ACS joins coalition to express concern about visa wage rule

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November 9, 2020

Submitted via Regulations.gov

Brian D. Pasternak, Administrator
Office of Foreign Labor Certification
Employment and Training Administration
U.S. Department of Labor
200 Constitution Avenue, NW
Washington DC 20210

Re: DOL Docket No. ETA-2020-0006

Dear Administrator Pasternak,

The undersigned associations, coalitions, and groups come to you jointly to express our concerns about flaws in the Department of Labor’s (hereafter referred to as DOL or Department) Interim Final Rule, published and in effect on October 8, 2020, entitled “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States” (hereafter referred to as IFR or DOL High-Skilled Wage rule).

Commenters' Interests

Signatories to this comment have a keen interest in helping to ensure that the U.S. immigration process effectively promotes – with appropriate integrity and security safeguards – the desirability and ability of high-skilled foreign-born professionals to be employed in our country.  Many of us are aware that a revised prevailing wage system would better create confidence in the reliability and fairness of U.S. high-skilled immigration.  However, we are very concerned about the significant policy shift resulting from the Department’s most recent wage rule.  While we have only been given a short 30-day period to analyze the impact of DOL’s IFR, the rule is already in effect and we can conclude that the specific policy approach adopted by DOL neither protects nor fosters a functioning high-skilled immigration system.

The signatories have varying interests and missions.  Some act as professional societies for scientists, lawyers, or educators, or human resource managers.  Some are trade organizations representing the nation’s business community, or certain industries, or one sector.  Others are associations whose members are the nation’s foremost institutions of higher education.  Some are advocacy groups.  Many of us actively take steps as organizations or through our members to ensure the United States has the capacity to both educate and employ domestic sources of professional talent.   Many of us have worked with successive administrations and Congress on issues critical to the global mobility of talent and compliance, functionality, and integrity in the employment-based immigration system of the United States.  Despite differences in approach, sector, and membership, each signatory has found it core to our mission as an organization that high-skilled immigration is a key component of the ongoing ability of the United States to obtain and retain the talent necessary for America and American enterprise to continue to innovate and create jobs in the United States.

Member firms and institutions of the undersigned organizations (and where our members are individuals, the employers, clients, and collaborators of our members) are among the nation’s foremost creators of jobs for U.S. workers.  They contribute immensely to the nation’s economic strength and global competitiveness.  They contribute immensely to the nation’s economic strength and global competitiveness.  To maintain that strength and competitiveness, they employ the talents of well-educated and highly skilled professionals who happen to be foreign-born along with the vast preponderance of U.S. workers that make up their workforce.  The ability to hire appropriate, eligible individuals in H-1B visa status is an important tool in the ability to bring that workforce together.  Established in the 1952 rewrite of the nation’s immigration laws, for over 65 years the H-1 visa classification has existed to allow U.S. employers to hire professionals born outside our country working in an occupation that typically requires the type of knowledge only obtained through completion of a university education.  Since 1990, this category has been subject to numerical limits and a Labor Condition Application (LCA), and designated as the H-1B visa – and many of our members expected to utilize the H-1B visa category to continue to employ current professional staff and hire new staff. DOL’s High-Skilled Wage rule directly upsets these reliance interests. 

Introduction

It is important to emphasize at the outset that DOL has adopted a dramatic shift in the H-1B and Permanent Employment Certification programs despite stating in its preamble explanation that “[t]he Department does not dispute that allowing firms to access skilled foreign workers can lead to overall increases in innovation and economic activity, which can, in turn, benefit U.S. workers” and that “the Department is certainly in favor of measures that increase economic growth and job creation.”  Indeed, there is significant economic literature in peer-reviewed publications extolling the benefits of high-skilled immigration to America and to Americans,[1] that at least to some extent is left unmentioned by the Department – and where mentioned is insufficiently weighed.  The IFR’s faulty justification and policy choices create regulatory framework that aggressively obstructs these national benefits in innovation and economic activity.

Given the immediate, direct, and sizable impact of DOL’s prevailing wage changes, we believe it was and remains incumbent upon DOL to seek feedback from the impacted employers in the regulated community ahead of implementation.  For the reasons identified in the lawsuits where a Complaint and Motion for Preliminary Injunction were filed to enjoin the High-Skilled Wage rule, we do not believe that DOL has satisfied the legal standard for claiming a good cause exception to the normal requirement to provide advance notice, take comment, and respond to comments under the Administrative Procedure Act (APA).  But beyond that legal imperative for full notice and comment rulemaking, the Department has promulgated a rule that has significant flaws, including the six described below, which make the rule unworkable.

