As some of you know, recently H1B, PERM wage levels rule that was submitted to OMB and later withdrawn. It was published as an interim final rule to Federal register on Oct 8th, 2020 and effective now. We will review the background, current wage levels, new wage levels, and impact in this article.
This prevailing wage level changes rule is going to impact few hundred thousand H1B holders, we will look at the impact at the end. Also, in terms of timing, this comes at the same time as new H1B rules also kick in by DHS to Strengthen H1B program with change in Definition, 1-year Approvals, Others.
Background for Rule to set New Wage Levels for H1B, PERM
US Dept of Labor gave an extensive amount of citations and history of the wage levels and the reasons to change the current prevailing wage levels for H1B LCA & PERM programs. The key reasons for the current changes are primarily driven by the below factors
- Better protect wages and jobs for US workers
- Reduce incentives to hire foreign workers over US Workers
- Current Unemployment situation in US with COVID-19
- President Trump’s Buy American, Hire American Executive Order
- President Trump’s Travel Ban for H1B holders tied to labor market
- Outdated Wage Levels system used by DOL for H1B, PERM
- Negative Impact of Labor Market due to H1Bs, PERM with general Wage Levels
Current H1B Prevailing Wage Levels, Percentiles
Currently, there are four prevailing wage levels defined that are used by US Dept of Labor for H1B Visa LCAs and PERM programs. The prevailing wage levels for a position vary by experience, education and locality. They are as defined as below
- Wage Level 1 – Entry Level : This is for entry level workers with basic understanding of job. This wage level corresponds to 17th percentile.
- Wage Level 2 – Qualified: This wage level is for qualified workers with education, experience, who can do moderate tasks with limited judgment. This wage level corresponds to 34th percentile.
- Wage Level 3 – Experienced : This wage level is for experienced workers with deeper experience by education and experience. This level work requires judgment and may also manage people. This wage level corresponds to 50th percentile.
- Wage Level 4 – Fully Competent: This wage level is for most expert level of workers, who can do complex tasks and can exercise a lot of judgment in their activities, including management responsibilities too. This wage level corresponds to 67th percentile.
If you want to know more, read What are H1B Prevailing Wage Levels, How to find them ?
Now, that you have some background, let’s look at the new changes that will be implemented by the US Dept of Labor (DOL) regulation.
A Lawsuit was filed on the changes in Wage Levels to H1B. Read Lawsuit Details, Key Argument Points – H1B Wage Levels Change
Regulation Document by DOL – Overview, Approach used
The Regulatory Document that is published by US Dept of Labor is 157 pages. Most of the text is background and analysis for changes. They start with the background of the H1B and PERM program, how wage levels came into existence. They talk about the similarities of H1B program and PERM program and why it makes sense to have same prevailing wage levels for both H1B and PERM.
They talk about the reasons for change stating the reason to preserve American Jobs as per INA and President Trump’s Executive orders. They talk about the adverse effects of low wages and how it impacts US workers based on many studies. They also share how low prevailing wages provide opportunity for US employers to hire foreign workers at lesser wages than US workers.
See below screenshot from regulation text.
Why current Prevailing Wage Levels are wrong
US Dept of Labor says that current prevailing wage levels used for H1B and PERM programs are based on OES (Occupational Employment Statistics) Survey Program. The OES prevailing wage levels are very generic and not tailored for H1B and PERM. They do not really factor in the DHS or USCIS requirements for H1B Workers that are related to specialty occupation.
Especially, they highlight telling that the current wage levels are artificially low and do not reflect wages for high skilled workers in a specialty occupation. See below screenshot from rule text.
You may watch the below YouTube Video as well that has article content.
Here is a table from the regulation document on “Top 20 LCA/H-1B Employers based on Certifications, as of 6/30/2020,” Employment and Training Administration, accessed August 2020.
