Assessing this week’s data and the ongoing debate about inflation and economic “overheating” requires an understanding of at least four key points:

1. The source of inflationary pressure is crucial to assessing how policy should respond. Inflation coming from the labor market because workers are empowered enough to secure wage increases that run far ahead of the economy’s long-run capacity to deliver them (that is, productivity growth) is the only source of inflation that should ever spur a contractionary macroeconomic policy response (either smaller budget deficits or higher interest rates). This type of inflation is what worries about “overheating” center on.
2. Other sources of inflationary pressure are far more likely to be transitory and hence should not spur a contractionary policy response.
   • Inflation in the prices of commodities is often volatile and driven largely by global markets. Such price increases are likely to hinge on idiosyncratic drivers like weather changes, oil field discoveries, or rapid growth in large economies outside the United States. This kind of inflation should not spur a contractionary response. These price increases are not driven by economic “overheating”; engineering an economic “cooling” by reducing budget deficits or raising interest rates will not stop them—but it will cause a lot of collateral damage in slowing growth within the United States.
   • Inflation driven by very large relative price changes is also highly likely to be transitory and should not be met with a contractionary macroeconomic policy response.
3. Arguing that inflation stemming from many sources should not be met with a contractionary policy response does not mean that this type of inflation is good, or even just benign. Such inflation often does reduce typical workers’ living standards. But to be effective, anti-inflation policy must address such types of inflation with tailored measures, not across-the-board macroeconomic austerity.
4. Spillovers of inflation that begin outside the labor market but spark inflation driven by wage-price spirals are highly unlikely given the extremely weak bargaining position and leverage of typical U.S. workers in recent decades. This degraded bargaining position also suggests that unemployment rates might reach far lower levels than they did in past decades before spurring wage growth sufficient to drive excess price inflation.

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The latest attack is another court case that made its way to the Supreme Court (California vs Texas)—which could have a ruling as soon as Thursday. Legal merits of the case aside (there were essentially none), the economic fallout of the case if it is decided in the plaintiffs’ favor would be profound, as the requested remedy is the abolition of the entire ACA.

The ACA was in some ways hugely complicated, but can be boiled down to five major undertakings:

• Strengthening employer-provided health insurance with mandates like no lifetime caps on benefits paid and an allowance for adults up to age of 26 to be covered on parents’ plans;
• Providing needed regulation for the “non-group” health insurance market (the market for people who can’t get insurance through their employer or through existing government programs);
• Providing subsidies to make purchasing non-group plans more affordable for many;
• Paying for states to expand their Medicaid programs significantly; and
• Raising taxes on high incomes to pay for its spending provisions.

Read more

Summary

More than two in five child care workers would have higher pay if there were a $15 national minimum wage in 2025, as called for by the 2021 Raise the Wage Act. Of the child care workers who would get a raise, more than nine in 10 are women.

This report finds that after a $15 minimum wage in 2025:

• As many as 560,000 child care workers would have higher take-home pay.

• The vast majority (95.4%) of child care workers who would get a raise are women, and 36.2% are Black or Hispanic.

• Among those child care workers who get a raise, average annual pay for year-round workers would rise by $2,900 (in 2021 dollars). The year-round earnings of Black or Hispanic child care workers would increase by $3,200 and $3,100, respectively.

• Child care worker pay increases would be concentrated at the bottom of the wage distribution and would significantly reduce inequality in this profession. If the Raise the Wage Act passed, the 10th-percentile child care worker hourly wage in 2025 would be 41.8% higher than it would be without the act.

• Wages would rise for 43.5% of child care workers nationally. In the following states, more than two out of every three child care workers would have higher take-home pay: Alabama (72.3%), Arkansas (69.1%), Iowa (72.8%), Kansas (76.3%), Kentucky (78.8%), Louisiana (72.0%), Mississippi (69.0%), Nebraska (68.9%), New Mexico (69.1%), Oklahoma (73.0%), Texas (70.0%), Utah (75.2%), and Wisconsin (67.1%).

Quality child care is essential to our economy

During the COVID-19 pandemic, working parents struggled to navigate day care and school closures; essential child care workers faced risks on the job and lost income; and child care centers faced increasing costs to meet additional safety standards (Workman and Jessen-Howard 2020). These difficulties highlight the vast social benefits that quality child care provides to both children and their families.

And yet child care work is—and has been—deeply undervalued. Domestic workers (many of whom provide child care) were originally excluded from the federal minimum wage when it was first established in the 1930s, as a direct result of racism against the Black women who made up most of that workforce (Wolfe et al. 2020; ILO 2021).

In this report, we show how raising the minimum wage would benefit these essential workers.

The Raise the Wage Act would make a big difference for child care workers

The 2021 Raise the Wage Act would increase the federal minimum wage to $15 in 2025 and disproportionately benefit workers in child care. Table 1 shows the projected effects of the policy in 2025 relative to “business as usual” wherein the federal minimum wage remains at its current level of $7.25 per hour. The Raise the Wage Act would increase the pay of 32 million workers; these “affected” workers make up 21.2% of the overall wage and salary workforce. Because they are paid particularly low wages, child care workers are much more likely to be affected by the policy. Wages would rise for more than 560,000, or 43.5% of, child care workers.

Table 1

Throughout this report, “child care workers” refers to workers in the “Child care” or “Pre-K and kindergarten teachers” occupation classifications (from the Bureau of Labor Statistics’ American Community Survey), excluding those who work in the “Elementary and secondary schools” industry. Since pre-K and kindergarten teachers are in a combined occupation category, the industry restriction is needed to exclude kindergarten teachers. While this also excludes pre-K teachers who work in elementary schools, it still provides a more comprehensive look at the universe of child care workers and pre-K teachers than if we just looked at workers in “Child care” occupations.

Table 1 also displays the effects of the Raise the Wage Act of 2021 on two alternative definitions of child care workers that do not include the industry restriction: (1) only those workers in the “Child care” category (that is, not including pre-K workers from the “Pre-K and kindergarten” category), and (2) all workers that appear in either the “Child care” or the “Pre-K and kindergarten teacher” occupation category (i.e., not excluding kindergarten teachers).

Women and Black workers are more likely to benefit

Many of the child care workers who would benefit from the Raise the Wage Act are women and people of color. Table 2 and Figure A show that, among child care workers, women and Black workers are particularly likely to see their pay rise. Nearly half (48.5%) of Black child care workers would benefit from the Raise the Wage Act—a higher share than other race/ethnicity groups. Women child care workers are also more likely to benefit than their peers who are men (43.8% would see a raise compared with 38.3%). Coupled with the fact that women make up the vast majority of child care workers, this means 95.4% of affected child care workers are women.

Table 2

Figure A

Table 3 shows that child care workers affected by the Raise the Wage Act would receive, on average, an annual pay increase of $2,900 (in 2021 dollars) if they worked year-round (52 weeks per year). Black or Hispanic child care workers would see slightly larger pay increases: The average annual earnings for these workers would rise by $3,200 and $3,100, respectively, if they worked year-round. These higher increases reflect the degree to which these workers were underpaid even relative to other child care workers.

Table 3

Figure B shows that pay increases for child care workers are concentrated in the bottom half of their occupations’ hourly wage distributions. For instance, without the Raise the Wage Act, the 10th percentile of the child care worker wage distribution would be just $10.58 in 2025. However, with the act, it would be 41.8% higher at $15. The 20th-percentile wage would be 19.8% higher in 2025 under the Raise the Wage Act.

Figure B

Child care workers in some states would benefit disproportionately

While nationally, on average, 43.5% of child care workers would benefit from the Raise the Wage Act, the benefits vary widely by state. Some states already have higher minimum wage standards; therefore, the national average understates the benefits of the Raise the Wage Act in low-minimum-wage states.

Figure C shows state-specific totals and shares of child care workers who would have higher pay as a result of the policy. More than two out of every three child care workers would have higher take-home pay in Alabama (72.3%), Arkansas (69.1%), Iowa (72.8%), Kansas (76.3%), Kentucky (78.8%), Louisiana (72.0%), Mississippi (69.0%), Nebraska (68.9%), New Mexico (69.1%), Oklahoma (73.0%), Texas (70.0%), Utah (75.2%), and Wisconsin (67.1%).

Southern states tend to have particularly high shares of child care workers who would benefit from the RTWA, since only three Southern states have a minimum wage higher than $7.25 (Arkansas, Florida, and West Virginia). In fact, the five states that would not have a minimum wage at all if it were not for the federal minimum wage are all in the South (EPI 2021).

Figure C

Low wages are not a ‘solution’ to the affordability problem

Low wages for child care workers have for too long been treated as a “solution” to help make child care affordable. This has failed on every count. Despite the low wages of child care workers, these services remain unaffordable for many low- and middle-income families. Meanwhile, low wages leave child care workers economically vulnerable and compromise the quality of care children receive.

These low wages also reinforce existing racial and gender inequality, since both Black child care workers and women are particularly likely to see their wages increase under the RTWA. Child care workers deserve to be paid a wage that better reflects the value of their work and allows them to care for their own families.

Raising the federal minimum wage to $15 by 2025 is an important first step, and policymakers must also address the affordability issue in tandem with raising the minimum wage, investing in this critical infrastructure to lower the costs for families (Mitchell, Narefsky, and Dade 2020; Gould et al. 2020).

Methodology

The estimates come from our analysis of the Raise the Wage Act of 2021 using the Economic Policy Institute Minimum Wage Simulation Model. The results in this memorandum are the projected effects of the policy in 2025. The model incorporates all already-scheduled state and local minimum wage increases through 2025. A description of the detailed methodology is available in Cooper, Mokhiber, and Zipperer 2019.

The total workforce used in these estimates includes all wage and salary workers with valid wage values, excluding the self-employed and those working abroad. “Child care workers” and “Pre-K and kindergarten teachers” are defined by the 2018 ACS occupation codes 4600 and 2300, respectively. “Elementary and secondary schools” is defined by the 2017 ACS industry code 7860.

References

Cooper, David, Zane Mokhiber, and Ben Zipperer. 2019. Minimum Wage Simulation Model Technical Methodology. Economic Policy Institute, February 2019.

Economic Policy Institute (EPI). 2021. Minimum Wage Tracker. Accessed May 17, 2021.

Gould, Elise, Marcy Whitebook, Zane Mokhiber, and Lea J.E. Austin. 2020. A Values-Based Early Care and Education System Would Benefit Children, Parents, and Teachers. Economic Policy Institute, January 2020.

International Labour Organization (ILO). 2021. ILO Minimum Wage Policy Guide. Accessed May 17, 2020.

Mitchell, Estelle, Laura Narefsky, and Annie Dade. 2020. The Care Minimum: The Case for Raising the Minimum Wage and Investing in Child Care Together. National Women’s Law Center, October 2020.

Wolfe, Julia, Jori Kandra, Lora Engdahl, and Heidi Shierholz. 2020. Domestic Workers Chartbook: A Comprehensive Look at the Demographics, Wages, Benefits, and Poverty Rates of the Professionals Who Care for Our Family Members and Clean Our Homes. Economic Policy Institute, 2020.

Workman, Simon, and Steven Jessen-Howard. 2020. The True Cost of Providing Safe Child Care During the Coronavirus Pandemic. Center for American Progress, September 2020.

Job openings increased most in accommodations and food services (+349,000) and hiring also increased in accommodation and food services (+232,000) a good indication that supply of workers was beginning to respond to demand in April.
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— Elise Gould (@eliselgould) June 8, 2021

Today’s JOLTS report also finds a series high quits rate of 2.7% while layoffs are now a series low of 1.0%. High quits mean workers feel comfortable leaving their jobs in search of better matches. Low layoffs are an obvious good. The economic recovery is gaining momentum.
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— Elise Gould (@eliselgould) June 8, 2021

Black and Latinx representation in professional occupations

This fact sheet was jointly produced by the Economic Policy Institute and the Department for Professional Employees, AFL-CIO.

This occupational segregation is observed in the severe underrepresentation of Black and Latinx workers in professional occupations that pay more, on average, than other occupations.2 Over the next decade, eight of the 10 major groups of professional occupations are projected to have above-average job growth.3 If current disparities in employment patterns remain unchecked, racial disparities in the economy are likely to continue growing.

The data in Table 1 paint a clear picture of the current gap in representation for Black and Latinx workers in professional occupations overall.4 But Black and Latinx professionals are also unequally distributed across professional occupation groups. For example, community and social service occupations have much higher rates of representation of Black and Latinx professionals, while others, like legal occupations, lag significantly behind the professional workforce as a whole for both groups. The severe underrepresentation of Black professionals in architecture and engineering, as well as in life, physical, and social sciences, is also notable.

Table 1

AAPI representation in professional occupations

While representation rates for Black and Latinx professionals generally follow similar patterns, representation for Asian American/Pacific Islander (AAPI) workers does not. As Table 1 shows, AAPI workers are overrepresented in several occupational groups that employ much smaller shares of Black and Latinx workers—especially STEM (science, technology, engineering, and math) and health care occupations—while they are underrepresented in those that employ larger shares of Black and Latinx workers, such as community and social service occupations and education, training, and library occupations.

Representation by sector

There are also clear differences in the employment of Black and Latinx professionals across broad sectors of the economy (Table 2). In the federal government and, to a lesser degree, in state and local governments, Black professionals are represented at much higher rates than in the private sector. Historically, the public sector has been a source of equitable job opportunities for Black professionals due to a combination of factors, including strong anti-discrimination and affirmative action regulations.5 Latinx professionals are more likely to be employed in local government or for-profit private-sector companies.

Table 2

Fast growth is projected in professional occupations—which may exacerbate inequality

Today’s inequities are of particular concern because several professional occupational categories are projected to grow at faster rates than the overall workforce. While the overall workforce is projected to grow by 3.7% from 2019–2029, the professional workforce is projected to grow at an average rate of 6.4%.6 In particular, computer and mathematical occupations, community and social service occupations, and health care practitioner and technical occupations are projected to grow at above-average rates.

Given underrepresentation of Black and Latinx workers in these occupations, and given that these occupations pay higher wages than other occupations, faster growth in these fields will exacerbate inequality if the problem of underrepresentation is not addressed.

While there has been some improvement in the representation rates of Black and Latinx professionals since the year 2000, the rate of change has been so slow that, if we continued at that rate, it would take 38 years to overcome the representational gap for Black professionals and 33 years for Latinx professionals.7 However, this does not take into account the fact that Black and Latinx shares of the overall workforce are projected to continue increasing over the next decade or more, lengthening the amount of time until this gap is overcome.8

Pay disparities persist within professional occupations

On average, professionals are paid 44% more than the median wage earned by workers in all occupations. The underrepresentation of Black and Latinx workers in professional occupations is therefore an important factor in the racial wage gap. But there is a compounding factor: Black and Latinx workers who are in professional occupations still earn less than their white counterparts in similar occupations (Table 3).

Table 3

Occupational segregation and discrimination are significant factors in explaining racial wage gaps, and these pay gaps are signs of the larger structural inequities that Black and Latinx professionals face in the workplace that impact related outcomes such as promotions, recruitment, and retention.9

Policy recommendations

In order to close the professional representational gap at a faster rate and address other inequities in professional occupations, many changes are needed at the federal, state, local, and workplace levels. The following five recommendations are not an exhaustive list of the necessary changes but should be seen as a starting place for policymakers looking to tackle these challenges.

Increase the ability for professionals of all races and ethnicities to organize and join unions

Representation rates for Black and Latinx professionals are higher in jobs that are covered by union contracts. According to EPI analysis, Black professionals make up 10.9% of all professionals in unions compared with 9.6% of professionals not in unions, and Latinx professionals make up 10.4% of professionals in unions compared with 9.5% of professionals not in unions.10 Union positions, on average, pay higher wages than nonunion jobs, and union contracts often have provisions that take subjectivity and bias out of the promotion and advancement process, increasing opportunities for Black and Latinx professionals to move up and remain in their chosen occupations.

While professionals of all races benefit from union coverage, the improvements won through a union are often greater for Black and Latinx workers: Among all occupations in 2019, Black workers who were covered by a union contract were paid 26.7% more than their nonunionized counterparts, and Latinx workers covered by a union contract were paid 35% more than their nonunionized peers. For comparison, the pay premium for all workers covered by a union contract in 2019 was 21.3%.11

Union membership and collective bargaining empower professionals to challenge the workplace discrimination that contributes significantly to the underrepresentation of Black and Latinx professionals, especially in the tech sector. Research from the Kapor Center for Social Impact highlights how unfair treatment is the most frequent reason that Black and Latinx professionals leave tech jobs.12

However, only 11.3% of professionals were union members in 2020.13 U.S. labor law makes organizing new unions very difficult, and there are few, if any, negative consequences for employers who break the law to stop a union drive.

Significant reforms are needed to remove barriers to accessing the fundamental right to organize and bargain for improved working conditions and expanded opportunities for Black and Latinx professionals to be employed and advance in professional occupations.14 The Protecting the Right to Organize (PRO) Act, introduced in Congress in 2021, would do just that by modernizing U.S. labor law and strengthening penalties for employers who break the law to discourage employees from organizing new unions.15

Strengthen anti-discrimination laws in the private sector

While the representation of Black and Latinx professionals has increased over the last 20 years, their representation in the private sector lags significantly behind their representation in the public sector, as noted above.

