even in STEM occupations.22 H-1B workers are generally significantly younger than the typical U.S. worker with whom they compete. Experience benchmarking would favor H-1B workers by offering them a significant wage discount, based on the Mincer method, over the U.S. workers with whom they compete. The upshot is that experience benchmarking would surely fuel age discrimination in these labor markets.

It is likely that experience benchmarking would yield substantial wage discounts (premia ratios <1.0) for H-1B workers, compared with the NPRM’s core approach. But we simply do not know because DOL has not compared the wage outcomes between experience benchmarking and raising the wage level percentiles. DOL has not published experience benchmarking wage tables for every occupation, geography, skill level, experience, and education.

One think tank, the Institute for Progress (IFP), a supporter of the experience benchmarking alternative, attempted to simulate the method using FY 2024 approved petitions and found that experience benchmarking wages for most H-1B workers are substantially lower than the NPRM’s core proposal. Contrary to IFP, we believe experience benchmarking should be rejected, in part for that reason. See its report, specifically the scatterplot chart “Blind Benchmarking misses underpaid H-1B workers” on page 20, where the number of red dots (i.e., experience benchmarking yields a lower prevailing wage than NPRM core proposal) far outnumbers the green dots (i.e., experience benchmarking yields a higher prevailing wage than NPRM core proposal).23 Even these analysts admit they don’t know whether their calculations are consistent with DOL’s sparse description of experience benchmarking. If this think tank’s analysis is roughly correct or on the right track, then experience benchmarking will yield much lower prevailing wages than the core NPRM proposal. If this is true, then the experience benchmarking method undermines the goals of this rulemaking.

In its justification for considering experience benchmarking, the NPRM states that “the methodology employed under the current rule may allow positions to be classified at wage levels that are less comparable to the actual education and experience of the alien worker.” Experience benchmarking, on the other hand, would “address this limitation by comparing the sponsored alien worker’s wage to the wages earned by U.S. workers with comparable education and experience…”24

But elsewhere, the NPRM undermines the case for experience benchmarking by noting that educational attainment is often a poor determinant of wages:

an examination of the top end of the wage distribution within the H–1B program shows that, for H–1B nonimmigrants with graduate and bachelor’s degrees, the association between education and income level begins to break down to some extent. An analysis of the highest earners within the H–1B program reveals that H–1B workers—particularly those with bachelor’s and graduate degrees—can be among the most skilled and capable in their fields. Interestingly, at this top end of the wage distribution, the typical link between education level and income begins to weaken. Among the most highly compensated H–1B workers, the higher the income level, the more likely the alien worker only has a bachelor’s degree.25 (Emphasis added.)

While skill-level misclassification is a major problem, experience benchmarking is the wrong solution because it creates new, unnecessary loopholes. Instead, as we describe below, we recommend that you require employers document their Prevailing Wage Determination (PWD) aligned with the National Prevailing Wage Center (NPWC) guidance and provide it for inspection.

The NPRM’s core proposal—the 34^th, 52^nd, 70^th, and 88^th percentiles based on the overall OEWS wages by occupation and region—coupled with skill classification oversight and accountability, better achieves the program goals than the experience benchmarking proposal discussed in the NPRM.

5. DOL should calculate an additional amount of compensation based on available data on the cost of benefits for workers in private industry and add a reasonable amount to the required prevailing wage

While we believe utilizing the OEWS data set and wage percentiles within the distribution is reasonable and preferable to other data sources and methods, the OEWS falls very short in terms of providing a holistic and realistic picture of what U.S. workers earn in H-1B occupations, as well as those in other LCA programs and PERM programs, by virtue of not including fringe benefits. We urge that DOL also calculate an additional amount of compensation based on available data on the cost of benefits for workers in private industry. If employers do not have to provide fringe benefits to the college-educated migrant workers they recruit or reasonable compensation that accounts for those fringe benefits, that will result in employers underpaying or undercompensating workers with visas vis-à-vis their U.S. worker counterparts, thereby causing adverse effects on workers in occupations covered by H-1B and the other LCA programs. The fissuring of the U.S. workforce has been abetted in part by employers practicing benefits’ arbitrage—in other words, employers seeking a workforce they do not need to provide benefits for—the H-1B, H-1B1, E-3, EB-2, and EB-3 program should not facilitate it.

Davis Bacon and Service Contract Act wage determinations—which are both valid wage sources for determining H-1B wage rates under current H-1B rules—include an additional hourly monetary value that is owed to the worker in “fringe benefits.” Under both Acts, the employer must pay the fringe benefits either in the form of a permissible fringe benefit listed by the applicable Act, or any combination of benefits thereof, or with an equivalent cash payment.26 The lack of any fringe benefits in OEWS prevailing wage determinations27 constitutes a severe deficiency in the OEWS wage data that conflicts with and undermines the statutory requirement that the H-1B prevailing wage will not adversely affect the wages and working conditions of similarly employed U.S. workers. 

Reliance on the OEWS to determine prevailing wages—without an adjustment for fringe benefits—is not an adequate method to set prevailing wages for LCA and PERM programs. If the prevailing wages and benefits for a particular occupation in a particular Metropolitan Statistical Area (MSA) are, for example, $30 per hour plus $10 per hour in leave, pension, and health benefit costs, but DOL determines the prevailing wage to be simply $30, U.S. workers will be adversely impacted. Employers will be encouraged to hire H-1B workers instead of U.S. workers, saving themselves $10 in benefit costs per hour and putting downward pressure on the locally prevailing compensation. Hiring H-1B workers at $30 an hour for example, with no benefits, would allow employers to underprice labor by 30%—which is the average benefit share of total compensation costs for private industry workers28—and it could encourage employers to replace U.S. workers with H-1B workers, or hire H-1B workers instead of U.S. workers, since employers are not required to recruit and hire U.S. workers before hiring H-1B workers. H-1B workers and those employed through other LCA programs cannot be expected to complain about this or have the bargaining power to negotiate adequate fringe benefits, because their employers control and have near-total power over their immigration status, and some workers will be also willing to accept the lower compensation, because it will likely be far more than they could earn in their country of origin.

BLS already collects the necessary data to determine the appropriate amount of fringe benefits that should be required as a supplement to the OEWS wages used to set a prevailing wage. The Employer Costs for Employee Compensation (ECEC) report from the Bureau of Labor Statistics (BLS) “provides the average employer cost for wages and salaries as well as benefits per employee hour worked” for workers in the civilian economy.29 The ECEC reports the total average wages and benefits paid by employers and lists these data as they correspond to broad occupational employment categories. These data are also differentiated according to the average amount paid for the major categories of fringe benefits: paid leave, supplemental pay, insurance, retirement and savings and legally required benefits. The ECEC also reports the average total compensation, wages and salaries, and total costs of fringe benefits paid by employers, broken down by geographic region, census division, and locality.30

Using the aforementioned data sets from the ECEC, DOL can determine the appropriate level of fringe benefits that must be offered and paid to LCA and PERM program workers. The ECEC provides data on health and retirement benefits, and wages and wage-related pay such as paid leave and supplemental pay. The wages reflected in the OEWS survey capture the wages and wage-related parts of total compensation. Employers paying wages will already be paying the ‘legally required’ payroll taxes. Therefore, the compensation missing from the OEWS wage rates is the cost of retirement and health benefits, which are about 11% of private sector compensation. The amount of pay reflecting these benefits that employers of LCA and PERM program workers should pay can easily be determined by taking the ratio of the sum of health and retirement benefits to the wages paid (the sum of wages, paid leave and supplemental pay). This can be determined for a broad occupational grouping and perhaps done at a regional level as well. This ratio when multiplied by the OEWS wage shows the amount of benefits that would be comparable to that earned in the private sector or civilian sector.

Although the occupational groups and geographic areas listed and reported in the ECEC are not as numerous and detailed as those in the OEWS’s occupational categories and geographical areas, this should not deter the DOL from utilizing these data to calculate the percentage of wages that should be added on as fringe benefits to the OEWS wage. Only a percentage to be added on must be determined – not an exact dollar amount. 

Thus, the ECEC data are sufficient to provide DOL–by region and broad occupational group–an average level of insurance and retirement benefits received by employees in that job and in that area. Following precedent from the DBA and SCA, the fringe benefits could be paid by the employer through any combination of a variety of options, such as paid leave, health and life insurance, retirement and savings accounts, etc., or the employer could simply pay the benefits in cash.

Unfortunately, there is very little transparency regarding whether employers using the H-1B, H-1B1, E-3, and EB-2 and EB-3 programs are offering fringe benefits, or to what extent. A requirement that these fringe benefits be offered to LCA and PERM program workers would ensure that the wages and working conditions of similarly employed workers are not adversely impacted. 

The current DOL compliance guidance on benefits for H-1B workers encourages benefits arbitrage through outsourcing and fissuring. The Wage and Hour Division fact sheet on the subject (#62L) reads, “The employer must offer benefits to H-1B workers on the same basis, and in accordance with the same criteria, as the benefits the employer provides to similarly employed U.S. workers.”31 By defining similarly employed workers as restricted only to those directly employed by the H-1B employer, DOL is encouraging benefits arbitrage by outsourcing firms, which can offer substandard benefits to all its employees and still comply with this interpretation of the H-1B rules.

6. DOL should prohibit employer-provided private wage surveys from being used as alternative sources of wage data to set prevailing wages

Under the main H-1B prevailing wage regulation language at 20 C.F.R. §655.731, an employer has a number of options at their disposal to determine a prevailing wage for an LCA. In other words, the OEWS wage levels are just one of the available options. The employer may use one of the following sources to establish a prevailing wage: the OEWS wage, the wage set in an applicable Collective Bargaining Agreement, an applicable wage set by the Davis-Bacon Act or McNamara-O’Hara Service Contract Act, an Office of Foreign Labor Certification National Processing Center prevailing wage determination, or a wage set by an independent authoritative source or another legitimate source of wage data. However, if the employer is paying a higher wage to similarly situated U.S. workers that it already employs, then it must pay the H-1B worker same higher “actual wage,” that it is paying the U.S. worker. (Specifically defined as “the wage rate paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question.”)

Therefore, employers do not need to use the OFLC’s calculated levels from OEWS data to determine a prevailing wage for an LCA or permanent labor certification application. The NPRM would improve the longstanding problems in how the prevailing wage is determined when using the OFLC-generated OEWS wage rates, but in the NPRM, DOL states that it considered whether to prohibit—but ultimately decided to permit—the continued use of an independent authoritative source or another legitimate source of wage data, which includes private wage surveys provided by employers and accepted by DOL. Standards for such alternative sources of wage data are described in 20 CFR § 655.731. In our 2020 report, we showed in Table 1 that in 2019, at least 9% of all certified wages for H-1B positions on LCAs were set by a private wage survey or other source accepted by the OFLC as legitimate.32

We strongly urge DOL to eliminate the use of private wage surveys provided by employers for setting wage rates in the LCA programs or for EB-2 and EB-3 green cards. While the share of LCAs approved with wages set by private wages surveys is relatively small at the moment, it is likely that the use, and abuse, of private wage surveys will expand substantially after publication of a final rule that is consistent with the wage level percentiles proposed in the NPRM. This will occur because employers will be motivated to use private surveys as a loophole to avoid paying the new higher wage percentiles.

DOL’s justification for continuing to allow private wage surveys is based on an analysis that is confusing. On the one hand, the agency claims that private surveys yield a wage 20% higher on average than the OEWS equivalent, but also says that wage surveys are necessary for niche or very specialized markets where, “occupations [are] not well represented in OEWS datasets.”33 The two claims are in contradiction. If a private wage survey is used to establish a wage in a niche job market, presumably not covered by the OEWS, then how can DOL feasibly calculate the differences? Footnote 211 in the NPRM does not provide sufficient detail to test this claim.

If DOL does not immediately eliminate the use of private surveys, it should at least ensure that usage of such surveys are rare and approved in only exceptional cases. Employers should be required to provide extensive documentation and justification for why the OEWS is an inadequate data source for determining the prevailing wage.

The recent history of the use of private wage surveys to set wages in the H-2B visa program—a temporary work visa program for lower-wage jobs outside of agriculture including in landscaping, forestry, hospitality, and construction—is instructive and should inform DOL’s review of wage surveys and other sources of wage data for setting H-1B wages. The evidence is clear in the H-2B context that when employers use private wages surveys, they primarily use them to pay lower wages than would otherwise be required.

In 2013 when DOL raised the minimum H-2B prevailing wage from the 17^th wage percentile to the mean wage for the occupation and local area, H-2B employers immediately and en masse, shifted their business model to use private wage surveys to set H-2B wage rates at below-average wage rates. Evidence revealed in federal litigation clearly suggests that the shift to the use of private wage surveys was a systematic response to higher wage rates, and one that was clearly successful. Specifically, in the nine months beginning soon after the H-2B wage rule was updated—between July 1, 2013, and March 31, 2014—employers increased their submissions of private wage surveys for H-2B prevailing wage determinations by 3,182%, as compared with the 12 months leading up to the federal court decision that invalidated the previous H-2B wage rule. In 21.1% of those prevailing wage determinations set by private wage surveys, the certified H-2B wage was lower than the previous prevailing wage system where the Level I H-2B prevailing wage was set at the 17th percentile wage by occupation and local area, according to OFLC-generated OEWS wage survey data, and 94.4% of the determinations were for a wage that was lower than the Level II wage, at the 34th percentile.34 Despite the fact that the H-2B prevailing wage has been set at the local average wage and DOL restricted the use of private wage surveys in 2015, they are still commonly used and successful at lowering wages for H-2B workers. One clear example of this which has been detailed, is a group of H-2B workers employed as crabpickers in Maryland—they earned roughly 25% less per hour than they should have been paid according to the local corresponding OEWS wage.35

The downside risk of continuing to allow private wage surveys—creating loopholes and administrative burdens—outweighs the risk to workers that the OEWS prevailing wage results in lower wages. If DOL’s calculations are accurate, employers should welcome the elimination of private wage surveys because the OEWS provides lower wage requirements and reduced costs in terms of purchasing survey data and/or conducting entirely new surveys.

7. If DOL considers permitting the use of employer provided private wage surveys, it should first conduct a detailed analysis of their usage and impact on H-1B wage rates, make the findings public, and issue a separate NPRM focused solely on private wage surveys

In order to promote transparency and comport with the statutory requirement that H-1B employers “will provide working conditions for [H-1B workers] that will not adversely affect the working conditions of workers similarly employed,”36 DOL should immediately prohibit the use of private wages surveys. However if DOL wishes to still consider their usage, DOL should conduct a study to benchmark the use of alternative wage data and especially private wage surveys against the OFLC-generated OEWS prevailing wages, to identify whether there are any systematic biases in such sources. If such biases are found, DOL could propose a new NPRM with additional guidance and safeguards to ensure that the alternative wage sources are not undermining U.S. wage standards. DOL should also conduct an analysis on the occupations that have been approved for wage setting with private wages surveys, to examine which occupations employers are claiming to be so unique that they do not fit within the definitions of over 800 occupations available in BLS’s Standard Occupational Codes, as well as analyze whether private wage surveys have negatively impacted conditions for H-1B workers and similarly situated workers.

It is important to note that, while in the aggregate, the use of private wage surveys is roughly 6.5% according to the NPRM, we know from our own reviews of LCA disclosure data that some firms rely on private wage surveys extensively. DOL should examine how private wage surveys vary across firms, industries, and occupations. Firms that rely on private wage surveys for more than 3% of the positions in their LCAs should be scrutinized and audited to ensure they are not being utilized to undercut the standards set by OEWS wage data. 

8. DOL must put measures in place that would prevent employer misclassification of H-1B workers at the wrong wage levels

As noted earlier, the NPRM requires that minimum H-1B, H-1B1, E-3, EB-2, and EB-3 salaries are set at more realistic wage rates that reflect the local market rates for the jobs they fill. While each wage level is intended to correspond to the position description, in practice the employer has substantial discretion choosing the skill level and DOL does not verify that a prevailing wage is appropriate unless a lawsuit or a complaint is filed by a worker. Such complaints are unlikely since it would require a migrant worker to blow the whistle on their own employer, the same employer that controls the worker’s visa status and ability to remain in the United States. We are unaware of any cases in which DOL has investigated an LCA-stage misclassification of an H-1B wage level, but there have been reports of, for example, H-1B employers receiving approval for LCAs that certify they will pay employees at the same prevailing wage level despite having job titles that clearly warrant different wage levels.

Simply put, employer selection of skill levels should be anchored to the actual duties of the position and verified by DOL and USCIS. There is no reason to allow employers to identify a skill level on a whim. If DOL does not fix this obvious problem, then the NPRM’s core objective of eliminating wage arbitrage will be undermined.

Skill level misclassification and inconsistencies undermine good governance of the H-1B program. Even a cursory examination of the LCA and I-129 data shows that such misclassifications, whether purposeful or inadvertent, are common. For example, positions with job titles leading with ‘senior’ are frequently misclassified as Level I. And even within the same employer, identical job titles are classified under different skill levels.

Yet the effectiveness of this NPRM hinges on ensuring that employers properly and consistently classify their positions at the correct skill level. DOL should take two actions. First, it should update and expand the NPWC’s Prevailing Wage Determination Policy Guidance.37 Second, it must hold employers accountable for their skill level selections.

The policy guidance should be rewritten and expanded so that it not only serves PWD adjudicators but also all employers, whether they use the OEWS or a private wage survey to determine the prevailing wage. The document should clarify skill level classification and serve as compliance guidance for all employers. The most recent NPWC policy guidance, published in 2009, is obviously inadequate and outdated. Employers are not effectively or consistently interpreting and identifying skill levels. The description of each skill level, Levels I through IV, consists of a single paragraph of ambiguous language. For example, how many years of experience should Level II consist of? Can an employer’s position that requires two to three years of experience ever be classified as Level I (Entry-Level)? If a worker with a master’s degree is filling a position that typically requires only a bachelor’s degree, can they be bumped up in skill level?

All employers should be required to follow the five-step Prevailing Wage Determination process outlined on pages 9 through 13 to identify the position’s skill level. Employers should be required to document and retain those records for inspection by USCIS when the I-129 petition for the LCA is filed. This will ensure consistent skill level identification within and across companies whether the firm uses the OEWS, private wage survey, a CBA, or requests a PWD.

Then USCIS should ensure that the worker being placed in the position is not overqualified in terms of education and experience for the position’s skill level.

Consider this example: A well-known firm received approval for two different LCAs at the same wage level (Level II), even though one LCA had the job title Senior Software Engineer and the other had the job title Software Engineer.38 The firm, a major employer of H-1B workers, is not accounting for differences in skill levels as evident from its own job titles when selecting the wage level for the LCA. Both engineers and senior engineers are receiving the exact same salary and wage level, and they are approved by DOL with zero scrutiny. Using the DOL Prevailing Wage Determination Policy Guidance, the LCAs in this case should be instantly flagged by identifying keywords such as senior, head, chief, and lead in job titles, and should be checked to determine whether the prevailing wage levels are appropriate. This example underscores a broader need for DOL to create a more robust compliance system to ensure employers do not misclassify workers at inappropriate wage levels. Our own cursory review has found hundreds of similar examples.

As a result, the LCA and petition process should be updated so that DOL reviews the qualifications of individual workers before USCIS approves a petition, to ensure that wage levels match up with the age, education, and experience of the workers being hired through the LCA and PERM programs. While USCIS currently performs this role to some extent, its adjudicators lack expertise in wage-and-hour issues and do not have the same mandate to protect labor standards as DOL staff. Therefore, these functions should be undertaken by the proper agency. DOL and USCIS already have a mandate to cooperate on H-1B applications and enforcement; a memorandum of understanding between the Secretaries of Homeland Security and Labor could detail a process where DOL plays a prominent role in ensuring that H-1B workers are classified at the appropriate wage levels. Published guidance from DOL on skill levels that is more detailed, clearer, and more realistic would also be helpful for everyone involved—employers and adjudicators alike.

9. DOL has failed to enforce the “actual wage” component of the H-1B prevailing wage rule and should begin enforcing it immediately

Under the prevailing wage statute, although an employer has several options at their disposal to determine a prevailing wage for an LCA, they must offer the higher of either the prevailing wage or the “actual wage,” which the corresponding regulation at 20 C.F.R. §655.731 defines as “the wage rate paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question.”

DOL has not exercised its authority to enforce the actual wage requirement. This is a wasted opportunity for one of the most important tools DOL has at its disposal to hold employers accountable for required wages. In order to ensure that H-1B employers are not undercutting the wage rates they pay H-1B workers, DOL should immediately begin enforcing this requirement.

In late 2021, we published a report detailing how thousands of skilled migrants with H-1B visas working as subcontractors at well-known corporations like Disney, FedEx, Google, and others appear to have been underpaid by one firm to the tune of at least $95 million in one single year.39 The victims likely included not only the H-1B workers but also the U.S. workers who were either displaced or whose wages and working conditions were degraded when employers were allowed to underpay skilled migrant workers with impunity. The workers in question were employed by HCL Technologies, an India-based IT staffing firm that earned $11 billion in revenue in 2020. HCL is consistently one of the top 20 H-1B employers and appears to have engaged in the systematic and strategic wage theft of its H-1B workers by exploiting the lax to nonexistent enforcement of the actual wage requirement. According to its own internal documents, HCL targeted its new H-1B hires expressly based on the spread between what it paid its own U.S. employees versus what it pays its own H-1B workers.

The report discusses our analysis of an internal HCL document, released as part of a whistleblower lawsuit against the firm. The document suggests that HCL—and perhaps other firms with similar business models—are not paying the legally required amount that corresponds to what is being paid to U.S. worker employees at HCL. The HCL document revealed that the large-scale illegal underpayment of H-1B workers that appears to be occurring is a core part of the HCL’s competitive strategy, and likely facilitated $95 million in stolen wages from HCL’s H-1B employees in just one year. Such abuses are surely widespread among H-1B employers because DOL has done virtually nothing to ensure program integrity by enforcing the H-1B wage rules, in particular the actual wage rule.

DOL could easily begin enforcing the actual wage provision by requiring H-1B employers to submit evidence documenting the wage rates paid to U.S. workers who are similarly employed in occupations for which the employer is also hiring H-1B workers. Employers must already “keep records for how they calculate the actual wages.” To our knowledge, DOL has never initiated an investigation regarding compliance with the “actual wage” provision of the law. The DOL Secretary should exercise their authority to inspect the actual wages paid by H-1B employers. The Secretary can do so without a complaint from a worker, under their authority to certify investigations, and should do so if presented with credible evidence of violations. DOL should provide clear compliance guidance for the actual wage provision and then require that H-1B employers attest to the wage rates they pay similarly situated U.S. workers and include them in the LCA documentation, and DOL should conduct audits of employers on a regular basis to ensure compliance. The audits could begin with the employers that hire large numbers of H-1B workers, for example, those that employ more than 25 H-1B workers, as well as H-1B dependent firms.

Secondary employers should also be required to submit LCAs and evidence documenting the wage rates paid to U.S. workers in the occupations that H-1B workers will be hired for through an outsourcing firm. Otherwise, some H-1B outsourcing firms—which almost exclusively pay H-1B workers at the two lowest wage levels, and employ H-1B and L-1 workers almost exclusively—will be able to game the system by using the actual wage paid to their own employees to meet the requirement, and not the employees of the secondary employer, where the H-1B workers will be placed—and where wages paid to the U.S. workforce are likely to be higher.

10. DOL should require secondary employers of H-1B workers to attest that they will not adversely affect wages and working conditions

Outsourcing companies are using the H-1B program to underpay H-1B workers, replace U.S. workers, and send tech jobs abroad. Typically, in this scenario, H-1B workers do computer and engineering work at the office of a U.S. employer but are employed by an outsourcing company, some of which are based abroad or have major operations abroad.40 The many reported cases of U.S. workers being laid off and replaced by H-1B workers have all been facilitated by this arrangement. In multiple incidents, the H-1B workers have been hired with annual wages of around $30,000 to $40,000 less than the workers they have replaced. Before they are laid off, the U.S. workers are often forced to train their own H-1B replacements as a condition of their severance packages; this is euphemistically known as “knowledge transfer.” Major, profitable U.S. employers like Disney and Toys “R” Us—as well as public employers and institutions like the University of California and Southern California Edison—have laid off thousands of U.S. workers who were forced to train their own replacements. Eventually, many of the outsourced jobs filled by H-1B workers get moved offshore.41

Contrary to the popular narrative proffered by corporations that support expanding and deregulating the H-1B visa program—the staffing firms that use H-1B visas are not using them to keep technology jobs in the United States—instead they are using them precisely to facilitate the offshoring of as many of those jobs as they can. That is in fact, the business model of those firms. News reports, including from the New York Times and Bloomberg, have shown that outsourcing companies “game the system” in order to obtain a high share of H-1B visas, which leaves fewer available for the firms that directly employ H-1B workers.42

The outsourcing/staffing model of employment generally may increase the incidence of labor and employment law violations by separating the main beneficiary of the labor provided by H-1B workers—the third-party firm that hires the outsourcing firm, i.e. the “lead” employer—from the H-1B workers who perform the work. Firms that rely on outsourced H-1B workers are a textbook example of what former DOL Wage and Hour administrator David Weil calls a “fissured” workplace, where the relationship between the worker and the lead employer is fissured, or broken, via the use of a temp agency or subcontractor43 (in this case the temp agency or subcontractors are the H-1B outsourcing firms). Research shows that fissuring leads to a wage penalty for workers who are subcontracted, employed as temps, and work for staffing firms,44 in part because the subcontractor keeps a percentage of the wages earned by the workers. It is also common knowledge that employers use this model to avoid paying for benefits like health care, retirement funds, and to avoid liability for labor violations. Because the staffing and outsourcing model contributes to the fissuring of the labor market, it should not be allowed as part of the U.S. immigration system—not in H-1B or in any other temporary or permanent immigration programs.

