Key takeaways

• The 2025 Census data on earnings, income, and poverty may reflect how the Trump administration’s policy choices were beginning to impact the economic well-being of workers, families, and children last year.
• Last year’s economy was characterized by slowing job growth, rising wage inequality, and growing policy uncertainty. We expect to see little to no improvements in key economic indicators such as lower-end household income and supplemental poverty rates between 2024 and 2025.
• The 2026 story is still unfolding and is likely to be worse, given these factors: decelerating nominal wage growth, higher inflation, and the 2025 budget reconciliation law that will leave more families and children vulnerable to poverty.

Next week, the Census Bureau will release the latest data on earnings, income, and poverty for 2025. This data could show early signs of how the Trump administration’s policy choices impacted the economic well-being of workers, families, and children across the country. The initial strong recovery from the pandemic recession measurably slowed in 2025 as the labor market softened and the policy climate grew more uncertain. To help place the upcoming data release in context, we highlight key trends that have characterized the economic and policy landscape in 2025. Though the economy continued to soften as inflation worsened in 2026 and the safety net grew increasingly more difficult to access as a result of the Republican Budget Reconciliation Law, the data in the Census will only provide specific insights for living standards in 2025.

In summary, we find:

1. 1. The U.S. economy in 2025 grew more slowly than in 2024, adding fewer than half as many jobs—only 764,000 jobs compared with 1.825 million in 2024. The unemployment rate slowly rose over the course of 2025, and the hires rate was depressed, making it harder for young people in particular to break into the labor market. While the prime-age employment-to-population remained relatively resilient to labor market softening, prime-age Black workers experienced large declines in their employment rate.
   2. With more moderate inflation, strong nominal wage growth translated into decent average hourly wage gains between 2024 and 2025, but gains were not shared equally. Lower-end wage growth stalled in 2025, which could have implications for lower-end incomes and poverty rates.
   3. Because the Republican budget reconciliation law is making basic needs programs like SNAP increasingly more difficult for families to access, we don’t expect to see any significant improvements in supplemental poverty between 2024 and 2025. We expect to the see the full impact of the Republican law in the years ahead.
   4. While the release will only provide data for 2025, our examination of the economic and policy landscape for 2026 suggests that a weaker job market, safety net cuts, and high inflation will worsen outcomes.

The labor market recovery softened in 2025

Because the vast majority of people in the United States rely on labor market income for their economic well-being, the labor market data we already have for 2025 should provide some insights into what the Census data may tell us. Overall, job growth has slowed, and the unemployment rate has ticked up as employment rates softened, particularly for certain demographic groups.

After the tremendous rebound from the pandemic recession, the labor market cooled somewhat. Payroll employment growth went from 3.3 million in 2023 to 1.8 million in 2024 and then 764,000 in 2025. A slowdown would be expected after such a strong recovery, and the number of jobs needed to keep up with population growth declined with lower net immigration in the wake of Trump’s draconian mass deportation policies. Nearly 100,000 federal jobs (96,000) were lost in the massive DOGE cuts (when comparing annual averages, which obscure more massive downward trends later in the year), and even manufacturing employment faltered in Trump’s first year, falling by 156,000 jobs between 2024 and 2025. If not for job growth in health care and social assistance, overall payroll employment would have fallen outright.

This weakening led to a mild increase in the unemployment rate, from 4.0% to 4.3% between 2024 and 2025. Figure A displays the change in some key labor market indicators for certain demographic groups. While the overall unemployment rate rose modestly, the increase was far greater for young workers, ages 16 to 24. It’s likely that the depressed hires rate has made it harder for young workers to break into the labor market. Older workers experienced much milder increases in their respective unemployment rates.

The share of the population with a job—the employment-to-population ratio fell from 60.1% to 59.7%, a drop of 0.4 percentage points. Prime-age workers—those between 25 and 54 years old—were more resilient to the labor market softening. However, prime-age Black workers experienced a tremendous decline of 1.3 percentage points between 2024 and 2025. This weakness may show up in the income and poverty data released next week. At the same time, prime-age Hispanic workers experienced an increase in their employment-to-population ratio.

Figure A

Wage inequality increased in 2025

Employment changes alone have important implications for family and household income, but wages are also an important part of the economic story. Figure B illustrates several key price and wage changes between 2024 and 2025. Though the economy was a bit weaker, the labor market delivered strong nominal wage growth for private-sector workers, measured by the Current Employment Statistics. Nominal average hourly wages increased 4.0% between 2024 and 2025. Inflation moderated—remember this is before the spike in 2026—and therefore, real hourly wages rose a modest 1.5%.

Unfortunately, the gains were not broad based. Unlike the faster wage growth among lower-wage workers through 2024, lower-end wage growth stalled in 2025. While the fall wasn’t large, it reversed the trends experienced between 2019 and 2024. The stair-step increase in wage growth, as shown in the right half of Figure B, suggests a return to a K-shaped recovery, wherein higher-wage workers experienced much faster wage growth than those at the middle or the bottom. While stronger average wage growth and modest median wage growth may suggest modest improvements in median household income—though tempered by slower job growth—weaker low-end wages may translate into losses for lower-income households and possibly rising poverty rates, particularly for groups hit hardest by falling employment.

Figure B

Republicans weakened SNAP last year and any chance at poverty alleviation in the years ahead 

The end of the expanded social safety net in 2022 eroded all of the gains in poverty reduction experienced between 2020 and 2021. Since 2022, poverty has continued to climb. This unfortunate trend in poverty is unlikely to reverse course in the latest Census release for 2025. This is partly because the Republican budget reconciliation bill signed into law by President Trump in July of last year significantly cut and limited access to basic needs programs like SNAP, one of the most successful programs in our country’s fight against poverty and hunger. Because the implementation of these changes and spending cuts is still ongoing, we are unlikely to see the full impact of the Republican law in next week’s data.

In 2024 alone, SNAP lifted more than 3.5 million people out of poverty. Nearly 40% of these individuals were children (see Figure C). In fact, both SNAP and the National School Lunch Program (NSLP), which provides reduced-cost or free lunches to low-income children in public and nonprofit private schools, lifted more than 2 million children out of poverty in 2024. After refundable credits, these programs, along with Social Security, make up the most effective anti-poverty strategies for children in the United States.

Figure C

Instead of strengthening the country’s nutritional assistance programs to improve access and the adequacy of benefits amid growing food insecurity, the Republican reconciliation package cut funding for the U.S. Department of Agriculture (USDA), imposed strict and costly work requirements, and eliminated waivers for areas with chronically high unemployment. The ongoing implementation of some of these changes, including factors associated with staff limitations, has led to a decline in SNAP participation by more than 4.5 million people. This drop will not be entirely reflected in the upcoming poverty statistics since some of this decline occurred in 2026. Yet the cutting back of resources for USDA and SNAP initiated by congressional Republicans and the administration will continue to translate into higher poverty rates and increased food insecurity, as states struggle to implement the costly and harmful changes now required by the new law.

The administration has also taken steps to ensure that we don’t have the data we need to trace the painful impact of these changes on food insecure families. In September 2025, Trump’s USDA canceled the country’s leading survey that documented the magnitude and severity of hunger and food insecurity in the U.S. They claimed that the USDA survey and report  were “redundant” and “politicized.” Soon after this, the administration allowed SNAP benefits to lapse for the first time in the history of the program, while at the helm of the longest full government shutdown in U.S. history, lasting 43 days and creating a chaotic situation for SNAP beneficiaries, many of whom needed to turn to food pantries for help. 

As we will be reminded when the Census releases its poverty statistics for 2025, the impact of all these harmful policies hit Black and brown families with children particularly hard. This is because families of color are disproportionately more likely to rely on SNAP to avoid food insecurity, and children of color are also more likely to be burdened by poverty than their peers.

In 2021, the United States demonstrated to the world that it had the capacity to reduce poverty to historically low levels by expanding access to SNAP and other basic needs programs. In 2025, Trump and congressional Republicans showed the world that they were willing to gut basic needs programs to pay for tax cuts that disproportionately favor the wealthy. We should not be surprised when we fail at poverty reduction in the years ahead.

Next week’s data will be about the economic story of 2025. The 2026 story is still unfolding and is likely to have a worse ending.

As noted earlier, the earnings, income, and poverty statistics the U.S. Census will publish next week are for 2025. While we don’t yet know the full economic story for 2026, it is unlikely to be a more promising one. This is because the slowdown in job growth that began in 2025 has further solidified throughout 2026. This weaker job market continues to be particularly harmful to Black and young workers. The softer labor market in 2026 has also coincided with worsening inflation. Higher inflation is largely due to Trump’s ongoing war in Iran, which has already wiped out 1.5 years of real wage growth in a matter of months.

The policy landscape for 2026 also looks bleaker. The spending cuts to the U.S. social safety net that Trump signed into law in the summer of 2025 will continue to hurt the ability of families to access basic services like Medicaid and SNAP. This will leave increasingly more economically insecure families vulnerable to poverty and unnecessary hardship in the face of a worsening affordability crisis.

Key takeaways:

• So-called right-to-work (RTW) laws undermine workers’ ability to form unions. Unionization rates are clearly lower in RTW states—and since unions raise wages, that suppression lowers pay.   

