FR 2021-00218

The Department of Labor has issued a final rule that proposes a new method for calculating the prevailing wages of foreign workers under certain visa programs, like the H-1B, H-1B1, and E-3 programs. This rule aims to ensure that foreign workers are paid wages equivalent to those earned by U.S. workers with similar skills and responsibilities. The intention is to protect U.S. job opportunities by eliminating the attraction for employers to hire lower-paid foreign labor instead of American workers. A phased implementation of these new wage calculations will allow both employers and workers to adapt to the changes gradually.

Summary of the Rule

This rule revises how prevailing wage levels for foreign workers are determined, aiming to bring them in line with the wages paid to U.S. workers who hold similar positions and possess comparable skills. The rule affects workers holding H-1B, H-1B1, and E-3 visas and some categories of employment-based immigrant visas. As part of its rollout, the rule includes a phased approach to implement the new wage structure to prevent sudden economic disruptions for businesses that hire foreign workers.

Issues and Concerns

One of the primary concerns regarding the new rule is its complexity. The document is lengthy and filled with technical jargon, making it potentially challenging to understand for those without expertise in immigration law or labor economics. This could lead to confusion among stakeholders, especially small business owners who may not have the resources to interpret the rule's full implications.

There are also concerns that the economic impact on small businesses has been underestimated. Small businesses could face increased costs due to the new wage requirements, possibly leading to layoffs or reduced hiring. Additionally, while the rule provides a transition period, this may not be enough to prevent adverse economic impacts on these businesses.

Another potential issue is the possibility of increased outsourcing as employers seek more cost-effective solutions in response to higher wage levels domestically. While the document acknowledges this possibility, it doesn't fully explore or quantify these outcomes.

Impact on the Public

For the general American public, this rule could mean fewer job opportunities being taken by foreign workers willing to work for lower wages, potentially leading to higher salaries and improved job prospects for U.S. workers. However, this optimistic outcome may not just hinge on the wage adjustments but also on how the broader economic landscape and labor market trends evolve in response to these changes.

Impact on Stakeholders

Employers and Small Businesses: They are likely to face increased operational costs due to the higher required wage levels. While larger companies might absorb these costs more easily, smaller businesses might struggle, leading to a competitive disadvantage or pushing them toward alternative solutions like outsourcing.

Foreign Workers: Those currently working or seeking employment in the U.S. might benefit from higher wages, aligning their pay more closely with their American peers. Yet, as employers adjust to higher costs, it could also lead to fewer job offers from U.S. companies, thereby limiting opportunities.

U.S. Workers: In theory, they stand to gain from potentially higher wages and more job security, assuming that the rule effectively reduces reliance on foreign labor at lower salaries. However, whether these benefits materialize depends heavily on how businesses adjust their employment strategies in light of the new requirements.

In summary, while this rule seeks to support American workers by leveling the wage playing field, it introduces a range of concerns and potential impacts. Stakeholders, particularly small businesses, may face challenges in adjusting to these changes, and the broader economic consequences, such as outsourcing trends, remain uncertain.

The document "Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States" discusses various financial aspects surrounding the updates to wage protections for foreign workers in the U.S. The financial references and implications of this final rule are substantial and multifaceted, impacting small businesses, particular sectors such as information technology and healthcare, and the broader economy.

Financial Impacts and Allocations

The document outlines significant financial impacts due to adjustments in the methodology for determining prevailing wage levels. A key change is the shift in wage levels for foreign workers, which is predicted to result in annualized transfer payments of $15.34 billion over ten years at a 3% discount rate, and $14.97 billion at a 7% discount rate. These figures represent a significant financial reallocation from employers to affected foreign workers due to increased wage requirements.

The estimated total 10-year transfer payments range between $130.83 billion and $105.16 billion, depending on the discount rate used. These transfer payments suggest substantial financial adjustments that employers will need to manage under the new regulations. Notably, the financial burden may be particularly heavy for small entities, which make up a considerable percentage of the employers using the H-1B program.

Issues and Concerns

Several issues are pertinent to these financial references. Firstly, there is a concern that the economic impact on small businesses has been underestimated. While the document provides detailed calculations, the broad reach of the affected industries suggests that the significant wage increases might place a heavy financial strain on smaller companies with fewer resources to adapt. The commentary underlines that up to 22% of small entities could face wage costs exceeding 3% of their total revenue, especially in critical years like 2020 and 2021.

Additionally, the phase-in period meant to ease the transition to new wage levels might not sufficiently mitigate the impacts on these businesses. The rule suggests a gradual approach, but the financial figures indicate that even phased increases can result in substantial cumulative costs for employers. The initial cost of $4.33 million in the first year for rule familiarization, followed by continuing annual costs of $2.46 million, underscores the administrative burden accompanying the financial changes.

Moreover, the document highlights concerns that the increased wage levels could lead to more significant outsourcing as employers seek to manage these heightened costs. However, this potential consequence is acknowledged but not fully explored or quantified within the document, leaving a gap in understanding the broader economic implications of the financial shifts introduced by the rule.

Calculations and Methodology

The document describes how prevailing wages will be recalculated at specific percentile levels using the Bureau of Labor Statistics' Occupational Employment Statistics (OES) data. Financial examples are provided, illustrating wage impacts across various sectors and geographic locations. However, while detailed, these methodological discussions could benefit from a clearer, more concise explanation of how these changes will directly affect worker wages and employer costs on a day-to-day basis.

In summary, the financial implications of this rule are profound, influencing wage structures across a broad range of industries and potentially reshaping the economic competitiveness landscape in the U.S. Proper consideration and understanding of these adjustments are crucial for companies, particularly small businesses, as they strategize to meet the new wage requirements without compromising their operational viability.