One way to address the abuses of the outsourcing/staffing firms, which operate as secondary employers, would be to issue policy guidance and update the appropriate DOL ETA application forms so that secondary employers to which H-1B workers are outsourced will be required to file Labor Condition Applications with DOL. Such guidance, which was considered in 2021 but then abandoned,45 would close the loophole that allows firms like Disney and Southern California Edison to replace its U.S. employees with H-1B workers by employing them through an outsourcing firm.46 Using Disney as an example, implementing this rule would require client firms like Disney—that benefit and profit from hiring outsourcers—to acknowledge their employment relationship with H-1B workers who are employed by outsourcers like Infosys and Tata, by requiring Disney to file its own LCA. By doing so, Disney would attest that hiring the H-1B worker through the outsourcer is not adversely affecting the wages and working conditions of the Disney workforce.

11. DOL should publish Labor Condition Application and permanent labor certification data in real-time on a central database

DOL publishes detailed LCA and permanent labor certification (PERM) disclosure data, but it is typically lagged by at least one quarter, and often much longer. The agency should publish LCA and PERM public access file applications in real-time to enable U.S. workers to apply for these positions. This would enhance the integrity of the programs and better align them to their purposes by ensuring that workers hired with temporary visas and green cards are filling true labor shortages.

U.S. workers have long complained loudly that employers hide job openings from them, reserving them for visa holders and PERM applicants. Even when those jobs are advertised, as is required by the PERM labor certification process, they are often placed in obscure locations. Workers call such job advertisements “fake job postings.” A recent ProPublica investigation has referred to the practice as “The Tech Recruitment Ruse.”47

The agency already collects the data and publishes it regularly on the OFLC disclosure data. But even a one-quarter year lag time renders it useless for job seekers. Publishing it in real-time would unlock enormous value for workers at little or no cost to the government or employers.

12. DOL had the requisite legal authority to update the H-1B prevailing wage levels

As discussed in detail in our 2020 report, DOL has the requisite legal authority to change the H-1B prevailing wage levels to an appropriate rate that protects wage standards and prevents adverse effects on U.S. workers in H-1B occupations. No analyst or commentator has credibly argued otherwise. For far too long, the H-1B wage levels have been set at an artificially low level that undercuts U.S. wage standards, therefore, it is reasonable for DOL to increase the minimum wage levels so that Level I is no lower than the local median wage.

13. DOL should expand the LCA process to include a front-end screening process that reviews the labor and employment law records of employers; those that have violated certain laws in the previous five years should be prohibited from hiring through the H-1B program

In a previous comment to the Department of Homeland Security (DHS), regarding the 2023 H-1B “modernization” rule,48 we recommended that DHS should expand the H-1B Registration System to include a front-end screening process that reviews the labor and employment law records of employers. If employers have violated certain laws, they should be prohibited from hiring through the H-1B program. We further recommended that DHS should consult with DOL to develop a list of key applicable laws and operate the system jointly with DOL, and ideally, also operate the updated registration process jointly, with DOL screening employer records through the LCA process. We reiterate that recommendation here and urge DOL to take steps to exclude lawbreaking employers that violate labor, employment, and immigration laws. While we realize our comment will only be read by DOL, we nevertheless include our discussion about DHS’s role in this process because we believe DOL and DHS should work in tandem to reduce labor and employment violations in the H-1B program.

In the 2023 proposed rule, Modernizing H-2 Program Requirements, Oversight, and Worker Protections,49 DHS proposed to create or expand several additional bars to approval of new petitions filed by H-2 petitioners who have previously committed legal violations related to the H-2 programs. EPI submitted comments generally supporting the proposed changes, which were adopted as a final rule.50 Although they fail to go far enough on their own, if adequately implemented the provisions will help curb abusive employers’ exploitation of the H-2 programs and will level the playing field for employers that obey the law. EPI additionally commented that employers that commit serious violations repeatedly should be permanently banned from the H-2 programs, as they have demonstrated their inability or unwillingness to comply with the programs’ requirements.

In those comments EPI further recommended that the DHS strengthen section 214.2(h)(10)(iii)(3), which addresses violations of “any applicable employment-related laws and regulations” by expanding it to include a number of other violations and making denial of petitions mandatory—rather than discretionary—if employers have violated any of those laws in the preceding five years.51 

We believe DHS should consider similar provisions for employers seeking to hire through the H-1B program because there have been numerous credible accusations of lawbreaking against H-1B employers, as well as investigations and litigation, finding that H-1B employers and recruiters that have been guilty of wage theft, financial bondage, and even human trafficking. The reality is that DOL has limited resources and has interpreted its authority to investigate H-1B employers as constrained, and it is difficult in practice for H-1B workers to come forward and complain themselves about employer lawbreaking—because they could face retaliation and lose their status, and possibly the opportunity to become lawful permanent residents—which means DOL likely receives fewer complaints than they otherwise would. And even when DOL does receive complaints, as numerous reports have shown, DOL often lacks the resources to investigate and take action against lawbreaking employers.52

Thus, at a minimum, to keep lawbreaking employers out of the H-1B program, DHS should have its own list of legal violations and deny any petition for an employer that has violated any of the laws on the list in the preceding five years. That would act as a backstop to prevent lawbreaking employers from hiring through the H-1B program. At present, as DHS rightly points out in the November 2023 Modernizing H-2 Program NPRM, even some of the worst violators of the law are allowed to recruit and hire H-2 workers. We know that this is also the case in the H-1B program. In fact, in the H-1B program, some of the biggest users of the program are also the most egregious violators, receiving thousands of H-1B petition approvals per year. And then after they violate the law, H-1B employees are afraid to complain to authorities because their immigration status is tied to their employer, and even if they are brave enough to lodge a complaint, as noted above, DOL may lack the resources to investigate violations and hold the employer accountable.

As EPI also recommended in the H-2 NPRM, DHS should go further to implement this by also cooperating with DOL to develop a front-end screening process that takes place at the labor condition application (LCA) stage, to vet the labor and employment law records of employers before they can be allowed to hire through the H-1B program. In multiple EPI reports and in comments in response to NPRMs, EPI has made a similar proposal—namely, that a front-end screening process should be created to prohibit employers with track records of wage and hour, labor, immigration, and other legal violations from hiring through the H visa programs.

To make a front-end screening process a reality, ideally, DOL should require employers to register for eligibility to use the H-1B program at the LCA stage, so employer records on compliance with labor and employment laws can be screened up front, before getting to the registration or petition stage. DOL could set up a registration process in which employers list basic information about their business and the purported need for H-1B workers (as is already done via the DOL temporary labor certification forms). As part of that new process, employers could be required to attest, under penalty of perjury and of being banned from hiring through the H-1B and other visa programs, that they have not been found to have violated any of the listed labor, employment, wage and hour, immigration, civil rights, disability, anti-trafficking, or anti-discrimination laws during the past five years. DOL could then attempt to verify by cross-referencing enforcement data and other relevant records—and could cooperate with other worker protection agencies like the NLRB and EEOC—and ultimately certify employers that have not violated the applicable laws.

To break established patterns of abuse, employers that have violated any labor, employment, wage and hour, immigration, civil rights, disability, anti-trafficking or anti-discrimination laws should be prohibited from submitting an LCA (or having their LCA approved) and ultimately not be allowed to hire H-1B workers. Employers that have clean records and an LCA approved by DOL could then continue on with the petition process at USCIS.

Given the present and likely future reality that WHD and other worker protection agencies will continue to be vastly underfunded and understaffed,53 such a screening process on the front end of the H-1B application process could act as a useful and efficient tool to prevent legal violations without WHD having to go through lengthy and costly investigations on the back end, after workers have arrived in the United States and been robbed or otherwise exploited.

At the petition level, if a new screening process at DOL is not created that takes place before or as part of the LCA process, DHS should, at a minimum and as noted above, build on proposed section 8 C.F.R. 214.2(h)(10)(iii)(B) for H-2 petitions by creating a list of key labor, employment, wage and hour, immigration, civil rights, disability, anti-trafficking, and anti-discrimination laws, the violation of which would establish strong evidence that an employer does not treat their employees well and is unlikely to follow employment and immigration laws with respect to their H-1B employees. Although this would work best in tandem with a front-end screening process at the LCA stage, DHS could make significant progress in keeping lawbreaking employers out of the H-1B programs by mandating that any employer that has violated any of the listed laws will be prohibited from having a petition approved for hiring H-1B workers.

Another option would be for DHS to modify the existing H-1B Registration System so that it also screens the records of employers. That way DHS could use it to both manage the annual cap and to assess and certify whether employers are eligible to hire through H-1B based on their past legal violations. Employers could be required to attest, under penalty of perjury and of being banned from hiring through the H-1B and other visa programs, that they have not been found to have violated any of the listed labor, employment, wage and hour, immigration, civil rights, disability, anti-trafficking, or anti-discrimination laws during the past five years. USCIS could work to verify the employer attestation, although ideally DOL should partner with to do this, by cross-referencing DOL enforcement data and other relevant records—preferably also in partnership with other worker protection agencies like the NLRB and EEOC—and would then ultimately certify employers that have not violated the applicable laws, allowing them to continue with the registration process.

Conclusion

The H-1B visa program is the largest temporary work visa program in the United States and an important pathway into the U.S. labor market for skilled migrants from around the world—but a pathway that has serious deficiencies when it comes to the workplace rights of migrant workers and for preserving U.S. labor standards. While less is known about the other LCA programs, H-1B1 and E-3, they have even fewer applicable rules in place to protect workers, which likely means they are having similar impacts on worker rights and labor standards. By issuing this NPRM, DOL has taken an important first step towards reversing decades of artificially depressed wage rates for H-1B workers, and for making the prevailing wage methodology rules consistent across the other LCA programs and for EB-2 and EB-3 green cards. This will benefit other similarly situated workers and simplify and streamline the prevailing wage determination process. Nevertheless, as our comment recommends, more must be done—in this rulemaking and other executive actions—to improve the effectiveness of the updated prevailing wage rates and on enforcement in the LCA and PERM programs, in order to safeguard U.S. wages and labor standards.

Daniel Costa
Director of Immigration Law and Policy Research
Economic Policy Institute
Washington, DC

Ron Hira, Ph.D., P.E.
Associate Professor
Department of Political Science
Howard University

Endnotes

1. See for example, Daniel Costa and Ron Hira, H-1B visas and prevailing wage levels: A majority of H-1B employers—including major U.S. tech firms—use the program to pay migrant workers well below market wages, Economic Policy Institute, May 4, 2020; Ron Hira and Daniel Costa, New evidence of widespread wage theft in the H-1B visa program: Corporate document reveals how tech firms ignore the law and systematically rob migrant workers, Economic Policy Institute, December 9, 2021.

2. Employment and Training Administration, Adverse Effect Wage Rate Methodology for the Temporary Employment of H-2A Nonimmigrants in Non-Range Occupations in the United States, Interim Final Rule, request for comments, U.S. Department of Labor, 20 CFR Part 655, DOL Docket No. ETA-2025-0008, RIN 1205-AC24 (October 2, 2025).

3. Daniel Costa and Ben Zipperer, “Trump’s new H-2A wage rule will radically cut the wages of all farmworkers: New estimates show farmworkers stand to lose $4.4 to $5.4 billion annually under DOL’s updated Adverse Effect Wage Rate,” Working Economics blog (Economic Policy Institute) November 26, 2025; for additional discussion and background, see Daniel Costa, “EPI comment on DOL’s 2025 Interim Final Rule modifying the AEWR methodology for H-2A farmworkers,” Public Comments, Economic Policy Institute, December 1, 2025.

4. PERM stands for Program Electronic Management Review, and is the first step for employers who wish to sponsor an employee for permanent residence in the United States through the EB-2 and EB-3 categories.

5. See for example, Daniel Costa and Ron Hira, H-1B visas and prevailing wage levels: A majority of H-1B employers—including major U.S. tech firms—use the program to pay migrant workers well below market wages, Economic Policy Institute, May 4, 2020.

6. George Borjas, The H-1B Wage Gap, Visa Fees, and Employer Demand, NBER working paper 34793, March 2026. See pages 3-4.

7. USCIS, X.com post, May 21, 2026 at 1:37 PM, https://x.com/USCIS/status/2057561453373399339

8. https://www.newyorkfed.org/research/college-labor-market#–:explore:outcomes-by-major

9. Here are just a sample of some of the recent news accounts in major media outlets: Katherine Bindley, “The ‘Great Hesitation’ That’s Making It Harder to Get a Tech Job,” Wall Street Journal, May 18, 2025; Christopher Rugaber, “Unemployment among young college graduates outpaces overall US joblessness rate,” Associated Press, June 26, 2025; Sydney Ember, “Young Graduates Face the Grimmest Job Market in Years,” NY Times, March 24, 2026.

10. Daniel Costa and Ron Hira, H-1B visas and prevailing wage levels: A majority of H-1B employers—including major U.S. tech firms—use the program to pay migrant workers well below market wages, Economic Policy Institute, May 4, 2020.

11. See for example, Connor O’Brien, Jeremy Neufeld, and Amy Nice, A Prescription for Fixing the Prevailing Wage System: Replacing Blind Benchmarking with Experience Benchmarking, Institute for Progress, March 27, 2026.

12. See Overview section in Wage and Hour Division, “H-1B Program,” web page on the U.S. Department of Labor website.

13. U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services, Modification of Registration Requirement for Petitioners Seeking To File Cap-Subject H-1B Petitions, 86 Fed. Reg. 1676, at 1720, Table 7, June 8, 2021.

14. See Table 12 in Department of Homeland Security, Weighted Selection Process for Registrants and Petitioners Seeking To File Cap-Subject H–1B Petitions, Notice of proposed rulemaking, CIS Docket No. 2820-25, DHS Docket No. USCIS-2025-0040, RIN: 1615-AD01 (September 24, 2026).

15. See for example, Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 4, 2020.

16. NPRM at 15490.

17. Norman Matloff, “H-1B Visas Are Transforming America,” Compact, October 8, 2025; Norman Matloff, Are foreign students the ‘best and brightest’? Data and implications for immigration policy, Economic Policy Institute, Briefing Paper #356, February 28, 2013.

18. NPRM at 15490.

19. Office of Foreign Labor Certification, OFLC Wage Search, last visited on May 23, 2026.

20. United States Citizenship and Immigration Services, Characteristics of H-1B Specialty Occupation Workers, Fiscal Year 2024 Annual Report to Congress, October 1, 2023 – September 30, 2024, U.S. Department of Homeland Security, April 29, 2025.

21. U.S. Bureau of Labor Statistics, Table 5.3 Educational attainment for workers 25 years and older by detailed occupation, 2022–23 (Percent), Employment Projections, U.S. Department of Labor, retrieved May 23, 2026; U.S. Bureau of Labor Statistics, Table 11b. Employed people by detailed occupation and age, Labor Force Statistics from the Current Population Survey, U.S. Department of Labor, retrieved May 23, 2026.

22. U.S. Bureau of Labor Statistics, Table 11b. Employed people by detailed occupation and age, Labor Force Statistics from the Current Population Survey, U.S. Department of Labor, retrieved May 23, 2026.

23. Connor O’Brien, Jeremy Neufeld, and Amy Nice, A Prescription for Fixing the Prevailing Wage System: Replacing Blind Benchmarking with Experience Benchmarking, Institute for Progress, March 27, 2026. PDF available here: https://ifp.org/wp-content/uploads/IFP_Prevailing_Wage_Experience_Benchmarking_.pdf

24. NPRM at 15490.

25. NPRM at 15474.

26. For the Davis-Bacon Act, see 40 USC §3141(2); and the Service Contract Act at 41 USC §351(a)(2).

27. Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment Wage Statistics, Frequently Asked Questions, at Section C, Number 8.

28. Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2025, March 20, 2026.

29. Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2025, March 20, 2026.

30. See tables, Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2025, March 20, 2026.

31. Wage and Hour Division, “Fact Sheet #62L: What benefits must be offered to H-1B workers,” U.S. Department of Labor, Revised July 2008.

32. Daniel Costa and Ron Hira, H-1B visas and prevailing wage levels: A majority of H-1B employers—including major U.S. tech firms—use the program to pay migrant workers well below market wages, Economic Policy Institute, May 4, 2020.

33. NPRM at 15479.

34. See discussion of the 2013 Interim Final Rule setting the H-2B prevailing wage methodology in Daniel Costa, The H-2B temporary foreign worker program: For labor shortages or cheap, temporary labor? Economic Policy Institute, January 19, 2016.

35. Daniel Costa, “H-2B crabpickers are so important to the Maryland seafood industry that they get paid $3 less per hour than the state or local average wage,” Working Economics (Economic Policy Institute blog), May 26, 2017.

36. 8 U.S.C. 1182 (n)(1)(A)(i)(II).

37. Employment and Training Administration, Prevailing Wage Determination Policy Guidance, Nonagricultural Immigration Programs, U.S. Department of Labor, Revised November 2009.

38. Ethan Baron, “H-1B: Uber snatches up more foreign-worker visas as it lays off hundreds of employees,” Mercury News, October 17, 2019.

39. Ron Hira and Daniel Costa, New evidence of widespread wage theft in the H-1B visa program: Corporate document reveals how tech firms ignore the law and systematically rob migrant workers, Economic Policy Institute, December 9, 2021. See also, news coverage of our report, for example, Lauren Kaori Gurley, “Analysis Claims Migrant Tech Workers Have Been Underpaid by Tens of Millions,” Vice News, December 9, 2021.

40. See for example, Senator Richard Durbin, “How American Jobs are Outsourced,” YouTube.com video, April 16, 2016.

41. See for example, Stef Kight, “U.S. companies are forcing workers to train their own foreign replacements,” Axios, December 29, 2019; Julia Preston, “Pink Slips at Disney. But First, Training Foreign Replacements,” New York Times, June 3, 2015; Julia Preston, “Toys ‘R’ Us Brings Temporary Foreign Workers to U.S. to Move Jobs Overseas,” New York Times, September 29, 2015; Michael Hiltzik, “How the University of California Exploited a Visa Loophole to Move Tech Jobs to India,” Los Angeles Times, January 6, 2017; Patrick Thibodeau, “Southern California Edison IT Workers ‘Beyond Furious’ over H-1B Replacements,” Computerworld, February 5, 2015.

42. Eric Fan, Zachary Mider, Denise Lu, and Marie Patino, “How thousands of middlemen are gaming the H-1B program,” Bloomberg, July 31, 2024; Julia Preston, “Large Companies Game H-1B Visa Program, Costing the U.S. Jobs,” New York Times, November 10, 2015.

43. David Weil, The Fissured Workplace: How Work Became So Bad for So Many and What Can Be Done to Improve It, Harvard, 2014.

44. A number of studies show a wage penalty for subcontracted/outsourced workers. For example, see Arindrajit Dube and Ethan Kaplan, “Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards,” Cornell University ILR Review. January 1, 2010); Deborah Goldschmidt and Johannes Schmieder, “The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure,” The Quarterly Journal of Economics, Oxford University Press, vol. 132(3), 2017, pages 1165-1217; Andres Drenik, Simon Jäger, Pascuel Plotkin, and Benjamin Schoefer “Paying Outsourced Labor: Direct Evidence from Linked Temp Agency-Worker-Client Data,” Econometrics Laboratory, University of California, Berkeley, September 2020.

45. Employment and Training Administration, U.S. Department of Labor, “U.S. Department of Labor revises interpretation, issues new guidance clarifying filing, compliance requirements in H-1B visa program,” Press Release Number 21-97-NAT, January 15, 2021.

46. Julia Preston, “Pink Slips at Disney. But First, Training Foreign Replacements,” New York Times, June 3, 2015.

47. Alec MacGillis, “The Tech Recruitment Ruse That Has Avoided Trump’s Crackdown on Immigration,” ProPublica, June 3, 2025.

48. Daniel Costa and Ron Hira, “EPI comments on DHS’s “Modernizing H-1B” proposed rule,” Public Comments, Economic Policy Institute, December 22, 2023; commenting on U.S. Department of Homeland Security, Modernizing H-1B Requirements, Providing Flexibility in the F-1 Program, and Program Improvements Affecting Other Nonimmigrant Workers, Notice of proposed rulemaking, CIS No. 2745-23, DHS Docket No. USCIS-2023-0005, RIN: 1615-AC70, 88 Fed. Reg. 72870 (October 23, 2023).

49. U.S. Department of Homeland Security, Modernizing H-2 Program Requirements, Oversight, and Worker Protections, Notice of Proposed Rulemaking, CIS No. 2740-23 and DHS Docket No. USCIS-2023-0012, RIN: 1615-AC76, 88 Fed. Reg. 65040 (September 20, 2023).

50. U.S. Department of Homeland Security, Modernizing H-2 Program Requirements, Oversight, and Worker Protections, Final Rule, CIS No. 2740-23; DHS Docket No. USCIS-2023-0012, RIN 1615-AC76, 89 Fed Reg. 103202 (December 18, 2024).

51. See EPI comment on the H-2 programs in the comment submitted to DHS in November 2023; Daniel Costa, EPI comments on DHS’s proposed rule on “Modernizing H-2 Program Requirements, Oversight, and Worker Protections,” Economic Policy Institute, November 20, 2023.

52. See for example, Rebecca Rainey, “Inadequate Labor Department Resources Stymie Enforcement Efforts,” Bloomberg Law, November 7, 2023.

53. See for example, AFL-CIO, Workers’ Rights Ice’d Out, February 25, 2026; Rebecca Rainey, “Trump’s Federal Workforce Cuts Hit Labor Department Enforcement,” Bloomberg Law, Feb. 24, 2025; Daniel Costa, Josh Bivens, Ben Zipperer, and Monique Morrissey, The U.S. benefits from immigration but policy reforms needed to maximize gains: Recommendations and a review of key issues to ensure fair wages and labor standards for all workers, October 4, 2024 (see Figure J); Daniel Costa and Philip Martin, Record-low number of federal wage and hour investigations of farms in 2022: Congress must increase funding for labor standards enforcement to protect farmworkers, Economic Policy Institute, August 22, 2023; Ihna Mangundayao, Celine McNicholas, and Margaret Poydock, “Worker protection agencies need more funding to enforce labor laws and protect workers,” Working Economics blog (Economic Policy Institute), July 29, 2021.

Being relatively sanguine about the effect of technology and AI on labor markets does not imply that we think labor markets have been working well for U.S. workers. On the contrary, unemployment has been too high and wage growth too slow for decades. But the roots of labor market dysfunction—both past and future—have very little to do with technological changes. Instead, this dysfunction is driven by the concerted policy push to exacerbate the extreme imbalance of power between typical workers and the corporate managers and capital-owners who hire them.

It is important to get the facts and analysis right on the questions of why labor markets have not delivered enough jobs or acceptable wage growth, and what the real threats are to decent jobs in the future. Faddish debates about AI distract attention away from the more fundamental problem of imbalanced power in labor markets, pulling policy in less useful directions.

More specifically, we argue:

• Interpretations of past episodes of rising wage inequality—whether they were driven by changes in technology or changes in policy, institutions, and norms—differ enormously based on one’s assessment of employers’ ability to exercise power in labor markets. If this power is great, then policy, institutions, and norms have great scope to influence wage inequality. If instead employer power is limited, technological change becomes the major force driving inequality.
• Technology manifests most directly in measured economic statistics as an increase in productivity—the amount of output generated in an average hour of work in the economy. Productivity growth has not historically been associated with higher unemployment or higher inequality, meaning that worries that technological change could be driving a jobless future have yet to materialize.
• Economic research claiming that the very rapid rise in wage inequality in the 1980s through the mid-2000s was caused by the rapid introduction of new technologies (mostly the spread of personal computers and other information and communications technologies) has not stood the test of time; few economists today would highlight the impact of technology alone as a driver of this inequality.
• While it is possible that technology can reduce the demand for specific jobs, these job losses can be more than counterbalanced by expanding employment in other sectors, as long as we maintain aggregate demand.
• In labor market models that allow for employer power, technological change in and of itself is largely neutral in its effect on the distribution of economic growth. But when employers exercise unbalanced power in wage-setting, they are often able to use new forms of technology to claim more of a firm’s output at the expense of typical workers. However, it is the unbalanced power that is the root of this problem—not technological change per se, which could easily boost workers’ wages if deployed in more balanced labor markets.
• Given this history of technology and labor markets, there is very little AI-specific labor market policy that will do much to help workers. Instead, policymakers should focus on broader policy levers to boost workers’ leverage in wage bargaining that will aid workers in claiming the potential gains spurred by AI in the future and reclaiming lost ground from past periods of economic growth. AI-specific provisions in workplace negotiations and collective bargaining agreements, of course, make lots of sense. How AI—or any technological tool—can be deployed to raise productivity and foster broad-based wage growth instead of increasing employer control will be a crucial question for many workplaces. But the best policy support for this process that can be given by national policymakers is strengthening worker voice and power, not trying to micromanage how AI is used in specific workplaces.