Strengthening labor law and anti-discrimination policies are important steps toward creating a more equitable and diverse professional labor force in all sectors. The Restoring Justice for Workers Act, first introduced in Congress in 2019, would prohibit private-sector employers from requiring new hires to sign mandatory arbitration agreements.16 Such agreements prevent working people from seeking justice through the judicial system for violations of their workplace rights, including Title VII of the Civil Rights Act, which prohibits employment discrimination based on race, color, religion, sex, and national origin.17

Workplace culture and rules are often shaped by the norms and practices of the racial majority, resulting in discrimination against those who are outside of those norms. One proposal to counter this type of workplace culture is the Create a Respectful and Open World for Natural Hair (CROWN) Act, which would protect against discrimination based on race-based hairstyles such as braids, locs, twists, and knots.18

Dismantle structures that perpetuate pay gaps

Large racial and gender wage gaps persist even when comparing workers with similar education, experience, and geographic location, revealing discrimination as a major factor.19 In 2016, the Equal Employment Opportunity Commission (EEOC) revised the Employment Information Report (EEO-1) to require large employers to report what they pay their employees by job category, sex, race, and ethnicity. This policy was introduced to strengthen enforcement of anti-discrimination laws and to draw employers’ attention to discriminatory pay disparities that may otherwise go undetected. Consistent and systematic collection of pay data also provides another layer of detail to existing reports of employment used to detect discriminatory hiring and promotion practices. However, in 2017, the Trump administration stayed the pay data collection rule, ending the reporting requirement. This rule needs to be reinstated.

An additional, complementary policy would prohibit employers from asking job candidates about previous pay history. As early as 2016, several states and localities began regulating the use of salary history during the hiring process.20 Implementing such a policy at the federal level would help to untether Black and Latinx professionals from lower levels of pay throughout their careers.

Remove barriers to job access for Black and Latinx professionals in STEM

The hiring of Black and Latinx professionals in science, technology, engineering, and math (STEM) fields lags behind hiring in other professional occupations. One possible barrier that contributes to this reality is the H-1B visa program, which allows employers to hire temporary migrant workers at below-market wages. Because their immigration status is controlled by their employers, it is difficult in practice for H-1B beneficiaries to seek out new jobs and it is difficult for them to exercise their workplace rights and advocate for better wages or improved working conditions.21 According to the U.S. Department of Labor, H-1B workers account for approximately 10% of employment in information technology and, in certain key occupations—like software developers working on applications—they account for a remarkable 22%;22 the share is likely even higher in certain geographies.

Since most employers are not required to advertise jobs to U.S. professionals before hiring through the H-1B visa program,23 they have access to a ready supply of underpaid and immobile workers and have little incentive to invest in recruitment, training, or retention initiatives for Black and Latinx professionals.

The H-1B visa program must be reformed to ensure that migrant workers have equal rights and are paid fairly. By uplifting labor standards in the H-1B program, we can ensure that it no longer serves as a barrier to Black and Latinx professionals accessing and retaining jobs in STEM occupations.24

Increase federal arts funding and leverage tax incentives to create talent pipelines and encourage diverse hiring in the arts, entertainment, and media industries

The National Endowment for the Arts, the National Endowment for the Humanities, and the Corporation for Public Broadcasting help bolster local economies and put creative professionals to work on nonprofit productions and performances. Federal policymakers can help ensure that more of these career opportunities are available to underrepresented professionals by increasing federal arts funding overall and working with the unions that represent creative professionals to develop diversity-hiring requirements and reporting objectives for grant recipients. Additionally, Congress should follow the lead of states like Illinois, New Jersey, and New York to expand existing tax credits for American-based film, television, and live entertainment productions and identify effective diversity requirements for these tax incentives that will spur more inclusive hiring in film, television, and live entertainment.25

Notes

1. Ana Hernández Kent and Lowell R. Ricketts, “Wealth Gaps Between White, Black and Hispanic Families in 2019,” On the Economy Blog (Federal Reserve Bank of St. Louis), January 5, 2021.

2. As defined by the Bureau of Labor Statistics, professional occupations include management occupations; business and financial operations occupations; computer and mathematical occupations; architecture and engineering occupations; life, physical, and social science occupations; community and social service occupations; legal occupations; educational instruction and library occupations; arts, design, entertainment, sports, and media occupations; and health care practitioner and technical occupations.

3. According to BLS projections, employment in all occupations is expected to grow 3.7% between 2019 and 2029. The major occupational groups expected to grow faster include community and social service occupations (12.5%); computer and mathematical occupations (12.1%); health care practitioner and technical occupations (9.1%); business and financial operations occupations (5.3%); legal occupations (5.1%); management occupations (4.7%); life, physical, and social science occupations (4.7%); and educational instruction and library occupations (4.5%). See “Table 1.1. Employment by Major Occupational Group, 2019 and Projected 2029,” Bureau of Labor Statistics Employment Projections, last updated April 9, 2021.

4. Because of the large and anomalous labor market fluctuations caused by the COVID-19 pandemic and economic recession in 2020, we base the analysis in this fact sheet on data from 2019 and earlier.

5. David Cooper and Julia Wolfe, “Cuts to the State and Local Public Sector Will Disproportionately Harm Women and Black Workers,” Working Economics Blog (Economic Policy Institute), July 9, 2020.

6. “Table 1.1. Employment by Major Occupational Group, 2019 and Projected 2029,” Bureau of Labor Statistics Employment Projections, last updated April 9, 2021.

7. Economic Policy Institute Current Population Survey Extracts, Version 1.0.15 (2021). Annual rate of change is based on authors’ analysis of the change in representation of Black and Latinx workers in professional occupations from 2000 to 2019 and their overall representation in the workforce in 2019. In the year 2000, white professionals made up 80.3% of the entire professional workforce, with Black and Latinx professionals making up just 8.5% and 5.2%, respectively.

8. Bureau of Labor Statistics, “Hispanic Share of the Labor Force Projected to Be 20.9 Percent by 2028,” TED: The Economics Daily, October 2, 2019.

9. Kim Weeden, “Occupational Segregation,” Pathways: A Magazine on Poverty, Inequality, and Social Policy (Special Issue 2019): 33–36.

10. Economic Policy Institute Current Population Survey Extracts, Version 1.0.15 (2021).

11. Bureau of Labor Statistics, “Table 2. Median Weekly Earnings of Full-Time Wage and Salary Workers by Union Affiliation and Selected Characteristics” (economic news release), January 22, 2021.

12. Allison Scott, Freada Kapor Klein, and Uriridiakoghene Onovakpuri, Tech Leavers Study, Kapor Center for Social Impact, April 2017.

13. Bureau of Labor Statistics, “Table 3. Union Affiliation of Employed Wage and Salary Workers by Occupation and Industry” (economic news release), January 22, 2021.

14. Department for Professional Employees, AFL-CIO, Toolkit: Advancing Racial Justice in the Professional Workplace, July 2020.

15. Celine McNicholas, Margaret Poydock, and Lynn Rhinehart, Why Workers Need the Protecting the Right to Organize Act (fact sheet), Economic Policy Institute, February 2021.

16. Celine McNicholas, “The Restoring Justice for Workers Act Is a Crucial First Step Toward Shifting the Balance of Power Between Workers and Employers” (statement), Economic Policy Institute, May 15, 2019.

17. Alexander J.S. Colvin, The Growing Use of Mandatory Arbitration, Economic Policy Institute, April 2018.

18. Candice Norwood, “A Yearslong Push to Ban Hair Discrimination Is Gaining Momentum,” PBS NewsHour, March 30, 2021.

19. Valerie Wilson and William M. Rodgers III, Black-White Wage Gaps Expand with Rising Wage Inequality, Economic Policy Institute, September 2016.

20. AAUW, “State and Local Salary History Bans” (interactive map), accessed June 3, 2021.

21. Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 2020. See also U.S. Citizenship and Immigration Services, U.S. Department of Homeland Security, Modification of Registration Requirement for Petitioners Seeking to File Cap-Subject H-1B Petitions, 86 Fed. Reg. 1676, at Table 7, page 1720, showing that 85% of new H-1B petitions went to employers paying at wage level 1 or 2, and 90% of petitions for the advanced degree exemption were awarded to employers paying at wage levels 1 and 2. Both wage levels 1 and 2 are below the local median wage for the specific occupation.

22. Employment and Training Administration, U.S. Department of Labor, Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States, Final Rule, 86 Fed. Reg. 3608, January 14, 2021.

23. Daniel Costa, H-1B Visa Needs Reform to Make It Fairer to Migrant and American Workers (fact sheet), Economic Policy Institute, April 5, 2017.

24. Department for Professional Employees, AFL-CIO, The H-1B Temporary Visa Program’s Impact on Diversity in STEM (fact sheet), March 2020.

25. Department for Professional Employees, AFL-CIO, A Policy Agenda for Advancing Diversity, Equity, and Inclusion (DEI) in the Arts, Entertainment, and Media Industries, February 2021.

From senior economist, Elise Gould (@eliselgould):

Read the full Twitter thread here.

+559k jobs in May is slightly better than the average growth of the prior 3 months. If this pace continues over the next year, we will likely get down to 4% unemployment by mid-2022 and will be fully recovered before the end of 2022, fully absorbing losses plus population growth.

— Elise Gould (@eliselgould) June 4, 2021

The labor market is down 7.6 million jobs since February 2020, but the total jobs shortfall should take into account pre-pandemic labor market trends or at least growth in the working age population. When those are included, the jobs shortfall is in the range of 8.6-10.7 million. pic.twitter.com/njpUX7KGPx

— Elise Gould (@eliselgould) June 4, 2021

Read more

The Biden administration has clearly decided to go big on the amount of fiscal support they are going to provide the economy over the next year—passing the $1.8 trillion American Rescue Plan (ARP) on the heels of a $900 billion package passed in December. They are determined to not repeat the policy mistake that led directly to a lost decade of economic potential after the Great Recession in 2008-09, when the government provided too little fiscal support. It took 10 full years after the Great Recession just to regain the pre-2008 unemployment rate low point, and even when this unemployment rate low was regained in 2017, it was partly because labor force participation still remained depressed. All of this raises a couple of questions: Just how much faster can recovery be this time, and would another month as disappointing as April make this fast recovery impossible to attain?

We think one reasonable metric of success would be a full return to pre-COVID labor market conditions by the end of 2022. These pre-COVID conditions included an unemployment rate of 3.5% and a prime-age labor force participation rate of 82.9%. Restoring pre-COVID labor market health by the end of 2022 would require creating 504,000 jobs each month between May 2021 and December 2022. This average monthly jobs growth target starts from today’s 9.0 million “jobs gap” relative to February 2020, and includes the need to absorb growth in the working-age population over the next 20 months (this growth in the working-age population requires roughly 55,000 jobs per month on its own). Hitting this end-of-2022 goal would see the U.S. economy reach 4.0% unemployment by mid-2022.

Read more

Further, this acceleration of wages in L&H might provide less evidence of even a sector-specific labor shortage than previously thought. When economists or other analysts express concerns about labor shortages, they generally mean a shortfall of potential employees that forces employers to gouge deeper into their profit margins to raise wages to attract workers. At some point this gouging will become unsustainable and so hiring will lag.

However, there is compelling evidence that the wage acceleration in L&H in recent months is not driven by employers raising base pay to attract workers, but instead by just an increase in tips stemming from restaurants filling back closer to pre-COVID capacity. Put another way, since December 2020, the rise in tip income, not an increase in base wages, can likely entirely explain the acceleration of wages for production and nonsupervisory workers in restaurants and bars. If this is the case, the wage acceleration will stop when restaurants get back to normal capacity. The evidence that the L&H wage acceleration is largely just a resurgence in tip income is as follows:

Read more

Key takeaways:

• At the beginning of the pandemic, we showed that not everybody can work from home, with the ability to telework differing enormously by race and ethnicity.
• As with the pre-pandemic period, there remains a large disparity between the share of Black and Hispanic workers who are able to telework during the pandemic, compared with white and Asian American and Pacific Islander (AAPI) workers.
  • Specifically, only one in six Hispanic workers (15.2%) and one in five Black workers (20.4%) are able to telework due to COVID, compared with one in four white workers (25.9%) and two in five AAPI workers (39.2%).
• According to April monthly data, the disparity in teleworking across educational level still persists. About one in three workers with a bachelor’s degree or higher still teleworked as a result of COVID (33.8%), compared with about one in 20 workers with a high school degree or less (4.8%).

The COVID-19 pandemic has highlighted and exacerbated underlying disparities in the health and economic wellbeing of people across the country. Segregated cities and neighborhoods have devastated many—disproportionately Black and Hispanic communities—under the weight of the pandemic and the ensuing recession, while others have been less impacted. Some families have seen multiple family members and friends become seriously ill or lose their jobs, while others have come away relatively unscathed (and in some cases, prospered). Millions of workers have risked their health and the health of their families by going to work in-person, while others have been able to work from home and don’t regularly encounter those facing the pandemic’s wrath.

The bottom line: disparities persist between who can safely stay home and get a paycheck and who cannot.

Read more

June 1, 2021

Suzan G. LeVine
Principal Deputy Assistant Secretary for Employment and Training
U.S. Department of Labor
200 Constitution Avenue NW
Washington, DC 20210

Brian Pasternak
Administrator, Office of Foreign Labor Certification
Employment and Training Administration
U.S. Department of Labor
200 Constitution Avenue NW
Washington, DC 20210

RE: Department of Labor, Employment and Training Administration, Request for Information on Data Sources and Methods for Determining Prevailing Wage Levels for the Temporary and Permanent Employment of Certain Immigrants and Non-Immigrants in the United States, Request for Information, DOL Docket No. ETA-2021-0003, RIN: 1205-AC00

Dear Suzan LeVine and Brian Pasternak:

Thank you for the opportunity to respond to Request for Information on Data Sources and Methods for Determining Prevailing Wage Levels for the Temporary and Permanent Employment of Certain Immigrants and Non-Immigrants in the United States.

We the two undersigned authors, have studied the H-1B program, immigration, and STEM labor markets for many years, and have published extensively about them, and have testified before Congress as experts on work visa programs: Ron Hira is an associate professor in the political science department at Howard University in Washington, D.C. Dr. Hira has published scholarly work, policy briefs, and in-depth reports, on high-skilled immigration policy.1 Daniel Costa is an attorney and researcher with the Economic Policy Institute (EPI) and is EPI’s director of immigration law and policy research. Costa has published numerous reports and commentary on work visa programs, including the H-1B program; his areas of research include a wide range of labor migration issues, including governance of temporary work visa programs, high-skilled migration, farm labor, worksite enforcement, and immigrant workers’ rights.

About EPI: EPI is a nonprofit, nonpartisan think tank established in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-income workers—regardless of immigration status—and assesses policies with respect to how well they further those goals. EPI has researched and commented extensively on the U.S. system for labor migration—through public comments, publications, and testimony—including in particular, with respect to the immigrant and nonimmigrant visas that the U.S. Department of Labor (DOL), the U.S. Department of Homeland Security, and the State Department are responsible for managing and overseeing. EPI submits these comments to DOL in response to their request for public input.

I. INTRODUCTION AND BACKGROUND ON THE PURPOSE OF THE H-1B PROGRAM AND THE ROLE OF PREVAILING WAGE RULES

DOL has issued this request for information (RFI) to all stakeholders to identify the best data sources and methods to use to set the required wage rates for H-1B workers and for DOL permanent labor certifications. Responding to this RFI effectively, however, first requires background about the current administration and outcomes of these programs. The fundamental problem with the H-1B program is not the data sources, instead it is the chasm between the program’s purpose and how it has been, and is being, administered. Sorely absent in the RFI is a clear description of the purpose of the H-1B program, and the decisive role that wage rules play in fulfilling its purpose.

DOL has profoundly failed in its administration of the H-1B and PERM programs across successive administrations.

For the past thirty years, DOL has made terrible regulatory choices with respect to the H-1B program rules that should protect labor standards. The purpose of the H-1B program is to fill jobs only when it is very difficult to find workers from the U.S. labor supply (i.e., U.S. citizens and lawful permanent residents, and other work permit holders). However, through its willful choices, with wage requirements being a central example, DOL has instead enabled employers to hire H-1B workers even when evidence suggests it is extremely easy to find workers from the U.S. labor supply. In practice, H-1B workers are commonly utilized by employers as substitutes, rather than complements, to U.S. workers. This outcome, antithetical to the H-1B program’s intent, is a direct result of DOL’s failed stewardship. DOL constructed a regime that allows U.S. employers to displace U.S. workers and undercut their wages and job opportunities. It results in H-1B and new employment-based immigrant workers being underpaid by billions of dollars each year, according to DOL’s own estimates. In choice after choice, DOL has undermined the integrity and accountability of the programs, badly distorting the U.S. labor market.

