The H-1B statutes are lobbyist-written and carefully crafted to be misleading to the casual reader. The "prevailing wage" is one area where there has been great confusion; in particular H-1B wage levels. The H-1B wage or skill levels are entirely a bureaucratic creation that have no relation to the job market.
The source of the H-1B Wage Levels is the Bureau of Labor Statistics Occupational Employment Statistics (OES). The BLS puts out a wage survey every May. The OES survey gives by occupation and location the average salary, the 10th, 25th, 50th, 75th, and 90th percentile wages. The 50th percentile (median) is what normal people call "the prevailing wage". In fact, the Department of Labor's (DOL) regulations required it (or the mean if the median is not available).
The State of Utah has had a contract for decades to manage foreign labor certification data. Until 2004 and apparently without any statutory authority, they had been taking the OES survey and then interpolating the data to create approximations of the 17th and 66th percentile wages and putting them out as a high and low prevailing wages.
Employers were routinely using the 17th percentile wage supplied by this website and claiming it was the "prevailing wage" in H-1B labor condition applications (LCAs) even though this did not meet the requirements under regulation for a prevailing wage.
However, the Department of Labor is required to approve all H-1B LCAs within 14 days as long as the form is filled out correctly, so employers can put down nearly anything as the prevailing wage and get it approved. The Utah system provided an extremely low wage that had the appearance of being government-approved even if it was not lawful.
In 2004 Congress enacted 8 U.S.C. § 1182(p):
(4) Where the Secretary of Labor uses, or makes available to employers, a governmental survey to determine the prevailing wage, such survey shall provide at least 4 levels of wages commensurate with experience, education, and the level of supervision. Where an existing government survey has only 2 levels, 2 intermediate levels may be created by dividing by 3, the difference between the 2 levels offered, adding the quotient thus obtained to the first level and subtracting that quotient from the second level.
No wage survey takes into account experience, education, and level of supervision and no existing survey had only two levels. This huge gap left the executive to do as it pleased.
Since then, the folks in Utah have been taking the OES data and interpolating the data to produce approximations such that:
- Skill Level 1: 17th percentile (bottom 1/6)
- Skill Level 2: 33rd percentile (bottom 1/3)
- Skill Level 3: 50 percentile (median or actual prevailing wage)
- Skill Level 4: 66th percentile (top 1/3)
Over the years, there have been published descriptions for these skill levels but they are entirely fictions that have no statistical relationship to the actual data. Note that no government wage survey has these wage/skill levels. The actual survey wage levels are the 10th, 25th, 50th, 75th, and 90th percentiles and median.
The skill breakdown for approved LCAs for H-1B workers was:
- Skill Level 1: 54 percent
- Skill Level 2: 29 percent
- Skill Level 3: 11 percent
- Skill Level 4: 6 percent
Combining Skill Levels 1 and 2, this means 83 percent of LCAs use a skill level that produces a "prevailing wage" below the actual prevailing wage. How much below depends upon the location. Most use still use the 17th percentile as the "prevailing wage".
In St. Louis, the wage levels for a software developer are:
- Level 1 Wage: $32.20 hour - $66,976 year
- Level 2 Wage: $40.07 hour - $83,346 year
- Level 3 Wage: $47.95 hour - $99,736 year
- Level 4 Wage: $55.82 hour - $116,106 year
In San Francisco, the wage levels for a software developer are:
- Level 1 Wage: $45.29 hour - $94,203 year
- Level 2 Wage: $57.27 hour - $119,122 year
- Level 3 Wage: $69.25 hour - $144,040 year
- Level 4 Wage: $81.23 hour - $168,958 year
This system allows employers to pay St. Louis wages to workers in a high cost of living area like Silicon Valley.
The wage levels are entirely an artificial creation. It is frustrating to hear talk in the administration of requiring a certain H-1B wage level. Instead, they should be talking in terms of percentiles.
Nothing prevents the administration from defining the skill levels as:
- Skill Level 1: 50th percentile
- Skill Level 2: 75th percentile
- Skill Level 3: 80th percentile
- Skill Level 4: 90th percentile
Or from making it policy that all H-1B workers should be paid at least the real prevailing wage, and in a manner that is unlikely to be reversed by the courts.