• States with RTW laws are also more likely to have other anti-worker laws and generally weaker labor standards. This is likely because both RTW and other anti-worker policies stem from the same anti-worker political roots, and because RTW’s suppression of unions deprives these states of strong potential political champions (unions) for other pro-worker policies.  

• Non-RTW states are more likely to have pro-worker policies like higher minimum wages and prevailing wage laws, restrictions on noncompete agreements, pay transparency policies, and more protective unemployment insurance benefits. 

• As a result, workers in RTW states are paid 6.7% less on average than workers in non-RTW states—more than double the 3.2% wage penalty we found in 2015. That means the RTW wage penalty has increased in recent years and now translates to over $4,000 less per year for a median full-time worker in a RTW state.

• The RTW wage penalty is steeper for women (7.3%) than for men (6.3%), and for Black (9.7%) and Hispanic workers (10.0%) than for white workers (5.4%).   

• Lawmakers already have the policy tools they need to boost wages and improve other outcomes for workers: 

• • At the state level, rolling back existing RTW laws is the most powerful lever.  

• • At the federal level, the Protecting the Right to Organize Act (which includes a ban on RTW) would be transformational for efforts to organize workers.  

• • Policymakers could also make progress on numerous other fronts, such as making UI systems more protective and raising minimum wages. 

In the United States, so-called right-to-work (RTW) laws are anti-union state policies promoted by big business interests to weaken unions and limit workers’ bargaining power. Despite the name, RTW laws do not provide any sort of job protection or right to a job. Rather, the deceptively named policy starves unions of resources, making it harder for them to negotiate collectively for better wages, benefits, and working conditions.

RTW laws emerged in the 1940s as part of anti-union campaigns to suppress worker organizing and maintain Jim Crow labor relations in Southern states; these campaigns worsened economic inequality and racial disparities (Childers 2024). Today, 26 states have active “right-to-work” statutes.1

As intended, RTW laws reduce union density (the share of workers who are either members of a union or covered by a union contract). These policies prohibit unions and employers from negotiating over union security—the contract terms under which workers covered by a union contract either join the union or pay an agency fee covering their share of representation costs. This deprives unions of critical resources and suppresses union membership (Sherer et al. 2026). RTW states—specifically those with RTW laws for at least 25 years—have an average union density rate of 6.2%, far less than half the union density rate in non-RTW states (16.0%) (see Appendix Table 1).

RTW laws not only reduce the number of workers with collective bargaining agreements but also limit unions’ political power to advocate for stronger labor standards for workers more broadly. This is, in part, why states without anti-union restrictions are more likely to pass protections such as prevailing wage mandates, restrictions on noncompete agreements, higher minimum wages, and pay transparency laws.

To assess the effects of RTW laws on outcomes for workers, we analyze whether wages are lower in RTW states after controlling for key demographic-, job-, and state-level characteristics (see Appendix Table 1 for full demographic controls as well as median and average wages by RTW status). We find that wages in “right-to-work” states are, on average, 6.7% lower than in non-RTW states. This penalty is worse for Black and Hispanic workers, as well as young workers and those without college degrees. Notably, the penalty is also larger for nonunion workers. This is because strong unions benefit workers across the state, not just those in unionized workplaces (Shierholz et al. 2026). In RTW states with weaker unions, nonunionized workers do not experience these positive “spillover” effects.

Pro-worker policies are more common in states without RTW laws

The strong correlation between wages and states’ RTW status is not surprising. Not only do RTW states have lower unionization rates, leaving workers with less leverage to bid up wages, but they often maintain other anti-worker policies. Combined, these anti-worker policies tilt bargaining power toward employers, weakening workers’ ability to garner higher wages. States without RTW laws are more likely to have a wide array of stronger labor standards in place that raise pay, protect workers’ ability to switch jobs, and support those who lose one. These same states—where unionization rates have not been suppressed by RTW laws—have a better safety net and stronger labor standards in part because stronger unions give workers more political power and the ability to better lobby for pro-worker policies writ large (Shierholz et al. 2026).

Figure A displays the incidence of these labor standards for states with and without anti-union RTW laws.2 This is far from a complete list of relevant policies that may correlate with RTW status and wage levels, but they are illustrative.

Figure A

Prevailing wage

Prevailing wage laws apply to certain contracts for public works and require that contractors and subcontractors pay the employees performing such work a prevailing wage rate. The prevailing wage rate is defined as the average wage paid to similarly employed workers in a specific occupation in the area of intended employment. Federal law requires this of federal contracts while state and local laws may apply to state and local contracts.

Prevailing wage laws are more common in non-RTW states. Figure A shows that nearly all (96.0%) of non-RTW states have prevailing wage laws, while only 23.1% of RTW states have these protections for workers on state contracts.3 Without prevailing wage requirements, contractors may reduce their workers’ wages to win bids on government contracts—putting contractors who pay their workers fair wages at a disadvantage.

Restrictions on noncompetes

Noncompete agreements are employment provisions that ban workers at a company from joining a competing business or starting their own for a set period after leaving a job. Noncompetes undermine economic dynamism and innovation; they depress business formation and labor mobility, hurt productivity and growth, raise prices, shrink workers’ wages, and restrict workers’ freedom (Shierholz 2024).

One of the most effective ways workers achieve higher wages is by securing another offer, and then either renegotiating their current salary or leaving for the new higher-paying job. It is not surprising then that workers in states that enforce noncompetes are paid less than similar workers in states that do not enforce noncompetes (Starr 2019). States without anti-worker RTW laws are nearly four times as likely to restrict noncompetes as RTW states (44.0% vs. 11.5%).4 In this analysis, we include only full bans on noncompetes and states with income-based restrictions. States with only small carve-outs for certain occupations provide a much weaker standard and are, by definition, less broad, so those aren’t included.

Minimum wage

Raising the minimum wage is particularly important for lower-wage workers. While the federal minimum wage has sat at $7.25 an hour since 2009, losing over 30% of its purchasing power, workers in 31 states enjoy a higher wage floor (Zipperer 2026). Non-RTW states are three times as likely to have minimum wages higher than the federal minimum compared with RTW states (92.0% vs. 30.8%). This is not a small difference. As of 2026, the average value of the minimum wage in non-RTW states is 60% higher—$5.36 more per hour—than in RTW states.5

Pay transparency

Pay transparency laws prevent employers from lowballing wage offers by requiring them to include wage information in job postings. While they vary, all laws include some requirement that employers provide salary information in job postings or if directly requested by applicants. Lack of knowledge about wages and benefits keeps potential workers in the dark and limits their ability to learn about and apply for better paid opportunities. A study on Colorado’s newly passed wage transparency law found that wages increased 4.2% faster than those in neighboring states without such laws (Shedge 2025). Further, wage transparency has the potential to reduce gender- and race-based discrimination by arming jobseekers with more information and limiting employers’ ability to pay different amounts to similarly qualified candidates. Only two RTW states have a pay transparency law, compared with 64% of non-RTW states.6

Unemployment insurance

Access to unemployment insurance (UI) also shapes workers’ ability to seek better wages. When a worker is laid off and their household income falls, unemployment insurance supports them and their family until they find another job. UI is a joint federal-state program that relies on state UI systems to effectively deliver benefits to unemployed workers. States differ in their rules and approaches under the federal UI framework, leading to wide variation in the share of unemployed workers receiving UI benefits (the UI recipiency rate).

Better UI not only cushions workers and their families but also provides workers with additional leverage in the labor market. When UI access and generosity fall, job seekers are forced to settle for lower wages and employers leverage this by offering less (Dahl and Knepper 2026). On the flip side, research shows a positive relationship between more UI generosity and wages (Rinz and Wasser 2026). The UI recipiency rate is significantly higher in non-RTW states compared with RTW states (32.8% vs. 18.7%).7 This is not surprising because non-RTW states have stronger unions, which fight to increase UI eligibility, ease of access, benefit levels, and benefit duration—to the benefit of all workers, union and nonunion (Hertel-Fernandez and Gould-Werth 2020). As with other pro-worker policies, better UI access can contribute to higher wages in non-RTW states.

Other policy levers

Not only do workers in non-RTW states enjoy higher wages, but they also benefit from increased economic security thanks to higher health insurance rates, higher public education spending, paid family and medical leave access, and no preemptions against higher labor standards. Every non-RTW state expanded Medicaid compared with fewer than two-thirds of RTW states (61.5%).8 Unsurprisingly, the uninsured rate is higher in RTW states than in non-RTW states (8.9% vs. 6.2%).9

Investments in public education deliver a more productive workforce and more informed and engaged society. Increased funding for schools not only improves educational attainment, but also increases wages and family incomes (Jackson, Johnson, and Persico 2016). Non-RTW states spend 45% more on public education than RTW states ($24,084 vs. $16,620).10 Paid family and medical leave provides essential benefits that help workers maintain their livelihoods while taking care of themselves and their families. These laws are also shown to increase labor force participation, job retention, and earnings (Glynn 2020). Only one RTW state has comprehensive paid family and medical leave provisions for private-sector workers, compared with 56% of non-RTW states.11

Finally, some cities, counties, and other local governments enact policies that raise standards for working people, but some state legislatures force those standards back down with preemption—the use of state law to void local ordinances. Preemptions apply to policies such as minimum wage, prevailing wages, paid leave, and fair scheduling (EPI 2025). Preemption laws interfere with local governments’ ability to set job quality standards. They suppress wages, exacerbate racial inequities, and reduce worker power (Sherer, Cohn, and Ahdoot 2025). These preemptions are more common in RTW states.