The exploitation of the H-1B program by U.S. employers hiring underpaid indentured workers is well understood by all stakeholders involved, including DOL, and has been documented in academic work, in the press, and in Congressional hearings. In numerous shocking cases, which have been widely reported in the news media, the program is being used to replace U.S. workers. There is only one reason an employer replaces a U.S. worker with an H-1B worker: because H-1B rules allow H-1B workers to be paid much less for the same work.

One such case is illustrative. In 2015, the Wage and Hour Division (WHD) investigated the case of Southern California Edison (SCE) replacing approximately 400 U.S. workers with H-1B workers who were hired by two outsourcing firms, which not coincidently have been two of the top ten H-1B employers for more than a decade. WHD concluded that no statutory requirements or administrative rules or regulations were violated.2 It was obvious the program was working against its purpose, however, DOL chose not to fix the administrative rules that permitted the practice. If DOL had set the wage requirement so H-1B workers were not paid less than their U.S. worker counterparts who were already employed at SCE, then the SCE case would never have happened. Clearly those workers’ wages and working conditions were adversely affected, a violation of the H-1B program’s statutory requirements.

By their nature, all temporary work visa programs are highly vulnerable to abuse,3 and as such, sufficient protections must be incorporated into the regulations. Recognizing this truth, Congress built into the H-1B program significant protections for U.S. and foreign workers alike, entrusting the DOL to implement and enforce them. Instead of fulfilling those aims, nearly every DOL choice having to do with upholding labor standards in H-1B has undermined critical protections for both U.S. and migrant workers, and DOL’s actions have failed to meet the H-1B statute’s requirement that the program not “adversely affect” wages and working conditions of similarly employed workers.

Those choices are generating extraordinary revenues and profits for: businesses that supply underpaid indentured workers; labor brokers and universities selling access to the U.S. labor market; and immigration attorneys processing large volumes of applications. In prior notices for this docket, DOL received thousands of comments supporting the status quo system. This is unsurprising because DOL rules have created a large clientele—employers, universities, labor brokers, and immigration attorneys—that directly profit from the current system that revolves around cheap, indentured labor. These groups have handsomely profited from the agency’s blunders and will fight to maintain it, which includes bringing frivolous litigation against DOL to keep H-1B and U.S. workers underpaid, despite DOL’s clear authority to require fair wages and labor standards and duty to uphold worker protections. Such comments should be seen in this light, and not prevail over the agency’s mission to ensure the programs meet their intended purpose of filling labor shortages and protecting both U.S. workers and migrant workers.

II. RESPONSES TO SPECIFIC QUESTIONS POSED BY DOL

1. What sources of data and methods are available that can be used alone, or in conjunction with other sources and methods, to approximate the wage level within an occupational wage distribution based on the OES wage survey and takes into account education, experience, and level of supervision for U.S. workers similarly employed across industries for specific occupation(s) and geographic area(s)?

While the American Community Survey (ACS) and the Current Population Survey (CPS) from the Census Bureau and the Bureau of Labor Statistics (BLS) are valuable sources of information on the wages earned and education levels of U.S. workers, in both cases the occupational classifications are not nearly as specific as those in the Occupational Employment Statistics (OES) survey, which is now known as the Occupational Employment and Wage Statistics (OEWS) survey. As a result, it would be difficult for DOL to incorporate data from the ACS or CPS to set H-1B wage rates that are narrowly tailored enough compared to the “nearly 800 occupations” covered by the OEWS (which are classified according to the occupational classifications in the Standard Occupational Classification (SOC) code system).4 By comparison, the Census Bureau’s occupational classification system does not use SOC codes, and consists of only 570 codes.

The foreseeable result of using a data set with fewer occupational classifications will be that H-1B employers will claim that the occupations they are hiring for do not fit within the codes used for classifying H-1B jobs, and as a result, will likely attempt to set H-1B wage rates with an “independent authoritative source” or “other legitimate source” of wage data,5 which in practice means employers can use private wage surveys, claiming that they correspond more closely to the work performed. DOL’s experience with private wage surveys in the H-2B context shows that private wage surveys are used almost exclusively to lower wage rates—and they are a viable option for doing so because employers can have a say in how the survey is constructed and who the subjects of the survey are.6 In the H-2B context, a recently filed lawsuit is now challenging the validity of private wages surveys.7

In 2020, according to DOL disclosure data, 8% of H-1B positions were set by an “independent authoritative source” or “other legitimate source” of wage data (hereinafter, private wage surveys).8 As we argue in a later section, we believe private wage surveys are not a legitimate method for setting H-1B wage rates and reducing the number and specificity of occupational categories will likely lead to more employers using private wages surveys.

The strength of the OEWS survey is that it has data on nearly 800 SOC occupations, and for all regions in the United States. It’s the only wage data source we know of that does so, and another benefit is that each year DOL calculates the mean and median wage for each occupation, as well as the 10th, 25th, 50th (i.e. median), 75th, and 90th percentile wages for each occupation at the national level—and the mean and median at the state level—publishing all of it on the BLS website in an easy to read and understand format.

However, the OEWS is far from perfect. The OEWS covers so many occupations and regions, that often the sample sizes are quite small, diminishing the validity of the result. And when employers fill out the OEWS survey form, rather than writing in the actual salaries of their employees, employers choose from a range of salaries (hourly and/or annually), which diminishes the accuracy of the results.9 And finally, the BLS conducts the OEWS survey every year but pools three years of data for its results, which as BLS notes, means there are “limitations associated with this estimation procedure in that it requires ‘updating’ for the earlier years of data and limits the usefulness of OEWS data for time series analysis.”10

We would urge the DOL conduct an audit of the OEWS data to ensure geographic and occupational sample sizes are sufficient to return valid wage data. There are many examples of OEWS-based wage data for high-skilled H-1B occupations on the website utilized by OFLC to set H-1B wages—the Foreign Labor Certification (FLC) Data Center website—that return implausibly low wages. For example, Level 1 wages for a Software Developers, Applications job (SOC 15-1132, retrieved from the 07/2020 – 06/2021 All Industries Database) in Northeast Minnesota are $9.87 per hour, 11 which is such a low wage that it is even less than even the Minnesota state minimum wage of $10 per hour.12 Similarly the Level 1 wage for Electrical Engineers (SOC 17-2071) is $10.43 for College Station Texas and the Level 4 wage is a meager $22.76.13 The Level 4 wage for Electrical Engineers reported by OFLC for College Station, Texas is less than half the national average hourly wage of $50.96 for SOC code 17-2071.14 Clearly there are significant methodological problems with the data being reported. We suggest that DOL identify reported FLC wages that are far below the national average and investigate such instances further to validate the data. If there are large inconsistencies then we suggest DOL aggregate its geographic, and/or occupational, data at higher levels to ensure required wages are appropriate to meet the purpose of the H-1B and PERM programs.

For high wage occupations, such as physicians, which are extensively used in both H-1B and PERM programs, the current OEWS survey is deficient because it does not capture sufficient granularity. The highest possible wage on the survey questionnaire is $115 per hour, which is at or below the mean wage for most physician occupations.

With nearly 600,000 workers in the H-1B program,15 the program is so large that its workers’ wages can significantly impact and bias OEWS results. According to the DOL final rule issued on January 14, 2021, H-1B workers account for approximately 10% of employment in all computer occupations, and in certain key occupations, like software developers, applications, they account for a remarkable 22% (more than one-in-five).16 The share is likely even much higher in certain geographies. The wages of H-1B workers create a significant bias, almost definitely downward in the OEWS data because of the lower prevailing wage levels that employers overwhelmingly select, and thus, the wages paid to H-1B workers should not be included in the survey data calculations that are used by OFLC to generate H-1B wage levels in the FLC database.

We recommend that DOL continue to use the OEWS to set H-1B wage rates, but that it invest significantly in improving the OEWS data set, and perhaps consider charging H-1B related fees that would help fund the additional work required to improve the OEWS. Further work is needed to validate the OEWS by comparing it against the actual wages and compensation of U.S. workers. This should be done to achieve the H-1B program’s intent of filling labor shortages in high-skilled occupations.

2. Besides the OES wage survey, what other sources of data and methods are available that can be used alone, or in conjunction with other sources and methods, to approximate wage levels, by occupation and geographic area, specifically for U.S. workers similarly employed at institutions of higher education, nonprofit entities related to or affiliated with such institutions, nonprofit research organizations and Governmental research organizations?

We are concerned about the validity of the ACWIA – Higher Education Database. The higher education labor market is small and is dominated by a small number of employers (sometimes just one) in many geographic and occupational markets. It is possible that higher education employers are essentially setting the prevailing wage on their own in many markets. Aggregating the data across multiple markets may mitigate such effects.

3. Should the Department continue to set wage levels at the same point within the OES distribution for all occupations and geographic areas or, alternatively, set wage levels at different points within the OES distribution for different groups of occupations and/or geographic areas? If the latter, what sources of data and methods are available that can be used alone, or in conjunction with other sources and methods, to approximate different wage levels for different groups of occupations, taking into account education, experience, and level of supervision for U.S. workers similarly employed across industries and geographic areas?

We believe that setting different wage percentiles for occupations and/or geographic areas would be overly complicated and burdensome on DOL and have limited value. Such fixed percentiles would not be stable over time. It is unclear how DOL would validate such an approach against a clear benchmark, and subsequently make adjustments in response to market dynamics. Instead—as we will argue further in later sections—DOL should focus on ensuring that the lowest wage level does not lead to “adverse affects” on the wages and working conditions of persons employed in H-1B occupations. To achieve that, the lowest wage level should never be lower than the local median wage. And in terms of the higher earners in each occupation, the higher wage levels should be set sufficiently high enough to prevent adverse impacts, which requires the highest (i.e. current Level 4 wage) being set above the 90th percentile.17

DOL should conduct a study to benchmark the actual wages and benefits H-1B and PERM workers receive—based on their education, experience, geographic location, and role with the employer—compared to an equivalent U.S. worker. Further, DOL should compare the characteristics and role of the H-1B worker to what employers entered on the Labor Condition Application (LCA) for the occupation, skill level, wages, and geographic location. This should be completed for several of the SOC codes.

These data would set an appropriate baseline, by which the OEWS and other data sources could be compared.

There is evidence that employers have systematically misclassified skill levels for their H-1B workers. Aggregate H-1B data reported by USCIS on experience and education do not match the skill level claims made by employers on the DOL’s LCA form. In fiscal year 2020, USCIS reports that nearly three-quarters, 72%, of approved H-1B beneficiaries were aged 30 years or older, and 40% of H-1B workers were 35 or older. Such ages indicate substantial experience warranting skill/wage levels of 3 and 4. USCIS also reports that a majority, 64%, of H-1B workers hold an advanced degree (Masters, Doctorate or Professional), again indicating high skill attainment that warrants skill/wage levels of 3 and 4.18 Yet, for fiscal 2020, DOL disclosure data show a mere 35% of all approved positions on LCAs were for skill levels 3 and 4.19 DOL must investigate the discrepancies between the skill levels reported on LCAs and the experience and education levels for actual workers approved on those LCAs. Otherwise, the entire of purpose of setting required wages is undermined.

In addition, DOL should be aware that thousands of positions with the descriptors “Senior” or “Lead” in the Job Title field have skill/wage level 1 in approved LCAs, and approximately 100,000 are classified as level 2.20 These substandard classifications, made by employers, directly contradict DOL guidance that such job titles indicate level 3 wages—which is described in DOL’s Prevailing Wage Determination Policy Guidance,21 issued in November 2009:

Level III (experienced) wage rates are assigned to job offers for experienced employees who have a sound understanding of the occupation and have attained, either through education or experience, special skills or knowledge. …Frequently, key words in the job title can be used as indicators that an employer’s job offer is for an experienced worker. Words such as ‘lead’ (lead analyst), ‘senior’ (senior programmer), ‘head’ (head nurse), ‘chief’ (crew chief), or ‘journeyman’ (journeyman plumber) would be indicators that a Level III wage should be considered.

DOL must immediately conduct an audit of the consistency between job title matches and wage levels.

4. Other than computation of an arithmetic mean or specific percentile within an occupational wage distribution based on the OES wage survey, are there any other statistical approaches or estimation techniques the Department should consider when computing the wage level(s) for occupation(s) and geographic area(s)?

While we believe utilizing the OEWS data set and wage percentiles within the distribution is reasonable and preferable to other data sources and methods, the OEWS falls very short in terms of providing a wholistic and realistic picture of what U.S. workers earn in H-1B occupations, by virtue of not including fringe benefits. We urge that DOL also calculate an additional amount of compensation based on available data on the cost of benefits for workers in private industry. If employers do not have to provide fringe benefits to H-1B workers or reasonable compensation that accounts for those fringe benefits, that will result in employers underpaying or undercompensating H-1B workers vis-à-vis their U.S. worker counterparts, thereby causing adverse effects on workers in H-1B occupations. The fissuring of the U.S. workforce has been abetted in part by employers practicing benefits’ arbitrage—in other words, employers seeking a workforce they do not need to provide benefits for—the H-1B program should not facilitate it.

Further discussion on fringe benefits and OEWS wage data

Davis Bacon and Service Contract Act wage determinations—which are both valid wage sources for determining H-1B wage rates under current H-1B rules—include an additional hourly monetary value that is owed to the worker in “fringe benefits.” Under both Acts, the employer must pay the fringe benefits either in the form of a permissible fringe benefit listed by the applicable Act, or any combination of benefits thereof, or with an equivalent cash payment.22 The lack of any fringe benefits in OEWS prevailing wage determinations23 constitutes a severe deficiency in the OEWS wage data that conflicts with and undermines the statutory requirement that the H-1B prevailing wage will not adversely affect the wages and working conditions of similarly employed U.S. workers.

Reliance on the OEWS to determine prevailing wages—without an adjustment for fringe benefits—is not an adequate method to set H-1B prevailing wages. If the prevailing wages and benefits for a particular occupation in a particular MSA are, for example, $30 per hour plus $9 per hour in leave, pension, and health benefit costs, but DOL determines the prevailing wage to be simply $30, U.S. workers will be adversely impacted. Employers will be encouraged to hire H-1B workers instead of U.S. workers, saving themselves $9 in benefit costs per hour and putting downward pressure on the locally prevailing compensation. Hiring H-1B workers at $30 an hour for example, with no benefits, would allow employers to underprice labor by 31%–which is the average benefit share of total compensation costs for private industry workers24—and it could encourage employers to replace U.S. workers with H-1B workers, or hire H-1B workers instead of U.S. workers, since employers are not required to recruit and hire U.S. workers before hiring H-1B workers. H-1B workers cannot be expected to complain about this or have the bargaining power to negotiate adequate fringe benefits, because their employers control and have near-total power over their immigration status, and some workers will be also willing to accept the lower compensation, because it will likely be far more than they could earn in their country of origin.

BLS already collects the necessary data to determine the appropriate amount of fringe benefits that should be required as a supplement to the OEWS wages used to set a prevailing wage. The Employer Costs for Employee Compensation (ECEC) report from the BLS “provides the average employer cost for wages and salaries as well as benefits per employee hour worked” for workers in the civilian economy.25 The ECEC reports the total average wages and benefits paid by employers and lists these data as they correspond to broad occupational employment categories. These data are also differentiated according to the average amount paid for the major categories of fringe benefits: paid leave, supplemental pay, insurance, retirement and savings and legally required benefits. The ECEC also reports the average total compensation, wages and salaries, and total costs of fringe benefits paid by employers, broken down by geographic region, census division, and locality.26

Using the aforementioned data sets from the ECEC, DOL can determine the appropriate level of fringe benefits that must be offered and paid to H-1B workers. The ECEC provides data on health and retirement benefits, and wages and wage-related pay such as paid leave and supplemental pay. The wages reflected in the OEWS survey capture the wages and wage-related parts of total compensation. Employers paying wages will already be paying the ‘legally required’ payroll taxes. Therefore, the compensation missing from the OEWS wage rates is the cost of retirement and health benefits, which are about 11% of private sector compensation. The amount of pay reflecting these benefits that employers of H-1B workers should pay can easily be determined by taking the ratio of the sum of health and retirement benefits to the wages paid (the sum of wages, paid leave and supplemental pay). This can be determined for a broad occupational grouping and perhaps done at a regional level as well. This ratio when multiplied by the OEWS wage shows the amount of benefits that would be comparable to that earned in the private sector or civilian sector.

Although the occupational groups and geographic areas listed and reported in the ECEC are not as numerous and detailed as those in the OEWS’s occupational categories and geographical areas, this should not deter the DOL from utilizing these data to calculate the percentage of wages that should be added on as fringe benefits to the OEWS wage. Only a percentage to be added on must be determined – not an exact dollar amount.

Thus, the ECEC data are sufficient to provide DOL–by region and broad occupational group–an average level of insurance and retirement benefits received by employees in that job and in that area. Following precedent from the DBA and SCA, the fringe benefits could be paid by the employer through any combination of a variety of options, such as paid leave, health and life insurance, retirement and savings accounts, etc., or the employer could simply pay the benefits in cash.

A requirement that these fringe benefits be offered to H-1B workers would ensure that the wages and working conditions of similarly employed workers are not adversely affected.