Background on past waves of concern regarding technology and labor markets

Concerns that technological changes can cause labor market distress for workers has a long history. The term “Luddite,” for example, has its origins in a movement of British textile workers in the early 19th century who opposed the introduction of new machinery they feared would displace their jobs.

In more recent decades, there have been waves of popular concern regarding technological advances as either a direct threat to workers’ well-being or an enabler of other threats (like globalization). In the early 1980s, for example, the rise of personal computers raised fears of “technological unemployment.”1 In the early 2000s, IT-enabled growth of “white-collar offshoring” was cast as a major threat to U.S. workers.2 In the 2010s, the introduction (real or imagined) of robots and autonomous vehicles was argued to imminently threaten huge swathes of the workforce.3 And, of course, in the last year or two, advances in AI have spurred a multifaceted debate about its impact—including its potential labor market effects.

Much of this concern over technological changes in recent decades has coincided with undeniably bad outcomes for most workers in the U.S. labor market. The post-1979 period has seen unemployment at excessively high levels for extended periods and wage growth for typical workers slow dramatically relative to what prevailed in the first three decades following World War II. Wage growth has slowed even relative to the much slower pace of economywide productivity growth that has characterized the post-1979 period. Slow wage growth for most workers has led to sharply higher levels of wage inequality, along with a shift of income away from labor compensation and toward business incomes (particularly corporate profits).4

However, despite the concern about the effect of technological change on labor markets—and even despite the objectively poor performance of labor markets for most U.S. workers in recent decades—the effect of technological change has been generally positive when looked at from the perspective of the U.S. working class writ large. The anemic wage growth since 1979 for the typical worker would have been far smaller, and perhaps even negative, had there been no technological advances and no corresponding increase in labor productivity since that time.

But the full potential boost to living standards that technology could have provided has been more than swamped by the declining leverage and bargaining power of typical workers over this same period. The shift in labor market power away from typical workers and toward employers is the result of intentional changes in public policies, institutions, and norms. Key examples include failures to protect workers’ right to organize unions from growing employer hostility, raise the federal minimum wage for long periods of time, and the maintain extended periods of very low unemployment. It is these intentional policy decisions, not technological progress itself, that have redistributed so much income away from typical workers and toward corporate profits and those at the very top of the pay scale (CEOS and other corporate managers, for example).5

Before walking through the economics and data supporting this statement, it is important to note one powerful piece of anecdotal evidence regarding the technological dog that didn’t bark. We highlighted waves of concern about technological advancements in the 1980s, early 2000s, 2010s, and today. We could not find any serious wave of concern from the mid- to late 1990s. This should be strange. The 1990s saw the technological advance with by far the greatest effect on the economy in several decades—the introduction of the Internet and the rise of e-commerce—often at the expense of brick-and-mortar retailers. Unlike the other waves of popular concern surrounding technological changes, the rise of the Internet in U.S. economic life really did show up in key statistics (Figure A clearly shows a sharp uptick in productivity growth in the 1990s business cycle, for example). Yet the late 1990s (even in real time) was generally seen as a period of broad-based prosperity and healthy labor markets.6 The explanation for this perception is simple: for the first time in decades, unemployment was driven low enough to generate opportunities for many who had been shut out of job markets and spur genuinely healthy wage growth for most workers. In short, technology—even the significant acceleration of technological advance in the late 1990s—was never really a headwind to decent labor market performance. Instead, the headwinds were all poor policy choices and changing some important ones (like allowing an extended period of very low unemployment) improved labor market performance radically, even in the midst of the most rapid technological change in decades.

Getting the story right on technology, inequality, and labor market dysfunction is crucially important for making the right policy decisions. Efforts to blame inequality and unemployment on bloodless, apolitical forces like “technology” constitute a convenient alibi for those social forces supporting the concrete policy changes that actually drove these outcomes. This technology alibi has been extraordinarily effective in distracting attention away from the major causes of rising inequality and anemic wage growth. As the debate over AI’s potential effect on labor markets begins, this history of technology-as-alibi needs to be kept front and center in the minds of analysts and policymakers alike.

A concrete example illustrates how myopic focus on new technological trends can divert attention away from the root causes of labor market dysfunction. In the mid-2010s, long-term unemployment (unemployment spells exceeding six months) was particularly high and had been for years. Around this time, many employers were using automated data systems to sort through job applications. As the automated systems ranked job applicants, they were frequently programmed to instantly reject applicants who had not worked in the previous six months. This obviously exacerbated the problem of re-employment facing the long-term unemployed, and proposals were floated to bar employers from undertaking this kind of application sorting.7

But this proposed solution was severely flawed relative to the optimal response. The reason why long-term unemployment was high in the 2010s was because overall unemployment was high. Aggregate demand (spending by households, businesses, and governments) was too low to absorb enough willing workers to meaningfully push down unemployment (either short- or long-term). Policy efforts to boost aggregate demand could have quickly lowered overall unemployment, and long-term unemployment would have quickly followed suit. We know this is true because as unemployment fell steadily (if slowly) into the late 2010s, long-term unemployment fell even more rapidly.8

Essentially, a severely damaged macroeconomy was inundating employers with far more applications for each job than they felt capable of processing efficiently, so these employers used a technological advance (automated hiring software) as a shortcut for sorting applications based on long-term unemployment. Barring employers from using this coping strategy for dealing with the excess of applications over job vacancies would not have solved any society-wide problem. Employers still would have faced too many applicants per job and would likely have just moved onto some other application sorting shortcut. A common one was ratcheting up educational credentials required for the job despite the underlying work not really demanding these credentials.9

Crucially, while barring employers from using unemployment duration as a criterion in their automated application sorting processes might have resulted in some long-term unemployed worker getting a job, this job would have come directly at the expense of another worker who was also unemployed. Again, the main labor market problem in the mid-2010s was too few jobs per jobseeker. Changing how these too few jobs were allocated would have done little to improve aggregate human welfare over this period. But generating more jobs through expansionary macroeconomic policy would have solved this underlying problem and improved aggregate human welfare enormously. Focusing on the technological fad (automated hiring systems) and missing the deeper economic problem (a shortfall of aggregate demand) led to a much less constructive policy debate.

We worry that concerns about AI’s potential effects on labor markets will prompt a rush to construct targeted AI-specific policies—as has happened over and over again in U.S. policy debates on technological change. These policies mostly will not materialize at all because policymakers will soon be distracted by the next fad. Even if some policies do get constructed, they would be mostly ineffective in making labor markets better for workers and will divert valuable attention away from other policies that would actually improve labor market functioning.

Is it possible we’re wrong and AI will be the technological change that finally drives bad labor market outcomes for the vast majority? It’s possible. But there’s no evidence of it doing that yet and the nature and history of how technology affects labor markets argues that it is policies bolstering typical workers’ bargaining position in labor markets—not the newest development in AI—that should preoccupy policymakers who aim to deliver better labor market outcomes for workers in the years to come.

Key definitions, issues, and questions about technological change and labor markets

The remainder of this report will focus on key concepts, definitions, issues, and questions about technological change and labor markets.

In section 2, we provide a brief overview of two competing models of the labor market. The choice of which model best describes the functioning of real-world labor markets is crucial in assessing how technological changes can affect labor market outcomes, and which influences (technology or institutional change) have driven historical trends in wage growth and inequality.

In section 3, we explain how economists tend to measure technological progress—as movements in productivity growth.

In section 4 we assess broad empirical correlations between faster productivity growth (or an increased pace of technological progress) and overall labor market outcomes.

In section 5 we evaluate the claims of some economists that particular forms of technological change have altered the relative demand for large classes of workers in competitive labor markets, and hence have driven much of the rise in inequality of pay seen in recent decades. We find these claims lacking in key evidence.

In section 6, we note some arguments surrounding the effect of technological change on labor markets that have not received enough attention from mainstream economists: the role of technology as a tool for employers to boost their leverage in pay-setting versus typical workers. However, we note that the root cause of this problem is unbalanced labor market power, not technology qua technology, which could in theory be just as easily used to boost workers’ power as degrade it.

Finally, we sum up what this analysis implies for policy and what should preoccupy policymakers looking for real solutions to boost workers’ pay and improve their labor market outcomes.

Competing models of the labor market

In recent decades, a key debate in labor economics has been determining which changes in the economy are responsible for the large rise in wage inequality since 1979. Since the late 1970s, only workers at the top of the wage distribution (those earning more than 90% of all other workers) have seen growth in wages that approaches growth in economywide productivity. Wage growth for workers below the 90th percentile has substantially lagged productivity growth.10

Two competing explanations for this rise in wage inequality are: first, technological change that has decreased the relative demand for less credentialed labor (sometimes called skill-biased technological change, or SBTC) and second, institutional changes (like the decline of unions, the erosion of the federal minimum wage, and a change in macroeconomic policy priorities) that undercut typical workers’ leverage and bargaining power in the labor market. 11

It is often underrecognized that the outcome of the debate over the sources of wage inequality hinges almost entirely on what one assumes is the correct underlying model of the labor market: one where labor markets are competitive and power is roughly balanced between workers and employers, or one where employers have structurally greater power than typical workers.

Those who emphasize technological change as the root of wage inequality are invariably working with a model that assumes labor markets are competitive. In these models, workers and employers are equally powerless, and wages and employment are set by the intersection of demand and supply curves in competitive markets for labor, with very little scope for the economy to diverge from these competitively determined levels without adverse consequences. Crucially, this means that only one employment level is consistent with a given wage level and vice-versa—wages and employment are jointly determined by the same underlying forces, and this means that any influence that affects one of these necessarily affects the other. Given this model of the labor market, it is natural to react to large changes in wages or employment for any group of workers by postulating that something must have shifted either relative labor demand or supply.

“Relative” labor demand or supply means demand or supply of one type of labor relative to other types of labor. So, for example, if employers decided that college-educated workers were growing more productive and valuable over time (say because they had more facility with new forms of technology), relative labor demand would increase for workers with college credentials, while relative labor demand would decrease for those without these credentials. The result would be both wage and employment levels rising for college workers and falling for noncollege workers.

Much of the economic research making strong claims that the rise in wage inequality over recent decades is driven by technological change relies on competitive models of the labor market. It is important to realize the strong role that this assumption of a competitive labor market plays in this research. Real-world trends in relative labor supply are easy to observe in data on the size of the workforces with and without college degrees. The relative wage can also be seen in the data—it’s the ratio of average wages for workers with a four-year college degree to the average wages of other workers. However, these two observable datapoints are often combined with the assumption of competitive labor markets to infer trends in relative demand for different types of labor. Often these inferences of trends in labor demand are incredibly influential in public debate. For example, the claim that the introduction of personal computers drove inequality in the 1980s and 1990s is often a direct statement about the inference that technology shifted the relative demand for workers without a college degree. Yet direct evidence of economic influences that reliably shift demand or the timing of when they might have happened is extremely thin.12

Those who emphasize the importance of institutional change for wage inequality are nearly always working with a labor market model that includes substantial employer-side market power. The source of this power may vary. It can include traditional monopsony power stemming from too few employers, dynamic monopsony power stemming from informational and logistic frictions associated with job changing and search, employer choice in how effort is elicited from workers (through costly monitoring or higher wages), or some other source.

Frictions and unbalanced power in labor markets mean that a range of influences besides workers’ own productivity affect wage levels and their evolution over time. Manning (2003) has argued that frictions in real-world labor markets make changing jobs costly to workers, and hence effectively grant employers substantial “monopsony power” over their employees. Some of these frictions that make job changes more costly include things like researching and applying for alternative jobs, changing commuting schedules, rejiggering child care arrangements, switching health insurance plans, and breaking social ties with work colleagues.13 No single one of these frictions imposes costs that are high enough to prevent any job switching from happening, but the accumulated drag of some or all of them can substantially blunt the potential of labor market competition to boost workers’ wages. Further, even quite small reductions in competition spurred by these frictions can lower wages significantly.

Of course, a literal labor market monopsony would be one in which only one single employer existed, which would obviously keep competitive pressures from working to help workers bargain for higher wages. The Manning (2003) model does not require just one employer or even some arbitrarily small number of employers; it only requires that some employers are able to exploit the real-world fact that the costs of switching jobs for workers is nonzero. If this cost of job switching is a part of the baseline model of labor markets, it grants employers considerable power.

Besides this baseline reality of costly job changing, other forms of employer power stem from realities of the production process within firms in capitalist economies.

For example, Bowles (1985) points out that employers must hire workers to produce output, but must also elicit effort from these workers. Employers’ main leverage to elicit effort is the threat to fire workers found to be shirking. Firms have two main instruments to maximize leverage from this threat: they can monitor workers intensely—so that any shirking is highly likely to be detected—or they can pay high wages to intensify the pain of losing a job. Either higher monitoring or higher wages can incentivize workers to expend more effort and shirk less. Both strategies are costly to employers: to implement the monitoring strategy, they must hire managers who do not contribute directly to production, but instead just oversee workers’ effort, whereas to implement the high-wage strategy, they must increase the pay of workers directly involved in production. In some cases, if the “outside” wage available to workers is one generated in a labor market characterized by substantial monopsony power, a high-wage strategy adopted by a firm to elicit effort can counterbalance the depressing wage effects of this monopsony power.

Regardless of the source of market power, recent cutting-edge research has demonstrated how far from the competitive ideal most labor markets truly are. The key effect of this employer-side power is to make the range of possible wage-employment level combinations set in the labor market much wider than is possible in competitive models. A given employment level can be consistent with a wide range of wage levels. This “range of indeterminacy” can explain, for example, why large increases in mandated minimum wages are often found in empirical studies to have no significant effect on employment levels.14 This noneffect of minimum wages on employment, conversely, would be hard to explain with competitive models where a single combination of wage and employment level is determined jointly by the intersection of demand and supply curves. Hence, the potential role for institutional change to significantly drive inequality—even absent any change to underlying demand and supply for labor—is much larger in models of labor markets with employer-side power.

For decades, the assumption that labor markets are best represented by competitive models was widely adopted across the economics profession, and this naturally channeled much research about rising inequality into searches for “demand-shifters” like technology. More recently, models with employer-side power have become much more prominent in labor market debates, and the possible scope for institutional change to drive trends in wages and inequality has been more widely recognized.15 Now, debates over the drivers of wage inequality in recent decades require a much higher empirical burden of proof than they did in the past, when the assumption of competitive labor markets lead almost inevitably to the conclusion that technology played a key role.

To put our cards on the table, we believe the evidence strongly supports a view of labor markets where employer power is significant, and that direct evidence of technological change having first-order effects in changing relative demand for labor is extremely thin (we highlight some of this evidence and its thinness in a later section). But putting this debate front and center when discussing the potential effects of technological change on wages and employment is a useful practice going forward regardless.

How economists typically measure technological progress: productivity growth

Economists generally measure technological progress as an increase in economywide productivity. There are two main ways that productivity and productivity growth are measured. First, labor productivity is the amount of income generated in an average hour of work in the U.S. economy. This income includes wages, but also business income (including corporate profits), rents accruing to landlords, and other forms of income. Second, total factor productivity (TFP, sometimes also called multifactor productivity) growth measures how much output has grown after accounting for the growth of all measurable inputs, such as labor and contributions from capital services (like factories and machines). Economists often focus more on TFP as a measure of pure technological change. However, in the rest of this paper, we will focus more on labor productivity and argue that it maps more directly onto popular conceptions of how technology might influence economic outcomes.

Labor productivity—or the income generated in the average hour of work in the U.S. economy—rises consistently over time. These increases are why the current generation is on average so much richer than their ancestors—the average hour of work in the economy of 2023 generated far more income than the average hour worked in (say) 1960. Labor productivity has grown steadily—if inconsistently—for the last century or more in the United States.

This paper focuses more on trends in labor productivity, because we think most people understand the broader determinants of growth in labor productivity as being reflective of technological change.16 For example, most people would see the introduction of digital scanners and computers as a key way that technological progress has changed how people perform work in recent decades. In contrast, many people would find it odd or too limiting to hold constant the effect of computers when assessing the influence of technological change on the labor market.

Figure A highlights trends in labor productivity growth and the contribution of its drivers over U.S. business cycles since World War II. The most striking finding from this analysis is that productivity growth over the most recent business cycles has been historically slow, not fast. This alone provides key context for current debates about how the economy can absorb technological progress: any technology-induced job destruction allowing a given hour of work to produce more income—and hence substitute more sharply for labor—has substantially slowed in recent decades. Yet breathless reporting on today’s technological advances often ignores this, or even outright claims the opposite.

Figure A

By far the biggest slowdown in the contributors to labor productivity growth has been in the category of TFP growth—or the “pure” form of technological change. The first implication of these trends is obvious: if rapid technological progress is feared to cause labor market problems, were these labor market problems more pronounced in past business cycles, when this technological progress ran faster? The next sections address this question.

Can accelerating technological progress cause mass joblessness?

If we define technological progress as the ability to produce more output in a given hour of work, this often raises an obvious concern: Won’t less labor be needed over time, causing mass joblessness?

The answer is a clear “no.” While it is true that the level of unemployment at any given point in time is in part a function of the economy’s productivity, there is another variable—aggregate demand—that policymakers have significantly more control over and which can be adjusted to keep unemployment low, regardless of productivity trends.

Unemployment rises when the economy’s potential output exceeds aggregate demand. Potential output is a measure of how much an economy could produce if nearly all the economy’s willing workers were fully employed.17 A key determinant of potential output is productivity—any given employed workforce can produce more if productivity is higher. Aggregate demand is the amount of spending by households, businesses, and governments. When aggregate demand falls beneath the economy’s potential output, then unemployment rises. Say that there is a hotel with staff and rooms for 50 parties. If only 45 parties offer to rent these rooms, then five rooms and the workers to staff them will be unneeded. If this deficiency of demand is widespread across most sectors of the entire economy, then unemployment will rise as unneeded workers are laid off and not reemployed in other sectors.

Figure B shows estimates of the economy’s potential output, as well as actual measures of gross domestic product (GDP)—the value of the nation’s output and income in a given period. When actual GDP falls beneath potential, this means that aggregate demand is running more slowly than growth in the economy’s supply side, resulting in rising unemployment. Recessions are indicated by grey shading in the figure and they are defined by actual GDP falling beneath potential output.

Figure B

This logic might at first glance seem to buttress fears about technological progress generating unemployment: technological progress boosts the economy’s potential output, and if this boost pushes it above the economy’s aggregate demand, then unemployment can result. But the data show clearly that sharp changes in potential output (which is how technology-driven productivity jumps would show up in this data) is not behind the mismatches in aggregate demand and potential output that lead to recessions.

The determinants of potential output move slowly. The size of the labor force and the nation’s capital stock (and its state of technological sophistication) do not whipsaw around year to year. Instead, they tend to grow at a slow and predictable rate over time. Aggregate demand is far more volatile and can whipsaw quickly from year to year. For example, when the bubble in home prices began deflating in late 2006 and 2007, households immediately began spending less money and saving more to make up for the lost value of wealth, leading quickly to the severe 2008–2009 recession.18 Similarly, in early 2020, the labor force available to firms in the face-to-face services sector did not disappear and cause an employment collapse. It was customers who disappeared as fears of COVID-19 spread, and it was this demand shock that led to mass layoffs in the early part of that year.19

But just as aggregate demand can fall quickly, policy efforts can boost it quickly to ensure recessions are short-lived and recoveries are rapid. Aggregate demand can be boosted through either monetary or fiscal policy interventions to boost demand, with the Federal Reserve using monetary policy tools (like interest rate cuts), and Congress and the president setting taxes and spending at the levels needed (in practice, fiscal policy turns out to be the more powerful tool). Support for the statement that policy can quickly restore falls in aggregate demand is provided by the U.S. economic recovery from the COVID-19 recession. In December 2020, after the low-hanging jobs created by simply reopening the economy after the first wave of the pandemic had been restored, the unemployment rate was 6.7% and job growth had turned negative. Absent further policy efforts, there was a real possibility of stagnation at this high rate of unemployment. But due to further fiscal recovery packages passed in December 2020 and March 2021, by the end of 2021, the unemployment rate had already fallen below 4% again—essentially matching the immediate pre-pandemic level.20

Table 1 highlights this point about which variable—aggregate demand or potential output—moves more quickly (and in the right direction) to cause periods of joblessness. It shows growth rates for both actual and potential GDP in the year before recessions have hit the U.S. economy, and then over the subsequent recession. It then calculates the “swing” in these growth rates—how much they changed as the economy entered recession. Crucially, any sharp divergence of real GDP from potential output is caused by changes in aggregate demand.

In all cases, real GDP growth has swung sharply from positive to negative in the first year of recessions, by an average of 4.6% in the five business cycles before the COVID-19 pandemic (the COVID-19 recession was so extreme that we will set it aside for now). Estimates of potential output slowed as well, but only by an average of 0.4% over these same business cycles. Further, slowing potential output growth can reduce unemployment if it represents a slowdown in productivity growth, so this slowdown in estimated potential output puts downward—not upward—pressure on joblessness. In short, the wrenching change that causes recessions and rising unemployment is not an acceleration of technological progress making labor unnecessary—again, potential output decelerated in each of these periods. Instead, the pronounced change is the rapid deceleration and outright fall of real GDP, which, given trends in potential GDP, must by definition have been caused by a fall in aggregate demand.

Table 1

Figures C and D provide some slightly more systematic looks at the relationship between productivity growth and joblessness. In both figures, average values over an entire business cycle peak—from one peak to the next—are assessed. The dates on the dots in the figure mark the beginning of the business cycle. Figure C shows the average rate of productivity growth and the average rate of unemployment across business cycles since World War II. Contrary to worries about tradeoffs between fast productivity growth and low unemployment, fast productivity growth is associated with lower average rates of unemployment across business cycles.

Figure C

Figure D shows the relationship between average productivity growth and the change in unemployment rates between business cycle peaks. That is, it looks to answer the question: On average, fast productivity growth may be associated with lower unemployment, but does fast productivity growth over a business cycle keep unemployment from falling as fast as it could have? Again, there is no systematic relationship between the average pace of productivity growth and the decline of unemployment over an entire business cycle.

Figure D

Over the last completed business cycle (from 2007–2019), productivity growth averaged roughly 1.5%. The most highly optimistic projections for how much AI can boost the pace of productivity growth are about 1% per year (most other projections are quite a bit lower). This would move productivity growth from 1.5 to 2.5%—a level that the U.S. economy saw for decades following World War II, and which was accompanied by lower average unemployment than has persisted in recent decades.21 In short, there is nothing in either the historical relationship between productivity growth and unemployment or in projections of AI’s impact on productivity growth that indicate that this technological change will prevent policymakers from sustaining low rates of unemployment—should they choose to do so.

Does technological change ever displace jobs?

None of this is to say that specific jobs are not threatened by technological progress. Rapid technological change concentrated in any specific sector can reduce employment in those sectors. The analysis above simply says that the aggregate number of jobs and the overall rate of unemployment is unlikely to be threatened by an acceleration of technological progress, as long as policymakers respond appropriately by boosting aggregate demand.

As productivity rises following an acceleration of technological progress, job losses within sectors experiencing the productivity increase will be counterbalanced (or more than counterbalanced) by expanding employment in other sectors as long as aggregate demand is maintained. Autor and Salomons (2018) empirically estimate how employment responds to a sectoral productivity shock. They find that the own-effect of a productivity shock within a sector is indeed modestly negative, with the reduction in hours of work needed to produce output in the sector not fully offset by the rise in demand for the sector’s output, made cheaper by productivity growth. However, the cross-effect of productivity growth within a sector—the effect of its own productivity growth on employment in other sectors—is strongly positive, and outweighs the negative own-effect in terms of aggregate employment trends.

Take the example of a 1% increase in productivity in a specific economic sector like manufacturing. Autor and Salomons (2018) find that the average first-order effect of a sectoral shock (the own-effect) is to decrease employment in that sector by 0.1%. This is the intuitive effect most people think about when they worry that introducing more automation into production might displace human labor in that sector.22

But this 1% rise in sectoral productivity means that more income is being generated in each hour of work in that sector, and this extra income boosts employment when it is spent in other sectors. This positive “final demand effect” on jobs alone almost completely counterbalances the direct effect, adding almost 0.1% to employment. Additionally, the combination of productivity growth and competition in product markets lowers the prices of goods from the sector that has seen the positive productivity shock. In the example of manufacturing, this would provide a boost to employment in sectors that use manufactured goods as intermediate inputs (for example, a falling price of computers makes it less expensive to produce accounting services). These “upstream effects” boost employment by almost twice as much as the direct effects reduce it. Overall, the economywide net impact of these effects is an increase in overall employment stemming from productivity growth within a given sector.