In December 2018 the Administrative Conference of the United States adopted new recommendations to enhance public engagement in rulemaking, in order to ensure that agencies receive more comprehensive information.[2]  This is because agencies benefit when “situated knowledge” is shared as part of rulemaking efforts; in other words, public officials benefit from having access to knowledge that is widely dispersed among stakeholders.[3]  “In particular, agencies need information from the industries they regulate, other experts, and citizens with situated knowledge of the field in order to understand the problems they seek to address, the potential regulatory solutions, their attendant costs, and the likelihood of achieving satisfactory compliance.”[4]

At the end of August 2020, the Department adopted new binding regulations on the guidance process, that incorporated recognition of these important principles when DOL announces policy but is not required to engage in notice and comment rulemaking.[5]  DOL obligated itself to essential steps to collect and consider public input before finalizing guidance, which it did not afford the regulated community in publishing this IFR. For example, DOL’s regulation governing mere guidance requires the Department to

1. allow at least a 30-day comment period before finalizing guidance,
2. undergo a cost-benefit analysis review by OMB’s Office of Information and Regulatory Affairs (OIRA) in full compliance with EO 12866, and
3. publicly post a response from DOL “that addresses major concerns raised in timely submitted comments. This response-to-comments should be similar to what typically appears in the preamble to a final rule under the APA” documenting the agency’s response to comments and concerns raised by stakeholders.[6]

DOL’s High-Skilled Wage rule does not abide by any of the above elements, and the following six points demonstrate why public input from the regulated community is crucial to the workable implementation of such a far-reaching rule. As such, the Department should withdraw its High-Skilled Wage rule as published and solicit public comment in the form of a Request for Information (hereafter RFI) and/or an Advanced Notice of Proposed Rulemaking (hereafter ANPRM), which would inform the Department how best to proceed.

Six Fatal Flaws in DOL's High-Skilled Wage IFR

Prevailing Wages Cannot Be Disconnect from Actual Wages. First, DOL begins the explanation of its IFR by amplifying the point that both the actual and prevailing “wage rates generally should approximate the going wage for workers with similar qualifications and performing the same types of job duties in a given labor market.” The Department observes that it is “a reasonable assumption that, if both the INA’s wage safeguards (actual and prevailing wage obligations) were working properly, the wage rates they produce would at least in many cases be similar.”  However, the structure imposed by the IFR does not yield this result—quite the opposite. Adopting a structure that directly contradicts the Department’s self-identified measure of a working prevailing wage structure evidences a significant error in DOL’s IFR.  The Department replaced the system in which it believes “prevailing wages are too low” with one that establishes prevailing wages that are unmistakably too high.

Members of the undersigned organizations have found that level 1 wages for jobs offered to their H-1B employees (representing about 14% of all LCAs) increased overnight by an average of 41%-50%, level 2 wages increased on average between 61%-70% (representing 49% of all LCAs), with level 3 and 4 wage rates increasingly haphazardly (between 30%-100%).  In addition, thousands of employers report that the new level 1, 2, 3, 4 percentiles of surveyed OES wages codified in DOL’s IFR (identified in the IFR to be at the 45th, 62nd, 78th, and 95th percentiles) are not being implemented as written in new 20 CFR 656.40(b)(2)(i)(A)-(D) and that often the new level 2 prevailing wage (62nd percentile) exceeds the old level 4 prevailing wage (67th percentile), among other anomalies.[7]