The current DOL compliance guidance on benefits for H-1B workers encourages benefits arbitrage through outsourcing and fissuring. The Wage and Hour Division fact sheet on the subject (#62L) reads, “The employer must offer benefits to H-1B workers on the same basis, and in accordance with the same criteria, as the benefits the employer provides to similarly employed U.S. workers.”27 By defining similarly employed workers as only those directly employed by the H-1B employer, DOL is encouraging benefits arbitrage by outsourcing firms, which can offer substandard benefits to all its employees and still comply with this interpretation of the H-1B rules.

III. ADDITIONAL COMMENTS AND SUGGESTIONS ON SETTING H-1B PREVAILING WAGE RATES

In addition to our responses to DOL’s specific questions, below we discuss additional evidence and analysis that we recommend DOL consider when determining how to update the H-1B prevailing wage.

1. The purpose of the H-1B program is to fill labor shortages.

The purpose of the H-1B program is to grant U.S. employers the ability to hire workers from abroad when there are labor shortages in positions that require at least a college degree. DOL describes the purpose of the program this way: “The intent of the H-1B provisions is to help employers who cannot otherwise obtain needed business skills and abilities from the U.S. workforce by authorizing the temporary employment of qualified individuals who are not otherwise authorized to work in the United States.”28

Employers and policymakers, and even U.S. presidents have discussed and promoted the H-1B program in these terms for decades. If the H-1B program was functioning as intended, it would be a valuable tool for complementing the U.S. workforce in H-1B occupations. However, the current administrative framework—and especially the low wages that DOL prevailing wage rules permit employers to pay H-1B workers—have allowed the program to be hijacked by employers who can undercut U.S. wage and labor standards. The countless news reports and government audits about workers being replaced and employers paying low wages, as well as litigation seeking to defend the rights of H-1B workers, are a testament to that.

There is nothing in the H-1B statute or regulations that requires DOL to ensure that employers are able to pay H-1B workers at wages that are far below the local median or average wage. Instead, DOL should pursue an H-1B policy that ensures that the H-1B program does not put downward pressure on wages and labor standards in H-1B occupations; the only way to do that, as we will argue, is to set the Level 1 wage at the 75th percentile, but at the very least, no lower than the local median or average wage for each occupation. And wages in H-1B occupations at the national level should also be considered, to prevent downward pressure on wages nationwide: no H-1B wage should be certified it if it lower than the national average wage for the occupation.

2. Definition of “prevailing wage” from the Davis-Bacon Act and Service Contract Act should inform DOL’s crafting of a new H-1B prevailing wage rule.

The two most common understandings of what constitutes a prevailing wage at the federal level come from the Davis-Bacon Act (DBA) and Service Contract Act (SCA). (The current H-1B prevailing wage rule permits H-1B wage rates to be set using prevailing wages from the DBA and SCA wage data sets, if applicable, which makes this a useful and valid comparison.) The DOL website hosts FAQs explaining how DOL determines a prevailing wage for both the DBA and SCA.29 The relevant section from the FAQ on the DBA reads almost identically to the corresponding regulation at 29 C.F.R. § 1.2(a)(1):

23. How are prevailing wage rates calculated?

The following basic rules apply to calculation of prevailing wage rates:
Basic hourly rate. The prevailing wage is the wage paid to the majority (greater than 50 percent) of the workers in the classification on similar projects in the area during the relevant period. If the same wage is not paid to a majority of workers in the classification, then the prevailing wage is the weighted average wage rate.

The relevant section from the DOL FAQ on the SCA reads:

How are prevailing wage determinations developed?
Wage determinations are developed based on available data showing the rates that are prevailing in a specific locality. Where a single rate is paid to a majority (more than 50%) of the workers in a classification of service employees engaged in similar work in a particular locality, that rate is determined to prevail. When information is used from the Bureau of Labor Statistics (BLS) or other surveys, statistical measurements of central tendency (median) and the average (mean) are considered reliable indicators of the prevailing rate. Which of these statistical measurements will be applied in a given case will be determined after a careful analysis of the overall survey, separate classification data, patterns existing between survey periods, and the way separate classification data interrelate. Use of the median is the general rule. However, the mean may be used in situations where, after analysis, it is determined that the median is not a reliable indicator.

Both descriptions from the DBA and SCA prevailing wage methodologies require that if a single rate is used to pay more than half of the workers in an occupation, then that rate is the prevailing wage, and in the alternative, the prevailing wage should be the median wage, or the mean, weighted by the number of workers. It is unlikely that there will be cases where more than half of H-1B workers in an occupation will be paid a single wage, thus the prevailing wage should be the mean or median. But since the H-1B statute requires that DOL generate four wage levels that correspond to experience and education, the H-1B minimum prevailing wage (i.e. Level 1) should not be lower than the mean or median, and Levels 2-4 should be set at higher percentiles in the distribution to account for higher levels of education and experience.

Both the DBA and SCA definitions of prevailing wage include fringe benefits. For example, the definitions section in the DBA defines it to include payment for “medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the forgoing, for unemployment benefits, life insurance, disability and sickness insurance, or accident insurance, for vacation and holiday pay.”30 As discussed above, DOL should also calculate the appropriate rates of fringe benefits and add it to H-1B the prevailing wage salaries that employers must pay to H-1B workers.

3. The H-1B statute at 8 U.S.C. 1182(n)(1)(A) requires DOL to set a prevailing wage level that is “based on the best information available” and “will not adversely affect the working conditions of workers similarly employed,” thus DOL must set the prevailing wage no lower than the median and preferably higher to account for downward pressure caused by the H-1B program’s flawed legal framework.

The statute creating the H-1B visa contains language requiring that employers offer to pay their H-1B employees at wage rates that are at least “the actual wage level paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question,” or the “prevailing wage” based on occupation and area of employment that is “based on the best information available,” whichever is higher. And further, the employer must provide the H-1B worker with working conditions that “will not adversely affect the working conditions of workers similarly employed.”31

As far as we know, the language in the statute and the labor condition application (LCA) that requires employers to pay H-1B workers the “actual wage” rate paid by the employer to other employees with similar experience and qualifications,32 has never been enforced. We urge DOL to begin enforcing this provision, as we have urged in earlier publications and public comments we’ve submitted. But until DOL does enforce it, the prevailing wage rules are the only mechanism with which to prevent adverse effects. Getting these rules right is critically important because H-1B workers are at a disadvantage in the workplace vis-à-vis their U.S. counterparts, since H-1B workers have significantly less job mobility based on their temporary and precarious immigration status.

While the prevailing wage requirement is intended to protect the wages of U.S. workers in occupations requiring a college degree from adverse impacts and to prevent college-educated migrant workers from being underpaid and exploited, there is ample evidence to prove that it has fallen short in preventing adverse effects on the working conditions of workers in H-1B occupations, especially with respect to salaries and wages. Corporate lobbyists and other H-1B proponents often cite this prevailing wage requirement in the H-1B law as evidence that H-1B workers cannot be paid less than U.S. workers. However, the reality is that the H-1B statute, regulations, and administrative guidance allow employers wide latitude in setting wage levels,33 and employers are able to game the system with impunity, including by misclassifying workers at inappropriate wage levels.

In order to comply with the statutory requirement that prohibits “adversely affecting” the working conditions of workers in H-1B occupations, the lowest permissible wage in H-1B must be set high enough to avoid downward pressure on wages. By definition, any wage paid to an H-1B worker that is lower than the local median wage will put downward pressure on workers in a specific area and occupation. But the DOL prevailing wage rule allows employers to pay at the 17th and 34rd percentiles, both of which are far below the local median wage. Thanks to data from USCIS in the preamble to the final regulation published in November 2020, we know that at the petition level, 85% of new petitions went to employers paying at wage Level 1 or 2, and 90% of petitions for the advanced degree exemption were awarded to employers paying at wage levels 1 and 2. 34 Since H-1B wage Level 3 is set at the local median wage, and Level 4 is set at the 67th percentile, this means that nearly all new H-1Bs during the past two years were issued to workers being paid at wage levels that are below the local median wage for the occupation (i.e., Levels 1 and 2).

The current DOL prevailing wage rule therefore adversely affects the wages and working conditions of other workers who are similarly employed to H-1B workers.

There are other factors at play that function to adversely impact wages and working conditions, and which DOL must account for in its prevailing wage rule, but until now, has not.

As early as the drafting of the Immigration Act of 1990, Congress was worried about “the problem of H-visa abuse.”35 Subsequently in 1992, the U.S. Government Accountability Office published a report highlighting concerns that the H-1B program was adversely affecting wages and working conditions, and later published reports with similar findings in 2000, 2003, 2006, and 2011,36 also including findings that H-1B workers were victims of wage theft and that many complaints about proper wages being paid were received about companies with an outsourcing business model.

The H-1B program’s legal framework also does not make it easy enough for H-1B workers to switch employers, which causes a power imbalance between employers and workers that can create adverse effects on wages and working conditions. H-1B workers have good reason to fear retaliation and deportation if they speak up about wage theft, workplace abuses, or other working conditions like substandard health and safety procedures on the job because their visa is tied to one employer that owns and controls their visa status. That visa status is what determines the worker’s right to remain in the country; if an H-1B worker loses their job, they lose their visa and become deportable. This arrangement results in a form of indentured servitude where employers can punish H-1B migrant workers for speaking out by firing them or not renewing their visa status, and/or not sponsoring them for permanent residence. Immigration Voice, an advocacy group representing H-1B workers who have approved permanent labor certification (PERM) applications for employment-based green cards, but who still have pending green card petitions, describe their own work status as “indentured servitude.” The group, which submitted a written statement for the record at a recent U.S. House of Representatives hearing, said, “the current system is a legalized form of indentured servitude that promotes the interest of a handful of employers and perpetrates an industrialized process of mass exploitation of skilled Indian immigrants. Such a glorified system of indentured servitude cannot be called a just immigration system.”37

On paper, H-1B workers can change employers, and about 50,000 H-1B workers change jobs every year, according to petition data (approximately 8% of H-1B workers). However, under current regulations an H-1B worker has only 60 days to find a new employer, but that employer must also be willing to sponsor the worker by filing a new H-1B petition with USCIS—which has associated costs in terms of fees and staff time to prepare paperwork, which may also include legal fees—and which may ultimately discourage many employers from hiring H-1B workers. While the portability provisions may be good for H-1B workers seeking new employment while they are still employed, H-1B workers who seek employment after being fired or retaliated against are in a much more precarious position. The specter of being fired or retaliated against then makes it understandably difficult for H-1B workers to complain to their employers and to government agencies about unpaid wages, inappropriately low salaries, and other substandard working conditions.

News reports have also highlighted how the H-1B’s legal framework does not adequately protect H-1B workers, revealing that many in computer occupations, as well as teachers and nurses, have been victimized and put in “financial bondage” by shady recruiters and staffing firms that steal wages, forbid workers from switching jobs or taking jobs the recruiters don’t financially benefit from, and file lawsuits against workers if they try to change jobs or quit.38

Another aspect of the H-1B program’s legal framework that can create adverse effects on wages and working conditions is the fact that H-1B, like other temporary work visa programs, in essence operate in practice to create a labor market monopsony for employers—awarding employers greater leverage over their workers39—and growing research has shown that even modest amounts of employer monopsony power are corrosive to workers’ ability to bargain for better wages.40 In fact, a number of economists have recently described how rising monopsony power in the labor market is an important factor in explaining U.S. wage stagnation. One of those economists, the late Alan Krueger, a professor at Princeton University who served as chairman of the Council of Economic Advisors in the Barack Obama White House, described how the executives of Silicon Valley technology firms were especially eager to use their monopsony power to keep their engineers’ wages low by limiting their opportunities to leave.41 Some of those executives—including Google’s Eric Schmidt, a vocal advocate of H-1B expansion—went so far as to collude with one another by agreeing not to poach each other’s engineers.42 So, especially in the technology industry, employers see limiting worker mobility as an important human resource strategy to keep wages low.43

And finally—as DOL and USCIS have known for well over a decade now—the biggest users of the H-1B program are companies that have an outsourcing business model. These companies exploit the H-1B program’s weaknesses to facilitate the transfer of U.S. jobs offshore as a lower cost alternative to hiring U.S. workers, and sometimes to replace incumbent U.S. workers with H-1B workers who are paid wages that are far below market wage rates. The latest data—for fiscal year 2020—show that of the top 30 H-1B employers, 17 of them were outsourcing firms. Those 17 outsourcing firms alone were issued 20,000 H-1B visas, nearly one-quarter of the total 85,000 annual H-1B limit.44

Outsourcing companies exploit the H-1B program’s weaknesses, which DOL has created, to build and expand a business model based on outsourcing jobs from other companies. In this arrangement, rather than being employed directly by the outsourcing company that hired them, the outsourcer sends its H-1B workers to work for third-party clients, either on- or off-site. The aim of the outsourcing company is ultimately to move as much work as possible abroad to countries where labor costs are lower and profit margins are higher. The H-1B workers serve three purposes in this business model: to facilitate the transfer of jobs and tasks offshore; to coordinate offshore teams; and to serve as a lower cost alternative to hiring U.S. workers for on-site jobs. H-1B outsourcing companies also replace incumbent U.S. workers45 with H-1B workers and typically pay their H-1B workers the lowest wages permitted by law, far below market wage rates.46 As a result, it is obvious that the outsourcing firms utilizing the H-1B program are adversely affecting wages and working conditions in H-1B occupations, which is also why numerous legislators have proposed fixes targeting the use of the program by those firms.

The statutory requirement for DOL to set a prevailing wage level that is “based on the best information available” and “will not adversely affect the working conditions of workers similarly employed,” requires DOL to take into account how skewed the H-1B program has been towards the lowest wage rates, as well as the vulnerabilities of H-1B workers that have allowed H-1B employers to use the program in ways that adversely affect wages and working conditions, as well as the outsourcing and offshoring of jobs in major H-1B occupations that the H-1B program has facilitated. As a result, DOL must set the H-1B prevailing wage at a level that is high enough to account for the downward pressure on wages and labor standards caused by the H-1B program’s flawed legal framework and wage rules and use by outsourcing firms.

4. DOL and USCIS data suggests wage level misclassification is a major problem and neither DOL nor USCIS are working to resolve it.

Our report in May 2020 found that, according to of DOL disclosure data, 60% of H-1B positions certified by DOL were assigned at wage levels 1 and 2, both of which are well below the local median wage for the occupation. Our unpublished analysis of 2020 data found that the total at wage levels 1 and 2 was 57%, virtually unchanged from the previous year.47 As mentioned earlier, data from USCIS in the preamble to their final regulation on allocating petitions by wage level, published in November 2020, showed that at the petition level, the number of approved H-1B workers at the two lowest wage levels is even higher, with 85% of new petitions were awarded to employers paying at wage Level 1 or 2—and 90% of petitions for the advanced degree exemption awarded to employers paying at wage levels 1 and 2.48 Since H-1B wage Level 3 is set at the local median wage, and Level 4 is set at the 67th percentile, this means that nearly all new H-1Bs during the past two years were issued to workers being paid at wage levels that are below the local median wage for the occupation (i.e., Levels 1 and 2).

This means that 85% to 90% of H-1B workers are “entry-level” workers according to DOL’s definition, or at the next skill and wage level just above that. But data on the characteristics of H-1B workers suggest that many of those workers assigned at low wage levels actually possess skills and experience that would require them to be assigned wages higher than Levels 1 and 2. In fact, as noted earlier, there is evidence that employers have systematically misclassified skill levels for their H-1B workers.

It’s worth reiterating that aggregate H-1B data reported by USCIS on experience and education do not match the skill level claims made by employers on the DOL’s LCA. In fiscal year 2020, USCIS reports that nearly three-quarters, 72%, of approved H-1B beneficiaries were aged 30 years or older, and 40% of H-1B workers were 35 or older—a significant indicator that those workers already possess at least six to eight years of experience. Such ages indicate substantial experience warranting skill/wage levels of 3 and 4. Further, H-1B workers’ educational levels, which are an important determinant of skills, indicate they should be filling higher-skilled positions. USCIS also reports that a majority, 64%, of H-1B workers hold an advanced degree (Masters, Doctorate or Professional), which indicate that a majority (more than three-fifths) of H-1B workers have the educational attainment and/or years of experience to fill positions at wage Levels 3 and 4.49 Yet, for fiscal 2020, DOL disclosure data show a mere 35% of all approved positions on LCAs were for skill/wage levels 3 and 4.50

The fact that, as just noted above, 90% of petitions for the 20,000 H-1B visas awarded under the advanced degree exemption were awarded to employers paying at wage levels 1 and 2, is shocking. By definition, 100% of H-1B workers who had a petition approved under that part of the H-1B cap possess at least a Master’s degree—and therefore close to 100% of those H-1B workers should be classified at skill and wage levels 3 and 4.