How to reduce damage from sectoral job displacements in labor markets—whatever its cause

It is certainly true that some individual workers may suffer from sector-specific job displacements, even if aggregate unemployment or employment is unaffected. The labor market is not frictionless, and it may take some painful time before comparable employment in a new sector is obtained. Some workers (particularly older workers) may never find a specific job as good as the one they lost. Yet much of this individual suffering could be ameliorated with broad policies that provide better protective social insurance, more widespread collective bargaining, and sustained high-pressure labor markets—policies that are highly desirable regardless of the pace of technological change.

One reason specific jobs are occasionally highly valued in the U.S. labor market is because they come bundled with nonwage compensation—like health and retirement benefits, which are not universally available. But if these benefits were universally available through more protective social insurance systems, the damage done by the loss of any particular job would be greatly lessened. Another key social insurance system—unemployment insurance (UI)—is too stingy in the U.S., causing large income losses while workers search for alternative employment. Boosting the protectiveness of UI would be a key win for those looking to reduce the pain caused by the loss of particular jobs.

Another reason some specific jobs can be highly valued in the U.S. economy is because they are unionized. This should not be as rare as it currently is, but recent decades have seen a combination of employer hostility and policy indifference lead to a near shutdown of organizing unions in newly created jobs at any large scale. This means that sectors today that remain unionized do so largely because of a historical legacy that saw their unions formed decades ago; the chances of workers leaving this sector finding a unionized job elsewhere are slim indeed. In short, there are only rare pockets of unionized jobs in the U.S. economy and new ones are not being created fast enough. Hence, anything (including technological progress) which leads to the destruction of today’s unionized jobs are likely to leave many of their former holders worse off.

Additionally, the U.S. economy has spent much of the past four decades with excessively high unemployment, which radically increases the cost of losing a job. When unemployment is low and vacancies are high, a worker who has lost their job can quickly find alternative employment, putting employers under constant pressure to keep job quality high enough to retain and attract new employees.

If U.S. policymakers created a more protective social insurance system, restored the effective right to organize unions, and maintained high-pressure labor markets with low unemployment, then a large part of the damage done by technologically induced job displacements would disappear.

Finally, despite all the possible challenges faced by workers who are displaced from specific sectors by technological change (or anything else), it is possible to both overstate how widespread these challenges are, and underestimate the value of new jobs and the higher productivity created by technological change.

How widespread is sector-specific “churn” caused by technology and has it increased?

Were technology responsible for a reallocation of jobs toward certain industrial sectors or occupations, we should expect to see an increased amount of employment flows with workers increasingly separating from jobs, and certain sectors losing and gaining shares of employment in the labor market. The U.S. labor market has always and everywhere been characterized by tremendous rates of job “churn”—workers separating from employers either voluntarily or involuntarily. For example, in the last year before the COVID-19 pandemic, 3.7% of all workers left their jobs each month. Similarly, 3.9% of all workers were newly hired each month (for a net change in employment each month of roughly 0.2%). Over a year, this is a huge amount of churn, with more than a third of the entire workforce changing jobs (or changing their employment status) each year. Yet this churn has been a feature of the U.S. labor market for decades, and most data indicates that it has actually slowed, not increased, in the 2000s—despite the proliferation of the Internet and large advances in computer hardware and software.

Figure E, reproduced from Bivens and Mishel (2017), clearly emphasizes this point. It shows the sum of the (absolute) change in occupational employment shares over various decades. To construct this metric, Bivens and Mishel examined the shares of total employment for 250 occupations at the beginning and end years of each decade and computed the changes in these shares. The metric shown in the figure is half of the sum of the absolute value of changes in occupational employment shares (taking only half of the sum avoids double counting gains and losses). This metric measures the share of total employment exchanged between occupations—or the measure of job churn between occupations—for each decade.

The decadal rates of occupational employment shifts, starting in the 1940s, are shown in Figure E. The rate of change was fairly uniform over the 1940–1980 period, and far more rapid than for any period since 1980. The period since 2000 has seen the lowest rate of change—half the rate of change of the 1940–1980 period.23

Figure E

Were technology causing massive displacements or reallocation, the data would have exhibited the opposite pattern. One important reason for the lack of widespread displacements is that technological increases can complement the tasks of workers, rather than permanently substitute away from particular occupations or industries. As a result, even though large shares of the labor market may be exposed to new technologies, much smaller shares of jobs would be destroyed entirely by automation. Indeed, some observers have in fact argued that AI provides “an opportunity to complement worker skill and expertise” (Acemoglu, Autor, and Johnson 2023).

Does technology reduce demand for workers without the right credentials or skills?

We argued in the previous section that technological change and increased productivity has not led to aggregate job loss or increased unemployment. Moreover, even in recent years, these forces have not even led to more rapid occupational churn in the labor market. However, many economists have argued that technological change was a major cause of growing wage inequality in the U.S. labor market in the post-1979 period, and that this technology-induced rise in inequality was the result of technological changes that boosted relative demand for workers with higher skills (almost always proxied by a four-year college degree). This technology narrative has been extraordinarily influential among policymakers, even as cutting-edge research increasingly casts doubt on it.

This shift in relative demand toward college workers, sometimes called skill-biased technological change (SBTC), has been a major focus of economic research in understanding the growth of U.S. wage inequality. The SBTC-based explanation of inequality relies on a model of competitive labor markets, where wages and employment of workers of different skill levels have their relative wages and employment levels set by the intersection of supply and demand. The SBTC theory claims that technological change has caused an increase in relative employer demand for college workers (presumably because these allegedly more skilled workers have greater facility with using new forms of technology), and this rise in turn led to higher relative wages (or a higher college wage premium) over the last several decades.

This stylized story simply does not fit the data. First, basic estimates of the relative demand for college labor suggest that the bulk of the growth in the college wage premium in the 1980s and 1990s is not due to an acceleration in employer demand for college labor, but a slowdown in the supply of college labor (therefore raising the price or wage of college labor). As Autor, Goldin, and Katz (2020) explain, “rapid and disruptive technological change from computerization, robots and artificial intelligence is not to be found” during these periods of massive innovation in computing technology. These authors (and others) often present this set of facts as demonstrating that inequality is the result of a “race between technology and education,” with technology presumed to raise relative demand for college graduates, while education conditions the supply. However, recent decades have clearly seen much more marked changes in the education/supply side of this race—and that leads to a narrative about the driver of inequality that departs significantly from stories that center technological change as the driving force.

Second, compared with earlier time periods, there has been little change in wage inequality between college and noncollege workers since 2000. Figure F shows the annual college wage premium over 1979–2023, controlling for demographic differences in the college versus noncollege population within each year. There was a sharp increase in the college wage premium in the 1980s and 1990s, but a much smaller rise since 2000, during the widespread adoption of computing at the workplace. In fact, there has been essentially zero change in college/noncollege wage inequality since 2010, so if anything, these wage patterns suggest a decline in the relative demand for college labor over the last one to two decades.

Figure F

In a preview of recent concerns over AI, the early recovery from the COVID-19 recession saw many expressing worries that employers would respond to the organizational changes they made in the era of social distancing to replace workers with technology. Casselman (2021), for example, wrote that:

An increase in automation, especially in service industries, may prove to be an economic legacy of the pandemic. Businesses from factories to fast-food outlets to hotels turned to technology last year to keep operations running amid social distancing requirements and contagion fears… But some economists say the latest wave of automation could eliminate jobs and erode bargaining power, particularly for the lowest-paid workers, in a lasting way.

As support, Casselman (2021) pointed to a 2021 working paper from the International Monetary Fund that argued: “Our results suggest that the concerns about the rise of the robots amid the COVID-19 pandemic seem justified” (Sedik 2021).

And yet, almost three years on, the post-pandemic labor market has actually been a huge source of strength for low-wage and low-credential workers. Autor, Dube, and McGrew (2023) show that after accounting for changes in the demographic composition of the workforce, the college/high school wage premium fell during the last two years. Instead of technological change widening the gap between those with more or fewer credentials, a tighter labor market during the 2021–2023 period compressed wages. Young, noncollege workers saw significant wage increases because the tighter labor market provided more opportunities to switch to higher paying jobs.

Employment rates for workers without a college degree are still worse than they were decades ago, but in aggregate, they are largely not determined by technological changes. An easy way to see this is comparing the United States to other advanced economy countries who have faced similar technological shocks but who have very different macroeconomic policy and social support systems. Figure G shows that in the United States, the share of the population with a high school but no college degree that is employed has dropped dramatically since 2000. In contrast, low-credentialed employment in other G7 countries has not experienced such falls. In some cases, like in Austria, Germany, and Great Britain, employment rates have grown for workers with just a high school education.

Figure G

Technology is a tool—the balance of labor market power determines who it helps

While most economic analysis of technology’s potential role in generating greater inequality in recent decades has focused on its effect in shifting demand and supply curves in competitive labor markets, this is often not how most informed consumers of news about the U.S. economy think about the effect of technology.

Instead, many media reports about technology’s role in the workplace—and how it might exacerbate inequality—focus on how it might be used as a tool for employer monitoring and speed up of workflow. For example, a well-known example of technology-enhanced monitoring is the “black box” installed in long-haul cargo trucks. Originally, these boxes were installed to validate that long-haul truckers were meeting mandated rest requirements for safety reasons. Now, however, one of the main appeals of the box for employers is to ensure that they only pay truckers for the time they spend actually moving cargo forward. Skott and Guy (2013) note that the producer of one of these black boxes boasts on their website that for trucking company managers, this technology “is like being able to sit next to every one of your drivers every second they drive.”

Another example is robots in an Amazon warehouse essentially setting the pace for human workers when processing packages. As Anway (2022) writes: “The clock was always ticking…As soon as she’d filled a rack, she’d press a button and one robot would zip it away while another robot would bring a new one to fill.” This high pace of work has been implicated in high rates of injury in these warehouses.

These examples have nothing to do with technology’s effect in shifting demand or supply curves for labor in competitive markets, and yet show technology as enabling exploitation and degrading job quality. A much smaller body of economic research highlights labor market models that shed light more directly on these situations.

Earlier, we described models where employers had market power and could choose between monitoring or high wages as strategies to elicit effort from workers. One could imagine technological change that reduces the cost of monitoring. This could induce firms to lean more heavily on the intensive monitoring strategy and less on the high-wage strategy. This in turn would lead to more workers having their wages set directly by the labor market outside the firm—an outside labor market which itself might be riven with employer-side power—and hence lower wages. This heavier reliance on monitoring would lower measured productivity, as more work hours in the firm would be spent monitoring other workers rather than producing output for sale. In this case, technological change would not be boosting productivity (it would in fact be lowering it) and would instead only be leading to a zero-sum (or even negative-sum) redistribution away from workers and toward employers and managers.

However, technological advance is not the only—and likely not the primary—determinant of whether firms choose a high-wage or a high-monitoring strategy. A bigger determinant is the relative bargaining power of workers. If the workers at a given firm manage to organize a union, for example, the choice is essentially decided: wages will be higher, and workers will value the unionized job more than what they can get in the outside labor market (and hence will expend more effort).

The example of the trucking black box monitoring technology makes this clear. Originally the box was thought necessary to keep truckers from breaking safety rules regarding how much rest they got between spells of driving. In more recent incarnations, it is marketed as a device to ensure trucking companies do not have to pay for any time spent that does not move cargo forward. However, what this example makes clear is that it is the underlying power relationship, not the new technology, that determines wages and job quality. For example, if workers were paid sufficiently for the entire time commitment of hauling cargo (and not just for time actively driving), the worry that they would skimp on rest requirements to earn more money would be blunted. Further, while the black box is often referenced as a tool for employer control, the underlying technology could in theory solve a pressing problem for truckers: proving that large swathes of time they’re not actively hauling cargo is in fact necessary “company time,” as they are forced to wait to pick up loads at ports.

In the supply chain breakdown of 2021 and 2022, a key bottleneck to moving goods from producers to consumers was a backlog at ports. This backlog led to truckers often having to wait long hours (or even days) idling in a queue waiting to have their cargo loaded. And often, this wait time went uncompensated. One employer objection to paying for this wait time could be verification—the company only “knows” when the trucker is really working for them when the load is transferred to the truck. But that’s obviously not true—the same technology that verifies whether long-haul truckers are spending enough time actively driving to meet their contractual demands could also verify that truckers are indeed in an active queue waiting for cargo to be loaded.

The real reason why truckers have not been compensated for these wait times in recent decades is not the technical impossibility of verifying wait times, but instead simply the power of employers. Trucking was once a highly unionized, high-wage job. The push to deregulate and deunionize beginning in the 1970s substantially eroded the relative wages in this sector. One imagines that if the black box had been invented in the 1950s and employers tried to force its adoption by a more heavily unionized trucking workforce, it would have been successfully rejected by the then considerably more powerful Teamsters union.

In short, it is true that technology exists that might aid employers engage in zero-sum redistributions away from typical workers. But the exact same technology used by employers to wring more effort and profit out of workers could often in theory be used by workers to wring higher wages and productivity out of employers. The same robots that are implicated in a work pace that is injurious to workers at Amazon could be a genuine boon to worker safety if robots handled all heavy loads and did so at a pace that did not put undue stress on human workers. This pace is not dictated by technology, it is set by employers, too often in the context of highly unbalanced power. In short, the problem is almost never in the technology itself, and nearly always in the relative power relationships.

Recent flashpoints about hiring discrimination and IRS audits highlight that unbalanced power is the root problem

Discrimination in hiring processes and in federal tax enforcement are two key examples highlighting that it is power—of bosses and policymakers—that determines whether or not technology (including variants of AI) are used to ameliorate or exacerbate existing inequalities in U.S. society.

It is known that automated processes for employer hiring can use embedded discriminatory criteria when sorting applicants.24 This is obviously a real problem. Yet discriminatory criteria do not appear by magic in automated data processing systems; their logic is explicitly or implicitly programmed somewhere along the way. The best response to this issue has very little to do with the automated process itself: it is making firms legally responsible for the outcomes of their own hiring software’s decisions and providing regulators enough access and information to perform audits and measure the magnitude of bias in the hiring process. There are even reasons to believe that discriminatory criteria embedded in automated hiring systems will be easier to detect and solve than old-fashioned employment discrimination that largely happened inside the heads of hiring managers.25 Again, the underlying problem here is not technology, it’s the broader social context this technology operates in, which could in fact benefit from the use of technology in combatting some of its problems.

A final example highlights a potential danger of focusing on technology as the problem rather than the more foundational decisions embedded in technology. A recent paper looked at IRS audit rates for Black and non-Black taxpayers. They found Black taxpayers audited at substantially higher rates. They found this disparity (and other key features of IRS audits) could possibly be explained if the IRS was picking taxpayers for audits based on an algorithm that sought to maximize the share of underreported income that was accounted for by refundable tax credits (like the Earned Income Tax Credit).26

This is an odd target to maximize if you thought the point of audits should be to simply generate as much appropriate revenue as possible. Potentially, however, it is an understandable thing to maximize if you are an agency that has been swayed by unrelenting Republican attacks on refundable tax credits in the name of minimizing “fraud” perpetrated by low-income taxpayers. The authors also find that the audits fall heavily on returns with zero business income. This is again odd if you want to maximize unclaimed revenue, as business income is rife with underpayment. But this choice might make sense for an agency that has been starved of resources—business income returns require a lot more resources to audit than individual returns.

Both plausible maximization goals (focusing on refundable tax credits and not focusing on returns with business income) cut sharply toward increasing the share of Black households that would be selected for audits. They suggest (implicitly) a much better maximization goal to guide the audit selection algorithm: maximize underreported income, period. This goal would not only raise more revenue (the larger point of audits), but would also erase the race-based disparity in current audits.

Again, the issue is not algorithms or automation per se, it is the human choices behind them. More broadly, is there any question that advances in information processing (AI or otherwise) could be a hugely helpful tool for using IRS audits to maximize revenue if that is what the agency wanted? To put it simply, banning or severely constraining the use of AI or any other information-processing tool in the conduct of tax enforcement would be a huge win for wealthy tax cheats looking to escape taxation. It may be fanciful to worry about such bans, but given that Republicans in Congress have routinely sought to hamstring tax enforcement for decades, if fears and generalized bad feeling about AI becomes widespread across society, it may provide an opening for such destructive proposals.

Conclusion and policy implications—looking through the latest technological fad to see the real threats to workers’ well-being

It is no doubt a useful exercise to make sure public policies are tailored to specific forms of significant new technology that arise. So, a recent spate of proposed legislative and regulatory activity around AI has many sensible elements. But it is also extremely easy to focus too much on the latest form of technology and get distracted away from more structural reasons for why U.S. workers struggle to secure a decent living in the labor market.

Addressing these structural issues—the too-thin social insurance systems of the U.S., the impediments to organizing unions, and the failure to sustain low rates of unemployment—would not only boost workers’ wage growth across the board. It would also address most of the stress on smaller groups of workers experiencing job displacement due to technological change.

There is real harm to public analysis and policymaking that focuses so much attention on each new mini wave of technological advance as a cause for workers’ problems. The most obvious harm is that it’s a clear misdiagnosis as source of wage suppression. If one could somehow completely ban progress on AI, this would do nothing to improve workers’ lot in the future. If we could go back in time and ban research on robots or autonomous vehicles, wages today for workers would be no higher. Yet AI and robots and autonomous vehicles have sucked up more attention than the structural issues we referenced above from many who should sincerely be concerned with how U.S. workers are faring. The attention of policymakers, researchers, and advocates is a scarce resource, and every minute they are convinced they need to be constructing plans around the newest technological fad is a minute they are not working on issues of deeper concern to workers.

When this is recognized and how technology is used by workplaces becomes a focus of empowered workers, smarter workplace policy can result. Key examples of clear-eyed stances toward AI can be seen in recent negotiations between the AFL-CIO and Microsoft, and the negotiated role of AI in contract agreements between the Writers Guild of America (WGA) and the Alliance of Motion Picture and Television Producers (AMPTP). The AFL-CIO and Microsoft have recently come to an agreement that Microsoft would remain neutral in future organizing campaigns and agreed to future discussions about how AI can be used to improve workplace productivity and workers’ pay and working conditions (rather than be used as a cudgel to reduce workers’ leverage and bargaining power). The WGA contract with the AMPTP states that writers can use AI as a tool in their own work, but that AI cannot be used to undermine writers’ claims to credit for what they produce. There will clearly be unforeseen issues that will arise going forward, but these are encouraging first steps that clearly show that, in a balanced labor market (like when a union is present), issues regarding AI (and any other technological change) have a strong chance of being settled in ways that benefit workers.

Notes

1. See Marcus (1983) for a contemporaneous account of fears concerning “technological unemployment.”

2. See Engardio, Bernstein, and Kripalani (2003) for an example of fears being raised over the prospect of “white-collar offshoring.”

3. See Gilbert (2013) for a piece detailing the alleged threats robots pose to human employment.

4. See Bivens and Mishel (2015) for a review of the historical interplay between wage growth for typical workers and productivity, and for a decomposition of where the wedge between these workers’ pay and productivity growth went.

5. See Bivens and Mishel (2021) for a review of the research supporting the case that it is this policy-induced degradation of typical workers’ labor market power that drove the sharp slowdown in wage growth for these workers and the resulting increase in wage inequality.

6. See Krueger and Solow (2002) for a deep examination of the “Roaring Nineties.”

7. See Ghayad (2013) for documentation of this employer sorting by duration of unemployment.

8. See Bivens and Shierholz (2014) for real-time evidence on how deficient demand, not worker skills or employer behavior, was the real cause of elevated long-term unemployment.

9. See Modestino, Shoag, and Balance (2020) for evidence of this type of employer “upskilling” during periods of too-slack labor markets.

10. See Gould (2019) for an overview of U.S. wage trends since 1979.

11. For a time in the 1990s, globalization—not institutional change—was generally seen as the main competitor to SBTC as the dominant driver of wage inequality in the U.S. Since then, however, economists have increasingly settled on (what we consider to be) the correct view that globalization has had significant effects on wage inequality but remains insufficient to explain most of the rise in inequality. See Bivens (2017a) for a review of some of this debate on globalization.

12. Card and DiNardo (2002) and Schmitt, Shierholz, and Mishel (2013) provide extremely detailed examinations of the direct evidence supporting the SBTC view and find it lacking.

13. See Bassier, Dube, and Naidu (2022) on how individual firms do have discretion over wage levels and cannot simply hire as many workers as desired at exogenously set “market wages.”

14. Lester (1952) first coined the term “range of indeterminacy” to describe the situation where a single wage might be consistent with many different employment levels. Schmitt (2013) has reviewed the research on the many margins of adjustment available to accommodate increases in mandated minimum wages.

15. For example, Ashenfelter, Card, Farber, and Ransom (2022) edited a symposium in the Journal of Human Resources on “Monopsony in the Labor Market,” and Mishel (2022) edited a symposium in the Journal of Law and Political Economy on “Not So Free to Contract: The Law, Philosophy, and Economics of Unequal Workplace Power.”

16. There is also the important issue that labor productivity is much more straightforward to measure and interpret than is total factor productivity. Because it measures increases in output growth after accounting for all observable inputs, in many measures, total factor productivity is simply a quantity representing what we cannot truly explain—it has been labelled a “measure of our ignorance.”

17. We say “nearly all” instead of “all” because potential output is not actually the maximum feasible output an economy could produce (say under conditions of wartime and price controls). Instead, it’s how much an economy can produce without spurring accelerating inflation. As aggregate demand gets extremely high relative to potential output, unemployment can be driven so low that workers’ wage demands exceed productivity growth, spurring inflation. This level of unemployment that maps onto maximum output that can be produced without accelerating inflation is sometimes called the “natural rate” of unemployment.

18. See Baker (2010) for the best macroeconomic narrative of how the housing bubble’s burst reduced aggregate demand and caused the Great Recession.

19. This dichotomy between determinants of potential output growth and aggregate demand growth is not quite as strict as this section indicates. Long periods of time when aggregate demand is depressed, for example, can actually reduce productivity growth and labor force growth as businesses invest less in labor-saving technologies and potential workers stay on the sidelines if wage growth is sluggish (see Bivens (2017b) for evidence on some of these links). Yet in well-functioning economies with responsible policymakers, policy decisions can effectively make the determinants of potential output and aggregate demand mostly separate.

20. See Bivens (2022) for an overview of the U.S. economic situation before the American Rescue Plan passed and the law’s subsequent effect on labor markets.

21. A very useful discussion and possible scenarios for AI’s effect on productivity growth over the next decade is provided by Briggs and Kodnani (2023). They estimate a 1.5 percentage point potential annual productivity growth rate boost due to the adoption of AI in the U.S., which would be likely significantly dampened by AI’s substitution away from other technologies and the possibility of a slower adoption period (say 20 years, rather than 10 years).

22. The numbers referenced here for direct, final demand, and upstream effects are very rough estimates taken from Figure 1B in Autor and Salomons (2018).

23. There is some suggestive evidence that some measures of churn—like job-to-job moves—have been increasing since roughly 2015, and that churn jumped enormously in response to the COVID-19 shock. However, as Figure E shows, even a pronounced uptick in churn relative to the recent past will likely not approach past historical peaks.

24. See, for example, the discussion of AI and employment discrimination in Kim and Bodie (2021).

25. See Mullainathan (2019) for this argument that it may be easier to correct discrimination occurring by algorithm relative to discrimination occurring by personal decision-making.

26. See Hadi et al. (2023). Note that they obviously could not assess the true IRS algorithm as this was kept confidential. Instead, they constructed their own algorithms and assessed them for how closely their predicted outcomes matched actual audit patterns.

References

Acemoglu, Daron, David Autor, and Simon Johnson. 2023. Can We Have Pro-Worker AI? Choosing a Path of Machines in Service of Minds. MIT Shaping the Future of Work Initiative, September 2023.

Anway, Nicholas. 2022. “Amazon’s Approach to Robotics Is Seriously Injuring Warehouse Workers.” OnLabor (blog post), May 5, 2022.

Ashenfelter, Orley, David Card, Henry Farber, and Michael Ransom, eds. 2022. “Special Issue: Monopsony in the Labor Market.” Journal of Human Resources 57, supplement 2022: S1–S10.

Atkinson, Robert D., and Wu, J. John. 2017. False Alarmism: Technological Disruption and the U.S. Labor Market, 1850–2015. Information Technology & Innovation Foundation ITIF, May 2017.

Autor, David, Arindrajit Dube, and Annie McGrew. 2023. “The Unexpected Compression: Competition at Work in the Low Wage Labor Market“. National Bureau of Economic Research Working Paper # 31010, November 2023.