To provide examples from occupations outside of the computer-related and engineering jobs typically filled by H-1B professionals, we look at Statisticians (SOC code 15-2041), Accountants (SOC code 13-2011), and Management Analysts (SOC code 13-1111) in New York City.   For an employer hiring a Management Analyst at the level 2 skill level, whether a U.S. worker or a worker in H-1B status, the annual salary may have typically been between $90,000 and $110,000 (depending on education and experience level).  The prevailing wage was $87,506, but under the IFR is now $150,259, far above the usual wage range.  Employers who hired Accountants, whether U.S. workers or workers in H-1B status, at the level 2 skill level, may have typically offered wages between $76,000 and $96,000 (depending on level of education and extent of experience) and now report that DOL’s IFR requires them to pay their H‑1B level 2 Accountants at least $129,854.  The level 2 prevailing wage for Accountants in New York City was previously $75,077, while the level 4 prevailing wage for Accountants in New York City was $102,086; thus, under the IFR, the new level 2 wage (supposedly the 62nd percentile of surveyed wages) exceeds the old level 4 (67th percentile of surveyed wages).  And some of the overnight prevailing wage increases for employers hiring experienced staff in New York City are just not reflected in the market place for the designated skill level as a general matter, such as IFR-mandated increases for level 3 Statisticians where the prevailing wages moved from  $109,824 to $149,822, increasing the required wages by 36%, and for level 3 Management Analysts, which saw a move from a prevailing wage of $110,698 to a new required wage of $207,188, or an overnight increase of approximately 87%. The Department of Labor manufactured a new prevailing wage rate system that is utterly disconnected from the actual wages employers pay similarly situated United States workers. 

The DOL IFR also ignores altogether an important evolution over the last decades in professional employment compensation across the United States, whereby many employers add to annual salaries with variable compensation tied to productivity, performance, or other specific goals.  The High-Skilled Wage rule will strain the ability of employers to harmonize salaries offered foreign-born professionals and their U.S. counterparts.  This strain may also incentivize employers to abandon variable compensation schemes altogether, in order to use available resources in an attempt to meet the new required wages.  Attempting to recalibrate resources applied to variable compensation schemes to instead supplement base salary is logical because variable compensation is never considered part of actual wages for purposes of prevailing wage compliance in hiring a foreign-born professional.[8]

The new construct adopted by the Department requires early-career professionals (level 1 and level 2 jobs) employed in H-1B status to be compensated between 90% of the occupational median (45th percentile of surveyed wages, new level 1) and approximately 125% of the occupational median (62nd percentile of surveyed wages, new level 2).  Experienced professionals (level 3 and 4 jobs) may not hold H-1B status under DOL’s IFR unless they are compensated far above the occupational median (the 78th percentile of surveyed wages for any professional who is “experienced,” and salary at the 95th percentile for managerial professionals).  This new construct does not reflect the market’s reality or current compensation in the U.S. labor market, and, furthermore, might place employers in the position of paying their foreign-born H-1B professionals a markedly higher wage than that paid U.S. workers  with similar education, experience, and responsibility.  

This disconnect impacts tens of thousands of employers and hundreds of thousands employees.  In sharing H‑1B data as part of its transparency efforts,[9] DHS has indicated that something on the order of 49,820 unique employers receive H-1B approvals annually, to cover initial cap-subject and cap-exempt filings as well as amendments and extensions of status, and DHS has estimated that about 583,420 H-1B professionals are currently work-authorized.[10]  Most H-1B employers, about 45,000 entities annually, receive under 10 approvals (with about 30,000 employers obtaining one, single H-1B approval); about 4,500 employers receive 10 or more H-1B approvals but less than 100; approximately 300 employers receive more than 100 approvals but not more than 1,000; and about 20 employers received more than 1,000 approvals. The impacts of the IFR will therefore be spread across tens of thousands of employers and hundreds of thousands of employees, forcing sudden increased costs upon businesses. An enduring weakness of DOL’s analysis is that it fails to consider how the new prevailing wage policy will impact the vast majority of employers utilizing the H-1B system Congress created, including employers in academia, research, or not-for-profit activity, those that are start-ups, and those that are small and medium-sized enterprises.

DOL Disregards High Intensity Occupational Activity.  Second, DOL relies heavily on the notion that simply because U.S. employers filing the most H‑1B petitions generally pay wages far in excess of the prevailing wage rate, it follows that the pre-IFR prevailing wage structure long in effect identified prevailing wages at levels 1, 2, 3 and 4 that are best characterized as markedly below market rates.  What DOL ignores is that the reason these particular U.S. employers pay such high wages is the high intensity of particular work in particular occupations in particular geographies in our country.  As DOL well knows, as part of the Occupational Employment Statistics (OES) survey the Bureau of Labor Statistics (BLS) identifies for each SOC (Standard Occupational Classification) code in each MSA (Metropolitan Statistical Area) or MD (Metropolitan Division) the number of employed individuals per each 1,000 employed persons in that particular occupation represented by the SOC code.  This is a useful proxy for the intensity of activity in that particular occupation in a particular geography.  Some of the employers that pay particularly high wages are competing in locations with unusually high intensity in the occupations for which they hire H‑1B professionals.