Workers in RTW states are paid less

Our analysis of the relationship between wages and RTW status puts states into three categories: long-term RTW states, always non-RTW states, and “switcher” states that have changed their RTW status since 2011.12 Appendix Table 1 provides descriptive statistics for these three groups of states, and Appendix Figure A provides a map of states by RTW status. Our estimates focus on comparisons between long-term RTW states and always non-RTW states.

A simple comparison of hourly wages, the primary variable of interest, reveals that average wages are 22.9% higher in non-RTW states ($40.28 in non-RTW states vs. $32.78 in RTW states). Median wages are 19.2% higher in non-RTW states ($28.79 vs. $24.16). Because there are differences between worker-, job-, and state-level characteristics in RTW and non-RTW states, and since some of these characteristics will directly impact workers’ wages, it is important to control for these factors in a multivariate regression model. This allows us to more accurately identify the relationship between RTW status and wages.

We estimate log wage equations using Bureau of Labor Statistics Current Population Survey Outgoing Rotation Group (CPS-ORG) data for 2023–2025. We pool three years of data to minimize any spurious year-specific economic relationships, thereby helping us achieve more precise estimates. The total sample consists of 234,155 workers, ages 16+, who earn wages and salaries. About 42% of the sample lives in states with RTW laws (see Appendix Table 1 for the sample’s full demographic breakdown).13

In Table 1, we construct a regression model, starting with an unadjusted framework and building up to a model that controls for the full range of explanatory variables. The dependent variable is the natural log of hourly wages.

The variable of interest is an indicator variable when the worker lives in a long-term RTW state. We also include an indicator in the regression for a switcher state, though that is not our focus of interest (see Appendix Table 2 for a complete set of regression results, including the coefficient for switcher states). There are currently 26 states with RTW laws on the books and 25 without them including Washington, D.C. (see Appendix Figure A). There are five switcher states that have adopted RTW in recent years: Indiana (2012), Michigan (2013), Wisconsin (2015), West Virginia (2016), and Kentucky (2017). In 2023, Michigan became the first state to repeal its RTW statute. We separate the five switcher states from the analysis to better isolate the relationship between wages and the long-run effects of RTW.

The naïve model, without any controls, suggests that workers in RTW states are paid 17.8% less than workers in non-RTW states (Model I in Table 1).14 But many factors contribute to wage differences: demographic characteristics such as age, race/ethnicity, gender, and level of education are relevant as well as job-related factors such as work hours, occupation, and industry. Since these vary across states, they reduce the measured relationship between RTW status and wages. Model II shows that when the analysis compares more similar workers with each other, the RTW penalty drops to 14.0%.15

There are other factors that are different in RTW states, aside from these individual and job-related characteristics. Most importantly, the cost of living. The cost of living in non-RTW states is higher than in RTW states, as shown in Appendix Table 1. In prior research, Gould and Kimball (2015) showed that choice of price indicator makes no material difference on the measured relationship between RTW and wages. Here we include the Bureau of Economic Analysis’ Regional Price Parity index: The regional price parity index is higher in non-RTW states.16 Not surprisingly, this correlates with wage levels and therefore is important to include in the model. As with earlier studies, we also include state unemployment rates to control for differences in economic conditions.

After including the full set of demographic, individual-, and state-level labor market and cost of living controls (Model III), our analysis finds that workers in RTW states are paid 6.7% less than similar workers in non-RTW states. For the average worker, this is a difference of $2.70 per hour, or more than $5,600 for full-time workers at 2,080 hours over the year. However, because the average is skewed upward due to wage inequality, an assessment at the middle of the wage distribution provides a more conservative but perhaps more robust estimate of the RTW wage penalty. Acknowledging that this is a likely understatement of the full relationship, the RTW wage penalty for the median worker at full-time hours is over $4,000 for the year.

Table 1

This does not mean that RTW laws are a causal explanation for this 6.7% wage penalty. As demonstrated earlier in this report, RTW status correlates strongly with a number of other anti-worker policies. Other research has attempted to calculate the causal effects of RTW laws on wages. Using the switcher states in the most recent period, Fortin, Lemieux, and Lloyd (2022) found smaller wage penalties, which is to be expected given the shorter time frame for measurement post-adoption. Our wage penalty for switcher states—shown in the final column of Appendix Table 2—is much smaller (closer to zero) than the coefficient for long-term RTW states, though not statistically significant at conventional levels. Dasgupta and Merchant (2023) also examine states recently adopting RTW laws and find a statistically significant decline in annual wages by almost $1,900. Again, these states are more recent RTW adopters, so the full effects we find may take time to materialize.

We find that this relationship between long-term RTW status and wages remains economically and statistically significant under alternative specifications of our econometric model. For instance, removing major industries and occupations changes the coefficient to -0.071. Restricting the model to RTW status as of 2026—removing the separate indicator for states that switched since 2011—yields a coefficient estimate of -0.060. Doing the same but dropping Michigan (since its status changed in the measurement period) results in a coefficient of -0.064. In our final model, we do not include an indicator for unionization, unlike Gould and Kimball (2015). If we reintroduce that variable, the coefficient is -0.063.

In each of our regressions discussed above, we include a three-year average as it improves data reliability and allows us to run smaller groups of the data (see next section). When we run our analysis using just 2025, our results do not change. In fact, when we run our three-year final model for the periods 2021–2023, 2022–2024, and 2023–2025, our coefficients remain in the -0.070 to -0.068 range.

Wage penalties are steeper for women, Black, Hispanic, and nonunion workers in RTW states

The RTW penalty is not uniform across demographic groups and other labor market characteristics. Table 2 below shows the results of a series of final-model regressions (comparable to Model III in Table 1) for a set of demographic groups.

We find that women’s wages in RTW states are penalized at a higher rate (7.3%) than men’s (6.3%). The wage penalty also persists across all racial and ethnic groups, but it is almost twice as large for Black (9.7%) and Hispanic (10.0%) workers as for similar white workers (5.4%) and more than twice as large as for Asian American and Pacific Islander (AAPI) workers (4.6%). Young workers between the ages of 16 and 24 face a greater penalty (8.4%) than older workers. And workers without a college degree experience a much higher penalty (7.8%) than workers with a college degree (4.7%).

Table 2

It is particularly important to note that RTW laws have a statistically significant negative effect on the wages of nonunion workers, as shown in the last row of Table 2. Our analysis indicates that nonunion workers in RTW states have wages that are 6.3% lower, on average, than their counterparts in non-RTW states. Union members likely experience a smaller penalty (3.6%) because their wages tend to be higher than those in nonunionized workplaces, regardless of the state’s RTW status (McNicholas et al. 2025). However, the wage impact of unions extends beyond those directly covered by a union contract. Unions lift wage standards across entire industries, meaning that nonunion workers in states with higher union density are more likely to receive better pay.

As the gap in wages and labor standards between RTW and non-RTW states has grown, so has the wage penalty

Using our final model (Model III in Table 1) with pooled 2023–2025 data, we find a 6.7% RTW wage penalty—a larger penalty than we found in earlier examinations. For example, we found a 3.2% wage penalty using data for 2009 (Gould and Shierholz 2011) and pooled 2010–2012 data (Gould and Kimball 2015). Some of the increase in the current estimate of the RTW wage penalty reflects small changes (likely improvements) in our methods. But part of the higher estimate persists even when we apply our current methods to earlier data: Applying these methods to the 2010–2012 data yields an RTW wage penalty of 4.7%.

One method change concerns “switchers”—states that changed from non-RTW to RTW status (or back) since 2019. In the 2010–2012 period, there were no switchers to affect the data.17 In our analysis, we isolate switchers from the long-term RTW group, but the RTW penalty remains negative and significant no matter how one deals with the issue of switcher states. For example, recategorizing the five switchers to match their 2012 status (all non-RTW) lowers the measured RTW wage penalty in the 2010–2012 period to 4.1%, but it remains significant.

Other changes relative to our earlier research include controlling for public-sector status; removing union as an independent variable from the regression; using the full working age range of 16 and up (as opposed to 18–64); and correcting an issue with nonrandom missing values to the metropolitan variable. We’ve further clustered standard errors at the state level as suggested by Douglas (2024), which does not affect the size of the coefficients, only the size of their standard errors and resulting statistical significance.18

Setting those minor model differences aside, a consistent comparison over time sees the RTW wage penalty rising from 4.7% in 2010–2012 to 6.7% in 2023–2025. One possible reason why this RTW wage penalty grew could be the increasingly divergent policy trajectories of RTW and non-RTW states over this period.