These data suggest it is likely that H-1B employers are underpaying many, if not most, workers relative to their skill levels, and since DOL’s guidance lacks in details—and in any case DOL conducts no oversight into whether or not H-1B positions are assigned at the correct wage levels at the LCA stage—employers are able to misclassify H-1B workers at inappropriate wage levels with impunity. As a result, DOL must investigate the discrepancies between the skill levels reported on LCAs and the experience and education levels for actual workers approved on those LCAs. Otherwise, the entire of process of setting required wages to protect labor standards is undermined. An audit should therefore be conducted using the methodology described in the Prevailing Wage Determination Policy Guidance, which was issued in November 2009.51

We offer one recent real-world example as evidence of how the current system is failing. Uber, the 29th-ranked H-1B employer in 2019, had 5,708 H-1B positions certified by DOL. Less than 1% were assigned as Level 1 and just over half (53%) as Level 2. Just over one-third were assigned as Level 3 and 13% as Level 4. While Uber had 5,708 H-1B positions certified by DOL and hired 1,160 H-1B workers in 2019, in the same year Uber made headlines by laying off 400 employees, including 125 software engineers, nearly half of whom were “senior” software engineers. The firm was hiring H-1B workers for the same types of positions it was conducting mass layoffs of. According to analysis by Ron Hira reported in The Mercury News, 1,800 of the certified H-1B positions were for “new software engineer jobs and about 1,500 for new senior software engineer jobs.” Uber’s wage-level classification for positions the firm identified as senior is questionable. The Mercury News article reported that “Uber’s applications put nearly half the senior software engineer positions at the Labor Department’s ‘Level 2’ wages, the same level it listed for more than half of the non-senior jobs.”52 The DOL’s prevailing wage guidance clearly states that, “Frequently, key words in the job title can be used as indicators that an employer’s job offer is for an experienced worker. Words such as ‘lead’ (lead analyst), ‘senior’ (senior programmer) … would be indicators that a Level [3] wage should be considered.”53 This illustrates the major weaknesses in the LCA. The employer has discretion over picking the wage level and DOL does not ensure compliance.

5. DOL must put measures in place that would prevent employer misclassification of H-1B workers at the wrong wage levels.

While each skill/wage level is intended to correspond to the H-1B worker’s education and experience, in practice the employer gets to choose the wage level and DOL does not verify that a prevailing wage is appropriate unless a lawsuit or a complaint is filed by a worker. Such complaints are unlikely since it would require an H-1B worker to blow the whistle on their own employer, the same employer that controls the H-1B worker’s visa status and ability to remain in the United States. We are unaware of any cases in which DOL has investigated an LCA-stage misclassification of an H-1B wage level, but—as just discussed above—there have been reports of H-1B employers receiving approval for LCAs that certify they will pay employees at the same prevailing wage level despite having job titles that clearly warrant different wage levels.

In the example of Uber in the previous section, Uber received approval for two different LCAs at the same wage level (Level 2) even though one LCA had the job title Senior Software Engineer and the other had the job title Software Engineer.54 The fact that Uber, which is a major employer of H-1B workers, is not accounting for differences in skill levels is evident from its own job titles when selecting the LCA wage level. Both engineers and senior engineers are receiving the exact same salary and wage level, and they are approved by DOL with apparently little scrutiny. Using the DOL Prevailing Wage Determination Policy Guidance, the LCAs in this case should be instantly flagged by identifying keywords like senior, head, chief, and lead within job titles, and should be checked to determine if the prevailing wage levels are appropriate. This example points to a larger need for DOL to create a more robust compliance system to ensure that employers do not misclassify workers at inappropriate wage levels.

As a result, the H-1B application and petition process should be updated so that DOL reviews the qualifications of individual workers before USCIS approves an H-1B petition, to ensure that wage levels match up with the age, education, and experience of H-1B workers. While USCIS currently performs this role to some extent, USCIS adjudicators lack expertise in wage and hour issues and do not have the same mandate to protect labor standards as DOL staff, and USCIS staff did not craft DOL’s Prevailing Wage Determination Policy Guidance. Therefore, these functions should be undertaken by the proper agency. DOL and USCIS already have a mandate to cooperate on H-1B applications and enforcement; a memorandum of understanding between the Secretaries of Homeland Security and Labor could detail a process where DOL plays a prominent role in ensuring that H-1B workers are classified at the appropriate wage levels. Updating DOL’s published guidance on H-1B skill levels so that it is more detailed, clearer, and more realistic, would also be helpful for everyone involved—employers and adjudicators alike.

DOL should promulgate a new H-1B wage rule that sets Level 1 at the 75th percentile and Level 4 above the 90th percentile and prohibit certification of any H-1B wage that is lower than the national average for the occupation.

The purpose of the H-1B program is to allow employers to hire workers with specialized skills that are not available in the existing local workforce.55 Specialized skills should command high wages; such skills are typically a function of inherent capability, education level, and experience. It would be reasonable to expect that these workers should receive wages higher than the median wage. One would therefore expect most H-1B positions to be assigned as Level 4 (the only wage level above the median), but as DOL and USCIS data show, H-1B employers as a whole assign only a very small minority of H-1B positions as Level 4: just 12% of positions in 2019 and 13% in 2020 were assigned at Level 4,56 and in 2019 and 2020, only 4% of approved petitions for new employment under the regular cap were assigned at Level 4 and only 2% of approved new H-1B petitions under the advanced degree exemption cap were assigned at Level 4.57

The data presented in our reports over the past decade and more recently, the data reported by USCIS on the distribution of H-1B petitions by wage level, all point to the obvious fact that all H-1B employers, but especially the largest employers, use the H-1B program either to hire relatively lower-wage workers (relative to the wages paid to other workers in their occupation) who possess ordinary skills or to hire skilled workers and pay them less than the true market value of their work. Either possibility raises important policy questions about the use and allocation of H-1B visas.

By setting two of the H-1B prevailing wage levels so low relative to the median and not requiring that firms pay at least market wages to H-1B workers, DOL has incentivized firms to earn extraordinary profits by legally hiring much-lower-paid H-1B workers instead of workers earning the local median wage. The fact that firms earn those profits through poorly crafted wage rules and by underpaying H-1B workers—instead of by offering a better or more innovative product or service—means DOL has in effect made wage arbitrage a feature of the H-1B program. And as the wage-level data we have reported on and cite here clearly shows, nearly all H-1B employers are exploiting these H-1B wage rules in order to pay below-median wages.58 We believe that the evidence is clear that these firms are not using the H-1B program sparingly to hire truly specialized workers and they are not using it only when U.S. workers are unavailable.

So how should DOL set a wage rule that guards against this and complies with the statutory requirement to prevent adverse affects on wages and working conditions?

The existing statutory language that sets out the H-1B prevailing wage requires that there be four H-1B wage levels, but it does not prescribe specific percentiles, and no law requires DOL to set any of these prevailing wage levels below the local median wage. To ensure that H-1B workers possess specialized skills and are fairly paid, and to protect local wage standards and eliminate wage arbitrage as a feature of the H-1B program, DOL should promulgate new regulations and issue administrative guidance that sets the lowest (Level 1) wage to the 75th percentile for the occupation and local area, and require that wage offers to H-1B workers never be lower than the national median wage for the occupation, in order to prevent downward pressure on wages nationwide.

Requiring and enforcing above-median wages for H-1B workers would disincentivize the hiring of H-1B workers as a money-saving exercise, ensuring that companies will use the program as intended—i.e., to bring in workers who have special skills—instead of using H-1B as a way to hire underpaid indentured workers for jobs that require at least a college degree.

The highest H-1B wage level (Level 4) should be set somewhere above the 90th percentile, to protect higher wage earners in H-1B occupations from the downward pressure and adverse effects that would result if the highest skilled H-1B workers are paid below that. (The formula that DOL is required to use may determine the exact percentile required at Level 4, which is why we do not recommend an exact percentile, just that it be above the 90th.)

And as discussed above, DOL should develop a methodology for calculating and adding additional salary to account for fringe benefits, which are not currently included in the OEWS wage data that are used to set H-1B wage rates. Using the Employer Costs of Employee Compensation (ECEC) reports, DOL can easily calculate a percentage or set of percentages that correspond to the appropriate fringe benefits that should be offered to workers in major occupational classifications or industries. As we discussed above, based on the latest ECEC report, adding 11% of salary for insurance and retirement benefits would be a good starting point for H-1B workers in the private sector. Adding fringe benefits or the equivalent in salary is also important from an equity standpoint, because under current law many H-1B workers will never be able to draw any benefit from the taxes that they pay into the Social Security program.

6. DOL should end the practice of allowing the use of alternative sources of wage data, including private wage surveys, to set H-1B prevailing wages.

Under the main prevailing wage regulation language at 20 C.F.R. §655.731, an employer has several options at their disposal to determine a prevailing wage for an LCA—which, as we discussed above—permit employers to use a wage set by an independent authoritative source or another legitimate source of wage data.

Therefore, employers do not need to use the OFLC’s calculations of OEWS data in the Foreign Labor Certification Data Center database to determine a prevailing wage for an LCA. Setting the Level 1 wage at the 75th percentile and Level 4 at above the 90th percentile would fix the longstanding problems of how the prevailing wage was determined using the OFLC-generated OEWS wage rates, but such a rule would remain silent on an employer using an independent authoritative source or another legitimate source of wage data, which include private wage surveys accepted by DOL. Standards for such alternative sources of wage data are described in 20 CFR § 655.731, but it remains unclear how such sources compare to OFLC-generated OEWS prevailing wages. In 2019, at least 9% of all certified wages for H-1B positions on LCAs were set by a private wage survey or other source accepted by the OFLC as legitimate.

In order to comport with the statutory requirement that H-1B employers “will provide working conditions for [H-1B workers] that will not adversely affect the working conditions of workers similarly employed,”59 DOL should promulgate new rules to ensure that the alternative wage sources are no longer used to set H-1B wage rates and undermine U.S. wage standards. If DOL decides against immediately eliminating the ability of employers to use alternative wage sources like private wage surveys to set H-1B wages, then at the very least, DOL should conduct a study to benchmark the use of alternative wage data and private wage surveys against the OFLC-generated OEWS prevailing wages, to identify whether there are any systematic biases in such sources. The results should be published to promote transparency, and if such biases are found—which we believe is a likely outcome—DOL should take the appropriate step of eliminating what amounts to a low-wage loophole in the H-1B prevailing wage rule.

The recent history of the use of private wage surveys to set wages in the H-2B visa program—a temporary work visa program for jobs outside of agriculture including in landscaping, forestry, hospitality, and construction—is instructive and should inform DOL’s review of wage surveys and other sources of wage data for setting H-1B wages. The evidence is clear in the H-2B context that when employers use private wages surveys, they primarily use them to pay lower wages than would otherwise be required.

In 2013 when DOL raised the minimum H-2B prevailing wage from the 17th wage percentile to the mean wage for the occupation and local area, H-2B employers, immediately and en masse, shifted their business model to use private wage surveys to set H-2B wage rates at below-average wage rates. Evidence revealed in federal litigation clearly suggests that the shift to the use of private wage surveys was a systematic response to higher wage rates, and one that was clearly successful. Specifically, in the nine months beginning soon after the H-2B wage rule was updated—between July 1, 2013, and March 31, 2014—employers increased their submissions of private wage surveys for H-2B prevailing wage determinations by 3,182%, as compared with the 12 months leading up to the federal court decision that invalidated the previous H-2B wage rule. In 21.1% of those prevailing wage determinations set by private wage surveys, the certified H-2B wage was lower than the previous prevailing wage system where the Level 1 H-2B prevailing wage was set at the 17th percentile wage by occupation and local area, according to OFLC-generated OES wage survey data, and 94.4% of the determinations were for a wage that was lower than the Level 2 wage, at the 34th percentile.60

Despite the fact that the H-2B prevailing wage has been set at the local average wage and DOL restricted the use of private wage surveys in 2015, they are still commonly used and successful at lowering wages for H-2B workers. One clear example of this which has been detailed, is a group of H-2B workers employed as crabpickers in Maryland—they earned roughly 25% less per hour than they should have been paid according to the local corresponding OES wage.61 As noted above, the similar private wage survey component of the H-2B wage rule was recently challenged in court,62 and it’s possible that the rule could be subject to challenge in the H-1B program if private wage surveys are found to be undercutting U.S. wage standards.

7. DOL has failed to enforce the “actual wage” component of the H-1B prevailing wage rule and should begin enforcing it immediately.

Under the prevailing wage statute, although an employer has several options at their disposal to determine a prevailing wage for an LCA, they must offer the higher of either the prevailing wage or the “actual wage,” which the corresponding regulation at 20 C.F.R. §655.731 defines as “the wage rate paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question.”

As far as we know, to date, this key provision of the H-1B wage rule has never been enforced. In order to ensure that H-1B employers are not undercutting the wage rates they pay H-1B workers, DOL should immediately begin enforcing this requirement. DOL could easily do so by requiring H-1B applicants to submit evidence documenting the wage rates paid to U.S. workers who are similarly employed in occupations for which the employer is also hiring H-1B workers. Secondary employers should also have to submit LCAs and evidence documenting the wage rates paid to U.S. workers in the occupations that H-1B workers will be hired for through an outsourcing firm. Otherwise, H-1B outsourcing firms—which almost exclusively pay H-1B workers at the two lowest wage level, and employ H-1B and L-1 workers almost exclusively—will be able to game the system by using the actual wage paid to their own employees to meet the requirement, and not the employees of the secondary employer, where the H-1B workers will be placed—and where wages paid to the U.S. workforce are likely to be higher.

8. DOL should require secondary employers of H-1B workers to attest that they will not adversely affect wages and working conditions.

Outsourcing companies are using the H-1B program to underpay H-1B workers, replace U.S. workers, and send tech jobs abroad. Typically in this scenario, H-1B workers do computer and engineering work at the office of a U.S. employer but are employed by an outsourcing company, some of which are based abroad or have major operations abroad.63 The many reported cases of U.S. workers being laid off and replaced by H-1B workers have all been facilitated by this arrangement. In multiple incidents, the H-1B workers have been hired with annual wages of around $30,000 to $40,000 less than the workers they have replaced. Before they are laid off, the U.S. workers are often forced to train their own H-1B replacements as a condition of their severance packages; this is euphemistically known as “knowledge transfer.” Major, profitable U.S. employers like Disney and Toys “R” Us—as well as public employers and institutions like the University of California and Southern California Edison—have laid off thousands of U.S. workers who were forced to train their own replacements. Eventually, many of the outsourced jobs filled by H-1B workers get moved offshore.64

Contrary to the popular narrative proffered by corporations that support expanding and deregulating the H-1B visa program—the staffing firms that use H-1B visas are not using them to keep technology jobs in the United States—instead they are using them precisely to facilitate the offshoring of as many of those jobs as they can. That is in fact, the business model of those firms. News reports, including from the New York Times, have shown that outsourcing companies “game the system” in order to obtain a high share of H-1B visas, which leaves fewer available for the firms that directly employ H-1B workers.65

The outsourcing/staffing model of employment generally may increase the incidence of labor law violations by separating the main beneficiary of the labor provided by H-1B workers—the third-party firm that hires the outsourcing firm, i.e. the “lead” employer—from the H-1B workers who perform the work. Firms that rely on outsourced H-1B workers are a textbook (if extreme) example of what former DOL Wage and Hour administrator (and now current WHD administrator nominee) David Weil calls a “fissured” workplace, where the relationship between the worker and the lead employer is fissured, or broken, via the use of a temp agency or subcontractor66 (in this case the temp agency or subcontractors are the H-1B outsourcing firms). Research shows that fissuring leads to a wage penalty for workers who are subcontracted, employed as temps, and work for staffing firms,67 in part because the subcontractor keeps a percentage of the wages earned by the workers. It is also common knowledge that employers use this model to avoid paying for benefits like health care, retirement funds, and to avoid liability for labor violations. Because the staffing and outsourcing model contributes to the fissuring of the labor market, it should not be allowed as part of the U.S. immigration system—not in H-1B or in any other temporary or permanent immigration programs.

One way to address the abuses of the outsourcing/staffing firms, which operate as secondary employers, would be to issue policy guidance and update the appropriate DOL ETA application forms so that secondary employers to which H-1B workers are outsourced will be required to file Labor Condition Applications with DOL. Such guidance, which was recently considered but then abandoned,68 would close the loophole that allows firms like Disney and Southern California Edison to replace its U.S. employees with H-1B workers by employing them through an outsourcing firm.69 Using Disney as an example, implementing this rule would require client firms like Disney —that benefit and profit from hiring outsourcers—to acknowledge their employment relationship with H-1B workers who are employed by outsourcers like Infosys and Tata, by requiring Disney to file its own LCA. By doing so, Disney would attest that hiring the H-1B worker through the outsourcer is not adversely affecting the wages and working conditions of the Disney workforce.

9. Because no labor market test exists and employers can easily misclassify H-1B workers at inappropriately lower wage levels, the prevailing wage rule is the only real protection available against adverse effects on wages and working conditions.

Unlike some other temporary work visa programs, the H-1B does not have a key labor force protection: a labor market test that requires employers to advertise and offer jobs to U.S. workers. Employers need not recruit from the U.S. labor force at all, nor demonstrate that a labor shortage exists, before hiring an H-1B worker—in fact, they can ignore the U.S. workforce altogether. Absent a labor market test, the H-1B program is defenseless to abuse unless the required minimum wage rates that must be paid to H-1B workers are set sufficiently high to ensure H-1B workers are complements to, rather than substitutes for, workers in the U.S. labor force. Setting the required wages at a sufficiently high enough level to prevent adverse effects on wages and working conditions is the only mechanism to ensure program accountability and fidelity to the program’s purpose of filling labor shortages. Thus, we urge DOL to issue a new H-1B wage methodology rule that adequately, and finally, protects both U.S. and migrant workers.