|Top Employers||Total LCAs Filed/Worker Positions Requested||Average Rate at which the Wage Offered exceeds Prevailing Wage||Percentage of Worker Positions where Wage Offered Exceeds Prevailing Wage by Over 20 Percent|
|Qualcomm Technologies, Inc.||701 / 38,533||5.74%||9.70%|
|Infosys Limited||7,615 / 21,627||6.53%||11.08%|
|Cognizant Technology Solutions US Corp.||20,192 / 20,192||0.24%||0.32%|
|Deloitte Consulting, LLP||7,316 / 16,567||61.62%||44.16%|
|Amazon.com Services, LLC||9,175 / 12,560||93.93%||68.38%|
|Oracle America, Inc.||543 /12,269||0.48%||0.55%|
|Tata Consultancy Services Limited||8,595 / 9,388||2.95%||4.90%|
|Zensar Technologies, Inc.||130 / 9,207||1.03%||0.77%|
|NVIDIA Corporation||396 / 8,977||4.69%||8.33%|
|Google, LLC||8,669 / 8,669||71.73%||58.60%|
|Ernst & Young U.S., LLP||8,170 / 8,170||88.59%||71.79%|
|Facebook, Inc.||3,583 / 7,674||24.71%||47.92%|
|Cisco Systems, Inc.||925 / 7,121||8.88%||16.65%|
|Qualcomm Atheros, Inc.||115 / 7,110||6.05%||15.65%|
|Apple, Inc.||2,983 / 6,889||117.89%||61.25%|
|Microsoft Corporation||6,544 / 6,631||31.48%||68.61%|
|Western Digital Technologies, Inc.||267 / 6,621||12.30%||21.72%|
|ServiceNow, Inc.||359 / 6,383||0.00%||0.00%|
|Computer Sciences Corporation||231 / 6,034||0.44%||1.30%|
|Kforce, Inc.||584 / 5,786||1.16%||1.71%|
|Percent of National LCA/H-1B Totals||19.2% / 31.6%|
|Simple Average for the Top 20||27.02%||25.67%|
The above table indicates how actual H1B Employees are paid about 20% higher than the prevailing wages in the region than regular workers. DOL rationale is that these stats clearly indicate that current prevailing wages in place for H1B workers are low and have to be changed.
Similarly, for PERM program as well they put up prevailing wage level data and show that PERM wages offered in labor certification is about 16.7% more than the prevailing wages for regular workers. Again, this data tells them that the wage levels for PERM is also low and have to be changed.
Now that you know the full background and DOL rationale, let’s look at the new prevailing wage levels changed for H1B and PERM.
New Prevailing Wage Levels for H1B, PERM
US Dept of Labor talks about their approach used based on stats and formulas on how they have come up with the new wage levels. We will not cover that here and directly get to the gist of it. The revised prevailing wage levels for H1B workers are as below
|Prevailing Wage Level||H1B LCA, PERM Wage levels Before||New H1B LCA, PERM Wage levels with Regulation|
|Wage Level I||17th percentile||45th percentile|
|Wage Level II||34th percentile||62nd percentile|
|Wage Level III||50th percentile||78th percentile|
|Wage Level IV||67th percentile||95th percentile|
How to interpret the Change in Prevailing Wage Levels?
What the above changes to prevailing wage levels technically means is that, if a company used to hire an entry level worker on H1B Visa using Level I wage before, now they have to pay Level III wage for the same entry level worker.
Example – California : Just to give you a perspective of the change, see below wage levels from FLC Data Center for Computer Occupation in California. In the past, the employer would have paid anywhere around $70,720 per year to get entry level H1B worker. Now, the employer has to pay between$110,000 and $120,370. If the company want to hire a mid to senior level person, they need to pay now much over $145,000, maybe $160,000 or more to meet the prevailing wage level requirement. Hopefully that is clear.
Below is the regulatory text screenshot for your reference.
If you want to compare Wage Levels, Check H1BGrader.com – Old vs New Wage Levels for H1B Position in an Area. They compare nicely with graphs, rates, check below sample
New H1B Wage Levels rule effective Date
As per regulation text, the new H1B, PERM wage levels will be effective from the day the regulation is published in Federal register. The official regulation was published in the Federal register on October 8th, 2020. So, the new wage levels are effective from October 8th, 2020. See below screenshot with effective date from Federal Register. There is a 30 days comment period as it is interim final rule.
Who does the New Wage Levels Rule apply to ?
The new wage levels rule is applicable to PERM applications with pending Prevailing Wage Level determinations on the effective date(Oct 8, 2020) of the regulation, new PERM applications filed on or after the effective date of the new rule. Also, for H1B LCAs filed with DOL on or after the effective(Oct 8, 2020) date of the regulation.
DOL clearly tells that they will not apply the new prevailing wage levels to previously approved prevailing wage determinations or PERM applications that were approved, including LCAs. Below is the exact regulatory text screenshot.
Impact of the New Wage Levels Changes ? 400K H1B holders ?
The impact of the new H1B and PERM prevailing levels is going to be huge, if they continue to be effective. H1BGrader.com website has done detail analysis saying that H1B wage levels rule can impact 275K jobs . As per their report and analysis, there are about 275,000 H1B holders ( added Level 1 – 63,815 and Level 2 – 214,197 job LCA count for FY 2020 – until Q3 June 30) who would be impacted, when they go for new H1B LCA for FY 2020.
But, the impact could be far more, if you see data for FY 2019, which is full year data, which has Level II workers at 316K, and Level 1 workers at 88K, this totals to over 400K H1B LCAs. So, the expected impact could be about 400K H1B holder, when they go for new LCAs. Below is the graph from their blog. You can check their Top 15 H1B Employer Wage Level Distribution report as well to get an idea.
We can expect similar impact for PERM program as well, we do not have any data points to share the impact on how many exactly would be impacted.
What do you think of the changes to the H1B wage levels and PERM wage Levels? Share your thoughts in comments.
You can check the official Regulation Report on Wage Levels