For example, the gap between minimum wages in RTW states and non-RTW states has grown since 2010, largely because policymakers in most RTW states have refused to increase their minimum wage despite the fact that the federal minimum wage has been stagnant in nominal terms since 2009. In that year, the average minimum wage in RTW states was $7.25 while the average minimum wage in non-RTW states was $7.54. That gap has grown enormously, from just $0.29 per hour in 2009 to $5.36 per hour by 2026 ($14.24 in non-RTW states vs. $8.89 in RTW states).

There were other potentially relevant policy changes between 2012 and 2025. The first state-level pay transparency law was passed in Maryland in 2020. Seventeen states followed suit in subsequent years, 15 of which were non-RTW states. On the flip side, six states have repealed their prevailing wage laws since 2012—all of which were RTW. Only one state, Michigan, reinstated its prevailing wage law. It did so in 2023, the same year it repealed RTW. While this is far from an exhaustive list, it’s not surprising that the measured RTW wage penalty has grown over time.

Repealing anti-union “right-to-work” laws and strengthening labor law is key to raising wages

The wage penalty for workers in RTW states has grown since the last time we conducted this research a decade ago. Long-standing and more recently enacted anti-union RTW laws in 26 states, in tandem with other anti-worker policies, have further eroded workers’ collective bargaining power, suppressed wages, and lowered labor standards. These outcomes are linked to clear policy choices, and lawmakers at every level of government have the tools they need to restore workers’ union rights, strengthen labor standards, and lift wages. Across the U.S., 56 million workers say they want a union in their workplace, yet only 10% of all workers have one (Shierholz et al. 2026). Current federal and state labor laws—including anti-union RTW laws—place too many obstacles in workers’ path to unionizing and give employers too much power to interfere with workers’ free choice.

First and foremost, states with RTW laws should follow Michigan’s recent lead and repeal them. Repealing state RTW laws will enable workers to unionize and raise wages across the country. Indeed, recent EPI research finds that equalizing collective bargaining rights across all states by repealing RTW laws that affect private employees and ensuring collective bargaining rights for public employees would increase national union density by almost 50% (from 9.9 to 14.4%) (Shierholz et al. 2026). States should also consider passing constitutional amendments that affirm collective bargaining rights and explicitly bar RTW-style restrictions, such as the 2022 Workers’ Rights Amendment in Illinois (Sherer 2026).

At the federal level, lawmakers should pass the Protecting the Right to Organize (PRO) Act. The PRO Act is designed to address major weaknesses of the National Labor Relations Act (NLRA), which has been severely eroded by amendments and court decisions. Among many other reforms, the PRO Act would eliminate the option for states to maintain anti-union RTW laws—restoring full bargaining rights to workers in all states as intended when the NLRA was originally passed in 1935 (McNicholas, Poydock, and Rhinehart 2021). Since its first introduction in 2019, the PRO Act has passed the House of Representatives twice with bipartisan support (Shierholz et al. 2026).

In addition to proposed PRO Act reforms that would enable newly unionized workers to pursue arbitration to achieve a first contract (if an employer fails to negotiate in good faith), federal labor law should set a minimum standard that such contracts include a cost-of-living adjustment (COLA). To further expand the benefits of collective bargaining, Congress should amend the NLRA to require default collective bargaining at any firm where CEO-to-worker pay ratios exceed 100 times what a typical worker makes in their industry (as this ratio would be one proxy for whether conditions at an employer are particularly unequal) (Shierholz et al. 2026). 

Legislators at both the state and federal level should also look to the list of anti-worker laws that are typically found in RTW states for more opportunities to rebalance unequal power in the labor market and improve wages and working conditions. These policies include:

• Raising the minimum wage;
• Banning noncompete agreements;
• Strengthening federal unemployment insurance guidelines and state UI systems;
• Removing state restrictions that preempt local governments from raising wages and strengthening labor standards.

These are among just a few of the policy levers states can use to raise wages and standards (EPI 2026b).

Our analysis suggests that repealing anti-union RTW laws and enabling workers to increase unionization levels are key to raising wages, both because RTW laws directly suppress unionization rates (and unions raise wages), and because weakening unions limits workers’ collective ability to shape other public policies.

Acknowledgements

The authors are grateful to Josh Bivens, Jennifer Sherer, Hilary Wething, and Ben Zipperer for their helpful comments and expertise.

Appendix

Appendix Figure A

Appendix Table 1

Appendix Table 2

Notes

1. See Appendix Figure A for RTW status. As of 2026, these states are Alabama, Arizona, Arkansas, Florida, Georgia, Iowa, Idaho, Indiana, Kansas, Kentucky, Louisiana, Mississippi, North Carolina, North Dakota, Nebraska, Nevada, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, West Virginia, and Wyoming.

2. States are categorized as “RTW” or “non-RTW” based on their status as of 2026.

3. Authors’ analysis of prevailing wage laws from DOL (2023) and state legislative websites.

4. Authors’ analysis of noncompete restriction policies from EIG (2026).

5. Authors’ analysis of minimum wage data from EPI (2026c).

6. Authors’ analysis of pay transparency laws from GovDocs (2026).

7. Authors’ analysis of UI recipiency rate data from DOL-ETA.

8. Authors’ analysis of Medicaid expansion policies from KFF (2026).

9. Authors’ analysis of uninsurance rates by state, 2023 through 2025, from Carter (2025).

10. Authors’ analysis of per-pupil education spending data from NCES-NPEFS (2024).

11. Authors’ analysis of paid family and medical leave policies from Wielk (2026).

12. Prior to 2012, the last state to change its status was Oklahoma in 2001.

13. This analysis builds on earlier work by Gould and Kimball (2015); see the report for a full description of the methodology and list of controls.

14. Interpreting the results from these semilogarithmic functions requires utilizing the exponential function on the coefficient. Specific to the binary variable coefficient (β1) for RTW, the percent change in workers’ wages resulting from a state being RTW can be calculated by the formula: 100*[exp(β1)-1]. Typically, the result of this equation will be very close to the coefficient itself but will differ more as the coefficient becomes larger. We show the coefficient in the first row of Table 1 and the exponentiated result as a percent in the third row.

15. Full regression results for covariates in all three models can be found in Appendix Table 2.

16. Because the 2025 BEA RPP data were not yet available at the time of publication, we assign an average of 2022–2024 data to all years in our sample (2023–2025).

17. Gould and Kimball (2015) classify Indiana as non-RTW as its RTW law had just taken effect.

18. We do not control for state-level fixed effects, as Douglas (2024) suggested, because state-level fixed effects perfectly correlate with RTW status and would deem our results uninterpretable.

References

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Carter, Caitlin. 2025. “Health Insurance Coverage by State: 2023 and 2024.” U.S. Census Bureau, September 11, 2025. 

Childers, Chandra. 2024. The Evolution of the Southern Economic Development Strategy: Rooted in Racism and Economic Exploitation: Part One. Economic Policy Institute, May 2024. 

Dahl, B. Gordon, and Matthew Knepper. 2026. “Unemployment Insurance, Starting Salaries, and Jobs: Evidence from Multi-state Firms.” The Review of Economic Studies, rdag056. https://doi.org/10.1093/restud/rdag056.

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Douglas, Christopher C. 2024. Right-to-Work States Do Not Have Lower Wages. Mackinac Center, December 2024. 

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McNicholas, Celine, Margaret Poydock, Heidi Shierholz, and Hilary Wething. 2025. Unions Aren’t Just Good for Workers—They Also Benefit Communities and Democracy. Economic Policy Institute, August 2025.

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Shedge, Nirav. 2025. Pay Transparency Laws and Wage Dynamics: Evidence from Colorado. Social Science Research Network, November 2025. 

Sherer, Jennifer. 2026. Rights to Unionize and Collectively Bargain: State Solutions to the U.S. Workers Rights Crisis. Economic Policy Institute, February 2026.

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But as the country’s workforce has shifted over the nearly 90 years since the FLSA was enacted, the FLSA’s overtime rate has not.

Recently, the Double Wage for Overtime Act was introduced by Rep. Casar (D-Texas) in the House and by Sen. Gallego (D-Ariz.) in the Senate. The Act would strengthen overtime protections for more than 13 million workers by amending the overtime rate for the first time since 1938. It would raise overtime pay from 1.5 times a worker’s regular rate of pay to double the regular rate.

How would this affect pay, hours worked, and employment?

The potential to significantly increase workers’ earnings is notable. A worker making $25 an hour and working 10 hours overtime a week for a full year would gain $6,500 more in annual income, all else equal. But, as with any change to overtime policies, employers could respond to the new standard differently, based on the needs of their workplace. In particular, some workers who often work overtime may work fewer overtime hours, as employers adjust schedules and spread work to minimize having to pay the overtime premium. But, due to the double overtime rate, overall compensation for working people would still rise.

The Double Wage for Overtime Act also serves as a mechanism to narrow race and gender pay gaps by boosting pay in historically undercompensated, overtime-eligible sectors, where women and workers of color are disproportionately represented, due to the broad impacts of racism and sexism on labor market outcomes.