IV. CONCLUSION

We again wish to thank DOL for considering our comments. We also wish to remind DOL that before winning the presidency, candidate Biden was explicit about his support for reforming work visa programs and “strong safeguards that require employers to pay a fair calculation of the prevailing wage.”70 If President Biden is committed to fixing the U.S.’s largest temporary work visa program—to ensure that the program is used to fill labor shortages instead of offshore jobs, and that 600,000 skilled migrant workers are treated and paid fairly—there are a number of actions his administration can take immediately that do not require Congressional approval or new legislation. Promulgating a new H-1B wage rule, with updated wage levels, is the most important action the administration could take to improve the program. We have outlined many of the best ways to do that in this comment, and we would be happy to discuss these proposals further.

Sincerely,

Daniel Costa, Esq.
Director of Immigration Law and Policy
Economic Policy Institute

Ron Hira, Ph.D., P.E.
Research Associate Professor, Political Science
Howard University

Endnotes

1. Some of these works are available here: https://www.epi.org/people/ron-hira/

2. See for example, Sarah Lynch, “Infosys says cleared in U.S. visa probe by Labor Department,” Reuters, September 8, 2015.

3. See for example, Daniel Costa, Temporary work visa programs and the need for reform: A briefing on program frameworks, policy issues and fixes, and the impact of COVID-19, Economic Policy Institute, February 3, 2021.

4. See Homepage and Frequently Asked Questions sections in Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment and Wage Statistics.

5. See 20 CFR § 655.731

6. Daniel Costa, “H-2B crabpickers are so important to the Maryland seafood industry that they get paid $3 less per hour than the state or local average wage,” Working Economics Blog (Economic Policy Institute), May 26, 2017; The H-2B temporary foreign worker program: For labor shortages or cheap, temporary labor? Economic Policy Institute, January 19, 2016.

7. See, Mark Ballard, “Louisiana crawfish workers claim they’re underpaid in suit; they say this labor rule allows it,” The Advocate, April 28, 2021; Texas RioGrande Legal Aid, “Louisiana Seafood Workers Sue to Invalidate U.S. Labor Rule That Allows Employers to Pay Rock-Bottom Wages,” Press Release, April 28, 2021.

8. Authors’ analysis of full year, fiscal year 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal year 2020 (Disclosure Data).

9. Bureau of Labor Statistics, OES questionnaire form, U.S. Department of Labor, Form Approved O.M.B. No. 1220-0042 Rev. March 2020.

10. See Section A, Question 4 in Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment and Wage Statistics, Frequently Asked Questions.

11. Retrieved May 30, 2021: https://www.flcdatacenter.com/OesQuickResults.aspx?code=15-1132&area=2700002&year=21&source=1

12. Minnesota Department of Labor and Industry, “New Year, New Minimum-Wage Rate as of Jan. 1, 2020,” December 17, 2019.

13. Retrieved May 30, 2021: https://www.flcdatacenter.com/OesQuickResults.aspx?code=17-2071&area=17780&year=21&source=1

14. Occupational Employment and Wages, May 2020, 17-2071 Electrical Engineers, retrieved May 30, 2021.

15. USCIS, H-1B Authorized-to-Work Population Estimate, Office of Policy & Strategy Policy Research Division, June 2020.

16. Employment and Training Administration, U.S. Department of Labor, Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States, Final Rule, 86 Fed. Reg. 3608, January 14, 2021.

17. Since the OEWS survey results already calculate the 90th percentile, we presume it may be less burdensome for DOL to begin using the 90th percentile. But in any case the Level 4 wage should be set no lower than the 90th percentile.

18. USCIS, Characteristics of H-1B Specialty Occupation Workers: Fiscal Year 2020 Annual Report to Congress, U.S. Department of Homeland Security, February 17, 2021.

19. Authors’ analysis of full year, fiscal year 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal year 2020 (Disclosure Data).

20. Authors’ analysis of full year, fiscal year 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal year 2020 (Disclosure Data).

21. U.S. Department of Labor, Employment and Training Administration, Prevailing Wage Determination Policy Guidance, Nonagricultural Immigration Programs, revised November 2009.

22. For the Davis-Bacon Act, see 40 USC §3141(2); and the Service Contract Act at 41 USC §351(a)(2).

23. Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment Wage Statistics, Frequently Asked Questions, at Section C, Number 8.

24. Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2020, March 18, 2021.

25. Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2020, March 18, 2021.

26. See tables, Bureau of Labor Statistics, U.S. Department of Labor, Employer Costs for Employee Compensation – December 2020, March 18, 2021.

27. Wage and Hour Division, “Fact Sheet #62L: What benefits must be offered to H-1B workers,” U.s. Department of Labor, Revised July 2008.

28. See Overview section in Wage and Hour Division, “H-1B Program,” web page on the U.S. Department of Labor website.

29. Wage and Hour Division, “Davis-Bacon and Related Acts (DBRA): Frequently Asked Questions” and “Frequently Asked Questions Pertaining to the Issuance of Wage Determinations Under the McNamara-O’Hara Service Contract Act (SCA) of 1965, as Amended,” U.S. Department of Labor.

30. Davis-Bacon Act, Section 3141(2)(B).

31. 8 U.S.C. 1182 (n)(1)(A)(i) and (ii).

32. Wage and Hour Division, “Fact Sheet #62G: Must an H-1B worker be paid a guaranteed wage?” U.S. Department of Labor, Revised July 2008.

33. See Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 4, 2020.

34. This includes H-1B petitions set by other sources including private wage surveys which are likely to be even lower than what Levels 1 or 2 require. U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services, Modification of Registration Requirement for Petitioners Seeking To File Cap-Subject H-1B Petitions, 86 Fed. Reg. 1676, at 1720, Table 7, https://www.federalregister.gov/documents/2021/01/08/2021-00183/modification-of-registration-requirement-for-petitioners-seeking-to-file-cap-subject-h-1b-petitions.

35. 1990 U.S.C.C.A.N. 6710, 6724

36. U.S. Government Accountability Office, Immigration and the Labor Market: Nonimmigrant Alien Workers in the United States, GAO/PEMD-92-17, 1992; H-1B Foreign Workers: Better Controls Needed to Help Employers and Protect Workers, GAO/HEHS-00-157, 2000; H-1B Visa Program: More Oversight by Labor can Improve Compliance with Program Requirements, GAO-06-901T, 2006; Reforms are Needed to Minimize the Risks and Costs of Current Program, GAO-11-26, 2011; H-1B Visa Program: Multifaceted Challenges Warrant Re-examination of Key Provisions, GAO-11-505T, 2011.

37. Immigration Voice, Statement for record for the House hearing “Why Dont They Just Get in Line? Barriers to Legal Immigration,” April 27, 2021.

38. See for example, Matt Smith, Jennifer Gollan, and Adithya Sambamurthy, “Job Brokers Steal Wages, Entrap Indian Tech Workers in US,” Reveal News, Oct. 27, 2014; Farah Stockman, “Teacher Trafficking: The Strange Saga of Filipino Workers, American Schools, and H-1B Visas,” Boston Globe, June 12, 2013

39. Bivens and Shierholz broadly define “monopsony power” as “the leverage enjoyed by employers to set their workers’ pay.” See Josh Bivens and Heidi Shierholz, What Labor Market Changes Have Generated Inequality and Wage Suppression?: Employer Power Is Significant but Largely Constant, Whereas Workers’ Power Has Been Eroded by Policy Actions, Economic Policy Institute, Dec. 12, 2018.

40. Eric M. Gibbons et al., “Monopsony Power and Guest Worker Programs,” IZA Institute of Labor Economics, Discussion Paper no. 12096, January 2019.

41. Alan B. Krueger, “The Rigged Labor Market,” Milken Institute Review, April 28, 2017.

42. Mark Ames, “The Techtopus: How Silicon Valley’s Most Celebrated CEOs Conspired to Drive Down 100,000 Tech Engineers’ Wages,” Pando, January 23, 2014.

43. See Ron Hira and Bharath Gopalaswamy, Reforming US’ High-Skilled Guestworker Program, Atlantic Council, South Asia Center, Atlantic Council, January 2019.

44. Ron Hira and Daniel Costa, “The H-1B visa program remains the “outsourcing visa”: More than half of the top 30 H-1B employers were outsourcing firms,” Working Economics Blog (Economic Policy Institute), March 31, 2021.

45. See for example, 60 Minutes, “Are U.S. Jobs Vulnerable to Workers with H-1B Visas?” CBS Nes, August 13, 2017.

46. Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 4, 2020.

47. Authors’ analysis of full year, fiscal year 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal year 2020 (Disclosure Data).

48. U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services, Modification of Registration Requirement for Petitioners Seeking To File Cap-Subject H-1B Petitions, 86 Fed. Reg. 1676, at 1720, Table 7, January 8, 2021. This includes H-1B petitions set by other sources including private wage surveys which are likely to be even lower than what Levels 1 or 2 require.

49. USCIS, Characteristics of H-1B Specialty Occupation Workers: Fiscal Year 2020 Annual Report to Congress, U.S. Department of Homeland Security, February 17, 2021.

50. Authors’ analysis of full year, fiscal year 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal year 2020 (Disclosure Data).

51. U.S. Department of Labor, Employment and Training Administration, Prevailing Wage Determination Policy Guidance, Nonagricultural Immigration Programs, revised November 2009.

52. Ethan Baron, “H-1B: Uber Snatches Up More Foreign-Worker Visas as It Lays Off Hundreds of Employees,” Mercury News, October 17, 2019.

53. U.S. Department of Labor, Employment and Training Administration, Prevailing Wage Determination Policy Guidance, Nonagricultural Immigration Programs, revised November 2009.

54. Ethan Baron, “H-1B: Uber snatches up more foreign-worker visas as it lays off hundreds of employees,” Mercury News, October 17, 2019.

55. See Overview section in Wage and Hour Division, “H-1B Program,” web page on the U.S. Department of Labor website.

56. Authors’ analysis of full year, fiscal year 2019 and 2020 LCA Disclosure Data, U.S. Department of Labor, Office of Foreign Labor Certification, Labor Condition Applications for fiscal years 2019 and 2020 (Disclosure Data). Analysis of fiscal 2019 data available in Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 4, 2020.

57. U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services, Modification of Registration Requirement for Petitioners Seeking To File Cap-Subject H-1B Petitions, 86 Fed. Reg. 1676, at 1720, Table 7, June 8, 2021.

58. See for example, Daniel Costa and Ron Hira, H-1B Visas and Prevailing Wage Levels: A Majority of H-1B Employers—Including Major U.S. Tech Firms—Use the Program to Pay Migrant Workers Well Below Market Wages, Economic Policy Institute, May 4, 2020.

59. 8 U.S.C. 1182 (n)(1)(A)(i)(II).

60. See discussion of the 2013 Interim Final Rule setting the H-2B prevailing wage methodology in Daniel Costa, The H-2B temporary foreign worker program: For labor shortages or cheap, temporary labor? Economic Policy Institute, January 19, 2016.

61. Daniel Costa, “H-2B crabpickers are so important to the Maryland seafood industry that they get paid $3 less per hour than the state or local average wage,” Working Economics (Economic Policy Institute blog), May 26, 2017.

62. See, Mark Ballard, “Louisiana crawfish workers claim they’re underpaid in suit; they say this labor rule allows it,” The Advocate, April 28, 2021; Texas RioGrande Legal Aid, “Louisiana Seafood Workers Sue to Invalidate U.S. Labor Rule That Allows Employers to Pay Rock-Bottom Wages,” Press Release, April 28, 2021.

63. See for example, Senator Richard Durbin, “How American Jobs are Outsourced,” YouTube.com video, April 16, 2016.

64. See for example, Stef Kight, “U.S. companies are forcing workers to train their own foreign replacements,” Axios, December 29, 2019; Julia Preston, “Pink Slips at Disney. But First, Training Foreign Replacements,” New York Times, June 3, 2015; Julia Preston, “Toys ‘R’ Us Brings Temporary Foreign Workers to U.S. to Move Jobs Overseas,” New York Times, September 29, 2015; Michael Hiltzik, “How the University of California Exploited a Visa Loophole to Move Tech Jobs to India,” Los Angeles Times, January 6, 2017; Patrick Thibodeau, “Southern California Edison IT Workers ‘Beyond Furious’ over H-1B Replacements,” Computerworld, February 5, 2015.

65. Julia Preston, “Large Companies Game H-1B Visa Program, Costing the U.S. Jobs,” New York Times, November 10, 2015.

66. David Weil, The Fissured Workplace: How Work Became So Bad for So Many and What Can Be Done to Improve It, Harvard, 2014.

67. A number of studies show a wage penalty for subcontracted/outsourced workers. For example, see Arindrajit Dube and Ethan Kaplan, “Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards,” Cornell University ILR Review. January 1, 2010); Deborah Goldschmidt and Johannes Schmieder, “The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure,” The Quarterly Journal of Economics, Oxford University Press, vol. 132(3), 2017, pages 1165-1217; Andres Drenik, Simon Jäger, Pascuel Plotkin, and Benjamin Schoefer “Paying Outsourced Labor: Direct Evidence from Linked Temp Agency-Worker-Client Data,” Econometrics Laboratory, University of California, Berkeley, September 2020.

68. Employment and Training Administration, U.S. Department of Labor, “U.S. Department of Labor revises interpretation, issues new guidance clarifying filing, compliance requirements in H-1B visa program,” Press Release Number 21-97-NAT, January 15, 2021.

69. Julia Preston, “Pink Slips at Disney. But First, Training Foreign Replacements,” New York Times, June 3, 2015.

70. Biden-Harris campaign website, “The Biden plan for securing our values as a nation of immigrants.”

Despite how much of American adult life is governed under employment agreements, most Americans also have little say over the terms of those agreements after they have been accepted. Most American workers are employed “at will,” meaning they can be fired by their employer at the employer’s discretion as long as the given reason does not violate federal law. If a worker is made to feel uncomfortable at work by a customer, or if the pace of work becomes stressful, or if conditions of their life change such that they need special accommodation, then in most cases solutions are up to the kindness of the employer to provide—there is nothing that requires them to do so.

Entering the workplace for most American adults can in that case represent an agreement to forfeit a degree of control over their lives in exchange for the wages necessary to live. If people do not have a voice in determining the pace and content of their time in the workplace, then in a real sense they lack control over the largest portion of their lives.

The core idea behind “civil rights” is that people should have the freedom to exist in political and social equality with one another. But under employment, an individual worker has a starkly unequal relationship with their employer. For workers to exist in the workplace without forfeiting their civil rights, they must be able to bargain on equal footing with their employers—that is, they need to have the ability to organize into unions among themselves. In this sense the movement for securing labor rights is not separate from the movement for securing civil rights—it is a fulfillment of those goals.

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The proposal also calls on Congress to develop comprehensive legislation to strengthen and extend protections against the abusive practice of misclassifying employees as independent contractors and uses federal housing grants to incentivize inclusionary zoning practices to alleviate the nation’s housing shortage.

On the tax side, it raises taxes on realized capital gains and on corporate income, and it closes loopholes and tightens enforcement in an effort to raise revenue through greater tax compliance.

About 18 months ago, we at EPI released a blueprint for guiding fiscal policymakers. In this blueprint, we identified the main targets of fiscal policy as: ensuring high-pressure labor markets and low unemployment, reducing inequality, and then (and only then) reducing the economic obligations incurred by the public debt.

The Biden administration’s budget (particularly given the passage of the American Rescue Plan earlier this year) scores extremely high on these marks. Specifically:

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An examination of the early filings of 281 large firms shows:

• The offer by CEOs to forgo salary increases during the pandemic was largely symbolic. Salaries were stable, but many CEOs pocketed a windfall by cashing in stock options and obtaining vested stock awards, compounding income inequalities laid bare during the past year.
• CEO compensation, including realized stock options and vested stock awards, rose 15.9% from 2019 to 2020 among early reporting firms. Growth in CEO compensation was slightly faster than last year’s strong growth—14.0% between 2018 and 2019—while the annual compensation of the average worker increased just 1.8% in 2020.
• Strong CEO compensation growth and modest growth in worker annual compensation yielded a remarkable growth in the CEO-to-worker compensation ratio, which jumped from 276.2 in 2019 to 307.3 in 2020 among early-reporting firms. In firms that retained the same CEO, the CEO-to-worker compensation ratio rose to 341.6 in 2020, up from 278.9 in 2019.

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Key takeaways:

• There are still nearly 10 million people actively looking for work and unable to find it. April state jobs and unemployment data released last Friday show that in many of the 24 states—led by Republican governors—that are cutting federal unemployment insurance (UI) programs, labor market conditions look similar to the national picture.
• The data likely understate the weakness of these labor markets, as labor force participation has fallen since the pre-pandemic level. And nearly all the states cutting UI still have significantly fewer jobs than before the pandemic.
• Those still filing for these benefits are the workers that need them the most, due to care responsibilities, health concerns, or other factors. Governors cutting off these key supports for these workers are not acting in the long-term best interest of any state’s workers or businesses.