Autor, David, Claudia Goldin, and Lawrence Katz. 2020. “Extending the Race Between Education and Technology.” American Economic Review, AEA Papers and Proceedings 110 (May): 347–51.

Autor, David, and Anna Salomons. 2018. “Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share.” Brooking Papers on Economic Activity: BPEA Conference Drafts, March 2018.

Baker, Dean. 2010. False Profits: Recovering from the Bubble Economy. Sausalito, CA: PoliPoint Press.

Bassier, Ihsaan, Arindrajit Dube, and Suresh Naidu. 2022. “Monopsony in Movers: The Elasticity of Labor Supply to the Firm Wage Policies.” Journal of Human Resources 57 (S): s50–s86.

Bivens, Josh. 2017a. Adding Insult to Injury: How Bad Policy Decisions Have Amplified Globalization’s Costs for American Workers. Economic Policy Institute, July 2017.

Bivens, Josh. 2017b. A “High-Pressure Economy” Can Help Boost Productivity and Provide Even More “Room to Run” for the Recovery. Economic Policy Institute, March 2017.

Bivens, Josh. 2022. “Will Friday’s Wage Growth Numbers Stop the Fed from Snatching Defeat out of the Jaws of Victory?” Working Economics Blog (Economic Policy Institute), July 2022.

Bivens, Josh, and Lawrence Mishel. 2015. Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay: Why It Matters and Why It’s Real. Economic Policy Institute, September 2015.

Bivens, Josh, and Lawrence Mishel. 2017. The Zombie Robot Argument Lurches On: There Is No Evidence that Automation Leads to Inequality or Joblessness. Economic Policy Institute, May 2017.

Bivens, Josh, and Lawrence Mishel. 2021. Identifying the Policy Levers Generating Wage Suppression and Wage Inequality. Economic Policy Institute, May 2021.

Bivens, Josh, and Heidi Shierholz. 2014. Lagging Demand, Not Unemployability, Is Why Long-Term Unemployment Remains So High. Economic Policy Institute, August 2014.

Bowles, Samuel. 1985. “The Production Process in a Competitive Economy: Walrasian, Neo-Hobbesian, and Marxian Models.” American Economic Review 75, no.1 (March): 16–36.

Briggs, Joseph, and Devesh Kodnani. 2023. “Upgrading Our Long-Run Growth Forecasts to Reflect the Impact of Generative AI.” Global Economics Analyst (Goldman Sachs), October 29, 2023.

Bureau of Economic Analysis (BEA). 2023. “Real Gross Domestic Product, Chained Dollars” [Table 1.1.6. ], National Income and Product Accounts (NIPA). Accessed December 2023.

Bureau of Labor Statistics, Current Population Survey (BLS-CPS). 2023. “Labor Force Statistics from the Current Population Survey” (web page). Accessed December 2023.

Bureau of Labor Statistics, Office of Productivity and Technology (BLS-OPT). 2023. “Productivity,” (web page). Accessed December 2023.

Card, David, and John DiNardo. 2002. “Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles.” Journal of Labor Economics 20, no. 4: 733–783.

Casselman, Ben. 2021. “Pandemic Wave of Automation May Be Bad News for Workers.” New York Times, July 3, 2021.

Congressional Budget Office (CBO). 2023. Potential GDP and Underlying Inputs, August 2019.

Engardio, Peter, Aaron Bernstein, and Manjeet Kripalani. 2003. “The New Global Job Shift: Is Your Job Next?,” Businessweek Economics (Bloomberg), February 3, 2003.

Fernald, John. 2023. Utilization-Adjusted Quarterly-TFP Series for the U.S. Business Sector, Federal Reserve Bank of San Francisco. Accessed December 2023. 

Ghayad, Rand. 2013. “The Jobless Trap.” Working Paper. 

Gilbert, James. 2013. “Robot Job Growth Is an Accelerating Problem, Researchers Tell 60 Minutes.” Huffington Post, January 14, 2013.

Gould, Elise. 2019. “Decades of Rising Economic Inequality in the U.S.” Testimony before the U.S. House of Representatives Ways and Means Committee, March 27, 2019.

Hadi, Elzayn, Evelyn Smith, Thomas Hertz, Arun Ramesh, Robin Fisher, Daniel Ho, and Jacob Goldin. 2023. “Measuring and Mitigating Racial Disparities in Tax Audits.” Stanford Institute of Economic Policy Research Working Paper, January 2023.

Kim, Pauline, and Matthew T. Bodie. 2021. “Artificial Intelligence and the Challenges of Workplace Discrimination and Privacy.” Journal of Labor and Employment Law 35, no. 2: 289–315.

Krueger, Alan, and Robert Solow, eds. 2002. The Roaring Nineties: Can Full Employment Be Sustained? New York, N.Y.: Russell Sage Foundation.

Lester, Richard. 1952. “A Range Theory of Wage Differentials.” ILR Review 5, no. 4 (March): 483–500.

Manning, Alan. 2003. Monopsony in Motion: Imperfect Competition in Labor Markets. Princeton, NJ: Princeton University Press.

Marcus, Steven. 1983. “Technology: As Computers Eliminate Jobs.” New York Times, June 2, 1983.

Mishel, Lawrence, ed. 2022. “Special Issue: Not So Free to Contract: The Law, Philosophy, and Economics of Unequal Workplace Power.” Journal of Law and Political Economy 3, no. 1.

Modestino, Alicia Sasser, Daniel Shoag, and Joshua Balance. 2020. “Upskilling: Do Employers Demand Greater Skill When Workers Are Plentiful?” Review of Economics and Statistics 102, no. 4: 793–805.

Mullainathan, Sendhil. 2019. “Biased Algorithms Are Easier to Fix Than Biased People: Racial Discrimination by Algorithms or by People Is Harmful – But That’s Where the Similarities End.” New York Times, December 6, 2019.

Organization for Economic Cooperation and Development (OECD). 2024. “Employment by Education Level” (indicator), https://doi.org/10.1787/26f676c7-en (accessed on February 4, 2024).

Schmitt, John. 2013. Why Does the Minimum Wage Have No Discernible Effect on Employment? Center for Economic Policy Research, February 2013.

Schmitt, John, Heidi Shierholz, and Lawrence Mishel. 2013. “Don’t Blame the Robots: Assessing the Job Polarization Explanation of Growing Wage Inequality.” Economic Policy Institute-Center for Economic Policy Research Working Paper, November 2013.

Sedik, Tahsin Saadi. 2021. “Pandemics and Automation: Will the Lost Jobs Come Back?” International Monetary Fund Working Paper No. 2021/011, January 2021.

Skott, Peter and Fred Guy. 2013. “Power, Luck, and Ideology: Technological and Institutional Parameters of the Agency Problems for CEOs.” Review of Radical Political Economics 45, no. 3.

Stansbury, Anna M., and Lawrence H. Summers. 2020. “Declining Worker Power and American Economic Performance.” Brooking Papers on Economic Activity: BPEA Conference Drafts, 2020.

Key takeaways:

• The H-1B visa program was created to fill labor shortages in professional fields and could be a valuable temporary work visa program, but new data show it is being subverted by employers that are not facing labor shortages and by outsourcing firms.
• H-1B use is overly concentrated among a small number of employers. In 2022, the top 30 H-1B employers hired more than 34,000 new H-1B workers, accounting for 40% of the total annual cap of 85,000.
• The top 30 companies also laid off, or will imminently lay off, at least 85,000 workers in 2022 and the first quarter of 2023.
• Thirteen of the top 30 H-1B employers were outsourcing firms that underpay migrant workers and offshore U.S. jobs to countries where labor costs are much lower.
• Laid-off H-1B workers, who likely number in the thousands, must find a new employer to sponsor their visa within 60 days after their layoff or they may be forced to leave the United States.
• President Biden should use executive authority to fix the H-1B program and implement new rules that raise wages for migrant workers and prevent outsourcing companies from exploiting the H-1B program.

The H-1B program is the largest U.S. temporary work visa program, with a total of approximately 600,000 workers employed by 50,000 employers. The program’s intent is to allow employers to fill labor shortages for jobs that require a college degree, by providing work authorization for migrant workers in fields like accounting, journalism, health and medical, and teaching. Most H-1B workers, however, are employed in occupations like computer systems analysis and software development.

Visas for new workers are capped at 85,000 per year, but many employers are exempt from that annual cap, including universities and their affiliated nonprofit entities, nonprofit research organizations, and government research organizations. Approximately 130,000 temporary migrant workers will receive new H-1B visas each fiscal year to begin new employment for capped and cap-exempt employers, with another 300,000 receiving renewals (which are not subject to the cap). Every April 1, the government decides, via lottery, which employers will receive the 85,000 new visas subject to the cap.

The H-1B program has many flaws that have become especially evident in light of recent mass layoffs in the tech sector. Instead of being used to fill genuine labor shortages in skilled occupations without negatively impacting U.S. workers’ wages and working conditions, the latest data show that the H-1B’s biggest users are companies that have laid off tens of thousands of workers in 2022 and the first quarter of 2023. The rest of the companies that dominate the program have an outsourcing business model that exploits the program by underpaying skilled migrant workers and offshoring U.S. jobs. President Biden can and should implement regulations and policy guidance to prevent misuse of the program, stop the exploitation of college-educated migrant workers, and ensure the program is consistent with congressional intent.

The top 30 H-1B employers hired more than 34,000 new H-1B workers in 2022 and laid off 85,000 employees

The H-1B program was created with the intent to attract skilled and talented workers to the United States to fill labor shortages in professional fields—a sensible goal that has widespread support. But its implementation has been bungled by the U.S. Departments of Labor and Homeland Security. Since employers aren’t required to test the U.S. labor market to see if any workers are available before hiring an H-1B worker or pay their H-1B workers a fair wage, employers have exploited the program. Rather than turning to the H-1B program as a last resort when U.S. workers cannot be found, most employers hire H-1B workers because they can be underpaid and are de facto indentured to the employer. This is evidenced by government data showing that technology companies continue to hire H-1B workers in large numbers while significantly reducing the sizes of their workforces.

Table 1 at the end of this post illustrates this by showing the top 30 H-1B employers that are subject to the annual cap according to the number of approved petitions for initial employment (i.e., for hiring new H-1B workers, not extensions for existing H-1B workers) for fiscal year 2022. In 2022, 48,000 employers registered with United States Citizenship and Immigration Services (USCIS) in hopes of hiring at least one H-1B worker, and nearly 30,000 employers ultimately hired at least one new H-1B worker. However, visa use is and has been highly concentrated among a small number of employers: The top 30 H-1B employers—representing 0.001% of employers that hired a new H-1B worker—hired more than 34,000 new H-1B workers, accounting for 40% of the new H-1B visas available under the annual limit for cap-subject companies.1

We then looked to see how many of the top 30 H-1B employers had announced layoffs of their workers in the United States, and how many of those workers were laid off in 2022 and the first quarter of 2023. To compile these data, we referred to Layoffs.fyi, an open source website tracking tech industry layoffs from publicly available news reports. (Layoffs.fyi has been widely cited by the media, due to the fact that the federal government does not track layoffs with specificity in terms of individual firms.) For firms on the list that did not appear in Layoffs.fyi, we did basic internet searches for news articles and included the citations in the source section of Table 1. Because of the limited nature of available data on layoffs by employer, as well as the Layoffs.fyi website and our searches, the number of layoffs reported in Table 1 should be considered a minimum of layoffs at the top 30 H-1B employers.

As Table 1 shows, 13 of the top 30 H-1B employers announced layoffs in 2022 and the first quarter of 2023. The layoffs at those companies totaled nearly 85,000, the same number as the H-1B annual numerical limit for cap-subject employers.

Amazon was at the top of the list in terms of both new H-1B workers and layoffs. Amazon hired 6,400 new H-1B workers in 2022, and hired the most new H-1B workers in 2021 as well, when it hired nearly 6,200 workers. Amazon has either recently laid off or plans to lay off 27,150 of its employees, more than twice the number of H-1B workers it hired in 2021 and 2022 combined.

Google and Meta (the latter formerly named Facebook) are both long-time top H-1B employers, together hiring over 3,100 new H-1B workers last year. Meta employs so many H-1B workers that for years it has declared itself an “H-1B dependent” firm in government filings because more than 15% of Meta’s total U.S. workforce is made up of H-1B workers. Together, Google and Meta laid off 33,000 employees, almost 11 times the number of new H-1B workers they hired in 2022. For more than a decade, top Google and Meta executives have been at the forefront of industry’s public calls for large increases in the H-1B cap, with Meta creating a lobby group, FWD.US, almost exclusively to push for more visas.

Four other leading tech companies on the list have announced mass layoffs. Microsoft, Intel, Qualcomm, and Cisco are the 13th-, 15th-, 18th-, and 28th-largest H-1B employers, respectively. Microsoft founder Bill Gates himself has testified before the U.S. Congress to decry the cap on H-1B visas, arguing for raising the cap significantly, even in the midst of the Great Recession in 2008. Together, these firms hired 2,735 new H-1B workers in 2022, but collectively they laid off close to 14,900 employees, nearly five and a half times the number of H-1B workers they hired.

Two nontech firms in the top 30 also announced significant layoffs: Goldman Sachs—the world’s second-largest investment bank which operates a services subsidiary—and McKinsey & Company—the well-known management consulting firm. Together, the two hired just over 1,000 new H-1B workers while laying off 5,200 employees.

Mass tech layoffs have left migrant workers vulnerable

It is important to note that no information source is available that reveals whether laid-off employees were migrant workers on an H-1B or other temporary visa, or if they were permanent residents, or U.S. citizens. We do know anecdotally—thanks to various news reports—that many H-1B workers were dismissed as part of recent layoffs, including at least 300 at Meta.

Because H-1B visas are tied to a specific employer, H-1B workers are in a precarious position if they are terminated. If they want to remain in the United States, they must find a new employer to sponsor their visa within 60 days—no easy task during a time of mass layoffs in the tech industry.

This is especially heartbreaking considering many H-1B workers have deep ties to the United States and their local communities. Many are married and have children who are U.S.-born, and own homes. This is to be expected, given that H-1B visas are valid for up to six years, and many workers remain in H-1B status well beyond that because their visas can be extended for longer if they are waiting for a permanent immigrant visa to become available while they remain in the green card “backlog.” If a laid-off H-1B worker can’t find a new job within the time allotted or adjust to another valid immigration status, they will have to leave the country, along with any family members who are also on a temporary visa.

While all H-1B workers have little power to bargain with employers because of their temporary visa status, laid-off workers are in an extraordinarily weak bargaining position. With the 60-day clock ticking and massive layoffs in their industry sectors and occupations, they will feel pressure to accept a job offer that pays substandard wages and offers poor working conditions just to remain in the country.

The H-1B workers who remain employed face other substantial pressures. For those workers, the very real threat of a future layoff will make them less likely to complain about longer hours, cuts to benefits and pay, and other forms of workplace exploitation—which in turn will degrade labor standards for all similarly situated workers. And their prospects for becoming permanent residents have now diminished greatly, because some tech companies like Google have decided to pause their efforts to obtain green cards for their H-1B workers in light of recent layoffs.

Outsourcing companies were again the biggest beneficiaries of the H-1B visa in 2022

In addition to employers exploiting the H-1B program while laying off tens of thousands of employees, outsourcing firms once again dominated the H-1B visa program in 2022, even among the top 30 H-1B employers. For more than 15 years, leading lawmakers from both parties have criticized outsourcing firms’ exploitation of H-1B and offered bipartisan fixes, yet the abuse continues unabated. Thirteen of the top 30 H-1B employers were outsourcing firms, and they were issued a total of 17,534 visas for new H-1B workers (21% of the total annual cap).

As we discussed in depth last year, this continues to be problematic because outsourcing companies—which have a fissured business model, do not make a product, and are staffing firms that resell labor to other firms—have been associated with paying their H-1B workers the lowest wages permitted by law, much lower than the U.S. market rate. Wages account for the vast majority of information technology service firms’ operating costs, but the outsourcing firm business model is viable only if it cuts the customers’ labor costs substantially while also earning profits for its shareholders. After cutting costs in the United States by using the H-1B visa, the outsourcers realize further cost savings and profits by shipping as many of the U.S. jobs and tasks as possible to their overseas operations where wages for tech workers are substantially lower.

In addition, we recently published evidence that at least one outsourcing firm is likely stealing tens of millions of dollars in wages from its H-1B employees, something we hope the Wage and Hour Division at the U.S. Department of Labor (DOL) will investigate. It is also notable that one of the major outsourcing firms was hit with the largest-ever civil fine for a violation of U.S. visa laws.

And finally, among the top outsourcing firms, only one—IBM—announced layoffs, with 3,900 workers laid off after hiring 1,239 new H-1B workers. Over the years, however, there have been countless shocking revelations in the press about how outsourcing companies have used the H-1B program to help U.S. companies subvert the law to lay off hundreds of their well-paid employees at a time. U.S. companies do this by contracting with major outsourcing firms like Infosys (#2 on the top 30), Tata (#3), Cognizant (#4), and HCL (#7)—and replacing their employees with H-1B workers paid tens of thousands of dollars less. Some of the documented cases were with clients like Disney, Southern California Edison, and even the University of California. 

DOL could end this shocking abuse of the program by closing the outsourcing loophole through new policy guidance that simply requires the end-user companies like Disney that contract with outsourcers to file an H-1B Labor Condition Application (LCA). In the LCA, companies would have to attest that their use of the H-1B program will not “adversely affect the working conditions” of their employees, and DOL would be able to enforce that promise.

H-1B needs major reforms to prevent the degradation of labor standards and exploitation of migrant workers

While the H-1B visa program has become a common pathway for attracting skilled migrants to the U.S. labor market, it has been usurped by employers that are not facing real labor shortages and by outsourcing firms, and all employers remain allowed to pay H-1B workers less than the local rate for the jobs they fill. These problems are well known and well documented but most members of Congress and presidents from both parties have taken no lasting action to fix it.

The good news is that as a candidate, President Biden explicitly supported reforms to U.S. work visa programs—and now as president, he has the authority to make them a reality. President Biden can issue new regulations, policy guidance, and other rules that would preserve and create good middle-class jobs, increase productivity by attracting skilled migrant workers who complement the U.S. labor force, and ensure migrant workers are paid fairly according to U.S. standards. Last year, the Congressional Progressive Caucus reminded him of this by calling on the president to fix the H-1B program using his executive powers.

In the remainder of his term, President Biden should implement these essential reforms to restore integrity and fairness to the H-1B program:

• Fix the outsourcing loophole by issuing policy guidance from DOL that requires secondary employers of H-1B workers (the companies that hire outsourcing firms to provide contract workers) to file labor condition applications. Guidance to require this was recently considered but never finalized, which would have prevented firms like Disney from replacing their U.S. employees with contracted H-1B workers.
• Implement DOL’s delayed H-1B prevailing wage methodology rule, so that H-1B workers are paid a fair wage and employers are prevented from undercutting U.S. wage standards. The rule currently appears on the White House’s regulatory agenda but it is unclear whether a rule will ever be proposed.
• Issue an updated version of USCIS’s H-1B visa allocation rule, which would distribute H-1B visas by wage level rather than random lottery. A rule like this would ensure that the highest-skilled H-1B workers are awarded visas and it also has bipartisan support.
• Direct the Wage and Hour Division to enforce the requirement in the H-1B labor condition application for employers to pay the “actual wage” rate they pay to other employees with similar experience and qualifications. Particular attention should initially be focused on firms that continue to hire large numbers of H-1B workers after conducting mass layoffs.

Table 1

Note

1. Stanford University ranked 29th in fiscal year 2022 according to the number of H-1B petitions approved for new H-1B workers but was excluded from Table 1 because, as a university, it is exempt from the 85,000 annual cap. Stanford was the only cap-exempt employer in the top 30.

Introduction and key findings: New data on H-1B abuse and why it matters

For nearly a decade and a half, news reports, research, investigations, and congressional hearings have detailed the abuses of the H-1B visa program by some of the biggest information technology companies.1 The H-1B program is a temporary work visa program that allows U.S. companies to recruit and hire college-educated migrant workers. It is one of the few work visa programs that can provide temporary migrant workers with the possibility of a path to permanent residency and citizenship, although that path is controlled by and at the discretion of H-1B employers. The original intent of the program was to attract skilled and talented workers to the United States to fill labor shortages in professional fields.2

Since the creation of the program, the abuses of the program have been many, included vastly underpaying workers, laying off U.S. workers and replacing them with much lower-paid H-1B workers, forcing U.S. workers to train their H-1B replacements as a condition of receiving severance and unemployment insurance, and cheating the H-1B lottery to acquire additional visas. There are provisions in the H-1B law that are supposed to work together to prevent employers from underpaying H-1B workers or replacing their incumbent U.S. worker employees (i.e., U.S. citizens or permanent residents) with H-1B workers who are paid much less to do the same job. But employers are getting around those provisions by contracting with IT outsourcing firms, enabled by the U.S Department of Labor’s (DOL) flawed interpretation that puts outsourced H-1B workers in a different comparison pool than U.S. workers who are hired directly by the employer (see text box, ”How companies contract with H-1B outsourcing firms to evade H-1B visa rules that protect wages and working conditions,” later in the report). As a result, clear abuses that contradict the original intention of the H-1B program have largely not turned into what DOL considers actionable violations leading to sanctions.

One widely reported example from the last decade illustrates the issue. The IT outsourcing firms Infosys and Tata Consultancy Services contracted with Southern California Edison (SCE), an energy provider, to replace hundreds of SCE employees with H-1B workers who were paid less to do the same jobs, with the U.S. workers being required to first train their H-1B replacements.3 When filing an H-1B application, one of the things that employers must attest to is that the filings do not adversely impact the wages and working conditions of similarly employed U.S. workers. But DOL investigated the case and found no wrongdoing: The outsourcing firms were the ones who had to attest to meeting certain provisions in the visa applications, and the SCE workers who were replaced were not considered part of the “similarly employed U.S. workers” whose wages and working conditions the outsourcing firms had to vouch not to adversely impact.4

In sum, DOL has determined it is acceptable for an employer to underpay an H-1B worker, even if U.S. workers are obviously being harmed, as long as the H-1B worker is hired through a contractor. This seemingly irrational DOL interpretation is the main reason why the dozens of news reports chronicling thousands of U.S. workers training their H-1B replacements—at Disney, the University of California, New York Life, Mass Mutual, Southern California Edison, etc.—have never resulted in a single penalty or any change in business behavior. In every reported case, the lower-paid H-1B worker was hired and employed by an outsourcing firm. 

There have been calls to close the outsourcing loophole but thus far the Department of Labor has not committed to doing so. In fact the department issued and then abandoned policy guidance that would have closed the loophole (as discussed later on in the report).

Now thanks to a federal whistleblower lawsuit brought against outsourcing firm HCL Technologies (HCL),5 we don’t need to wait for DOL to close the outsourcing loophole to achieve some justice for the workers affected by abuses of the H-1B program. As a result of the lawsuit, we have new insights into what appear to be clear violations of another element of the H-1B statute, one which requires employers to pay their H-1B employees no less than they pay their U.S. employees who are citizens or permanent residents (referred to in this report as “U.S. workers”). These violations call for immediate federal action. In this case, the alleged violations cannot be waved off via the outsourcing loophole because HCL itself appears to be paying its own H-1B employees less than it pays its own U.S. worker employees.

HCL, India’s third-largest IT outsourcing firm, is a familiar name in the tech world. It earned notoriety about six years ago when Disney made headlines for forcing its workers to train their replacements who were migrant guestworkers employed through the H-1B visa program (and supplied to Disney by HCL). HCL is now the defendant in a lawsuit brought under the False Claims Act for the firm’s alleged “egregious and widespread fraud against the United States in applying for and securing visas.”6 The most significant of the alleged violations is rampant wage theft by HCL via paying H-1B workers less than they are statutorily required to be paid, estimated in this report to likely exceed $95 million annually. A document related to the case that recently became public exposes details that show how underpaying H-1B workers is an intentional corporate strategy. 

Specifically, an internal HCL presentation of its strategy for filing H-1B visa applications7 shows how it hires migrant workers employed through work visas to fill jobs in key business lines and job roles to maximize wage savings compared with hiring U.S. citizens and permanent residents. This strategy document provides details on the wages paid to HCL employees in the United States on H-1B visas and HCL employees who are U.S. citizens and permanent residents. Wages of the former are far lower than wages of the latter. 

The HCL document is significant beyond the case itself because most of the biggest users of H-1B visas are companies that have outsourcing business models like HCL’s.8 And the jobs that these companies are outsourcing—in IT services and software development—are the relatively high-wage but entry- to mid-level technology jobs that for years served as a bridge to the American middle class.9 Some of these IT jobs are especially important to women and workers of color. For example, computer systems analyst is one of the few IT occupations with a reasonable share of women employed, and African Americans are better represented in this occupation than in other major computer occupations.10 

The document is our first inside look at an outsourcing firm’s playbook for abusing work visa programs—abuse that appears to not comport with either the letter or intent of the law. It also raises serious questions about efforts by the U.S. Department of Labor to enforce the sections of the H-1B statute and regulations intended to protect the wages and working conditions of both U.S. workers and migrant workers. These revelations serve as a compelling justification for a sweeping investigation by DOL into whether companies are systematically underpaying H-1B workers in violation of the law, and for immediate action by Congress and the Biden administration to protect labor standards. 

