Professor Blasts Research on H-1B Visa Workers Earning Higher Wages

By Don E. Sears  |  Posted 2010-05-27

Professor Blasts Research on H-1B Visa Workers Earning Higher Wages

In response to a recently published University of Maryland study, eWEEK interviewed Norman Matloff of the University of California, Davis, to get his perspective on the findings. The Maryland findings claim H-1B visa holders typically earn more in wages in the U.S. when you control for education level and several other factors. eWEEK interviewed the Maryland study's authors, Assistant Professor Sunil Mithas and Professor Henry Lucas, last week. Why are H-1B visa holders earning more than U.S. workers? According to the Maryland study, "because of their intangible human capital, rigorous screening and selection processes and willingness to work across borders, [foreign visa workers] are likely to earn higher wages than U.S. citizen IT professionals."

Matloff believes after evaluating the Maryland research that there is a substantial conflict in the findings with other academic research. Matloff sat down with eWEEK to discuss the plethora of problems he calls "disturbing" in the Maryland study. The following is the question-and-answer interview with Matloff that occurred on May 26 over e-mail.

eWEEK: What are your main problems with the University of Maryland study that found H-1B visa holders are being paid more than U.S. citizens?

The study is fatally flawed, because its data source is grossly unrepresentative of H-1Bs in the computer field. The readership of InformationWeek [a good portion of the University of Maryland's research is based on a 2006 study done by Information Week and the staffing firm Hewlitt Associates] tends to be much more managerial and less technical, so the survey is not picking up the typical H-1B computer professionals.

The Maryland study's own data shows this. In years of experience, for instance, the H-1B respondents in the study are much more experienced than the government H-1B data show. Not surprisingly, then, the H-1B wages in the Maryland study don't match those of the government H-1B data either, with the InformationWeek respondents earning much higher wages. The median for H-1Bs in computer-related occupations was about $60,000 (in 2003, the middle of the authors' data period), according to the U.S. Citizen and Immigration Services (the former INS).  This is far short of the Maryland authors' mean of $79,087. Even the 75th percentile in USCIS was only $72,815. The data do vary from year to year, but all of the years of USCIS show that the authors' claimed wage figures simply do not jibe with those of the USCIS. Again, this shows that the InformationWeek sample involves the wrong population.

In addition, as an academic I'm very disturbed at the appalling lack of even-handedness on the part of the Maryland authors. Their statements to the press do not jibe with their own findings, and their coverage of previous research is severely one-sided. I'll cite three (of many) examples:

First, the Maryland authors have failed to tell the press that they correctly recognize the basic economic principle that the H-1Bs, due to mobility limitations, will be paid less than comparable Americans. A U.S. citizen or permanent resident can move to another employer if offered more money, whereas an H-1B faces major obstacles. Mithas and Lucas do say this in their paper, noting that this is the reason why they found green card holder wages to be higher than H-1Bs. In other words, the authors agree with those of us whose research has found that H-1Bs are paid less than comparable (key word) Americans, Yet the authors' statements to the press don't mention this, nor do they even mention it in their paper's Abstract and Conclusions section.

A second example concerns controlling for relevant variables. The authors correctly state that this must be done, and indeed in one small section of their paper they do control for job location and job title, two crucial variables. They find that the claimed wage premiums for H-1Bs are greatly reduced once these variables are accounted for: Their calculated premium is 6.8 percent without factoring in these variables, but it shrinks down to 2.3 percent with these controls included. The former figure is almost three times as large as the latter, yet they've cited only the larger figure in the press interviews I've seen. Again, given the emphasis they place, correctly, on controlling for relevant variables, it is irresponsible to cite the larger number and not the smaller--but more accurate--one.

Third, a central component of academic research is proper reporting of prior research. The Maryland authors' paper is sorely lacking in this regard. They give detailed criticism of previous work that finds problems with the H-1B program, while never offering any criticism at all of the work they cite that portrays the program in a positive light. For instance, they fault some research showing wage problems for H-1Bs for not reporting the results of statistical significance tests, while not mentioning that many of the papers they highlight as supporting H-1B don't present those test results either.

Moreover, the authors do not mention at all the fact that two Congressional-commissioned employer surveys have found that H-1Bs are indeed often paid less than comparable Americans. These surveys are far more relevant than regression analysis (the tool used by the authors, myself and others), as regression can only attempt an indirect, approximate answer to the questions at hand. Employer surveys address this question directly, and thus are very important. It was unconscionable for the Maryland authors to omit discussion of these official employer surveys.

In short, this paper was not the evenhanded treatment that is expected in academia.

H-1Bs in 2010

eWEEK: What data have you looked at to compare the findings in the University of Maryland study?

I have my own studies, published in the University of Michigan Journal of Law Reform, in which I found a 15-20 percent underpayment for H-1Bs. Other studies, such as the one done at UCLA, have found underpayment of as much as 33 percent. Mithas and Lucas do cite that article of mine, but incorrectly give readers the impression that I only analyze studies done by others, and they don't cite the UCLA study at all.

There are also the two government employer surveys I cited above, the Miano studies (cited but incorrectly analyzed).

eWEEK: The University of Maryland study uses data compiled by technology-publisher Information Week and Hewlitt Associates (a staffing firm) with data from 2000 to 2005. Does this data hold up to statistical scrutiny? Why or why not?

As I stated above, this is simply the wrong population for the question at hand.

eWEEK: In a recent Q&A with the University of Maryland professors, eWEEK asked their opinion on the current visa cap in 2010 on H1-B holders. They responded that -The current quota of 85,000 may be too low because it is almost always fully utilized. We argue in the paper that setting the quota too low may be more harmful than setting it too high because if the economy does not need workers, the quote will go unfilled as has happened before.' Do you have thoughts on this?

Of course the quota is filled during years where there is substantial hiring.  If someone sells new Ferraris at $10,000 each, with a quota of 1,000 cars, of course that quota will be fully utilized! That would be a bargain for Ferraris, and H-1Bs are a bargain for employers too.

One very important point is that employers save money by hiring H-1Bs in two ways, what I call Type I and Type II. Type I is the one always mentioned, in which employers pay H-1Bs less than comparable Americans. But in Type II, the employers save money by hiring younger (thus cheaper) H-1Bs in lieu of older (thus more expensive) Americans. In my writings, I've emphasized that Type II is just as important as Type I.

eWEEK: What is your view of the H-1B visa program in 2010? Is there value in having skilled technical professionals brought in on visas from other countries to help U.S. companies?

I have always strongly supported bringing in "the best and the brightest" from around the world, and facilitating their work visas and green cards. But the vast majority of H-1Bs are not in that league; they are ordinary people, doing ordinary work--and doing so more cheaply than Americans. It is absurd that there are so many H-1B hires when qualified Americans cannot find IT work and must change professions.

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