Republican governors in 24 states—including Florida and Nebraska just this week—have indicated they will pull out from the federal unemployment insurance (UI) programs created at the start of the pandemic. Some states are ending participation in all federal pandemic UI programs, others only some of the federal supports. These actions are dangerously shortsighted.

UI provides a lifeline to workers unable to find suitable jobs, giving them time to find work that matches their skills and pays a decent wage. Moreover, the money provided through these entirely federally funded programs bolsters consumer demand and business activity in local economies, helping to speed the recovery. In many states, these federal UI programs are providing the bulk of all unemployment benefits to jobless workers. By cutting off these programs—which currently provide an extra $300 in weekly benefits, allow workers who have exhausted traditional UI to continue receiving benefits, and expand eligibility to workers typically not included in existing UI programs—governors are weakening their states’ potential economic growth.

Further, the most recent national jobs and unemployment data show that the country has not yet recovered from the COVID-19 recession. In April, the country was still down 8.2 million jobs from before the pandemic, and down between 9 and 11 million jobs since then if you factor in the jobs the economy should have added to keep up with growth in the working-age population over the past year.

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Executive summary

Four years ago, the U.S. primary aluminum industry was hanging on by a thread. Between 2010 and 2017, 18 of 23 domestic aluminum smelters shut down production, eliminating roughly 13,000 good jobs (Scott 2017). By 2016, the U.S. industry was down to three alumina refineries; by 2017, only one remained in operation. In 2017 the Commerce Department launched an investigation under Section 232 of the Trade Expansion Act of 1962 to determine whether aluminum (and steel) imports could pose a national security threat, leading to import restrictions on aluminum products in March 2018 from countries other than Canada and Mexico—initially a 10% tariff, and later import quotas for a selection of countries (Commerce 2018).1

This report demonstrates that U.S. aluminum producers rebounded following implementation of the Section 232 import measures, with negligible impact on consumers of downstream aluminum products. Domestic producers of both primary aluminum and downstream aluminum products have made commitments to create thousands of jobs, invest billions of dollars in aluminum production, and substantially increase domestic production.

Key conclusions of this report include:

• Aluminum is essential for national defense and critical to the orderly operation of the broader economy. Dwindling U.S. production capacity poses a high risk for costly supply disruptions. Currently there is only one operating U.S. smelter capable of producing high-purity aluminum required for military and aerospace applications—and it is the only one in a NATO country.

• Projects, investments, jobs, and capacity are on the rise since the initiation of the Section 232 aluminum tariffs. At least 55 new and expansion projects are in downstream aluminum industries producing extruded (rod and bar, pipe and tube, and extruded shapes) and rolled (sheet and plate) products. These new and expanded facilities will employ nearly 4,500 additional workers, generate $6 billion in new investments, and add nearly 1 million metric tons of annual rolling and extrusion capacity to the downstream domestic aluminum industry.

• U.S. production of primary aluminum has increased. In the two years from the March 2018 implementation of the Section 232 aluminum import measures to the February 2020 pre-COVID-19 economic peak, U.S. production of primary aluminum increased by 37.6% compared with the preceding two-year period. This increase was a result of restarts or production increases at five of the six remaining smelters. Domestic aluminum production reached 1.14 million metric tons at an annualized rate before the COVID-19 economic shock took hold, up from 741,000 metric tons in 2017.

• U.S. and Canadian shipments of semi-finished products, industries that are closely intertwined with primary aluminum production, also rebounded. Shipments of all extruded products increased 2.7% (281.2 million pounds), and total sheet and plate shipments increased 7% (1.2 billion pounds) relative to the preceding two-year period.

• Section 232 measures led to an uptick in employment. Since implementing the Section 232 import measures, U.S. employment in primary and downstream aluminum industries increased by 1,200 on net by February 2020, at the start of the COVID-19 crisis. Employment in the industry was buttressed by 5,570 jobs created by restarted and newly expanded primary aluminum production and secondary rolling and extrusion mills.

• There is no evidence of a meaningful adverse effect of Section 232 on industries or consumers. Econometric analysis of the causal relationship between primary aluminum prices and prices of aluminum-consuming end-use goods—including canned beer and other beverages, construction goods, furniture, and motor vehicle bodies—shows the effects are statistically zero to economically trivial. The lack of a meaningful causal relationship indicates Section 232 import measures had no adverse effect on downstream industries or consumers.

• There also is no evidence of a causal relationship between primary aluminum prices and domestic industrial output of semi-finished aluminum products. Price changes in raw aluminum exhibit no causal effect on production of aluminum extrusions or sheeting.

• A booming domestic market offset falling exports for tariff-impacted U.S. whiskey. The U.S. aluminum import policy elicited retaliatory tariffs by the European Union (EU) against U.S. whiskey and bourbon exports. While U.S. whiskey exports to the EU fell, exports to the rest of the world fell more. Waning U.S. whiskey exports to countries not imposing new tariffs indicates that producers diverted production to capitalize on the booming domestic market for “super premium” spirits, which grew 11% in 2019, or faster than any year since 2015.

When the tariffs on aluminum (and steel) imports were imposed, critics claimed that while the tariffs would save thousands of jobs in primary metals industries, hundreds of thousands of jobs would be eliminated in the rest of the economy. These critics referenced a 2018 study by the Trade Partnership, which wildly exaggerated the impacts of the tariffs (Francois and Baughman 2018; Scott 2018a). This report demonstrates that the negative effects claimed in the Trade Partnership study and feared by other critics have yet to be found in the U.S. economy.

In total, the U.S. manufacturing sector added 210,000 new jobs between February 2018, the month before the tariffs took effect, and February 2020, the month before the onset of the COVID-19 economic shock.2 Outside of manufacturing, the economy added more than 4 million new jobs in this same period. Looking more specifically at the industries aluminum producers supply, there remains no evidence that the imposition of tariffs on aluminum have had the kinds of negative employment impacts—in downstream manufacturing or other parts of the economy—that were predicted by critics of those tariffs.

Introduction

In spring 2017, the U.S. aluminum industry was in a precarious position, prompting the U.S. Department of Commerce and the president to initiate a Section 232 National Security Investigation, authorized by the Trade Expansion Act of 1962, into threats posed by aluminum (and steel) imports. The root cause of this threat was, and continues to be, the growth of excess capacity and overproduction in China and other countries where government supports distort global markets and put the survival of U.S. aluminum production at stake.

The risks of a diminished aluminum industry extend far beyond the harm done to U.S. businesses and their workers. Aluminum is an essential input for military uses ranging from armor plating for vehicles and naval vessels, to aircraft and other aerospace applications. Currently, there is only one operating U.S. smelter capable of producing the high-purity aluminum required for defense applications (the other comparable smelters are located in China, Russia, and the United Arab Emirates). Dwindling U.S. aluminum capacity also poses a risk to broader economic security, should defense needs crowd out nondefense uses and disrupt production chains in other sectors essential to economic activity and governance, such as power transmission and transportation systems, manufacturing machinery, and construction.

The global excess capacity crisis began when China directed massive subsidies toward a significant expansion of its aluminum industry. Due to the economics of highly capital-intensive industries that require large economies of scale in production (Hersh and Scott 2021), China’s moves forced other nations to follow suit, taking actions to support their own aluminum production in order to counter the adverse effects of China’s expansion. Chinese primary aluminum production capacity increased more than 1,400% from 2000 to 2017 and is responsible for 83% of the total increase in global aluminum production capacity in this time (CRU 2021).

China’s growth in aluminum production has been fueled both by massive subsidization delivered through concessional financing, tax and environmental regulatory forbearance, and access to key inputs like bauxite ore and electricity at below-market prices (WTO 2017a, 2017b). Additionally, Chinese trade measures restricting the export of primary aluminum and subsidizing semi-finished processed aluminum products with WTO-prohibited export tax rebates are succeeding in capturing a growing global market share of both the primary and secondary aluminum market, as well as advantaging other aluminum-consuming goods produced in China (OECD 2019).

Though the largest offender, China is not alone in delivering subsidies that distort the global aluminum market. As the Chinese capacity mushroomed, primary aluminum producers in other regions, such as India and the Persian Gulf states, also expanded capacity with similar types of government supports. According to the Organisation for Economic Co-operation and Development (OECD), “[g]overnment interventions appear widespread all along the aluminum value chain,” including subsidization valued at between $20 billion and $70 billion during 2013–2017 (OECD 2019). In addition to China, the OECD identified India, Russia, and Middle East producers Bahrain, Oman, Qatar, and Saudi Arabia as providing significant subsidies to support their primary aluminum industries (Figure A). Unsurprisingly, capacity and production expansions have occurred primarily in the subsidizing countries. India’s aluminum production nearly doubled from 2013 to 2017, while its production capacity increased by almost 20%. Over the same period, China’s capacity expanded by 51% and its production increased by 46%; in absolute terms, China’s aluminum capacity and production, as the world’s largest industry, was still 11 times the size of India’s. Amid such heavily subsidized growth, the U.S. aluminum industry bled capacity and production, contracting by 40% and 62%, respectively, from 2013 to 2017.

Figure A

The continued expansion and maintenance of excess capacity both inside and outside of China suppressed global aluminum prices, transmitting injury directly to domestic aluminum producers in the United States. Aluminum is a global commodity, and prices are primarily driven by total global supply and demand and set on the London Metal Exchange (LME), regardless of where the aluminum is produced, sold, or stored. Thus, even if the United States does not experience direct changes in aluminum imports, the U.S. aluminum market effectively imports the adverse price and volume effects of subsidized production and surplus global capacity through changes in LME aluminum prices.

Collapsing prices have decimated U.S. primary aluminum production, capacity, and employment. The LME market price of aluminum fell 39% between 2007 and 2016. In an industry with high fixed costs, most domestic producers were unable to weather this long-term sustained price collapse. Between 2000 and 2017, 18 of 23 domestic smelters shut down, and more than 13,000 good domestic production jobs disappeared (Scott 2017).

On March 8, 2018, President Trump used Section 232 authority to impose a 10% tariff. The positive effects were notable. Following imposition of Section 232 import measures and prior to the global economic shock from the COVID-19 pandemic, domestic production in both the primary aluminum (including both alumina refining and secondary smelting and alloying of aluminum) and downstream aluminum rolling and extruding industries were up. Section 232 measures helped these producers hire workers and expand operations—adding capacity, making large investments, and increasing production, as is shown in this report. Then came the COVID-19 economic shock, which hit the aluminum industry as well. As the world recovers from the pandemic and looks to build back stronger and more resilient—and with growing attention to the need to build and support secure, reliable domestic supply chains—Section 232 measures remain a critical tool to counter surging overcapacity in countries with the worst-polluting producers of this critical commodity.

The resurgence of the U.S. aluminum industry—with minimal apparent knock-on effects in other parts of the economy—belies claims by critics, pundits, and representatives of many firms in downstream industries, who argued that the Section 232 tariffs would have a devastating negative impact on a wide range of domestic industries (Francois and Baughman 2018). For example, according to Bloomberg, Ford Motor Co. “began the year by warning that rising costs for raw materials like steel and aluminum, coupled with unfavorable exchange rates, would add $1.6 billion to its costs this year” (Naughton 2018). Of course, increases in the real value of the dollar, which gained nearly 8% from before the Section 232 measures until the start of the pandemic, raise the cost of everything that domestic automobile manufacturers import from the rest of the world (including finished vehicles and parts), and changes in the cost of metals are a tiny fraction of their overall costs (Scott 2018a). In fact, econometric evidence presented in this report shows that changes in primary aluminum prices have statistically insignificant or economically negligible causal impacts on downstream aluminum-using goods such as canned beverages, construction materials, motor vehicle parts, kitchen utensils, and furniture. Complementary data compiled here demonstrate that Section 232 aluminum measures have had no significant, industry-specific or economywide negative impacts on employment or output in U.S. manufacturing or other domestic industries.

Despite benefiting U.S. aluminum producers and having no discernible impact on aluminum consumers, country exemptions and excessive product-specific exclusions to Section 232 import measures increasingly undermine the efficacy of the policy—particularly for downstream products—significantly curtailing the quantity of aluminum goods covered by the measures and the benefits of these measures for the U.S. industry. That the quantity of aluminum products excluded from import measures far outstrips actual U.S. imports of aluminum products indicates how broken the exclusion process has become (Figure B). For example, the Trump administration granted exclusions for 12,873 MMT of aluminum sheet product imports when, in 2017, U.S. consumers imported a mere 1,102 MMT. The exclusions exempted 1,663 MMT of sheet imports from the European Union, even though U.S. consumers imported only 143 MMT of aluminum sheet goods from the European Union in 2017 (USITC 2021). Continually whittling away at the program with such excessive product exclusion requests destroys downstream demand for U.S. primary aluminum and undermines the effectiveness of the policy. Maintaining the Section 232 aluminum import measures remains critical to stabilizing and expanding U.S. aluminum production.

Figure B

Section 232 tariffs yield positive impact on U.S. aluminum industries

After suffering decades-long declines, U.S. primary aluminum production shot up by 60% immediately after implementation of the Section 232 tariffs in March 2018 through January 2019 (Figure C). Thereafter, primary aluminum production remained stable until the COVID-19 economic shock weighed on demand for durable goods in the spring of 2020. While still far from historical capacity, improving market conditions under the Section 232 policy have led to substantial new investments to reopen or expand U.S. primary aluminum production facilities, as shown in Table 1. Combined, these projects restarted 530,000 metric tons of primary aluminum capacity and brought back 1,095 jobs with new investments of $335 million in upgraded and expanded facilities and other fixed cofsts necessary to start production.

Figure C

Table 1

Critics of the Section 232 aluminum measures warned that tariffs would jeopardize downstream producers of secondary aluminum products—semi-finished extrusion, casting, and rolling operations that further transform raw aluminum for production in myriad aluminum-consuming industries. Table 1 further shows this was not the case. U.S. producers of downstream semi-finished aluminum invested in restarts or expanded capacity at 55 facilities. These projects will create 4,475 new jobs, with a capital investment of $6.0 billion. In total, U.S. primary and secondary aluminum producers have committed $6.4 billion in new investments to restart and expand capacity, adding 5,570 new jobs.

Figures D and E illustrate why U.S. primary and downstream producers are restarting or expanding operations: Demand for aluminum produced in the United States and Canada was growing prior to COVID-19.3 Shipments of aluminum extruded products (Figure D) increased by 281 million pounds (2.7%) following implementation of Section 232 measures and up to February 2020, relative to the same period preceding the measures. Shipments in all segments in this market increased significantly, including rods and bars, up more than 54 million pounds (5.3%); pipes and tubes, up more than 19 million pounds (2.3%); and other extruded shapes, up nearly 208 million pounds (2.4%).

Figure D

Figure E

Figure E shows that shipments also grew strongly in aluminum sheet and plate production as well in the same March 2018 to February 2020 time frame, relative to the equivalent period before Section 232 measures. Total sheet production has increased more than 1.2 billion pounds (7.0%). Non-heat-treatable sheet increased 586.1 million pounds (10.1%) and “other” sheet and plate (including heat-treatable) increased a whopping 1.1 billion pounds (35.1%). The only segment of the industry that declined was aluminum can stock, in which shipments decreased by 6.4%; however, this appears to be the result of increasing import penetration largely due to the excessive aluminum sheet product exclusions discussed above.

Figures D and E report trends on shipments of downstream aluminum products from plants throughout the United States and Canada. More detailed data from the Federal Reserve (2021) on U.S.-only industrial production of aluminum and aluminum products also show the aluminum industry rebounding after implementation of Section 232 measures for aluminum imports. These data provide estimates of real output, based on measures of physical output, or (where output data are not available) total production-worker hours, by industry. Overall, U.S. production in the primary and secondary industries increased by 16.3% through December 2018. In the following year, production waned with relaxation of the Section 232 import measures, but by December 2019 U.S. output still remained more than 6% above the level prior to implementation of Section 232. In contrast, U.S. production of nonferrous metals other than aluminum declined by 2.5% over the same time period, offering a parallel case without the support of Section 232 measures against which to compare effects on the U.S. aluminum industry (Federal Reserve 2021).

Beer industry making bogus claims

The beer industry has cried foul regarding the effect of the Section 232 duties on beer sales, but it’s the industry’s deceptive analysis of basic economic trends in the processed food and beverage industries that smells rotten. The Section 232 duties have had virtually no impact on the beer industry or other canned beverage industries and, as discussed in further detail below, careful statistical analysis shows that the price of aluminum has no discernible causal effect on the price of canned beer and other beverage products. A private consulting study prepared for the beer industry reports that the aluminum used in beverage cans represents only 5.7% of the manufacturers’ cost of beer in cans (John Dunham & Associates 2018).4 In other words, even assuming that a 10% tariff passes entirely through to the costs of cans, that would equal less than 0.6% of beer production costs—immaterial in an industry that spends tens of billions of dollars annually on marketing and sponsorships. Price data compiled by the Bureau of Labor Statistics (BLS 2021d) show that in the two years after Section 232 measures were implemented, canned beer prices increased less than 0.5% annually—far below overall consumer price inflation—while sales maintained a stable, rising trend (Census 2021).