Key findings

Following are key takeaways from the report:

• The IT outsourcing firm at the center of the whistleblower case alleging fraud of the H-1B temporary work visa program is one of the largest H-1B employers. A lawsuit brought under the False Claims Act alleges that that HCL Technologies (HCL) committed fraud when acquiring H-1B visas, which are visas for highly skilled workers. HCL earned nearly $7 billion from its U.S. operations in 2020, ranked eighth in total H-1B approvals with more than 4,000 in 2020, and has received more than 31,000 visas since 2009. It is India’s third-largest IT outsourcing firm, earning 63% of its $11 billion in revenue in 2020 from the United States. It maximizes profit by finding H-1B workers who are significantly less expensive to employ than already-employed U.S. workers.
• According to an internal document from HCL, the firm appears to craft its H-1B workforce composition based on job roles where it can save the most on labor costs compared with what it pays U.S. employees for the same position. One of HCL’s internal corporate documents—a presentation containing details about HCL’s corporate strategy, as well as detailed information about the composition of HCL’s workforce, disaggregated by immigration status, occupation, and salary—was made public in the lawsuit. HCL’s actions are inconsistent with what the H-1B law explicitly requires, and also violates the spirit of the law, which is intended to protect wages and labor standards for both migrant workers and U.S. workers. 
• HCL pays its H-1B workers less than the U.S. workers it employs with similar skills as a key competitive strategy, allowing it to expand its business and increase profits. The data from the company’s internal document suggest the firm underpays H-1B workers in virtually all jobs across all business lines.
• HCL itself disclosed its apparent underpayments to H-1B employees, underpayments which would violate the requirement that employers pay their H-1B employees no less than they pay their U.S. worker employees. According to HCL’s own calculations in its internal document, the firm systematically pays H-1B workers much less than its U.S. citizen employees, contravening HCL’s attestations in its visa applications to the U.S. Department of Labor that it will pay H-1B workers the higher of the prevailing wage (in layman’s terms, what most workers engaged in similar work in the same geographic area earn according to a DOL methodology) or the “actual wage” paid to its employees who are U.S. citizens or lawful permanent residents and doing the same work at the company. 
• HCL’s apparent wage theft from H-1B workers amounts to approximately $95 million annually, according to our estimate based on information revealed in the presentation.
• The HCL document reveals clear violations of the H-1B statute that the U.S. government has failed to enforce. Much attention has been paid to the legal ways that employers underpay their H-1B workers—by opting (with no government oversight) to comply with the prevailing wage requirement by paying entry- and junior-level prevailing wages that are actually much lower than what workers of similar education and experience elsewhere are actually paid. While those prevailing wage levels should be raised, the DOL should also focus on the other part of the “wage requirement” section of the H-1B law that requires employers to pay their H-1B workers at least the same actual wage as their similarly employed U.S. workers. We have not found evidence that DOL has ever investigated or enforced this rule for any firm.
• HCL’s actions are tantamount to U.S. immigration policy being used to subsidize the outsourcing and offshoring of decent, high-paying U.S. jobs. Allowing employers to pay their H-1B workers less than the market rate for their labor—both legally through the flawed prevailing wage rule and unlawfully due to a lack of enforcement of the actual wage rule—in tandem with DOL’s flawed interpretation of the law, DOL has made the H-1B the “outsourcing visa.” In other words this interpretation is accelerating the fissuring—the outsourcing of jobs to lower-paid contract workers that degrades wages and job quality more broadly—of the IT labor market and its destructive effects.
• The abuse revealed by the HCL presentation is the proverbial tip of the iceberg: it points to widespread, systemic H-1B abuse. HCL did not invent nor pioneer the exploitation of H-1B program; its exploitation of the H-1B program is standard industry practice, not an outlier.
  • Fourteen years ago, Sens. Dick Durbin (D-Ill.) and Chuck Grassley (R-Iowa) revealed for the first time that outsourcing firms, like HCL, were the biggest users of the H-1B program. Outsourcing firms have consistently dominated the program since then. Outsourcing firms mimic one another’s business practices, including techniques to exploit the H-1B program.
  • The top seven H-1B employers in fiscal year 2015—the year the HCL document reflects—were outsourcing firms and direct competitors of HCL. They all pay their H-1B workers at wage rates that are similar or lower than what HCL pays, and all the outsourcing firms paid relatively lower wages than what the biggest H-1B employers that directly employed their H-1B workers paid in that year. 
• Congress and the Biden administration should take immediate action to fix the H-1B program’s flaws.
  • The relevant federal agencies, including the Departments of Labor, Homeland Security, and Justice, should launch investigations into H-1B wage theft.
  • The Department of Labor’s Wage and Hour Division (WHD) and Employment and Training Administration (ETA) should require and conduct better and effective oversight going forward and seek to raise prevailing wage standards in the H-1B program via regulation, and the Department of Homeland Security’s United States Citizenship and Immigration Services (USCIS), should also conduct better oversight and improve the visa allocation process in the H-1B program, also via regulation.
  • The Department of Justice’s (DOJ) Civil Division, in conjunction with USCIS and DOL, should vigorously prosecute visa fraud under the False Claims Act, consistent with a recent federal court decision applying the False Claims Act to H-1B visa fraud.
  • Congress should act by passing lasting legislative reforms to fix the H-1B program and stem abuses, and to increase protections for both H-1B workers and U.S. workers.

H-1B wage requirement: Intended to protect both H-1B and U.S. workers

The H-1B visa program is the largest U.S. temporary work visa program for high-skilled workers, with approximately 600,000 visa holders currently in the United States.11 The H-1B visa authorizes firms to employ foreign college-educated workers under specific conditions. Because these “guestworker” visas are highly vulnerable to abuse—often because the visa application and status is controlled by employers, which restricts labor market mobility for migrant workers—Congress included provisions in the visa’s requirements to protect wages and labor standards for both U.S. workers and migrant workers on H-1B visas. The principal protection is the wage requirement—which is intended to ensure that H-1B workers are paid a market rate according to local standards; i.e., the same wage an equivalent U.S. worker (defined as a U.S. citizen or lawful permanent resident) would earn in a similar occupation and in the same local area—and that H-1B workers are paid no less than U.S. workers who are coworkers doing similar jobs for the same employer. This ensures that H-1B workers are paid a fair wage and are not being cheated, and that wages and conditions for U.S. workers are not undercut by firms underpaying their H-1B employees. In sum, the wage requirement is intended to remove the financial incentive employers might have to prefer an H-1B worker over a U.S. worker because the H-1B worker can be paid less.

The statute that establishes the H-1B program requires the hiring firm to file a labor condition application (LCA) to the secretary of labor, attesting it will adhere to the H-1B wage requirement.12 The text box includes the relevant language from 8 U.S.C. §1182(n):

In short, the law requires that an H-1B worker must be paid the greater of the actual wage or the prevailing wage. The “actual” wage is determined by the wages paid to U.S. workers who are already employed by the firm and tasked with similar duties. The “prevailing” wage is, in layman’s terms, what most workers engaged in similar work in the same geographic area earn. It is typically set according to DOL survey data that corresponds to the local area and occupation, and is divided into four levels that purport to correspond to education and skill levels.13

Much policy discussion about the wage requirement has focused on raising the low prevailing wage levels set by DOL, something we have published on extensively—and which all major H-1B employers take advantage of to legally underpay H-1B workers, not just outsourcing firms.14 Numerous bills have been introduced in prior Congresses to substantially raise the prevailing wage level, most of them bipartisan.15 In addition to congressional efforts, there have been recent executive branch proposals to reform the calculations used to set the prevailing wage levels, in order to make them better reflect true market wages—a change DOL has clear authority to undertake.16 Nevertheless, DOL delayed, until November 2022, the effective date of a final rule it had issued previously that would have raised H-1B prevailing wages, and that was supported by worker advocates.17 By its own calculations, DOL’s decision to delay the effective date is costing H-1B workers tens of billions of dollars in wages.18 In its most recent regulatory agenda, DOL indicated that the rule would undergo another round of rulemaking in November 2021, likely meaning it would replace the final rule with an updated one.19 

Precious little focus, however, has been placed on the other wage requirement stipulation, which requires H-1B employers to pay its H-1B workers at least the same “actual wage” that each employer pays to the U.S. workers it also employs in similar occupations. (U.S. workers in this case means U.S. citizens and lawful permanent residents.) The rule states plainly and clearly that an H-1B employer must pay its H-1B employees “wages that are at least…the actual wage level paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question.”20

The HCL presentation shines a spotlight on how government enforcement of the H-1B actual wage requirement has been negligent—and as far as we know, DOL has never investigated nor enforced this rule—and now we have new insight into how HCL appears to be flouting it with total impunity.

HCL presentation is evidence the company is likely violating the ‘actual wage’ requirement of the H-1B law by paying virtually all its H-1B employees far less than U.S. citizens in same roles 

The HCL presentation details the company’s strategy for determining the number of H-1B applications (referred to as “nominations” in the document) to be filed, for which lines of business (LoBs), and for which job roles. 

HCL segregates its workforce into four status categories to conduct its analysis for constructing its H-1B workforce: 

• Citizen: U.S. citizens and permanent residents employed by HCL
• Landed–Visa Dependent: H-1B workers hired abroad, almost exclusively in India, by HCL and sponsored by HCL to come to the United States
• Local–Visa Dependent: H-1B workers who already were present in the United States working for other employers when they were hired by HCL and subsequently transferred their visas to HCL
• TP or Third Party: Workers hired through contractor firms

In the presentation, HCL lists each status in columns along with head counts, abbreviated as “HC,” as well as “ARC,” meaning additional resource cost, which represents wages for the citizen, landed, and local categories, but costs to the company for the third party category. (See the Appendix for more information on the document and the terms used in the document.) The presentation also, importantly, calculates the cost difference between each status. For example, Citizen vs. Landed ARC is the percentage premium HCL pays its workers who are U.S. citizens relative to the H-1B employees that it hired from India, for each job role. The formula is as follows:

Citizen vs. Landed ARC = (Citizen ARC−Landed ARC) ÷ Landed ARC

According to table after table in the document, H-1B workers both hired in India and in the U.S. are shown to be vastly underpaid compared with their U.S. citizen and permanent resident counterparts not hired with H-1B visas (referred to in this report as “U.S. workers”). According to HCL’s own calculations, the firm systematically pays H-1B workers much less than its U.S. workers—as much as 47%—contravening HCL’s attestations in its visa applications where it promises to pay the actual wage if it is higher than the prevailing wage.21

Paying H-1B workers less than U.S. workers is a competitive strategy HCL appears to have perfected. According to its own document, HCL underpays H-1B workers in virtually all jobs across all business lines, and it carefully manages and tracks wage differentials. For example, see Figure A, which is an image of one of HCL’s tables, along with our annotations. The column labeled “Citizen Vs Landed ARC,” which is circled, shows that citizens are paid more than landed H-1B workers for all jobs. In each case throughout HCL’s presentation, the percentage difference that U.S. citizens are paid more is very large, ranging from 13% to 87%.

Figure A

While violations for underpaying Local-Visa Dependent H-1B workers exist, our examples here focus on the pay differential between HCL’s U.S. and Landed-Visa Dependent workers because the presentation is the company’s strategy for hiring new H-1B workers from India;22 i.e., new Landed-Visa Dependent workers. 

Table 1 highlights the final listed occupation in the image: HCL’s employees with expertise with Oracle databases. As the table shows, HCL pays its Oracle database experts who are U.S. citizens $140,240 per year, but the H-1B employees hired in India in the same job, in the same line of business, and with the same skills, just $85,459, a difference of nearly $55,000. Put another way, HCL pays its U.S. Citizen Oracle database experts 64% more than its Landed-Visa Dependent H-1B workers doing the exact same job (HCL calculates this in the Figure A column titled “Citizen Vs Landed ARC”). According to the plain language of the H-1B statute, HCL is required to pay its H-1B Oracle database experts with H-1B visas $140,240, because that is the “actual wage” it pays its U.S. citizen employees in the same job. Further, HCL’s notes in the document reveal that it applies for more H-1B workers for Oracle database job roles precisely because the cost differences between H-1B and U.S. workers are so great. 

Table 1

Another part of the document, shown in Figure B (see text we have highlighted in yellow), illustrates how HCL organizes its H-1B application pool around specific guidelines. HCL says its H-1B nominations (i.e., applications), have been “carefully constructed” to favor submitting applications for H-1B workers in job roles with the highest wage gap between U.S. and H-1B workers, demonstrating a clear intent to maximize profits by abusing the H-1B program to illegally underpay migrant workers. HCL’s H-1B criteria include: “Cost of local [U.S. citizen] hiring significantly higher than landed [H-1B visa worker hired in India].” 

Figure B

Throughout the presentation, HCL targets H-1B applications for job roles where hiring local (i.e., U.S. citizens or permanent residents; Local-Visa Dependent; and, Third Party) is more expensive than “landed” H-1B visa holders who were recruited in India. In its analysis of every line of business throughout the presentation, HCL states explicitly that the large wage differential between hiring local and these H-1B workers from India is the critical factor in determining which jobs HCL wishes to fill with these H-1B workers. For example, it notes on page 7 that “Local hiring is ~30% more expensive than landed,” on page 8 that “local hiring is 36% more expensive than landed,” and on page 9, that “local hiring ARC is 58% more expensive compared to landed ARC.” On page 11, HCL notes that “70% of nominations [for H-1B] are across 6 skill groups, which have an average of 62% fulfillment and where local hiring is 70% more expensive than landed [H-1B].”23 All of these excerpts illustrate how the significant cost savings HCL gains from hiring much-lower-paid H-1B workers is central to the firm’s H-1B hiring strategy through all of its lines of business.

HCL is also affirming here that its H-1B and U.S. worker employees are “similarly employed” by directly comparing wages of H-1B workers with U.S. workers within job roles. “Citizen Vs Landed [H-1B] ARC” wage savings, as shown in Figure A, is the key variable in the firm’s analysis. Further, HCL repeatedly states that “Local Hiring is [X]% more expensive than Landed [H-1B],” with the goal of targeting new H-1B applications in those job roles where the wage differential is greatest. This demonstrates that HCL has determined that H-1B workers can take on the same positions—in other words are substitutes for—currently employed U.S. workers in those job roles, i.e., they are similarly employed, as envisioned in the statute cited in the text box “Section of H-1B law that requires employers to pay the higher of the actual or prevailing wage,” 8 U.S.C. § 1182(n). 

HCL appears to be stealing at least $95 million per year in wages from its H-1B employees

So, what do all of HCL’s strategies and policies on H-1B hiring amount to in terms of wage savings on labor costs for HCL? By taking the number of all H-1B workers, landed and local, who appear to be illegally underpaid from the HCL document, and the amounts that each appear to be underpaid by, compared with their U.S. citizen and permanent resident co-workers who are doing the same jobs—we estimate that HCL is saving at least $95 million per year by illegally underpaying its H-1B employees. That’s $95 million in stolen wages from H-1B workers every year—white-collar wage theft on a grand scale—which has been facilitated by negligent labor standards enforcement in the H-1B program. (See Appendix for a detailed explanation of our methodology.) 

HCL is a top H-1B recipient and large player in the tech industry—and has been involved in recent H-1B abuse scandals 

HCL is not a small outsourcing firm. It is India’s third-largest IT outsourcing firm, generating 63% of its $11 billion in revenue in the United States.24 HCL is a staffing firm that outplaces nearly all its H-1B workers at hundreds of customer sites for well-known corporations, including USAA, Merck, Google, T-Mobile, Boeing, Keurig Dr Pepper, FedEx, Intel, Deutsche Bank, Pentagon Federal Credit Union, Cisco, Disney, University of California, and Microsoft.25 

Despite being a major player in the industry and working closely with most of the household names headquartered in Silicon Valley, HCL has been at the center of multiple H-1B program-related scandals that have made headlines and the front pages in recent years. The most notable were at Disney and the University of California, where U.S. workers were laid off, but first forced to train their H-1B replacements supplied by HCL, who were paid tens of thousands of dollars less per year.26

Nevertheless, the scale and magnitude of HCL’s apparent abuse and legal violations of the H-1B program suggested by their internal document is stunning, especially considering the number of H-1B workers HCL has employed over the years. Last year, HCL ranked eighth in total H-1B approvals with more than 4,000: 1,405 new visas and 2,801 visa renewals. Over the past dozen years, HCL consistently has been one of the largest H-1B employers, receiving a total of 31,000 H-1B visa approvals from USCIS since 2009.27

Lack of enforcement invites outsourcing employers like HCL to underpay migrant workers

The Department of Labor’s flawed legal reasoning, lax application requirements, and negligent enforcement have opened the door for outsourcing firms like HCL to underpay migrant workers with impunity and to create an entire business model around it. For many years, outsourcing firms have exploited a loophole created by DOL’s flawed interpretation of the H-1B statute. The statute requires U.S. employers to attest that their use of the H-1B program “will not adversely affect the wages and working conditions of workers in the United States similarly employed.”28 Customers like Disney, seeking to save money by replacing their U.S. workers with H-1B employees who are paid substantially less, dodge the wage and working condition requirements by simply outsourcing the H-1B hiring to a contractor like HCL. By doing so, HCL, not Disney, is directly hiring the lower-paid H-1B worker, and the U.S. worker being replaced is employed by Disney, not HCL. DOL has wrongly interpreted the H-1B statute to mean it is only violated in cases where an employer adversely affects the conditions of the employer’s own, direct employees (HCL in the Disney example). By doing so, DOL is incentivizing and subsidizing the outsourcing of jobs to lower-paid contract workers in the technology labor market—a fissuring that degrades the wages and working conditions of H-1B workers and U.S. workers alike.

In sum, DOL has determined it is acceptable for an employer to underpay an H-1B worker, even if U.S. workers are obviously being harmed (they are being laid off and replaced, after all), as long as the H-1B worker is hired through a contractor like HCL. This DOL interpretation appears to be irrational and unjustified, and is the main reason why the dozens of news reports chronicling thousands of U.S. workers training their H-1B replacements—at Disney, the University of California, New York Life, Mass Mutual, Southern California Edison, etc.—have never resulted in a single penalty or any change in business behavior.29 In every reported case, the lower-paid H-1B worker was hired and employed by an outsourcing firm. DOL can easily close the outsourcing loophole it created (more on that later), but the HCL presentation reveals a type of abuse that even the DOL cannot ignore.

The presentation shows HCL pays its own H-1B employees less than its own directly employed U.S. workers, which appears to be a clear violation of the H-1B “actual wage” requirement, even under DOL’s current interpretation. The DOL, the Department of Homeland Security, and Department of Justice should investigate this large-scale malfeasance.30 If violations are found, the government should levy a punishment sufficient to change behavior and deter future violations by HCL and other employers, as well as order HCL to pay back wages to affected H-1B workers. Further, government agencies should restructure their oversight of the H-1B program to ensure compliance, protecting H-1B workers from wage theft and U.S. workers from being undercut now and in the future. 

Violating the actual wage requirement is likely an industrywide practice 

More than 14 years ago, Sens. Richard Durbin (D-Ill.) and Charles Grassley (R-Iowa) uncovered that outsourcing firms rather than traditional technology ones were the largest H-1B employers.31 Outsourcing firms like HCL have continued to dominate the H-1B program ever since. The outsourcing business model relies on supplying labor services to clients, and the ability to secure lower-cost workers is a significant comparative advantage. Exploiting the vulnerabilities in the H-1B program—vulnerabilities created both by statute and governance—is fundamental to the viability of these companies. As a result, the revelations uncovered in the HCL document, combined with available data on the H-1B program, suggest that violating the actual wage requirement is likely an industrywide practice among outsourcing firms.

In order to still reap a profit for themselves as middlemen, the outsourcing firms have to offer clients a way to cut costs. Since IT services is a labor-intensive business—more than 75% of overall costs are for labor—the only way to cut costs for the client and at the same time earn a profit is by finding workers who are significantly less expensive to employ than the U.S. workers already employed by the client.32 The outsourcing firms derive these savings by offshoring as much work as possible to low-cost countries like India, where salaries are often 90% lower than U.S. salaries, coupled with recruiting and hiring H-1B workers at salaries much lower than the salaries paid to U.S. workers.33

To illustrate, Table 2 below shows the top 10 H-1B employers in fiscal year (FY) 2015, according to government data available from USCIS. (FY15 was selected because it corresponds with the timeframe of HCL’s planning document.) It shows the top eight H-1B employers in that period were firms with the same outsourcing business model as HCL. They all pay similarly low average salaries for IT jobs, ranging from $69,000 to $82,000 (HCL is at $81,000, a salary consistent with the salaries listed in the slides of their presentation). This is not surprising, since HCL competes head to head with these same firms, and it is common knowledge that firms within an industry mimic the most profitable practices within a sector. In the IT outsourcing sector, the most profitable practice is exploiting the H-1B program. In contrast, Microsoft and Google—which are not outsourcing firms—ranked 9th and 10th in terms of the most H-1B approvals, respectively, and pay substantially more in salary to their H-1B workers: $121,000 and $131,000. In Google’s case, it paid 89% more to its H-1B employees in 2015 than Tata Consultancy Services(TCS)—a major outsourcing firm like HCL—paid its H-1B workers. 

Table 2

In Figure C, which comes from HCL’s presentation, HCL underscores its competitors’ dependence on H-1B visas. Those competitors—Infosys, TCS, Wipro, and CTS (Cognizant Technology Solutions)—were the top four recipients of H-1B approvals in FY15 (as shown in Table 2). 

Figure C

All of this suggests that HCL’s approach to exploiting the H-1B program is the norm, and not an exception or an outlier. The data show that all firms with an outsourcing business model pay similarly low wages to their H-1B workers, which suggests these firms within the IT industry are mimicking one another’s competitive advantage of exploiting the H-1B program. The new information we have about HCL, in tandem with existing information about other outsourcing firms, strongly suggests that all of the biggest H-1B outsourcing firms likely are violating the H-1B program’s actual wage requirement, especially considering that we know now that they all employ significant numbers of U.S. workers (as shown in Figure C, under “US headcount” and “% on Visas”).34

DOL should close the H-1B outsourcing loophole created by its flawed statutory interpretation 

Some additional discussion about how the H-1B outsourcing loophole operates is warranted. In previous cases that DOL has investigated, including at Disney, DOL asserted that HCL’s practice of paying H-1B workers tens of thousands of dollars less in wages than what the client company—Disney—was paying its own workers was perfectly legal because the H-1B actual wage requirement does not apply when compared with U.S. workers employed by a customer’s company. Of course, such an interpretation is wrong and flies in the face of the intent of Congress to protect both H-1B and U.S. workers. Through this flawed interpretation, DOL invites firms to abuse the H-1B visa, and the subsequent abuse has turned the H-1B into what some have dubbed the “outsourcing visa.”35

DOL’s flawed interpretation also has incentivized the widespread fissuring of the IT services industry. As documented by scholars such as David Weil, replacing employees with contract workers leads to lower-quality jobs, lower wages and benefits, greater job insecurity, and a shift of risk from employer to worker without concomitant reward.36 Disney and every other major employer has enormous financial incentive to outsource jobs to firms like HCL, and these firms in turn exploit the H-1B program because it allows them to pay lower wages and offer fewer benefits and poorer working conditions to migrant workers who are tied to temporary visas and have very little bargaining power. DOL should be working to limit unwarranted fissuring, but instead the agency is incentivizing and accelerating widespread fissuring in the IT services labor market, thereby degrading wages and working conditions for U.S. and migrant workers alike.37

Through this loophole, DOL is also incentivizing and accelerating offshoring, the movement of high-wage jobs from the United States to lower-cost countries. Outsourcing and offshoring are only viable as a business model when they are done in conjunction. HCL’s business model is to replace the customer’s U.S. workers with a blend of workers who are located offshore (India in HCL’s case), and onsite in the United States. Not all jobs and tasks can be sent offshore, however. Some significant share of jobs, due to the nature of their tasks, are geographically sticky and require physical presence in the United States. The typical offshore to onsite labor ratio in the industry is 70:30; i.e., 70% of the workers are located offshore and 30% of the workers are onsite in the United States.38 Firms like HCL reap substantial cost savings by moving work and tasks to its employees in low-cost countries like India, where wages are 90% less than U.S. wages. But those cost savings alone are not sufficient to make it worthwhile for the customer to outsource to HCL. Outsourcers must find additional cost savings from its workers onsite in the United States. The ability to hire H-1B workers at lower costs than similarly skilled U.S. workers is the linchpin for making the outsourcing-offshoring business proposition attractive to customers. Customers expect to cut labor costs sufficiently to counterbalance the additional risk they take on by outsourcing, loss of managerial control, and negative publicity from outsourcing and offshoring. If underpaying H-1B workers was off the table, as it should be, HCL could not offer sufficient overall savings to customers like Disney, who in turn would be much less likely to outsource and offshore their in-house workforce. 