Finally, the bill offers a strong deterrent to employers who might otherwise overwork employees. Stronger overtime protections incentivize fairer and more reasonable scheduling, and act as a protection against unpredictably long hours. And, by incentivizing employers to spread hours out to employees who work less than 40 hours a week, stronger overtime protections are also likely to reduce the number of workers who are working part-time “involuntarily” (because they can’t get enough hours).

Any impact on employment is likely to be small, but positive. Some might argue, as they often do in opposing minimum wage increases, that requiring businesses to pay their employees more would reduce employment. But the overwhelming body of evidence on minimum wage increases shows that they raise wages without causing meaningful job losses.

Moreover, increasing the overtime premium differs from increasing the minimum wage in an important way. A higher minimum wage requires employers to raise the pay of all workers earning below the new minimum. By contrast, employers have considerable flexibility in responding to a higher overtime premium. Rather than paying the higher overtime rate, they could hire additional workers or offer more hours to employees who currently work part-time. In part because employers have these alternatives, any employment effect of increasing the overtime premium is likely to be positive.

How does this compare with “No tax on overtime”?

The legislation is far better for working people than Republicans’ “no tax on overtime” policy. Although a tax deduction may sound like a compelling way to help people who work overtime, it is a deeply flawed policy with very uneven benefits. It largely benefits middle-to-high-income earners, provides only modest tax savings for those workers who do qualify, leaves some workers worse off, and preserves financial gains for employers who overwork employees. Strengthening overtime standards—instead of offering gimmicky tax cuts—is the real way to deliver for working people.

How would this affect local economies and businesses?

As mentioned above, if this legislation were to take effect, businesses would have choices and flexibility as to how to comply. Firms may hire additional employees, which would increase employment in the overall economy. They may also choose to innovate and become more efficient in how they direct their employees’ use of time. Reducing excessive numbers of work hours may also improve worker health, concentration, and lead to fewer fatigue-related accidents, which would increase productivity in the workplace, benefiting workers and employers alike.

Though employers can respond to an increase in overtime protections in many ways, the increase would raise labor costs, as it puts money in workers’ pockets. Importantly, this is unlikely to translate into higher prices for consumers. Research on minimum wage increases, which raise labor costs, finds little-to-no inflationary impact from minimum wage increases. And minimum wage increases are a much greater shock to labor costs than an increase in the overtime premium. Increases in the minimum wage affect all hours worked for impacted workers, while the higher overtime rate would only affect hours worked past 40 in a week, a small fraction of total hours worked.

In fact, the Double Wage for Overtime Act would boost affordability by helping ensure that workers actually earn enough in wages to cover the cost of living with dignity and security. The potential income increase for working-class households would have a positive effect on local businesses as well. When workers have more money in their pockets, they can put that money back into their communities.

In short, increasing the overtime wage premium would strengthen one of the nation’s foundational labor standards, putting more money in workers’ pockets while encouraging employers to create jobs, instead of relying on excessive overtime. The Double Wage for Overtime Act is a straightforward opportunity for lawmakers to tackle continued affordability concerns. It is a long overdue modernization of overtime pay that would benefit millions.

The bill includes a combined $71.9 million cut for the Department of Labor’s Wage and Hour Division (WHD) and the Occupational Safety and Health Administration (OSHA). Further, the measure implements a 3% cut to the National Labor Relations Board (NLRB). While the legislation slightly increases funding for the Equal Employment Opportunity Commission (EEOC) that the Trump administration has weaponized for political reasons, the amount overall remains insufficient. The appropriations measure now moves to the Senate, where the budget cuts face an uncertain future.

If enacted, these reductions would further strain these agencies that have faced over a decade of flat funding that hasn’t accounted for inflation or rising labor force participation (see Figure A). This chronic underfunding has severely impacted their ability to enforce worker protection laws.

Figure A

The consequences of underfunding worker protection agencies

The Department of Labor serves the nation’s workers by administering and enforcing most federal worker protection laws, such as the Fair Labor Standards Act, the Occupational Safety and Health Act, and the Family and Medical Leave Act. Within this framework, WHD ensures that workers receive wages earned while OHSA evaluates safe workplace conditions and standards. Moreover, independent agencies such as the EEOC enforce a range of anti-discrimination laws while the NLRB enforces private-sector labor law, including workers’ rights to a union and collective bargaining. Together, these government agencies are designed to equip workers with the tools to combat workplace abuses and rectify unequal bargaining power. However, enforcement agencies are unable to fulfill their mandates with reduced staffing and resources.

Since 1992, OSHA has experienced a 16.0% decrease in inspectors. OSHA has been left with so few resources that it would take 191 years for its inspectors to visit every workplace under its coverage just once. Furthermore, a recent Government Accountability Office report flagged critical agency shortcomings, noting OSHA’s weak efforts to address the rising tide of workplace violence against health care and social service workers.

WHD has faced similar staffing challenges. The number of WHD investigators is at its lowest point since at least 1973, despite being tasked with protecting many more workers. As a result, the total number of resolved WHD investigations has dropped significantly over the past few years (see Figure B).

Figure B

Meanwhile, the EEOC has experienced an uptick in discrimination claims over the decades alongside rising labor force participation, yet its resources have not matched the pace of these shifts. For the NLRB, funding for the agency has remained flat except for a recent $6 million reduction in case-handling. The lack of funding has severely impacted field offices—the primary point of contact for union elections—with six closing between 2014 to 2025. In 2024, the NLRB released a statement describing their struggle to meet responsibilities such as conducting hearings and elections amid funding and staffing shortages. The consequence of these challenges is evident. Although favorability for unions nears a record high, major efforts to undermine worker organizing persist.

House budget cuts would leave workers more vulnerable to exploitation

If enacted, the House’s budget cuts would exacerbate an already precarious workplace reality. There were 5,070 fatal work injuries in 2024, according to the Bureau of Labor Statistics (see Figure C). Put another way, a worker died every 104 minutes from a work-related injury. Foreign-born Latinx workers were disproportionately impacted. Reducing OSHA funding and staffing will make it even harder to ensure preventable deaths do not occur.

Figure C

Additionally, amid eroding worker protections, workers have had billions of dollars of wages stolen each year. Undocumented workers are especially impacted, with many fearing to report violations especially amid the Trump administration’s anti-immigrant policies.

Furthermore, workers continue to face discrimination, filing an average of 83,000 charges per year since 1997. Political attacks on diversity, equity, and inclusion have only eroded the mechanisms designed to address these injustices.

The House budget proposal claims to champion efficiency, but true efficiency cannot be achieved by dismantling an already vulnerable labor protection ecosystem or by slashing public-sector resources. The chronic underfunding of worker protection agencies turns legally guaranteed protections into hollow promises and leaves workers exposed to unchecked exploitation and vulnerability. A budget that truly supports U.S. workers would pass robust funding for staffing, investigators, and programs that guarantee safety, fairness, and justice across every workplace.

After years of pushing unsuccessfully to weaken work hours protections for 14–15-year-olds in Ohio, industry groups have partially succeeded with the help of State Senator Tim Schaffer. Just months after a public outcry led Governor Mike DeWine to veto similar child labor rollbacks in 2025, Schaffer revived the attack on child labor laws by sneaking an amendment into a broader bipartisan education bill. An unrelated amendment tacked onto the new law will allow employers to schedule 14–15-year-olds until 9 p.m. during the school year, though (unlike prior versions of the legislation) only on nights not preceding a school day. The change puts Ohio state law in conflict with long-standing federal child labor standards and allows employers to treat young teens more like adults for scheduling purposes, while saving on labor costs. In Ohio, employers can pay youth under 16 the federal minimum wage of $7.25, nearly $4 less than the regular state minimum wage of $11 an hour.

Industry-supported Ohio senator snuck failed child labor rollback into bipartisan bill to force lawmakers’ support

In late 2025, Governor DeWine vetoed a standalone bill that would have extended the number of hours that employers can schedule 14–15-year-olds to work on any night during the school year—in violation of federal law—after advocates from a long list of child health and welfare, education, organized labor, and economic justice organizations publicly urged him to oppose it. In his veto message, DeWine acknowledged that existing work hour guidelines—providing young teens (under 16) opportunities to gain work experience “after school up to 7 p.m.”—have been “in place, across this country, for many years” and have “served us well” and “effectively balanced the importance of 14- and 15-year-old children learning to work, with the importance of them having time to study.”

But DeWine has now approved similar changes as part of a comprehensive, bipartisan education bill that received broad support, including from education and child advocates. State Senator Schaffer’s 11th-hour backdoor move to add previously vetoed child labor legislation to this year’s education bill was a desperate effort to force changes that have otherwise failed to pass muster, even in a Republican-controlled state legislature.

Federal child labor laws reflect decades of research about the harms of overwork

Allowing young teens to work more hours at night opens the door to problems ranging from poor academic outcomes to a greater chance of injury. Studies have consistently shown that intensive work at a young age is associated with poor academic outcomes; longer hours raise the risk of work-related illness and injury; and working later into the night exacerbates sleep deprivation that in turn can interfere with teens’ education and well-being. Allowing employers to schedule young teens to work until 9 p.m. also increases the likelihood of nighttime driving for new drivers (minors can be permitted to drive at age 15.5 in Ohio), an additional risk factor for accidents. Motor vehicle crashes are already the leading cause of death for teens and young adults, who are three times more likely than adults to die in a car accident.