For example, in the IFR preamble explanation, the Department states that H-1B workers make up 22% of all professionals working in the United States in the Software Application Developer occupation.  BLS reports in its raw OES data that across the United States, there are only 26 of the 392 MSAs or MDs where more than 1% of all employed persons in that geographic area work in that one occupation, as Software Application Developers.  Omitting double counting where the MSA and MD boundaries overlap, there are less than 20 high intensity geographies for Software Application Developers, where at least 1% of all employed persons work in that single occupation.  Given that DOL states that one-fifth of all H-1B workers are in the occupation, that DOL shares in the IFR that about one-fifth of all LCAs are filed by 20 companies, and that many of those companies do business in these high intensity areas and seem likely to hire Software Application Developers by the nature of their business, it is likely that many of the companies need to pay a premium to attract both domestic talent and foreign-born talent – a reality for which the Department failed to account.

Source: BLS from OES data

The 30-day comment period does not allow sufficient time for the necessary analysis to validate that the LCAs with wages in excess of prevailing wages are primarily for such high-intensity jobs and locations.  Of course, DOL has access to the data to analyze this issue and could have taken the time to conduct the necessary research before devising its policy solution to revise the prevailing wage rates.  It appears that DOL did not consider this reality or evaluate it. 

DOL Improperly Relies on Median Wages and Presumed Wage Suppression. Third, with respect to economists who have studied high-skilled immigration in peer-reviewed journals, the Department fails to cite and consider economists’ data-based studies specifically addressing the wage impacts to U.S. workers of the wages paid to H-1B workers.  Instead, DOL primarily relies on policy analysts that are aware that “(c)onceptually, the market wage is the wage a U.S. worker would command for a position in a specific occupation and region,” but nevertheless, for H-1B workers, they “believe that the most reasonable and closest proxy for a market wage is the median wage for an occupation in a local area,” without evidence for why the median could be the most reasonable and closest proxy.[11]

DOL adopted this “belief” as its own, resetting the level 1 wage as 90% of the occupational median wage in the job location and resetting the level 2, 3, and 4 required wage rates in excess of the occupational median.  Yet, by way of example, no employer in any sector in any geography in our country sets compensation for those completing graduate or professional degrees with little professional experience (these are typically level 2 professionals, that amount to approximately 49% of all H-1B Labor Condition Applications), above the median wage for all professionals in the occupation in the job location.

DOL states multiple times throughout the preamble explanation that it was compelled to adopt its new prevailing wage approach because H-1B workers suppress wages for U.S. workers, yet that is not what economists have found from data-based analysis.

One seminal economic analysis found that between 1990 and 2010, a 1 percentage point increase in the “foreign STEM share of a city’s total employment”—“made possible by the H-1B visa program”—increased the wage growth of U.S.-born college-educated labor by 7–8 percentage points and the wage growth of non-college-educated U.S.-born workers by 3–4 percentage points.[12]  Moreover, even curbing H-1B inflows directly, regardless of prevailing wages paid to H-1B visa holders, will not increase wages paid to domestic workers as evidenced by an economic study that modeled the “complete elimination” of the H-1B visa program and found “essentially zero” change to wages for high-skilled Americans in year one and a slight reduction in wages for high-skilled Americans by year three.[13]

Perhaps more definitively, when the National Academies of Sciences, Engineering, and Medicine completed a literature review in 2016 on the economic and fiscal impacts of immigration in the United States there was a broad consensus with respect to high-skilled immigration that any impacts on U.S. wages by high-skilled, college-educated foreign-born professionals are close to negligible.[14]  While DOL repeatedly cites to the economist George Borjas and his study of low-skilled immigrant labor as being instructive to the wage impacts of immigration on the general labor market, the Department fails to recognize that with respect to high-skilled immigration Borjas was a significant contributor to the 2016 National Academies report and did not find a negative wage impact from high-skilled immigration.  In the National Academies study, Borjas reported that wage impacts from immigrants on the U.S.-born college-educated workforce is minor (an increase for U.S. professionals of one-half of one percent in wage rates as a result of high-skilled immigration), as shown on the following table: