Norm Matloff's H-1B Web Page: cheap labor, age discrimation, offshoring
Professor Norm Matloff's H-1B Web Page
The H-1B work visa is fundamentally about cheap, de facto
The tech industry lobbyists portray H-1B as a remedy for labor
shortages and as a means of hiring "the best and the brightest" from
around the world. Though I strongly support that latter goal, the
lobbyists' "best and brightest" claims are not valid.
The vast majority of H-1Bs, including those hired from U.S.
universities, are ordinary people doing ordinary work, not the best
and the brightest. On the contrary, the average quality
of the H-1Bs is LOWER than that of the Americans.
Furthermore, vast majority of H-1Bs, again including those hired from U.S.
universities, are not doing work for which qualifed Americans are
Instead of being about talent, H-1B is about cheap, immobile labor:
- Employers accrue Type I wage savings by paying
H-1Bs less than comparable Americans (U.S. citizens and permanent
- Employers accrue Type II wage savings by hiring younger,
thus cheaper, H-1Bs in lieu of older, thus more expensive (age 35+)
- Both types of wage savings are fully LEGAL, due to loopholes in
the law and regulations. The problem is NOT one of lack of
- For many tech employers, having immobile workers is even more
important than having cheap labor. If an engineer leaves an employer
in the midst of an urgent project, this can be a major problem for
the employer. The H-1B and green card programs give the employer
heavy leverage to force workers to stay.
- Abuse of H-1B extends across the industry, including the large
U.S. mainstream firms., facilitated by the nation's top
immigration law firms. It does NOT occur primarily in the Indian
"body shops," and it DOES occur in the hiring of international
students from U.S. university campuses.
The underpayment of H-1Bs is well-established fact, not rumor,
anecdote or ideology. It has been confirmed by two
congressionally-commissioned reports, and a number of academic studies,
in both statistical and qualitative analyses.
Even former software industry entrepreneur CEO Vivek Wadhwa, now a
defender of foreign worker programs who is quoted often in the press and
who has testified to Congress in favor of expansion of the programs, has
I know from my experience as a tech CEO that H-1Bs are cheaper than
domestic hires. Technically, these workers are supposed to be paid a
"prevailing wage," but this mechanism is riddled with loopholes.
Wadhwa has also
I was one of the first [CEOs] to use H-1B visas to bring workers to the
U.S.A. Why did I do that? Because it was cheaper.
Even Rep. Zoe Lofgren, the most strident advocate of the H-1B program
Congress has ever had, now realizes that H-1B is used for cheap labor,
in full compliance with the law. She concedes that
the program is undercutting American workers:
U.S. Rep. Zoe Lofgren, a Democrat whose Congressional district includes
Silicon Valley, framed the wage issue at the hearing, sharing the
response to her request for some wage numbers from the U.S. Department
Lofgren said that the average wage for computer systems analysts in her
district is $92,000, but the U.S. government prevailing wage rate for
H-1B workers in the same job currently stands at $52,000, or $40,000
"Small wonder there's a problem here," said Lofgren. "We can't have
people coming in and undercutting the American educated workforce."
(Lofgren's 2011 reform bill, however, would not fix the situation, and
would add an equally-harmful automatic green card program. In addition,
Lofgren's bill implicitly singles out the Indian IT services as the main
offender, disgraceful and absolutely inaccurate scapegoating.)
Contents of this site:
- Age is THE core H-1B issue. Most H-1Bs are
under 30, and since younger workers are cheaper than older ones (in both
wages and health care costs), employers use the H-1B program to
avoid hiring older Americans. (Note: "old" is age 35!)
Another major attraction for employers, especially in Silicon Valley,
is the "handcuffed" status of H-1Bs.
In practical terms, foreign tech workers have serious mobility issues.
In particular, if the worker is being sponsored by the employer for a
green card, the worker dare not switch jobs, as that would entail
starting the multiyear green card process all over again. Employers
value this immobility very highly, since the exit of an engineer in the
midst of an urgent project is very harmful. Immigration lawyers extol
this as a major "benefit" of hiring H-1Bs. Thus employers tend to
give preference to the foreign workers over similarly-qualified
Americans when hiring,
- In addition, two congressional reports and a number of academic studies
have shown that
H-1Bs are often paid less than
i.e. those of the same age, education and
Some other studies claim to show that the H-1Bs are not underpaid, but
they suffer from methodological problems. In any case, one can
readily see the underpayment, by noting that the H-1Bs are largely
unable to move freely in the labor market--if one cannot move, one cannot
find the best salary among competing employers. Thus the H-1Bs are on
average paid below-market wages. Note also the material
on prevailing wage below.
As mentioned above, even H-1B advocate and former tech CEO Vivek
Wadhwa has admitted underpaying H-1Bs himself.
Underpayment of H-1Bs is usually done in full compliance with
The problem is primarily NOT one of lack of enforcement or
fraud. Instead, recall from above that even Vivek Wadhwa and Rep. Zoe
Lofgren--two extremely vociferous suppporters of foreign worker
programs--admit that abuse of the H-1B program is legal,
due to gaping loopholes in H-1B law.
For example: The law and regulations require that employers pay H-1Bs
the prevailing wage--but the latter does NOT account for "hot"
technical skills, say Android programming. These command a premium
of 15-25% in the open market. Thus one can see immediately that the
legal prevailing wage is typically lower than the true market wage.
This is what Rep. Lofgren was referring to in the above quote
(though her numbers are not quite correct).
The law also requires the employer to pay the "actual wage," a misnamed
term that refers to the wage earned by other "similar" workers employed
at the firm, in the same job. Clearly this is rife with loopholes too.
The employer can claim the foreign worker is unique in terms of skills,
experience and job, so the actual wage is actually his wage (Dept. of
Labor written policy recognizes this). And of course if most or all
of the "similar" workers are foreign too, the statute loses all meaning.
Furthermore, the DOL PERM data (for green card applications,
which operate with the same wage rules as H-1B) show that most
employers pay only the prevailing wage or very near it, NOT the actual
wage. Since the legal prevailing wage is below market rates, it is
clear that most employers are underpaying their H-1Bs.
- Abuse of foreign worker programs
pervades the entire tech
industry, INCLUDING the large, mainstream U.S. firms, and INCLUDING
the foreign workers hired from U.S. universities.
It is NOT limited to the Indian "bodyshops."
The large U.S. firms do tend to hire better-qualified workers than do
the bodyshops, but BOTH the mainstream firms AND the bodyshops are
hiring at a discount relative to their market sector.
By the way, Microsoft has claimed on a number of occasions that
their H-1Bs are paid over $100,000 per year, but government data show
this to be false.
Legal fees are tiny compared to the wages savings the employer
accrues by hiring the foreign worker. H-1B sponsorship costs
about $2,000 in legal and other fees; for a green card, it may be
$10,00. But these are one-time costs, compared to the employer's saving
tends of thousands of dollars EVERY YEAR, FOR THE 6 YEARS OF THE H-1B
There is no tech labor shortage.
- No study, other than those sponsored by the industry, has ever
shown a shortage.
- Wages, both for new graduates and established professionals,
have been stable in the engineering and programming fields. Starting
salaries for new computer science graduates were up about 3% in
Spring 2011, according to NACE; a 2011 DICE report, in spite of
claiming a shortage, concedes that overall tech salaries are up 1%; a
San Jose Mercury News article in July 2011 reports a strong
job market in Silicon Valley, but also states that wages are up only
3% since 2009. None of these figures indicates a labor shortage.
- Low unemployment figures are not good measures of a shortage.
The real issue is underemployment, occurring for instance (a)
when an engineer or programmer is forced to leave the field, becoming
"employed" elsewhere, typically at a lesser wage, or (b) when those
who work as independent consultants (a large chunk of the
programming profession) find contracts hard to get and rates lower
than before. None of this shows up in unemployment data.
- A 2007 Urban Institute study found that the universities are
producing more than enough graduates at the bachelor's level in
- Figures for students graduating with computer science degrees
cannot be used to determine whether we have a shortage of people
qualified for computer science jobs. Most people in the computer
field, including those in software development, have their degrees
in fields other than computer science.
- In 2012 congressional testimony, Texas Instruments admitted
that they have plenty of American engineering job applicants at
the bachelor's level.
- American STEM bachelor's degree holders tend not to pursue
graduate study because the pay is not high enough--and that in turn
is due to the large influx of foreign STEM graduate students.
- This was actually forecast in an NSF internal report back in 1989.
(More on this below.)
- A blue-ribbon commission appointed by the federal National
Institutes of Health found that there is a huge glut of workers in
lab science research. Moreover, the commission found that the glut
was largely due to a heavy influx of foreign workers, and that it has
led to dismal working conditions that has caused talented young
Americans to avoid lab science.
Employers hire only a tiny fraction of those who apply.
HR departments routinely exclude CVs of applicants they deem "too
expensive"--those that are over age 35. (So managers never see these
CVs, and mistakenly believe there are no applicants.)
Shortage arguments based on analysis of American K-12
math/science scores to those of other nations are red herrings,
based on misleading averages. It is also rank hypocrisy, since the same
employers who claim that "Johnny can't do math" are laying off tens of
thousands of Americans who had been top math/science students when they
Indeed, as noted above, Texas Instruments,
stated that there is no shortage
of American engineers at the bachelor's degree level. (For a point
about the graduate level, see NSF material below.)
The world's "best and brightest" should be welcomed, but only a
tiny percentage of H-1Bs are in that league. Even among
the former former students now in the worforce--the group the industry
claims are especially talented--the immigrants on average produce fewer
patents per capita, are less likely to work in R&D, and have their
U.S. degrees from lower-ranked schools than Americans of the same
education, age and so on.
Meanwhile, the H-1B program results in many of our own best and
brightest U.S. citizens and permanent residents being squeezed out of
the market once they accumulate 10 years or so of experience, and
worse, many top college students are discouraged by H-1B and
offshoring from pursuing the field in the first place.
In other words, H-1B is causing an internal brain drain
of the best and brightest American talents. This has
been explicitly recognized by UC Berkeley researchers, and as noted
earlier, by a blue ribbon commission in the National Institutes of
Health. The latter focused on the PhD level.
The industry lobbyists claim that the industry needs H-1Bs because
50% of engineering doctorates in the U.S. are awarded to foreign
But almost no jobs in the computer industry need a PhD;
even Intel recruiters have told me that their firm has very little interest
in hiring PhDs.
Moreover, an internal report in the National Science Foundation,
a key government agency, actually advocated the use of the H-1B program
as a means of holding down PhD salaries, by flooding the job market with
foreign students. The NSF added that the stagnation of salaries
would push domestic students away from PhD study, which is exactly what
has happened. Former Fed chair Alan Greenspan has also explicitly
advocated the use of H-1B to hold down tech salaries.
In other words, H-1B is the cause of the relative lack
of Americans getting PhDs, not the solution to that
"problem" as claimed by the industry.
The per-capita rates of patents among immigrant engineers have
been similar to, or lower than, those of natives.
Jennifer Hunt, much cited by the industry, found that
After I control for field of study, in the middle graph,
and education, in the bottom graph, both main work visa groups [i.e.
H-1Bs who came directly to the U.S.] and student/trainee visa holders
[H-1Bs who first came to the U.S. as students and later entered the
job market under the visa] have statistically significantly lower
patenting probabilities than natives...
This is directly contrary to the industry lobbyists' claim that the
H-1B program is needed for innovation. On the contrary, the
displacement of the American workers has produced a net loss in
Proposals to establish fast-track green card programs to retain
the foreign workers are misguided.
First, in the EB-1 green
card category, which is for outstanding talents, waits are already
short. Second, and more importantly, the foreign workers are mostly
young, and would still crowd out American workers of age 35+ even with
A rallying cry of those who promote the "automatic green card" proposals
is "If we send the foreign students home, they'll work for our
competitors!" This is a bizarre justification for displacing American
workers. Moreover, even if the foreign students do acquire green cards
and stay in the U.S., many will STILL "help our competitors"; research by UC
Berkeley professor AnnaLee Saxenian showed that most Asian immigrants
were involved with tech firms back home, through consulting, investment
and so on.
- Other than a minuscule exceptional category,
H-1B employers are NOT
required to try to fill the jobs with Americans before hiring the
The claims that each H-1B creates four new jobs are based on
fallacious statistical analysis.
This has been exposed by the Wall Street
Journal, and the claims are obviously invalid anyway--Filling the jobs
with qualified Americans would have the same job-generating effects.
The foreign STEM students at U.S. universities are generally NOT being
"sent home after they graduate," contrary to political rhetoric.
Among those who wish to work in the U.S. after graduation and have an
American employer willing to hire them, the overwhelming majority do stay.
- WHAT SHOULD BE DONE: The bipartisan
Durbin/Grassley bill in the Senate is an excellent bill. However, note
that some parts are extremely useful while others are rather
useless. The most useful provision would redefine the legal term
prevailing wage so that it would reflect the true market wage,
which is NOT the case currently. The provision extending the
H-1B-dependency restrictions to all employers would also be of value.
By contrast, the portions of the bill dealing with fraud and
enforcement are NOT useful, since (as stated earlier), the problems with
H-1B are loopholes, not enforcement. In addition, for reasons give
above, green card programs should NOT be expanded or liberalized; the
IDEA Act by Rep. Lofgren would be a step backwards, not forwards.