DOL issued policy guidance this year to fix the outsourcing loophole it has de facto created. Under the proposed guidance,

…when a primary employer places an H-1B worker with a secondary employer that is a common law employer of the H-1B worker, such as when a staffing agency places a software engineer with certain technology firms, the secondary employer, in addition to the primary employer, must file a petition and an LCA.39

In the HCL example, this proposed change would have required secondary employers like Disney to file LCAs for H-1B workers placed at its worksites, attesting that it will not adversely affect the wages and working conditions of workers at either company. This would be a major leap forward in stamping out abuse, because the ability of outsourcing firms to place lower-paid H-1B workers at client sites—in these secondary employer arrangements—has been the most common way the H-1B program has been used for at least the past 15 years. Yet, DOL subsequently abandoned the policy guidance, providing no explanation and offering no indication of the future of the policy.40

The Labor Department has the legal authority to investigate H-1B wage theft

In recent cases of H-1B abuses, including those cited here, DOL’s Wage and Hour Division (WHD)—which is “responsible for ensuring that workers are receiving the wages promised on the LCA and are working in the occupation and at the location specified”41—has appeared reluctant to use its authority to investigate what have appeared to be blatant violations of the H-1B wage requirements. And even when the department has investigated, as noted earlier, its flawed interpretation of the law has resulted in no penalties against employers nor any change in behavior among outsourcing firms and the client firms that contract with them. Nevertheless, even with the current flawed legal interpretation with respect to the outsourcing loophole, WHD has significant authority to investigate the types of abuses we have described in this report, in terms of the H-1B actual wage requirement. 

WHD’s own fact sheet lists four circumstances under which it is authorized to initiate an investigation related to the H-1B program:

• • WH [Wage and Hour Division] receives a complaint from an aggrieved person or organization;
  • WH receives specific credible information from a reliable source (other than a complainant) that the employer has failed to meet certain LCA conditions, has engaged in a pattern or practice of failures to meet such conditions, or has committed a substantial failure to meet such conditions that affects multiple employees;
  • The Secretary of Labor has found, on a case-by-case basis, that an employer (within the last five years) has committed a willful failure to meet a condition specified in the LCA or willfully misrepresented a material fact in the LCA. In such cases, a random investigation may be conducted; or
  • The Secretary of Labor has reasonable cause to believe that the employer is not in compliance. In such cases, the Secretary may certify that an investigation be conducted.42 

With respect to the bullet points above, the relevant details are provided in the H-1B statute at 8 U.S.C. 1182(n)(2)(G).43 Subsection (i) clearly states that the secretary of labor may investigate an H-1B employer if the secretary “has reasonable cause to believe that the employer is not in compliance.” Subsection (ii) is also straightforward, giving the secretary authority to investigate when he or she has received credible information from a source:

If the Secretary of Labor receives specific credible information from a source, who is likely to have knowledge of an employer’s practices or employment conditions, or an employer’s compliance with the employer’s labor condition application under paragraph (1), and whose identity is known to the Secretary of Labor, and such information provides reasonable cause to believe that the employer has committed a willful failure to meet a condition of paragraph (1)(A), (1)(B), (1)(C), (1)(E), (1)(F), or (1)(G)(i)(I), has engaged in a pattern or practice of failures to meet such a condition, or has committed a substantial failure to meet such a condition that affects multiple employees, the Secretary of Labor may conduct an investigation into the alleged failure or failures. The Secretary of Labor may withhold the identity of the source from the employer, and the source’s identity shall not be subject to disclosure under section 552 of title 5, United States Code.

HCL’s own internal document that has been made public through litigation, as well as the claims made by the whistleblowers involved in the False Claims Act lawsuit against HCL, are credible sources of specific information that, under current law, should trigger a DOL investigation of HCL’s H-1B program practices. There is perhaps no more credible source than the employer itself, HCL, and in addition, the federal district court that has admitted HCL’s presentation into the official record is another obviously credible source. 

The labor secretary’s authority to investigate HCL’s failures to pay the correct wage rates to their H-1B employees in past years (HCL’s internal document lists salaries from 2015) may be temporally limited, however, by 8 U.S.C. 1182(n)(2)(G)(vi). That section of the statute provides that the secretary must receive the information that could be the basis for an investigation related to an H-1B labor condition application (LCA) “not later than 12 months after the date of the alleged failure” of an employer to comply with the attestations in the LCA. However, the corresponding regulation at Section 5 of 20 C.F.R. §655.806(a)44 further defines how the 12-month statute of limitations operates: 

(5) A complaint must be filed not later than 12 months after the latest date on which the alleged violation(s) were committed, which would be the date on which the employer allegedly failed to perform an action or fulfill a condition specified in the LCA.

In practical terms, this means that if an employer did not pay the correct wage six months ago—even if the corresponding LCA was filed six years ago—then a complaint could still be filed validly according to the 12-month rule.45

In addition, according to case law from DOL’s Administrative Review Board, complaints about H-1B violations can be equitably tolled, meaning that an exemption from the 12-month limitation could apply if the plaintiff (for example, an aggrieved H-1B worker) could not have reasonably discovered the legal violation until after the 12-month period had expired.46 Equitable tolling would be warranted if a complainant was misled by their employer, prevented from asserting rights due to extraordinary circumstances, or the complainant raised the correct claim but mistakenly filed it in the wrong forum.47 

Furthermore, Section 5 of 20 C.F.R. §655.806(a) also clearly states that WHD may assess remedies and back wages that are owed from more than 12 months prior, as long as they are related to a complaint that was validly filed within the 12-month jurisdictional limit in the statute:

This jurisdictional bar does not affect the scope of the remedies which may be assessed by the Administrator. Where, for example, a complaint is timely filed, back wages may be assessed for a period prior to one year before the filing of a complaint.

In addition, because H-1B visas are valid for up to six years, and often for longer when applications for permanent residence are filed for an H-1B worker, many of HCL’s current H-1B employees may have been hired in the years prior to or during fiscal year 2015. As a result, the secretary of labor, through WHD, would be justified in initiating an investigation, because the apparent wage theft and LCA violations uncovered in the HCL document likely are still ongoing (meaning they would fall within the 12-month limitation). 

In any case, even if HCL cannot be penalized for providing false information on LCAs in previous years, due to the 12-month limit, the information presented here and in the whistleblower lawsuit is evidence of an ongoing pattern and practice by HCL—which justifies the initiation of an investigation into HCL’s current practices. HCL’s internal document suggests that the firm is likely to still be carrying out its strategy and explicit policy to systematically and unlawfully underpay its H-1B employees compared with similarly employed U.S. workers, in violation of the H-1B actual wage requirement. WHD therefore should investigate HCL and other outsourcing firms with the aim of making as many H-1B workers whole as it possibly can—through repayment of back wages that are owed, under its existing authority—and levy any other fines and penalties that can serve as a deterrent against future violations, including debarring HCL or other outsourcing firms from hiring through the H-1B program. 

Finally, it should be noted that, as WHD’s fact sheet shows, H-1B enforcement is largely based on the receipt of complaints about an employer’s specific wrongdoing. However, complaints from H-1B workers themselves to DOL are unlikely since it would require an H-1B worker to blow the whistle on their own employer, the same employer that controls the H-1B worker’s immigration status and ability to remain in the United States. That’s another compelling reason why WHD should be more proactive and take action to enforce the law and protect H-1B workers from wage theft based on the existing evidence that has been made public through revelations in the HCL litigation. 

Conclusion and recommendations 

HCL Technologies, India’s third-largest IT outsourcing firm and the eighth-largest employer of college-educated migrant workers with H-1B visas in the United States, appears to be violating U.S. law by vastly underpaying migrant workers and lying on forms it submits to the U.S. Department of Labor to obtain visas for its workers. Specifically, corporate documents suggest that the firm is not—as it attests on those forms—paying H-1B migrant workers the greater of the prevailing wage or the actual wage paid to U.S. workers it employs in the same job roles. Rather, the documents show HCL is paying its H-1B workers tens of thousands of dollars less than it is paying U.S. citizens in those same jobs, in violation of the actual wage requirement. If true, the magnitude of the lawbreaking is stunning, with violations numbering in the tens of thousands. As noted above, based on the number of workers and average levels of underpayment at HCL, we estimate that the company is stealing roughly $95 million from H-1B workers every year. This wage theft is also degrading wages and labor standards for all workers in similar occupations, and the IT industry at large. Further, it allows HCL to offer its contract workers to such U.S. employers as Cisco, Disney, Google, and other firms at a much lower cost than the workers that competitor outsourcing firms can reasonably offer. In effect, U.S. immigration policy is being used to subsidize the outsourcing and offshoring of decent and high-paying U.S. jobs. 

The cumulative loss of wages to workers in the United States—including both migrant workers and workers who are U.S. citizens—likely totals in the billions of dollars, just from the abuses of the H-1B program by one company. In 2020, 17 of the top 30 H-1B employers were outsourcing firms with business models similar to HCL’s, which means that the potential wage theft being facilitated similarly by other outsourcing firms through the H-1B program is at least an order of magnitude larger. 

Immediate action should be taken to stop the apparent wage theft and abuse of the H-1B program by HCL that undercuts labor standards—as well as to stop abuses by other companies that might be violating the actual wage requirement—and to make H-1B workers whole. To help remedy this situation, we recommend that:

• Congress hold hearings to investigate visa program vulnerabilities uncovered by the HCL document.
• The Department of Labor’s Wage and Hour Division recover the full amount of back wages for all H-1B workers who have been the victims of HCL’s apparent violation of the H-1B actual wage requirement.
• The Department of Justice’s (DOJ) Civil Division, in conjunction with United States Citizenship and Immigration Services and DOL, vigorously prosecute visa fraud under the False Claims Act, consistent with a recent federal court decision applying the False Claims Act to H-1B visa fraud, as well as other visas used for skilled occupations, like the L-1 and B-1.48
• Congress request the Government Accountability Office and the Office of Inspector General at both the Department of Homeland Security and DOL, investigate the types of H-1B visa abuse that have been uncovered, along with other forms of abuse.
• The Equal Employment Opportunity Commission and DOJ Office of Special Counsel investigate HCL’s compliance with anti-discrimination laws given its overt preference for H-1B workers over workers who are U.S. citizens and lawful permanent residents.
• The Department of Labor’s Office of Federal Contract Compliance Programs audit HCL and its clients (because many are federal contractors).

The Departments of Labor and Homeland Security should also take immediate action—using existing legal authority—to improve other aspects of the H-1B program and thereby protect labor standards. We urge that:

• DOL vigorously enforce the attestations made by H-1B employers on their applications, including the wage and working conditions requirements.
  • The secretary of labor has the statutory authority to initiate an investigation and should use it. HCL’s own document, the whistleblowers in the False Claims Act lawsuits, and the federal district court that is acting as the forum for the litigation are all credible sources that justify the initiation of an investigation.
• DOL fix the outsourcing loophole by issuing policy guidance requiring secondary employers of H-1B workers (the companies that hire firms like HCL to provide contract workers) to file labor condition applications. This would help stop DOL from artificially creating huge financial incentives leading to the fissuring of the IT labor market (the replacement of employees with contract workers with lower wages and fewer protections).
• DOL promulgate a regulation to increase the required minimum prevailing wage levels for H-1B jobs to reflect true market wages.
• DHS promulgate a regulation to allocate H-1Bs based on applications offering to pay the highest wages.
• DHS provide deferred action and employment authorization to any H-1B workers who are victims of employers found to have violated labor, employment, or immigration laws—including visa fraud.
• DHS and DOL permit and facilitate H-1B workers to become eligible to receive U visas (for victims of crime who assist law enforcement) if they come forward as whistleblowers and/or assist authorities in prosecuting lawbreaking employers.

Finally, Congress should pass legislation that implements lasting and much-needed reforms in the H-1B visa program and to stem abuses. We recommend that such legislation:

• Increase the H-1B wage requirements to reflect true market wages and allocate H-1Bs based on applications offering to pay the highest wages.
• Establish a labor market test that requires employers to prove a labor shortage exists before they can hire through the H-1B program.
• Allow H-1B workers to self-petition for permanent residence (i.e., ending employer sponsorship for green cards).
• Improve and enhance portability between employers for H-1B workers.
• Establish a robust post-entry auditing system to ensure employers are held accountable when they underpay H-1B workers and violate other labor and employment protections.

Appendix: Methodology for estimating annual underpayment and wage theft of H-1B workers

To estimate annual underpayment of HCL’s H-1B visa workers, we use data provided in the HCL document, “Guidelines for H1 nominations,” which is an exhibit in the recent False Claims Act whistleblower case filed against the company by former HCL employees in September 2021 (United States of America, ex rel. Ralph Billington, Michael Aceves, and Sharon Dorman (Plaintiffs) v. HCL Technologies LTD. and HCL America, INC.). The HCL presentation is a planning document for its fiscal year 2016 H-1B visa allotment, which the U.S. government opened April 1, 2015. Thus the document was likely created in late 2014 or early 2015. It used data on the company’s existing workforce to outline how the company would determine which positions it would seek to fill by applying for an H-1B visa for that position. The presentation includes detailed tables analyzing the additional resource costs (ARC) for each type of worker by worker-status for the three lines of business (LoB) in which most of HCL’s H-1B workforce is employed. The three LoBs are:

1. Engineering and R&D services (ERS)
2. Application development and systems integration (APPS & SI)
3. IT Infrastructure management services and solutions (INFRA)

HCL segregates its workers into four status categories to perform its H-1B application analysis:

• Citizen: U.S. citizens and permanent residents employed by HCL
• Landed–Visa Dependent: H-1B workers hired in India and sponsored by HCL to come to the U.S.
• Local–Visa Dependent: H-1B workers who were already present in the United States working for other employers but who were hired by/transferred their visas to HCL
• TP or Third Party: workers hired through contractor firms

For each of the three LoBs, HCL tables show headcounts (#) and compare the ARC for workers in the four status categories. 

While the presentation does not define ARC, we infer from other evidence that ARC represents the average wage paid to the workers, not the average total cost of compensation, benefits, and taxes HCL incurs for its workers.

First, according to USCIS data, in fiscal year 2015 HCL paid its H-1B workers $81,317 (See Table 2 earlier in our report). This is wage-only data and is consistent with data in the HCL presentation.

Were the ARC to reflect all costs of compensation, the wages reflected would be implausibly low. The rule of thumb for employers is to add 27% to the direct cost of an employee to account for benefits (health care, leave, etc.). This is called the worker’s loaded cost. 

So, the straight wage of someone with a loaded cost of $76,200 would be $60,000 ($76,200= 1.27 X $60,000). There are statutory policy constraints that create a de facto absolute wage floor of $60,000 for certain H-1B employers like HCL. The presentation says that the average wage for the Landed–Visa Dependent workers such as Sr. Mechanical Designer was $68,328. If that were the loaded rate then the wages for that position would be $53,802 (=$68,328/1.27), which would place HCL at significant legal risk. 

Note that from a policy standpoint, whether the ARC is wages-only or loaded cost is immaterial since the H-1B workers must be paid wages and benefits at least as much as the firm’s similarly employed U.S. workers. Landed H-1B workers are receiving a substantially lower ARC than similarly employed U.S. citizens whether ARC is measuring wages-only or some combination of wages and benefits.

Within a specific LoB, multiple views of ARC differentials are presented by: project category, skill, or job role.

HCL tables for job role were used to estimate the wages because they provide the most disaggregated view and play a critical role in HCL’s H-1B application strategy to exploit H-1B-to-citizen wage gaps. 

HCL’s underpayment is calculated for both its Landed–Visa Dependent and Local–Visa Dependent workers and then summed.

Appendix Table 1 shows how H-1B wage savings are estimated. The columns labeled “Savings from Landed H-1B” and “Savings from Local H-1B” show the calculations):

For each Job Role (Skill):

Landed H1B Savings=(Citizen ARC−Landed ARC) × Number of Landed

Local H1B Savings=(Citizen ARC−Local ARC) × Number of Local

Total Wage Savings is the sum of Landed + Local Savings for all job roles. 

Appendix Table 1

Additional notes regarding our calculations:

• Job roles where the H-1B ARC is greater than the Citizen ARC are left out of the calculation because those workers cannot be identified as being underpaid the actual wage requirement.
• Workers listed as “Third Party” are not relevant for these calculations and were therefore not included because those workers are employed by another firm, not HCL.
• The detailed tables in HCL’s presentation include the vast majority, though not all, of HCL’s H-1B workers in those business lines. HCL presents the job roles with the most H-1B applications for each business line. For example, the ERS table shows only the subset of job roles that account for the most H-1B workers and applications. Further, some business lines that have H-1B workers are not included in HCL’s analysis. As a result, our estimates likely understate the cumulative underpayment to H-1B workers. 

The cumulative wage savings for each of HCL’s major lines of business are:

• ERS = $18,380,591
• APPS & SI = $68,220,782
• INFRA = $8,053,730

The resulting total amount by which H-1B workers appear to be illegally underpaid by is: 
$94,655,103

Endnotes

1. EPI has published reports detailing H-1B abuses dating back to 2007. See, for example, Ron Hira, Outsourcing America’s Technology and Knowledge Jobs: High-Skill Guest Worker Visas Are Currently Hurting Rather Than Helping Keep Jobs at Home, Economic Policy Institute, May 16, 2007; Ron Hira, Bridge to Immigration or Cheap Temporary Labor? The H-1B & L-1 Visa Programs Are a Source of Both, Economic Policy Institute, February 17, 2010. The New York Times published an investigative series in 2015, which included the following article: Julia Preston, “Large Companies Game H-1B Visa Program, Costing the U.S. Jobs,” New York Times, November 10, 2015. The CBS News show “60 Minutes” profiled H-1B abuses in 1993 (“North of the Border; American Businesses Are Importing Foreign Computer Programmers While American Programmers Are Unemployed,” March 19, 1993) and again in 2017 (“You’re Fired,” March 19, 2017.)

2. The H-1B visa program was created to fill labor shortages in high-skilled fields that require at least a college degree. While it has increasingly been dominated by employers in STEM fields, specifically IT, there are H-1Bs approved for a very wide variety of white-collar jobs including journalism, accounting, marketing, and in the medical field, etc. The key eligibility criterion is that a bachelor’s degree is typically the base-level educational attainment required to enter the occupation.

3. Patrick Thibodeau, “Southern California Edison IT Workers ‘Beyond Furious’ over H-1B Replacements,” Computerworld, February 4, 2015.

4. Harichandan Arakali, “India’s Infosys Cleared In Southern California Edison Department of Labor Probe,” International Business Times, September 8, 2015.

5. HCL Technologies was formerly known as Hindustan Computers Limited. Its subsidiary HCL America operates in the United States.

6. United States of America, ex rel. Ralph Billington, Michael Aceves, and Sharon Dorman (Plaintiff) v. HCL Technologies LTD. and HCL America, INC. (Defendants). Fourth Amended Complaint for Violations of the False Claims Act. United States District Court for the District of Connecticut. Civil Action No. 3:19-CV-1185 (MPS).

7. HCL. “Guidelines for H1 nominations.” Exhibit 57. Case 3:19-cv-01185-MPS Document 48-57, filed September 7, 2021.

8. Ron Hira and Daniel Costa, “The H-1B Visa Program Remains the “Outsourcing Visa”: More than Half of the Top 30 H-1B Employers Were Outsourcing Firms,” Working Economics Blog (Economic Policy Institute), March 31, 2021.

9. For example, see Sam Harnett, “Outsourced: In a Twist, Some San Francisco IT Jobs Are Moving to India,” MPR News, December 28, 2016. Harnett profiles Hank Nguyen who had to train his H-1B replacement when the University of California outsourced his work to HCL: “Nguyen says he escaped to America in 1981 … taught himself about computers so he could get a job in the tech world … the surest way for him to have a stable middle-class life.” Additionally, government data show that only one-fourth of computer systems analysts (Standard Occupation Code #15-1211), one of the most common H-1B occupations, have a master’s degree or more education. A higher share of computer systems analysts have educational attainment that is less than a bachelor’s degree. See Bureau of Labor Statistics, “Table 5.3 Educational Attainment Distribution for Workers 25 Years and Older by Detailed Occupation, 2018-19,” last modified September 8, 2021 [accessed November 2021]. The classic book by Robert Zussman, Mechanics of the Middle Class (University of California, 1985) describes how many from working class backgrounds entered engineering and technology occupations because they were attracted by the possibility of improving their economic status and class.

10. Women account for 36% of computer systems analysts, a much higher share than their share of software developers, at 19%. African Americans account for 10% of computer systems analysts, higher than their 6% share of software developers. See Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey, Table 11. Employed Persons by Detailed Occupation, Sex, Race, and Hispanic or Latino Ethnicity,” last modified January 22, 2021 [accessed November 2021].

11. USCIS Office of Policy & Strategy, Policy Research Division, H-1B Authorized-to-Work Population Estimate, U.S. Department of Homeland Security, June 2020.

12. Inadmissible aliens, 8 U.S.C. §1182(n); see also U.S. Department of Labor, Fact Sheet #62G: Must an H-1B Worker Be Paid a Guaranteed Wage? (fact sheet), revised July 2008.

13. As an EPI fact sheet explains, while “corporate lobbyists and other H-1B proponents claim that H-1B workers cannot be paid less than U.S. workers because employers must pay H-1B workers no less than the ‘prevailing wage,’” employers often choose the lower “entry-level” or Level 2 wage, and the government doesn’t check to verify that the workers earning those wages are indeed at the low end of the experience and education spectrum. See Daniel Costa, “H-1B Visa Needs Reform to Make It Fairer to Migrant and American Workers” (fact sheet), Economic Policy Institute, April 5, 2017. Instead of using the DOL wage survey, employers also can opt for an independent wage survey or request a prevailing wage determination from the DOL to set the prevailing wage. In 2019, 9% of H-1B jobs had a prevailing wage that was certified by DOL according to an independent wage survey; see Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 2020.

14. Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 2020.

15. See, for example, the press release announcing the introduction of the H-1B and L-1 Visa Reform Act in both chambers in the 116th Congress: Office of Sen. Dick Durbin, “Durbin, Grassley, Pascrell, Gosar Lead Overhaul to H-1B, L-1 Visa Programs: Bipartisan, Bicameral Reforms Will Protect American Workers and Improve Fairness for Skilled Labor Applicants” (press release), May 26, 2020. Similar bipartisan legislation has been introduced in every Congress for more than a decade.

16. Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 2020.

17. Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Immigrants and Non-Immigrants in the United States: Delay of Effective and Transition Dates [final rule], 86 Fed. Reg. 26164 (May 13, 2021).

18. Delaying the effective date and transition dates of the updated H-1B prevailing wage rule in the final rule by 18 months, as DOL proposed and finalized, will cost H-1B workers $35.48 billion in wages over 10 years, according to the DOL’s own calculations, or in discounted terms, “The Department estimates the total reduction of transfer payments over the 10-year period is $32.05 billion and $28.19 billion at discount rates of 3 and 7 percent, respectively.” Employment and Training Administration, “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Immigrants and Non-Immigrants in the United States,” U.S. Department of Labor: Proposed Delay of Effective and Transition Dates, 86 Fed. Reg. 15154 (March 22, 2021), see text and “Exhibit 3 – Total Transfer Payments of the NPRM.”

19. U.S. Department of Labor, “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States,” listed on regulations.gov from the Office of Information and Regulatory Affairs, Office of Management and Budget (RIN-1205-AC00).

20. 8 U.S.C. § 1182(n) Labor condition application. For more discussion in the current Code of Federal Regulations, see “What Is the First LCA Requirement, Regarding Wages?,” 20 C.F.R. § 655.731 (2020).

21. Employers attest on Form ETA-9035 they will pay H-1B workers the same as their U.S. workers, which means they will pay H-1B workers at least as much as the actual wage they are paying their U.S. workers in similar occupations. The statute requiring payment of the actual wage can be found at 8 U.S.C. § 1182(n) Labor condition application. For more discussion in the current Code of Federal Regulations and a description of the “actual wage” requirement, see “What Is the First LCA Requirement, Regarding Wages?, (a) Establishing the Wage Requirement,” 20 C.F.R. § 655.731 (2020).

22. The authors reviewed available H-1B petition approvals for HCL from USCIS data for fiscal years 2008–2013, 2018, and 2019. The data show that in each year, 97% to 99% of HCL’s H-1B workers hailed from India. As a result, we refer to HCL’s “landed” H-1B workers as being of Indian origin.

