Even amid perceived curbs on H-1B hirings in the US, a new study by the National Bureau of Economic Research (NBER) found that it may not lead to a drastic drop in Indian professionals’ entry into the country.
The study by economist George J Borjas, which is titled ‘The H-1B Wage Gap, Visa Fees, and Employer Demand’ found that structural wage gaps and labour market dynamics embedded within the programme make H-1B hiring financially attractive.
The allure of employing H-1B workers remains high despite significantly higher visa costs, with the new $100,000 fee now into effect.
What is the H-1B wage gap mentioned in the study?
According to the study, an average H-1B worker earns about 16 per cent less than a US-born worker in the same locality despite the same education, age, gender, and occupation.
This finding is particularly relevant for Indian nationals, many of whom are employed either by large US technology firms or by Indian-origin IT services companies operating in the US.
Is the wage gap consistent?
This wage gap is not uniform across employers. At large American technology companies such as Meta, Apple, Amazon, Google, Microsoft and Tesla, the difference is minimal.
In fact, at Meta and Tesla, the wage gap ranges from approximately minus 1 per cent to minus 3 per cent and is statistically indistinguishable from zero. In these firms, H-1B workers, many of them highly skilled Indian software earn salaries close to $150,000 on average, the study found.
The average pay for an H-1B professional, on the other hand, is about $80,000.
Why the $100,00 fee won’t curb H-1B hirings
The main question is whether charging a high visa fee would discourage companies from hiring foreign workers. Borjas’ research suggested it would not. He found that employers save nearly $100,000 in payroll costs over six years by hiring one H-1B worker.
In simple terms, the total salary savings over six years are about the same as the proposed $100,000 visa fee. So, if a company pays that fee once, it would cancel out the savings, but it wouldn’t cost them more than what they save.
Because of this, companies would still have a reason to hire, especially if they expect continued wage flexibility or other benefits.