For all these reasons, federal law limits the maximum number of working hours for young teens to three hours per night or 18 hours a week and prohibits work past 7 p.m. during the school year. Because states can legislate above FLSA standards but not below, the new state standards conflict directly with federal law.

The enacted rollback is less harmful than last year’s failed bill but still hurts children and violates federal law

While the bill DeWine vetoed in 2025 would have allowed employers to schedule 14-year-olds to work until 9 p.m. on any night during the school year, the bill he signed on Friday allows employers to schedule 14-year-olds to work until 9 p.m., only on nights not preceding a school day. However, this limitation on working hours during school nights does nothing to change overall concerns: that later and longer working hours during the school year threaten children’s well-being and education. The new state law also conflicts with federal law and will sow confusion. Employers who follow new state guidelines will be at high risk of violating the FLSA (which will continue to apply to most Ohio employers) and incurring fines and other enforcement actions from the U.S. Department of Labor. This is a lesson that employers have already learned the hard way in states like Iowa where the National Restaurant Association, NFIB, and others have pushed for similar child labor law changes that put state standards into conflict with federal law.

The outcome this year in Ohio provides a useful illustration of how corporate interests and dark money groups are conspiring to weaken labor standards in state legislatures across the country. Schaffer has championed multiple legislative efforts to roll back child labor protections in Ohio in coordination with industry groups that benefit from weaker standards and has even sought to erode federal child labor standards through a concurrent resolution calling on Congress to weaken the FLSA to match.

Schaffer has been clear about his intention to benefit employers, working closely with lobby groups like the billionaire-founded right-wing dark-money group Americans for Prosperity and state affiliates of industry lobby groups like the National Federation of Independent Business (NFIB) and National Restaurant Association. These organizations have fought at the state and federal level for unpopular child labor rollbacks, as well as blocking minimum wage increases, paid sick leave, and other policies that improve conditions for workers. Schaffer has received legislative awards or campaign endorsements from all three groups.

By repeatedly proposing—and in this case implementing—rollbacks that conflict with federal law, Ohio lawmakers are chipping away at the already fragile federal floor for workplace protections. Industry campaigns to weaken child labor laws are continuing, and there is a very real risk that federal child labor protections could face similar threats. In light of these threats, states should instead pursue policy options to strengthen standards and ensure that young teens who work can do so without harming themselves in the process.

According to today’s Consumer Price Index (CPI) release, overall inflation was 4.2% over the last year. The sudden burst in inflation, along with slowing nominal wage growth, means that the average hourly real wage for private-sector workers is now no higher than it was in January 2025.

So far, excessive inflation has been limited to energy and airfares. But as long as the war continues, there is a heightened threat that price increases will spill over to the broader economy, triggering a more permanent increase in the cost of living and further reductions in real earnings.

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.

Key takeaways:

• Affordability is not just about prices; it’s the outcome of a race between income growth and price inflation. When income growth is slower than price inflation, affordability worsens. When income growth is faster, affordability improves.
• Focusing just on prices is bad for understanding how the economy works and how it has performed in the recent past, and it leads to an overly restrictive policy menu for improving families’ affordability.
• Policy can more reliably address income growth for typical families. This growth has been stunted for decades by the rise of inequality. Closing this gap by ensuring more equitable distribution of future growth is the strongest tool we have for improving affordability.

Affordability has been the policy buzzword of recent years. Much of the affordability discourse—both among policymakers and the public—has focused near-exclusively on prices as the big affordability problem. But affordability is not a problem of high prices, instead it’s the outcome of a race between incomes and prices. And the reason typical families have faced an affordability crunch in recent decades is not because prices have grown exceptionally fast, it’s because incomes for the vast majority have grown too slowly. This income growth has been suppressed mostly by rising inequality that has put a growing wedge between overall economic growth and the income growth of typical families.

Getting the drivers of affordability right is important—it’s not just quibbling. If you only examine price growth and try to infer what has happened to affordability over periods of economic history, you’ll usually get the story wrong. And if policymakers only look at how to change the trajectory of prices while ignoring what they can do to change the trajectory of incomes, they will be far less effective in providing useful relief to U.S. families. There are far more ways to use policy to raise incomes in a targeted and effective way than there are to suppress price growth.

Below, we provide some more background on why analyses of affordability need to include incomes, why policymakers have much more scope to raise incomes in a useful way as opposed to pushing down prices, and why focusing just on prices can obscure whether affordability has improved or worsened.

Why do prices dominate today’s affordability debates?

In modern capitalist economies, prices rise essentially every year (though at quite different rates), but so do incomes. Determining what has happened to families’ ability to afford a decent and secure life requires looking at measures that take into account both sides of the affordability equation, such as real (inflation-adjusted) income growth. Nobody really disputes this. After all, Americans could buy a new car for $600 in the 1930s, but nobody thinks society was generally richer back then.

The narrow focus on prices in assessing one’s own economic struggles likely stems from several factors.

First, inflation was very fast in the early 2020s. Americans hadn’t experienced inflation rates that high in decades, and they didn’t like them, so prices remain front of mind for many.

Second, it is true that price changes can dominate what happens to real incomes over very short time periods (say a year or less). This recognition is why we can be so sure that the oil price shock inflicted by the U.S. bombing of Iran is going to be so damaging to U.S. families. The rise in oil prices so far this year has likely baked in at least a 1.5% increase in inflation over the next 6–12 months. In 2025, real wage growth for the large majority of workers was slower than 1.5% (which was the outcome of roughly 4% nominal wage growth minus 2.5% inflation). Given this, a sharp and unexpected 1.5% jump in prices will likely erase any prospective real wage gains for workers in 2026.

Finally, it has been noted that many Americans see wage gains as something they accomplished themselves through hard work, while prices are out of their immediate control. Inflation is hence seen as damage done to them and something they need relief from. But this is mostly wrong—policy choices impact wage growth at least as much as inflation, and the most effective policy relief for living standards will come through measures that raise wages, not restrain prices.

Policy can target incomes more effectively and precisely than prices

One person’s income is another person’s cost, which means prices are a bundle of different stakeholders’ incomes. The bill you pay at the grocery store must cover payments the store makes to its shareholders, the salary of the CEO and managers, the wages of cashiers, and the cost of buying food from producers. We don’t want all these incomes to be forced down. Given extreme levels of inequality in the U.S., we would likely be fine with lower CEO pay and payments to shareholders, but we would want wages of cashiers and many in the food production supply chain to rise. Efforts to simply clamp down on this price will have uncertain effects on incomes.

In the jargon of economists, focusing on prices is sector-based policy but to genuinely improve affordability we need factor-based policies, where factors of production like capital, rank-and-file workers, and corporate management can be specifically targeted by policies that aim to raise or restrain their incomes.

Fortunately, there are many good policy options for targeted affordability policy specifically toward low- and middle-income families. Incomes for these families—and for anybody without dynastic wealth—are dominated by wages and public benefits. We talk about each of these in turn below.

Boosting public benefits is affordability policy

Public benefits are entirely under policymakers’ control. If policymakers really cared about the affordability of groceries or health care or energy, they could boost benefits for food stamps, Medicaid, and the low-income heating energy assistance program. These programs currently deliver needed assistance to tens of millions of families to make life more affordable—and they do this with vanishingly small administrative costs, meaning they are highly efficient. Yet all of these programs are slated for steep cuts in the coming decade due to the Republican tax and spending megabill passed in 2025. This bill will inflict large damage to the most vulnerable families’ ability to afford decent and secure lives.

Further, Congress and the Trump administration chose to not extend the Biden administration’s more-generous subsidies for people to buy health insurance through the marketplace exchanges of the Affordable Care Act. The failure to extend these subsidies—even after a full federal government shutdown engineered by congressional Democrats aimed at prioritizing this issue—means that average out-of-pocket costs will double for those buying insurance in the exchanges.

Besides just reversing these cuts, making the U.S. welfare state more robust could also greatly boost the affordability of a decent life. Things like making health coverage more universal with lower out-of-pocket costs, reforming unemployment insurance to make it more protective, and providing all families with children a generous universal child allowance could dramatically improve affordability.

Policy can boost affordability through higher wages as well

The link between policy changes and wage growth is slightly less direct than for public benefits, but it remains very strong. Capitalist labor markets are inherently tilted toward employers and against workers. The only periods of history that have seen strong and equal rates of wage growth across the workforce have been periods where policy supported institutions that boosted workers’ leverage with employers.

The 30 years after World War II saw the creation of policies and institutions that successfully spread the gains from rising productivity equitably among workers up and down the wage distribution, with low- and middle-wage workers seeing growth rates as fast as high-wage workers. This equitable distribution of wage growth was a crucial way that income growth more broadly was kept equitable in this period.

Since 1979, however, these institutions have been steadily attacked and weakened with no new institutions being stood up to take their place in ensuring an equitable distribution of economic growth. The result has been that wages and incomes of typical families have lagged far behind average income and wage growth (or productivity). The wedge between income growth experienced by the vast majority of families and average growth is simply income being generated in the economy that is not helping typical families’ affordability struggles. Instead, it is income being funneled reliably away to the top.

There’s no reason that the institutions that equalized wage growth cannot be built back up and modernized.

The federal minimum wage is the most obvious policy institution for raising wages at the low end of the labor market. Raising the federal minimum wage from its current shamefully low $7.25 would directly boost affordability for tens of millions of workers. In the middle of the wage distribution, unions have proven to be the institution that has historically counteracted employer power and given typical workers increased leverage. However, unions are in a far weaker position today relative to their high points because of intentional policy choices—specifically because policymakers failed to act to curb employers’ growing hostility (and often their illegal activities) toward union organizing. If stronger policy boosted union density, unions would raise wages for both members and non-members alike.

Low- and middle-wage workers also benefit enormously from a determined effort to keep unemployment low for extended periods of time. In recent decades, policymakers have tolerated excess unemployment to keep inflation in check, but this is far too costly a strategy to keep potential inflation in check. Besides locking out millions of willing workers from job opportunities, long periods of excess unemployment were periods when real (inflation-adjusted) wage growth became literally stagnant.

Policymakers often seem skeptical of the effectiveness of these wage-boosting policies, arguing that the effects are too indirect and will take too long to provide benefits to workers. It’s true that efforts to boost unionization and sustain full employment will take some time to push up wages. But they will do this reliably. Further, many policies advanced in the name of reducing prices would also take a long time to come to fruition. For example, calls to tighten antitrust restrictions against corporate mergers and to break up established monopolies often have lots of merit. However, they are not policies that happen instantly and have purely predictable effects.

Focusing too hard on prices can obscure when affordability is actually improving

Finally, one key reason to broaden the affordability debate beyond prices is simply to make sure the public and policymakers can correctly identify periods of improvement or degradation of affordability. As an example of how focusing only on prices can lead to an incorrect diagnosis of affordability trends, take the example of two five-year stretches in recent economic history, both measured from a business cycle peak and going five years forward from there: In the years between 2007 and 2012, annual inflation averaged 1.8% and peaked at 5.5%, while between 2019 and 2024, inflation averaged 4.2% and peaked at 9%. Based on price growth alone, one would expect affordability to have eroded more rapidly in that second period, and indeed the popular narrative is that the early 2020s inflation was particularly destructive for affordability.

But between 2007 and 2012, the nation’s unemployment rate averaged 8.3%, while it averaged less than 5% between 2019 and 2024. After 2007, it took 93 months to re-attain the pre-recession unemployment rate, while it took just 29 months after the 2019 business cycle peak. In short, the labor market was far stronger in the second period.

And when it comes to real (inflation-adjusted) wage growth, the second period—largely because of its lower unemployment—saw far better outcomes than the first. In the 2019–2024 period, inflation-adjusted wages for low-wage workers (those at the 10th percentile) and the median worker rose by a cumulative 15.3% and 5.8%, respectively. In short, contrary to most conventional wisdom, affordability improved in this time. Between 2007 and 2012, real wages outright fell for both low-wage and median workers. Even with very slow inflation, affordability was demonstrably worse in that earlier period.

Figure A

More recently, inflation averaged slightly lower in 2025 (2.5%) than 2024 (2.9%). Yet for many workers—and particularly low-wage workers—2025 saw weaker (or even negative) real wage growth. This is largely due to some slight cooling in the labor market as unemployment rose from 4.0% to 4.4% over the course of 2025. Hence, even as inflation decelerated, the cooling labor market led to an even faster deceleration in nominal wages, which meant that affordability worsened for many workers.

Figure B

Reducing inequality is the key to improving affordability

Because many policymakers believe that affordability concerns are a new problem caused by inflation of recent years, they are now on a frenzied search for new and creative solutions to this price problem. But because the real affordability problem for U.S. families did not emerge in the past few years (remember, affordability was improving in the five years before 2025) and because the genuine long-run problem of affordability was about the inequality of income and wage growth, not excess inflation, most of these new and creative solutions just won’t hit the mark.

It’s understandable why many policymakers seem frustrated with being reminded of the long-diagnosed problem of inequality and the proven remedies—such as sustained full employment, higher wage standards like minimum wages, protecting workers’ fundamental rights to organize unions and bargain collectively, and a more robust welfare state.

Some, of course, just don’t believe in some of these solutions, while many who do would argue that these proven remedies are politically unrealistic in the current moment. But because the real affordability problem is an inequality problem that requires those at the top of the income and wealth scales having to accept less growth going forward (less than the stratospheric gains they’ve gotten used to, it should be said), any genuine solution is going to seem impossible in today’s political system that is dominated by the wealthiest families and corporations. Any policy—whether old and well-tested or new and creative—that actually aims to redistribute income, wealth, and power away from where it sits today will face a wall of opposition that must be politically overcome one way or the other. There’s no “one weird trick” where you can develop a policy creative and neat enough that it will somehow fool the rich and powerful about what its end result will be. And if the end result of the new and creative policy does not threaten the prerogatives of the rich, it’s not a real solution.

Today’s affordability concerns are indeed rooted in objective facts about the material circumstances of middle- and working-class families in the United States. Precisely because of this, they deserve more serious analysis and policy responses than they have been getting. This means focusing more on incomes than prices, and it means being clear-eyed that it has been the upward redistribution of income to the top—abetted by policy decisions—that is the drag on typical families’ affordability. Until solutions address that, they’re mostly just noise.

Key takeaways:

• Income inequality has skyrocketed since 1979 because of intentional policy choices that suppressed wages for typical families to accelerate income growth at the top.
• Middle-class household incomes would be roughly $30,000 higher today if their incomes had simply kept pace with average income growth since 1979.
• Recognizing that today’s affordability problems are overwhelmingly inequality problems is the key to constructing the right policy solutions.
  • As a start, protecting workers’ right to organize unions, fostering long periods of very low unemployment, and keeping minimum wages high will help typical families claim their fair share of income growth.

When most people—including policymakers—complain about a lack of affordability, they think of prices being too high. But affordability is the outcome of a race between prices and incomes. After all, goods and services were a lot cheaper 90 years ago during the Great Depression, but we all know that nearly everybody is richer today than their peers back then. Bringing incomes into the affordability picture makes for better understanding and better policy.

New Congressional Budget Office (CBO) data show that rising income inequality is the main reason that affordability feels out of reach for too many U.S. families. For more than four decades, most of the income growth in the U.S. economy has been funneled to those at the very top, leaving typical families with far less than their proportionate share of the economy’s gains. If middle-class household incomes had simply kept pace with average income growth since 1979, their pay would be roughly $30,000 higher today. If we account for taxes and government transfers, incomes would still be $19,000 higher today for these middle-class households. Think of this gap as an “inequality tax”: the amount that rising inequality has cost the typical U.S. family. Life would be much more affordable for these families today if they hadn’t been hit by this inequality tax.

This inequality is not the result of competitive markets fairly rewarding people’s skills and hard work. Instead, it resulted from an intentional policy campaign of wage suppression. Labor markets in capitalist economies are inherently tilted toward employers. Fair pay and broadly shared prosperity only materialize when policy affirmatively aims to correct this power imbalance. This can happen—policy choices that bolstered workers’ leverage and bargaining power in labor markets kept growth fast and equal for decades following World War II, for example. But lawmakers rolled back these policies at the behest of capital owners and corporate managers.  

The latest CBO inequality data make the scale of this policy shift visible. Figure A shows the distribution of market income growth for non-elderly households by income group since 1979. We use market income to look at pre-tax, pre-transfer outcomes to assess the equality of outcomes generated by markets. We isolate non-elderly incomes because older households tend to have very low market incomes and these older households have grown as a share over time—so we don’t want any poor performance of market incomes documented here to simply be the outcome of natural population aging. Among this non-elderly group, the top 1% have captured a hugely disproportionate share of market income growth. Between 1979 and 2022, market income for the top 1% grew 277% (from $784,573 to $2.958 million) compared with just 26% growth for the middle fifth of households (from $76,359 to $96,335). This lopsided growth is the root of America’s affordability problem. Even as the economy grew and average incomes rose, typical families fell further behind those at the top who captured most of income growth.

Figure B shows the inequality tax over time, plotting actual market income for the middle fifth of households against what their income would have been if it had grown at the same rate as overall average income. By 2022, the inequality tax reached $30,676 per household, meaning middle-class families are forgoing that much income each year because of rising inequality. The gap has widened steadily since 1979, a sign that the affordability problem facing typical families is not a recent development but rather the cumulative result of decades of policies that have shifted income upward.

Because market income for middle-class families is driven predominantly by labor income, the inequality tax in Figure B reflects the consequences of decades of wage suppression. Of course, the United States has a system of taxes and means-tested transfers (safety net programs like Medicaid and food stamps, for example) that leads to post-tax and transfer income being more equal than market income in any given year. But the tax and transfer system did not ramp up in importance as market income inequality grew after 1979, and even after accounting for its effects, inequality increased significantly. Figure C shows that even when using post-tax and transfer income, the inequality tax remained substantial at $19,320 per middle fifth household in 2022.