23. HCL, “Guidelines for H1 nominations,” Exhibit 57. Case 3:19-cv-01185-MPS Document 48-57, filed September 7, 2021, at pages 7–9, and 11. From United States of America, ex rel. Ralph Billington, Michael Aceves, and Sharon Dorman (Plaintiffs) v. HCL Technologies LTD. and HCL America, INC. (Defendants). Fourth Amended Complaint for Violations of the False Claims Act. United States District Court for the District of Connecticut. Civil Action No. 3:19-CV-1185 (MPS).

24. HCL Technologies, “Unaudited Financial Results for the Quarter Ended June 30, 2021,” Quarterly Reports—Full Financial Results, published July 29, 2021.

25. Authors’ analysis of U.S. Department of Labor, Employment and Training Administration, Office of Foreign Labor Certification, “Disclosure data” for labor condition applications from fiscal year 2020 [accessed October 2021]. The named firms are secondary entities HCL lists on its H-1B applications.

26. See, for example, Julia Preston, “Pink Slips at Disney. But First, Training Foreign Replacements,” New York Times, June 3, 2015; see also, Michael Hiltzik, “How the University of California Exploited a Visa Loophole to Move Tech Jobs to India,” Los Angeles Times, January 6, 2017.

27. Authors’ analysis of U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services, H-1B Employer Data Hub [accessed October 26,2021].

28. “Inadmissible Aliens, Labor Condition Application,” 8 U.S.C. § 1182(n)(A)(ii).

29. See, for example, Sarah N. Lynch, “Infosys Says Cleared in U.S. Visa Probe by Labor Department,” Reuters, September 8, 2015; see also, Julia Preston, “Lawsuits Claim Disney Colluded to Replace U.S. Workers With Immigrants,” New York Times, January 25, 2016.

30. The three federal agencies play different roles with respect to enforcement in the H-1B program. For example DOL enforces the rules regarding the wages and working conditions of H-1B and U.S. workers and the attestations made by employers on DOL forms. Enforcement by DHS is related to claims on USCIS petitions, which may also include information about employment and wages, but DHS looks to ensure that information provided on petitions is not fraudulent. DOJ looks at other related issues, for example whether employers have discriminated against workers based on citizenship or nationality.

31. Office of Sen. Chuck Grassley, “Grassley, Durbin Ask for Details on Companies’ Use of H-1B Visas: Top Nine Foreign Based Companies Use Nearly 20,000 H-1B Visas” (press release), May 14, 2007.

32. Infosys, a direct competitor of HCL and the No. 2 India-based outsourcing firm, details its costs in its financial reporting to the U.S. Securities and Exchange Commission, allowing us to estimate the labor cost share. In 2021, Infosys reported $10.2 billion in cost of sales plus operating expenses, of which $7.6 billion came from employee costs plus subcontractors (i.e., labor costs for delivering services to customers). So, workers delivering services to clients accounted for 74.5% of Infosys’ overall costs. Authors’ analysis of Infosys, Form 20-F Annual Report, Fiscal Year ending March 31, 2021.

33. For example, the job website Indeed.com reported annual salaries for software engineers in India at $8,349 per year, which is 92% less than its reporting of $109,552 for software engineers in Washington, D.C. Authors’ analysis of data retrieved from Indeed.com on October 24, 2021. Currency conversion of 75 rupees per one dollar according to Morningstar.com.

34. It is important to note that many of the U.S. workers employed by outsourcing firms were likely “rebadged” from client firms. Outsourcers like HCL will approach a client to take over a large IT department, typically numbering in the hundreds. As part of the outsourcing deal, some direct employees of the client will be transferred to HCL, which is known as rebadging, e.g., some direct employees of Disney will transfer to become employees of HCL. This is done to ensure continuity in operations, enable smooth transfers of knowledge to the outsourcer, and to soften any negative public relations a client might face in the wake of mass layoffs. Those rebadged workers overwhelmingly are U.S. workers. In most cases, those U.S. workers will be terminated by the outsourcer after 12 to 18 months because U.S. workers are more expensive compared with their lower-paid H-1B counterparts, who are hired to replace them. Such practices—terminating U.S. workers while hiring lower-paid H-1B employees who are similarly employed—are violations of both the actual wage and adverse effects attestations the H-1B employers sign. DOL has never enforced these laws.

35. Ron Hira and Daniel Costa, “The H-1B Visa Program Remains the ‘Outsourcing Visa’: More Than Half of the Top 30 H-1B Employers Were Outsourcing Firms,” Working Economics Blog (Economic Policy Institute), March 31, 2021.

36. David Weil, The Fissured Workplace: Why Work Became so Bad for so Many and What Can Be Done to Improve It (Cambridge, Mass.: Harvard University Press, 2017).

37. EPI’s Lawrence Mishel and Josh Bivens identify fissuring and domestic outsourcing as a major factor in wage suppression and wage inequality. See Identifying the Policy Levers Generating Wage Suppression and Wage Inequality, Economic Policy Institute, May 13, 2021. A number of studies show a wage penalty for subcontracted/outsourced workers. For example, see Arindrajit Dube and Ethan Kaplan, “Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards,” ILR Review, Cornell University. January 1, 2010, https://doi.org/10.1177/001979391006300206, and Deborah Goldschmidt and Johannes Schmieder, “The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure,” Quarterly Journal of Economics, Oxford University Press, vol. 132, no. 3 (2017), 1165–1217.

38. Infosys, HCL’s close competitor, reports to the U.S. Securities and Exchange Commission its onsite personnel’s share of billable hours are 26%, while offshore personnel’s share are 74%, in Infosys, Form 20-F Annual Report, Fiscal Year Ending March 31, 2021, (Revenues section).

39. U.S. Department of Labor, “U.S. Department of Labor Revises Interpretation, Issues New Guidance Clarifying Filing, Compliance Requirements in H-1B Visa Program” (press release), January 15, 2021.

40. On January 20, 2021, the Department of Labor’s Employment and Training Administration announced it withdrew the policy guidance requiring secondary employers to file LCAs. See “January 20, 2021. U.S. Department of Labor Withdraws Program Bulletin Announcing Revised Interpretation and New Guidance under the H-1B Visa Program for Review,” available at https://www.dol.gov/agencies/eta/foreign-labor/news.

41. U.S. Department of Labor Wage and Hour Division, Fact Sheet #62U: What Is the Wage and Hour Division’s Enforcement Authority Under the H-1B Program? (fact sheet), revised November 2016.

42. U.S. Department of Labor, Wage and Hour Division, Fact Sheet #62U: What Is the Wage and Hour Division’s Enforcement Authority Under the H-1B Program? (fact sheet), revised November 2016.

43. U.S. Department of Labor, Wage and Hour Division, H-1B Labor Condition Application; H-1B Visa Reform Act, 2004 Amendments, INA § 212(n), 8 U.S.C. § 1182(n) (2004).

44. Who May File a Complaint and How Is It Processed?, 20 C.F.R. § 655.806 (2000).

45. See also Jain v. Empower IT, Inc. d/b/a Infobahn Technologies, No. 08-08 (ARB Oct. 30, 2009) [noting that the 12-month clock is measured from the date of the last violation].

46. See, for example, Merriam-Webster dictionary, definition of equitable tolling.

47. Ndiaye v. CVS Store No. 6081, 04-LCA-36 (ARB Nov. 29, 2006), at 7.

48. Jean-Claude Franchitti v. Cognizant Technology Solutions Corporation et al., Memorandum and Order. August 17, 2021.

On October 19, 2015, President Obama proposed new DHS regulations that would reinstate the STEM OPT extension and increase its duration from 29 months to 36 months per STEM degree for foreign STEM graduates, and allow the extension eligibility to apply to up to two STEM degrees. Effectively, this would allow foreign graduates with STEM degrees to be employed for up to six years while on an F-1 visa. The DHS regulatory notice solicited comments from the public. In our comment, we argue that the president’s STEM OPT extension proposal is problematic for several reasons:

1. The STEM OPT extension program has no authorization in the law and was created entirely via executive fiat by the George W. Bush administration in 2008, which extended the original OPT program period from 12 to 29 months. Except for a three-year pilot program in 1990 (which expired shortly thereafter), Congress has never explicitly authorized the employment of foreign students on F-1 visas for 12, 29, 36, or 72 months.
2. The STEM OPT extension program masquerades as a mentoring and training program for foreign graduates with STEM degrees from U.S. universities; in practice it is a large temporary work-visa program for foreign workers with virtually no rules.
3. There are no enforceable wage standards or protections for the foreign students in the OPT program or for the U.S. workers with whom the OPT workers compete. Employers are permitted to deeply undercut locally prevailing wages for jobs in STEM fields. Employers are not required to first recruit U.S. workers or even publicly advertise jobs to them before hiring OPT workers, meaning that employers do not have to establish the existence of a labor shortage before hiring workers through OPT.
4. The STEM OPT program makes de facto guestworkers significantly cheaper than U.S. workers by waiving the employer’s obligation to pay federal payroll taxes. This creates a financial incentive for employers to hire OPT employees instead of U.S. workers in STEM jobs, which is an obvious disadvantage for U.S. workers, most of whom are likely to be recent STEM graduates seeking entry-level jobs.
5. The program will further reduce employment opportunities for U.S. graduates in STEM fields. And because the OPT is a de facto guestworker visa that can last as long as six years and has no annual numerical limit, its existence will encourage more foreign students to study in the United States in hopes of remaining here to work, leaving fewer educational opportunities for U.S. students.
6. There is no justification for extending the OPT work permit from one year to three or six years that is not based on the educational needs of foreign students or on the needs of the U.S. labor market. A 12-month work/training period is more than adequate for any STEM degree program.

Read the full text of our comment to DHS. (The version linked to in this blog post has been lightly edited for grammar and clarity from the original version sent to DHS.)

The Disney H-1B scandal broke into the national spotlight when the New York Times covered it in June. This news came in the wake of LA Times reporting that Southern California Edison was replacing hundreds of American workers with H-1B guestworkers. These two cases are only the tip of the iceberg. Employers looking to cut costs have replaced, substituted, and overlooked American workers for hundreds of thousands of jobs, and the U.S. government has facilitated the suppression of their wages for decades through its management of H-1B guestworker program.

In response to the Edison story, 10 U.S. Senators spanning the ideological spectrum (from Bernie Sanders to James Inhofe), wrote to the Obama administration asking for an investigation. After investigating, the Obama Administration let one of the companies, Infosys, off the hook, claiming that the law allowed Infosys to replace those American workers with H-1B guestworkers, who were paid tens of thousands of dollars less to do the same jobs.

The Obama administration has been very aggressive in its interpretation about the executive branch’s authority over immigration rules. But when it comes to ensuring that American workers impacted by the visa program are treated fairly, President Obama has decided to look the other way. If the Obama Administration feels its hands are tied by the law, it should push Congress hard to reform the programs. Instead, they have done nothing.

Instead of diligently working to find a solution to this widespread H-1B visa abuse, Obama’s DHS team has been working overtime to create a new, large guestworker program that allows employers to easily exploit and underpay (or not pay) foreign students who can work for them for up to 3 years; this is known as Optional Practical Training or “OPT.” The updated OPT program the president is proposing will mean even more lost jobs and wages for American workers. Especially hard hit will be recent college graduates who invested years and tens of thousands of dollars to obtain degrees in science, technology, engineering, and math (STEM) fields, but are faring terribly in this economy under the dual weight of a dismal job market and mountainous student debts.

Through its actions the Obama administration is effectively inviting employers to pad their profits by replacing their American workers with cheaper H-1B guestworkers. Bob Iger, CEO of Disney and a big financial supporter to the Obama campaign, is laughing all the way to the bank at the expense of his American workers. Mr. Iger is a leader in the Partnership for a New American Economy, a group advocating for more H-1Bs by claiming that there’s a shortage of American talent.

Hopefully the H-1B issue will be raised in tonight’s GOP presidential debate. The Disney scandal is taking place in Florida, home to two of the candidates, Senator Marco Rubio and Governor Jeb Bush. Both candidates have proposed to expand the H-1B program without fixing any of the program’s flaws, which allow American workers to be overlooked for jobs or replaced by cheaper temporary workers. Donald Trump (of all people), the front-runner for several months, will be the only candidate on the stage tonight who has proposed sensible ways to fix the H-1B program: he has proposed that American workers have a first shot at job openings and would prevent employers from using the H-1B as a cheap labor program.

The outsourcing companies involved in the Southern California Edison (SCE) scandal I wrote about last week—where U.S. workers were replaced with H-1B guestworkers—are Infosys and Tata Consultancy Services. These two India-based IT firms specialize in outsourcing and offshoring, are major publicly traded companies with a combined market value of about $115 billion, and are the top two H-1B employers in the United States. In Fiscal Year (FY) 2013, Infosys ranked first with 6,269 H-1B petitions approved by the government, and Tata ranked second with 6,193. As with the SCE scandal, these leading offshore outsourcing firms use the H-1B program to replace American workers and to facilitate the offshoring of American jobs. Because of this, it’s likely that Americans lost more than 12,000 jobs to H-1B workers in just one year. FY13 H-1B data I’ve analyzed, acquired through a Freedom of Information Act request, reveals new details about how firms like Infosys and Tata are using the H-1B nonimmigrant visa program. Spoiler alert: they don’t use the H-1B visa as a way to alleviate a shortage of STEM-educated U.S. workers; they use it primarily to cut labor costs. But the other main arguments proffered to support an expansion of the H-1B program are easily debunked with even a cursory look at the H-1B data.

Lower wages

The principal reason that firms use H-1Bs to replace American workers is because H-1B nonimmigrant workers are much cheaper than locally recruited and hired U.S. workers. As Table 1 shows, Infosys and Tata pay very low wages to their H-1B workers. The average wage for an H-1B employee at Infosys in FY13 was $70,882 and for Tata it was $65,565. Compare this to the average wage of a Computer Systems Analyst in Rosemead, CA (where SCE is located), which is $91,990 (according to the U.S. Department of Labor). That means Infosys and Tata save well over $20,000 per worker per year, by hiring an H-1B instead of a local U.S. worker earning the average wage. But at SCE specifically, the wage savings are much greater. SCE recently commissioned a consulting firm, Aon-Hewitt, to conduct a compensation study, which showed that SCE’s IT specialists were earning an average annual base pay of $110,446. That means Tata and Infosys are getting a 36 to 41 percent savings on labor costs—or saving about $40,000 to $45,000 per worker per year.

Table 1

Adding insult to injury, Infosys and Tata have a history of getting in trouble for paying even lower wages than they are already legally allowed to pay. In 2013 Tata paid $30 million to settle a wage theft dispute involving 13,000 foreign workers, and Infosys paid a record $34 million to settle a visa fraud case after it committed “systemic visa fraud and abuse of immigration processes.” As a general principle, companies that behave like this should not be allowed to benefit from the U.S. temporary foreign worker programs, much less be the top two beneficiaries of them.

H-1B is not a bridge to permanent immigration

The proponents for H-1B expansion claim that the H-1B program is a stepping-stone to permanent immigration. But the vast majority of H-1B workers at Infosys and Tata never get on path to legal permanent residence (often referred to as getting a “green card”) and citizenship: In FY13, Infosys only sponsored seven H-1B workers for permanent residence, and Tata sponsored ZERO H-1B workers, while the U.S. government approved 12,432 H-1B visa petitions for these two companies alone. (See Table 2) In other words, the H-1B workers Infosys and Tata hire are being used as temporary, cheaper, disposable labor, not as a way to permanently introduce talent and innovation into the American labor market.

Table 2

H-1B is not about skills or skills gap

Proponents of the H-1B repeatedly argue that the program injects much needed skills into the labor market, which are presently lacking in the U.S. workforce. They claim the H-1B is used: 1) to recruit and hire the “best and brightest” workers from around the world; 2) to fill skills gaps in the U.S. workforce; and 3) as a way to retain talented foreign students with advanced degrees who received their education and training in the United States. H-1B data and the SCE case show that none of these arguments are even remotely true.

If American workers are training their foreign replacements before they get laid off, then it is quite obvious that it’s the American trainers—not the H-1B trainees—who have the superior skills. Are H-1B workers being brought in because they have extensive formal training, like an advanced degree? The answer to that is a definitive no. The vast majority of Infosys and Tata’s imported H-1B workers hold no more than a Bachelor’s degree. During the FY10-12 period, 78 percent of Tata’s and 85 percent of Infosys’s H-1B employees held only a Bachelor’s degree or less. Finally, there’s also no evidence that Tata and Infosys are using the H-1B to retain foreign students who studied and earned an advanced degree in the United States: Only 1-in-206 of Infosys’ H-1B workers held an advanced degree from a U.S. university, and even less of Tata’s H-1B workers did, just 1-in-222. (See Table 3)

Table 3

All of the evidence makes it abundantly clear that the H-1B visa is being used to displace U.S. workers employed in decent-paying middle class STEM jobs. U.S. immigration laws are supposed to protect U.S. workers from being displaced, and they grant the Secretary of Labor ample authority to investigate egregious abuses of the H-1B program like the one at SCE, which is why EPI Vice President Ross Eisenbrey has called on Sec. Perez to investigate. Thanks to the reporting by Computerworld and the L.A. Times, there is now clear and credible evidence to justify the Secretary’s attention in this case. If the investigation finds willful violations of the H-1B program, Tata and Infosys should be debarred from using the program. Ultimately, a major substantive reform of the H-1B is required—but as the L.A. Times has editorialized in light of the SCE scandal—“Congress needs to fix it.”

SCE describes itself as “one of the nation’s largest electric utilities…deliver[ing] power to more than 14 million people.” SCE earned net profits of $1.4 billion on $13.2 billion in revenues over the past year. The company’s stock price is up 10 percent over that time and it pays its investors a 4.8 percent yield in dividends. An observer could be forgiven for believing that a job delivering safe and reliable power to homes in the United States might be reasonably safe from being offshored to India or even outsourced to temporary foreign workers. But he or she would be mistaken. In fact, the SCE case is just one more example in a long line of cases in which American workers are being replaced by H-1B workers.

Adding to the injustice, American workers losing their jobs are being forced to do “knowledge transfers,” an ugly euphemism that means being forced to train your own foreign replacement.

Americans should be outraged that most of our politicians sit idly by while outsourcing firms hijack the nation’s temporary foreign worker programs. Unpublished H-1B data from United States Citizenship and Immigration Services reveals the scale of the problem: A majority of H-1B visas are now being used by firms that displace American workers and facilitate the offshoring of high-wage jobs.

In November, as part of his executive immigration actions, President Obama announced sweeping changes to U.S. immigration policies. Some of what was announced, like deferred action for millions of unauthorized immigrants, will benefit U.S. workers in the low-wage labor market. Other changes—including actions to increase high-skilled immigration at the behest of the tech industry—are still being finalized and no one outside the government knows what they’ll be. Unfortunately, the administration is not considering changes that would help the U.S. workers educated in science, technology, engineering, and mathematics (STEM) who are hurt by the disastrous flaws in the H-1B program.

According to the U.S. Department of Labor (DOL) website, “The Immigration and Nationality Act (INA) requires that the hiring of a foreign worker will not adversely affect the wages and working conditions of U.S. workers comparably employed.” This closely mirrors the language in section 212(n)(1)(A)(ii) of the INA, which requires employers hiring H-1B workers to attest that they will “provide working conditions for such a nonimmigrant [H-1B] that will not adversely affect the working conditions of workers similarly employed.” If the Secretary of Labor receives credible information that leads him to reasonably believe that an employer has not complied with this requirement, he has statutory authority to investigate the case under INA section 212(n)(2)(G).

The SCE case is clearly one in which the hiring of H-1B workers is adversely affecting the wages and working conditions of American workers. There isn’t a clearer case of adverse impacts—American workers are losing their jobs to H-1Bs from another country. The Secretary of Labor has the statutory authority to investigate this and take action; he should use it.

If the president wishes to help the middle class, as he claimed in his State of the Union address, then his administration should take action to prevent the H-1B and other visas from being used to replace American workers. President Obama famously ran attack ads against his 2012 presidential rival Mitt Romney, calling him the “Outsourcer in Chief.” All the while, Obama has permitted an exponential expansion of IT outsourcing through his visa policies. In the past six years, thanks in large part to the H-1B and L-1 visa programs, America has lost hundreds of thousands of high-paying middle-class jobs to overseas locations.

Congress should act immediately to close the loopholes that have transformed the H-1B into the “Outsourcing Visa,” a term coined by Indian government officials.

Fixing problems with the H-1B program is not difficult. Bipartisan solutions have been introduced in past sessions of Congress by Sens. Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) and cosponsored by Sens. Sherrod Brown (D-Ohio) and Bernie Sanders (I-Vt.). The SCE employees should demand that their own senators, Democrats Barbara Boxer and Diane Feinstein, cosponsor and reintroduce the Durbin-Grassley H-1B and L-1 visa reform bill. This legislation would raise wage standards, give American workers a first and legitimate shot at job openings that would otherwise go to new H-1B workers, ensure that American workers are not replaced by H-1Bs, and give DOL more enforcement authority. The California senators should demand hearings to investigate why and how these “guestworker” programs can be used in ways that pervert the real reason they were created: to fill skilled-labor shortages. The SCE employees should demand similar representation from their delegation in the U.S. House, including Rep. Judy Chu, who represents Rosemead, Calif., the city where SCE is headquartered.

The SCE case highlights all of the most flagrant abuses of the H-1B guestworker program, in particular that American workers are being forced to train their own less expensive, foreign replacements. Disturbingly, this is far from a one-off occurrence. It is a systematic and widespread business model, adversely impacting tens of thousands of skilled American workers every year. Another large-scale example was just reported: Disney laid off hundreds of its U.S. IT workers and is outsourcing those functions to India-based offshoring firm HCL. HCL is bringing in H-1B and other temporary foreign workers to replace the American Disney employees, and it will ship some of the work and tasks to India.

The Post says Census got the number of STEM jobs wrong, because, in fact, one out of every five jobs requires STEM skills, even if the students end up working outside their field. That’s stretching definitions, though the idea that many STEM grads can use what they learn outside their field of study is certainly true. But, amazingly, the Post also says the numbers don’t really matter: “Whatever the number generated, it should not be seen as determining the need for STEM education.” Whether one STEM worker in four finds a job in his field of study, or only one in ten, the education is so valuable we can’t have too many STEM majors, according to the Post editorial. Why, even farmers should have STEM degrees because, “many farmers rely on genetic modification of crops.” That’s just silly. Many truck drivers rely on civil engineering, but they don’t need engineering degrees any more than a farmer planting hybrid corn needs a math or genetics degree.

The Post’s editors believe there’s no such thing as an oversupply of STEM graduates, but their editorial doesn’t review the boom and bust history of STEM graduate oversupply, or even mention what effect oversupply might have on the earnings or aspirations of the students who have paid for and worked to complete STEM bachelor degrees. By contrast, the USA Today authors (some of whom have done research with EPI before), all of whom are academics with close ties to actual students, do care about what happens to STEM grads after they leave school and look for work. They are rightly concerned that the wages of IT personnel have been flat for 16 years, and they worry that overproducing STEM grads, coupled with industry’s immigration proposal to triple the number of IT guestworkers, will suppress wage growth and deny IT workers the middle class security most would like, let alone a fair share of the tech industry’s fabulous profits.

If too many educated STEM workers chase too few STEM jobs, wages will continue to stagnate or even fall for them. The tech industry believes it would benefit from that, and its leaders have shown a ruthless desire to suppress the wages of their skilled workforce. The USA Today authors point out that the biggest names in IT, including Apple, Google, Intel, and Adobe, unlawfully conspired to keep their workers’ wages artificially low, but were discovered and sued for antitrust violations and restraint of trade. Some of the plaintiff IT workers are objecting to a proposed $300 million settlement of their antitrust claims against those four corporate giants as too little, while suits against other IT firms have not yet made it to trial or settlement talks. The corporate conspiracy is estimated to have cost the workforce several billion dollars in lost wages.

The industry’s efforts to suppress wage growth through illegal conspiracies and to import guest workers on visas that deny them the most basic of labor protections (i.e., the right to freely shop around between employers for the highest wage they can find) barely raise eyebrows among members of Congress, who are instinctively drawn to the view that “being competitive in the world market” means keeping labor costs low.

So what if the corporations’ profits are astronomical and their CEOs’ salaries are extravagantly high? Congress and most of the media equate what’s good for Apple and Google executives with what’s good for the country.

But really, if the economy is to work for more than just the 1 percent, our focus ought to be on increasing the wages and salaries of employees outside the executive suite, rather than profits, stock prices, and CEO compensation, all of which are inflated by keeping salaries low. Claiming, as the Post does, that we can never have too many STEM workers leads to destructive policies, such as flooding the labor market with foreign guestworkers earning below-average salaries. Anyone who cares about the U.S. students studying for STEM degrees has to be shocked and alarmed that already, one-third to one-half of new IT jobs are filled by guestworkers. What will happen if industry gets its way and the number of H-1B workers from abroad doubles or triples, while other temporary and permanent visa categories are also expanded to appease tech companies? What will happen to job opportunities and salaries in STEM occupations? As the USA Today authors ask, “How many more Americans will be frozen out of the middle class?” The damage could be severe and long lasting.