Figure D shows who loses and who gains from rising inequality. While the inequality tax cost middle-income families $19,320 in 2022, families at the very top benefited enormously. The 96th to 99th percentiles gained about $88,000 from rising inequality, while the top 1% gained $1.1 million in 2022.

Perhaps surprisingly, the lowest quintile also slightly gained. For this group, lower taxes and higher levels of means-tested benefits counterbalanced a significant loss of market income due to inequality (their market income inequality tax would be around $4,000). The greater fiscal transfers to the bottom fifth are an under-recognized policy achievement of recent decades. It is also an achievement under constant threat, with the latest one being the large cuts to Medicaid and food stamps coming because of the Republican tax and spending bill that passed in 2025.

Figure D

U.S. families’ feeling that life is less affordable than it should be is grounded in objective realities about how the economy has failed them. And it’s understandable why so many of these families think about prices, which they see as the final barrier between them and being able to obtain what they need for a good life, whether the price is for a gallon of gas or a loaf of bread or a monthly health insurance premium.

But the forces causing this affordability crunch are far larger than any given set of prices. Instead, they are mostly the forces that led to rising income inequality by intentionally suppressing the power of workers in labor markets. This wage suppression meant that middle-class income growth was never going to outpace inflation consistently enough to ensure steadily improving economic security.

In short, today’s affordability problems are overwhelmingly inequality problems. Recognizing this fact is the key to constructing the right policy solutions. As a start, protecting workers’ right to organize unions, fostering long periods of very low unemployment, and keeping minimum wages high will help typical families claim their fair share of income growth.

Once the Assembly’s bill reached her desk, Virginia Governor Abigail Spanberger had the opportunity to strengthen it or sign it into law. Instead, Governor Spanberger put forward her own heavily amended version of the bill last week, weakening the proposed collective bargaining framework so extensively that her version would lock Virginia into an unstable, ineffective system in which collective bargaining would remain merely “optional” and where employers and workers would remain perpetually uncertain about what rules might apply to them from year to year depending on what appointees of future governors might decide. The governor’s amended bill will now be considered by the Assembly in its one-day veto session this week. Below, we analyze some of the many substantive differences between the Assembly bill and the governor’s bill, as well as the likely economic impacts.

Virginia’s ability to reap economic benefits of collective bargaining will depend on strength of any new law 

EPI has previously analyzed the economic importance of strengthening collective bargaining rights in Virginia, where the state’s long-standing ban on public-sector collective bargaining has suppressed workers’ wages and union membership. Our most recent analysis showed that state and local government employees in Virginia earn, on average, 26.7% less than private-sector peers with similar education and experience. Virginia’s public-sector pay gap is the second highest in the nation while its public-sector unionization rate (at 14.1%) is the fourth lowest, outcomes that our 50-state data show are closely correlated with the strength or weakness of a state’s collective bargaining laws. Recent EPI research further shows that beyond helping states narrow public-sector pay gaps and improve conditions for directly affected workers and the public they serve, stronger collective bargaining laws are highly correlated with widely shared benefits including higher wages, more equitable state economies, and healthier democracies.

State public-sector collective bargaining laws are complex and highly variable. In our prior research, we grouped state laws into three categories based on assessment of whether collective bargaining is:

1) illegal: state law prohibits public employers and unionized workers from entering into collective bargaining agreements.

2) permitted: collective bargaining is “optional” insofar as it is allowed in certain jurisdictions but occurs only if both parties agree to engage in it; whether parties are required to negotiate over wages or other terms and conditions of work is not defined in state law.

3) required: once a group of workers has gone through the process of forming a legally certified union, employers have a “duty to bargain” over pay (at a minimum), and there is a specified process for both parties to follow in negotiating to reach agreements that result in a legally binding collective bargaining agreement.

Currently, Virginia’s collective bargaining law straddles the first two categories: collective bargaining is illegal for units of state government in Virginia, but the state has recently (since 2021) permitted local governments to enact their own collective bargaining systems.

As shown in Table 1, data show that average public-sector pay gaps vary across states depending on the strength of their collective bargaining laws. Virginia’s large public-sector pay gap is an extreme outlier, currently exceeding even the average among all states with the weakest laws (where collective bargaining is illegal).

Table 1

Governor’s bill deletes essential elements of a strong collective bargaining system

Virginia lawmakers now face a choice between two dramatically different visions for collective bargaining: an Assembly bill that would move Virginia into the stronger “required” category, and the governor’s substitute bill that would lock Virginia into the weaker “permitted” category.

The Assembly’s collective bargaining bill includes clear language recognizing the rights of public employees to choose whether to unionize; setting forth consistent rules, timelines, and processes for workers and employers to follow for union elections and contract negotiations; and establishing a new, independent state labor board to support and administer the new framework across all covered state and local jurisdictions. The Assembly bill also has limitations—for example, it falls short of equalizing rights of all public employees by excluding most higher education workers—but it does provide a clear, strong roadmap for implementing a robust, effective collective bargaining system modeled on proven best practices from other states to serve as a solid foundation for Virginia to build on.

The governor’s amended version of the bill weakens all these key elements of the statutory framework proposed by the Assembly and the proposed labor board’s role in enforcing a clear statutory framework. In many important sections of the bill, the governor’s amendments include changing the word “shall” to the word “may”—a critical change that converts entire sections of statutory rules and requirements into mere suggestions, rather than legally enforceable expectations applying equally to all workers and employers. Another repeated pattern throughout the governor’s bill is the deletion and replacement of a host of detailed statutory guidelines with directives that such guidelines should instead be “determined by the board” or that the board “shall adopt regulations” to answer critical questions about workers’ rights and employer obligations in the unionization and collective bargaining process.

Table 2 summarizes just a few of the key differences between the Assembly bill and the governor’s bill. The Assembly bill proposes a framework similar to those successfully implemented in many other states, including statutory language defining the topics parties are required to negotiate over, clear rules for union elections and negotiations procedures, and binding arbitration to ensure that negotiations will eventually conclude with a contract settlement. These standard elements are essential to a strong, effective collective bargaining system that enables workers to have an equal voice at the bargaining table—but the governor’s bill removes all of these elements.

Table 2

The stark contrast between the scope of bargaining as defined in the Assembly bill versus the governor’s bill is especially salient. The strength of any collective bargaining system depends on clear, consistent rules for which topics unions and employers must be willing to discuss in negotiations and which subjects must (or may) legally be incorporated into a collective bargaining agreement. When subjects of bargaining are “permitted” but not required, parties may try to pick and choose what to discuss, one party may refuse to negotiate over matters that are important to the other, and non-mandatory topics are generally not considered as part of arbitration procedures and often therefore never get included in final contracts. Alarmingly, the governor’s bill leaves the scope of bargaining completely undetermined, giving the labor board discretion to determine when and whether it is “appropriate” to require parties to negotiate even over topics as basic as wages.

This change alone would lead us to categorize the governor’s bill as a model for “permitting” (but not requiring) collective bargaining, making it unlikely to significantly narrow Virginia’s public-sector pay gap or achieve other important economic outcomes associated with stronger collective bargaining laws. As shown above in Table 1, workers in states where collective bargaining is “permitted” but not required continue to experience pay gaps far above average (and far greater than in most states with strong collective bargaining laws).

At a minimum, any collective bargaining legislation in Virginia should be measured against the status quo and whether it represents progress toward achieving full and equal collective bargaining for all workers. Here, the governor’s bill falls woefully short and could even represent a step backwards for some workers. At best, the governor’s bill would lock Virginia into a system where collective bargaining becomes “permitted” for more workers than are currently covered by local collective bargaining ordinances. At worst—depending on rules yet to be determined by a future labor board—the governor’s bill could erode existing rights of some local government workers who might find themselves in the future governed by weaker state collective bargaining procedures than those they’ve been able to win at the local level since 2021.

The governor’s bill includes additional significant changes too numerous to cover in detail here. Among other notable amendments that weaken the proposed framework for collective bargaining or its implementation, the governor’s bill:

• delays application of the new law to January 1, 2030, for local governments
• excludes Virginia Port Authority workers from coverage
• maintains exclusion of most higher education workers from coverage (including faculty, professional staff, researchers, graduate assistants, etc.) and specifies that this exclusion extends to health care workers at university hospitals and health care facilities

In the short term, the numerous exclusions, delays, and weaknesses introduced or expanded by the governor’s bill would leave Virginia workers with a limited patchwork of different rights covering different localities and occupations. In the long term, this would create permanent uncertainty about whether and when various rules covering particular groups of workers might be changed by the labor board.

It’s clear that the fight to ensure every employee in Virginia has a voice on the job has only just begun. Collective bargaining is a fundamental right, not intended to be left up to the whims of individual local elected officials or to-be-determined future members of a new state labor board. Collective bargaining is both a labor issue and a civil rights issue, as NAACP Virginia State Conference leaders recently pointed out. Nowhere is this clearer than in Virginia, where the denial of collective bargaining rights to generations of workers is directly rooted in a history of white supremacist backlash against Black worker organizing. Virginia lawmakers still have a chance to enact meaningful collective bargaining legislation in 2026, but doing so will first require rejecting the damaging amendments put forward by Governor Spanberger.