The beer industry’s ongoing strength is reflected in the steady growth of employment overall in breweries, wineries, and distilleries since the end of the Great Recession in 2009. In fact, Figure F shows that employment in the industry more than doubled to 155,300 in February 2018—before the Section 232 aluminum import measures took effect—from 72,700 in June 2009. Following the aluminum import measures, trend growth in breweries, wineries, and distilleries was unbroken, increasing by a further 17%, or 26,500 more jobs. Examining the beer industry claims of harm from the aluminum tariffs in more detail, most of the job losses claimed in the industry’s private consultant report were in downstream distribution sectors, with 91% of the 20,300 jobs lost in “retailing, supplier and induced” segments (John Dunham & Associates 2018). As shown below, there is no evidence of job losses to date in these broader segments of the economy. Much like the aggregate modeling analysis by the Trade Partnership, referenced above, such models bear no relationship to observed impacts of the aluminum tariffs on the domestic economy to date (see our analysis of Francois and Baughman 2018, below). This report concludes with an examination of these broader claims about the impacts of the Section 232 import measures on the U.S. economy.

Figure F

If anything, the beer industry has been a victim of its own continued success during the pandemic. While robust consumption has continued, there was a sudden shift toward consumption of beer and other beverages in cans, displacing demand for beer in glass bottles and stainless steel kegs (Beverage Information Group 2018). A recent Washington Post article makes clear this has little to do with Section 232 import measures, and everything to do with demand for canned beverages far outpacing supply from can manufacturers that can’t scale production capacity fast enough (Reiley 2020).

Aluminum consumers face negligible effects from Section 232 measures

An important concern in assessing the impacts of Section 232 measures on imported aluminum products is how these measures affect downstream industries and consumers of products that use aluminum inputs. Harm to downstream industries would occur if Section 232 measures significantly increased aluminum prices, causing increased costs for producers or consumers of primary aluminum-embodying goods, and then those costs squeezed profit margins or consumer welfare—by forcing consumers to either pay more for or consume less of a given product. To assess this linkage between aluminum input prices and end-user prices, we employ standard, related, and time-tested econometric techniques known as Granger causality analysis and vector autoregression (Granger 1969; Sims 1980).

Vector autoregression (VAR) is a statistical method for modeling a system of variables and their interrelationship and co-evolution over time. Granger causality analysis uses the VAR model to test for evidence of a statistically causal relationship between the variables in the model. If past values of variable 1 are shown to significantly predict current values of variable 2, then it can be concluded that variable 1 “Granger-causes” variable 2. While the price variable used in this modeling (variable 1) includes the effects of Section 232 tariffs and quotas, the results of the statistical test are not limited to the effects of Section 232 measures, but rather evaluate whether a change in prices resulting from any factor causes a change in the price of the aluminum-using good (variable 2). Technical discussion of this methodology and detailed results are presented in the appendix.

In this case, we model (1) the price of primary aluminum products, (2) the price of aluminum-consuming products, and (3) the effective federal funds interest rate.5 Results of the statistical relationships are reported in Appendix Table 1. The end-use products investigated represent the U.S. industries consuming the largest volume of aluminum products as a share of their overall value added, including beverage manufacturing, construction materials, motor vehicle bodies and parts, kitchen utensils, and furniture. First, our results find no discernible statistical relationship between a change in the price of primary aluminum and changes in the prices of canned beer and ale case goods, aluminum cans and can components, or beverage manufacturing. Even though aluminum inputs make up 10% of the value added in beverage manufacturing, according to input-output tables produced by the Bureau of Labor Statistics (BLS 2021b), aluminum prices do not have a causal effect on beverage prices.

Similarly, we find no causal effect of aluminum prices on motor vehicle body manufacturing—where aluminum accounts for 14% of the value chain—nor do we find a causal effect for nonresidential construction goods (6%) or commercial furniture (3%). The econometric results indicate that any change in primary aluminum prices is expected to result in no change in the price of the end-use product. We do find evidence of a causal relationship between primary aluminum prices and motor vehicle parts, as well as for aluminum kitchen utensils. However, while these results are statistically significant, the magnitude of the effect is, in essence, economically negligible. In both cases, a 1% increase in the price of primary aluminum is expected to elicit a less than 0.1% change in the price of the end-use good.

Second, we test whether the price of primary aluminum production has a causal effect on industrial production of secondary aluminum products that transform raw aluminum into intermediate semi-finished aluminum products—the extrusions, castings, sheets, and plates illustrated in Figures B and C above. Evidence of a causal relationship between primary prices and measures of secondary aluminum production would indicate that Section 232 aluminum import measures could be harming downstream segments of the U.S. aluminum industry. However, here too we find no statistically significant relationships (see Appendix Table 1).

Finally, if Section 232 aluminum import measures were skewing primary aluminum prices, we would expect to see effects in the market prices for scrap aluminum products, which would be in higher demand. However, our results definitively indicate no statistically causal relationship between primary prices and the price of aluminum base scrap, or the price of used beverage can scrap.

To recap, economic injury from Section 232 aluminum import measures could be caused if price increases passed through to prices of goods produced in downstream industries, causing other businesses to lose profitability or cut back on production, or for consumers to pay higher prices or curtail purchases. Analysis of the data does not support such conclusions. While conceptually a relationship exists between input prices and final goods prices, econometric analysis of the causal relationship between prices finds effects ranging from statistically zero to essentially nothing.6 In most cases, there is no statistically significant causal relationship between prices or production in the industries downstream from primary aluminum; where there is evidence of a relationship, the effect is so small as to be economically trivial. It is also possible that increasing prices of primary aluminum inputs could induce downstream consumers to increase their productivity, offsetting costs by becoming more efficient. This would be a positive outcome, too, though we have insufficient evidence to draw such a conclusion.

Aluminum tariffs show no impact on broader U.S. employment

The lack of a causal relationship between primary aluminum prices and downstream industries is reflected in the fact that employment outcomes show no indication of the negative effects predicted by Section 232 critics. Table 2 compares two studies (Francois and Baughman 2018; Francois, Baughman, and Anthony 2018) produced for the Trade Partnership, a special interest group, that projected expected employment impacts of the steel and aluminum tariffs against the actual performance of the economy between February 2018 and February 2020—the eve of the COVID-19 economic shock, and equivalent to the time horizon for the 2018 projections.7 The table covers total U.S. employment in 27 detailed and four aggregate industries, and overall nonfarm employment in the domestic economy.8

Table 2

An earlier critique of the first study explained why the actual impacts of the tariffs would be quite minor and why the study should be treated as an outlier in studies of tariffs, not as a guide to policy decision (Scott 2018b). In particular, the study’s modeling exercise deviates from standard assumptions that the economy always adjusts rapidly to maintain full employment via realignment of prices in response to tariffs or other trade measures. These standard assumptions are not grounded in reality, but the alternative assumptions chosen by modelers for the Trade Partnership err in the other direction, presuming hyper labor market inflexibility with the result that the model necessarily predicts massive employment dislocations—also not grounded in reality, particularly in an economy that had grown steadily for the preceding eight years, pushing the unemployment rate well below 4% prior to the COVID-19 shock (Scott 2018a; BLS 2021c). Finally, the macroeconomic effects of tariffs on aggregate demand are ambiguous, not clearly contractionary, as the Trade Partnership report implies.

These two reports are representative of the anti-tariff hysteria that often pervades policy debates. Now, with the benefit of hindsight, history reveals the hyperbole of such claims. The Trade Partnership studies claimed that while the tariffs would save thousands of jobs in primary metals industries, several hundred thousand jobs would be lost in the rest of the economy. In fact, the U.S. economy added nearly 4.3 million jobs on net. A majority of the actual job gains, 3.8 million, came from service-sector industries, although the Trade Partnership studies estimated that a majority of their projected job losses, nearly 377,000, would occur in the service sector. The Trade Partnership projections were no more accurate when it came to manufacturing employment. In the real world, the U.S. economy added 210,000 manufacturing jobs following Section 232 import measures, whereas the Trade Partnership predicted manufacturing would lose nearly 20,000 jobs.

The actual employment results in Table 2 show the extent of anti-tariff hyperbole. The Trade Partnership also vastly overestimated the employment costs to downstream industries reliant on inputs of primary metals. The Trade Partnership predicted job losses in industries like fabricated metals (-12,877) and motor vehicles and parts (-4,917), as well as in sectors of the economy farther afield from metals and manufacturing like personal and recreational services (-35,033); in actuality, these industries added 19,100, 12,100, and 1.78 million respectively. Among other flaws in these predictions, the Trade Partnership did not take account of how appreciation of the international value of the U.S. dollar and extensive exclusions to the Section 232 measures granted to U.S. importers of steel and aluminum eroded the effectiveness of the policy. The employment results presented in this table make two things clear. First, such predictions, though compelling in public debates, were wildly off base. Second, the Section 232 measures worked as intended without harm to other segments of the U.S. economy.

Cry me a whiskey river

In response to the U.S. Section 232 aluminum measures, the European Union imposed retaliatory tariffs on imports of U.S.-made whiskies, bourbon, and rye. While the industry has voiced opposition to the Section 232 measures, there is little evidence that EU retaliation is dampening the party for U.S. whiskey producers. As the Distilled Spirits Council of the United States (2021), an industry lobbying group, put it, “America’s native spirit has been enjoying a resurgence in recent years.” In fact, sales of American whiskey, by volume, grew at an annualized rate of 6.8% from 2017 to 2020, notably faster than the growth of 6% the industry registered in the preceding three years (2014 to 2017).

Figure G shows that, indeed, exports of U.S.-made whiskey, bourbon, and rye fell after June 2018. But exports to the rest of the world—which, unlike the EU, did not impose retaliatory tariffs—fell even more. We can conclude from the common trend seen in disparate export markets in Figure G that this did not result from tariffs, but from some other common factor. It is possible the entire world experienced a shift in preferences away from American whiskey all at the same time. But a more plausible explanation would be that U.S. whiskey producers found more profitable uses in domestic markets for the whiskey they were already producing. Because whiskey improves and increases in value with aging, producers cannot quickly adjust the quantity produced to respond to changing market conditions. They can, however, change the quality of the product to compete in higher-value market segments with higher profit margins, chasing the booming “super premium” market. In 2019, revenues from sales of U.S. super premium whiskeys grew 11% year over year, compared with 6.7% growth in 2018 (Distilled Spirits Council 2021). The COVID-19 pandemic slowed super premium growth as it disrupted global supply chains, but at 8.2% in 2020, sales of U.S. super premium whiskeys still grew faster than in any other year since 2015.

Figure G

Conclusion: Section 232 tariffs have aided aluminum producers

This report has demonstrated that, to date, the aluminum tariffs have had their intended effect: The domestic producers of both primary aluminum and downstream aluminum products have made commitments to create thousands of jobs, invest billions of dollars in aluminum production, and substantially increase domestic production since Section 232 tariffs were imposed on March 8, 2018. The Biden–Harris administration should continue and limit exclusions to Section 232 import measures on an interim basis until it can achieve a permanent, multilateral solution to the chronic problem of excess global aluminum production capacity.

Acknowledgments

The authors thank Jori Kandra for technical and research assistance and Colleen O’Neill for editing assistance. This research was made possible by support from the American Primary Aluminum Association.

About the authors

Adam S. Hersh, PhD, is a Visiting Economist at the Economic Policy Institute. Previously, Hersh was a research associate at the Political Economy Research Institute, University of Massachusetts Amherst; chief economist for the Congressional Joint Economic Committee, Democratic staff; senior economist at the Franklin and Eleanor Roosevelt Institute and the Center for American Progress; a visiting scholar at Columbia University’s Initiative for Policy Dialogue and the Shanghai University of Finance and Economics; and a research fellow at the University College, London’s Institute for Innovation and Public Purpose. He is a contributing author with Joseph Stiglitz of Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity (2015).

Robert E. Scott joined the Economic Policy Institute in 1996 and is currently director of trade and manufacturing policy research. His areas of research include international economics, trade, and manufacturing policies and their impacts on working people in the United States and other countries; the economic impacts of foreign investment; and the macroeconomic effects of trade and capital flows. He has published widely in academic journals and the popular press, including The Journal of Policy Analysis and Management, The International Review of Applied Economics, and The Stanford Law and Policy Review, as well as The Los Angeles Times, Newsday, USA Today, The Baltimore Sun, The Washington Times, and other newspapers. He has also provided economic commentary for a range of electronic media, including NPR, CNN, Bloomberg, and the BBC. Mr. Scott has a PhD in economics from the University of California, Berkeley.

Appendix: Methodology for analyzing causal relationship between aluminum prices and aluminum-consuming industries

This appendix outlines the methodological approach for assessing how Section 232 measures on imported primary aluminum products may affect downstream industries and consumers of products that use aluminum inputs. Harm to downstream industries and consumers could occur if Section 232 measures caused an increase in prices for aluminum products paid by U.S. users of aluminum and those price increases pass through to producer or consumer prices for aluminum-embodying goods. In order to assess this possibility, we evaluate a more basic question: Do changes in the price of primary aluminum cause changes in aluminum-using products? This question asks whether any change in aluminum price is a significant determinant of prices for goods that use aluminum as an intermediate input, irrespective of what factors cause a change in prices.

Data and methodology

To evaluate this question, we estimate reduced form vector autoregressions (VARs) that model the variables of interest as an interrelated system that co-evolves over time (Sims 1980). The VAR is an attractive analytical tool because it does not force an assumed structural form onto the data. Each variable in the system is modeled jointly as a function of its past values and the past values of the other related variables in the system. After estimating the system, we can evaluate causal relationships between the variables by testing whether past values of one variable are statistically significant determinants of the current value of another variable, following Granger (1969).

Our variables of interest are (1) prices for primary aluminum, (2) prices for aluminum-using products, and (3) the effective federal funds rate—the interest rate at which depository institutions borrow and lend reserve balances held at Federal Reserve Banks. This interest rate is the primary target for Federal Reserve monetary policy actions and is linked both in theory and in practice to changes in general price levels, as well as to the level of demand for goods and services across the economy via the Taylor Rule (Taylor 1993). Separately, we also test whether primary aluminum prices and the federal funds rate have a causal relationship with industrial production of secondary, semi-finished aluminum products and aluminum scrap prices.

Data are observed monthly and drawn from the Federal Reserve Bank of St. Louis’s FRED Economic Data, spanning January 2005 to January 2020. Univariate analysis with a modified Dickey-Fuller test (Cheung and Lai 1995) fails to reject the null hypothesis of a unit root for each variable under consideration. While the individual variables are nonstationary (integrated of order one, or first-difference stationary), tests with Johansen’s procedure show that there is no cointegration—or, a stable, long-run relationship—between the variables (Johansen 1995), and the system can be modeled with a VAR, as opposed to a vector error correction model.

The VAR model consists of

where  is the natural log of price at time of primary aluminum, is the natural log of the price of the aluminum-using product, and is the natural log of the effective federal funds interest rate. The model estimates parameters ,  to , and  , which are, respectively, a vector of constant terms, 3 × 3 matrices of coefficients relating the current dependent variable to past values of the independent variables, and a vector of randomly distributed residual with mean zero and uncorrelated across time.

The specific number lags of the dependent and independent variables specified varies for each set of aluminum product and aluminum-consuming goods modeled, and are chosen with some subjectivity, though guided by minimizing a battery of statistical tests, including the likelihood ratio test, the final prediction error, Akaike’s information criterion, Schwarz’s Bayesian information criterion, and the Hannan and Quinn information criterion (Neilsen 2001; Lütkepohl 2005). Results were robust to alternative lag-length specifications. The VAR parameters were estimated simultaneously by the “seemingly unrelated regression” method of Zellner and Theil (1962). Post-estimation, the statistical assumptions were tested to confirm that the VAR parameters are stable (with eigenvalues lying within the unit circle) and that the residual is normally distributed and not serially correlated, indicating that the models are well specified.

The specific parameters estimated that define the structures of VARs are typically of less concern than how the system behaves when there is an exogenous change in one of the variables. In this case, we are concerned whether a change in the price causes a change in , evaluated with a Granger (1969) causality test. This evaluates the hypothesis that the coefficients on are jointly statistically significant in determining against the null hypothesis that the coefficients are all equal to zero. If the test statistic exceeds a critical value at a 95% probability or higher, we can reject the null hypothesis and conclude that Granger-causes . In the event we identify a significant causal relationship, then the system of equations making up each VAR can be used to simulate the effect on of a shock to by simulating an impulse response function.

Appendix Table 1 reports the Wald test statistic χ² and the associated probability for rejecting the null hypothesis of zero causal effect for each pair of prices (or industrial production). For the majority of end-use products considered, we find no statistical evidence that primary aluminum prices affect the price of end-use products (<95% probability). This means that a change in aluminum prices is expected to have zero effect on the price of end-use goods. We do find statistically significant causal effects (>95% probability) of the aluminum price on the prices of motor vehicle parts and stamped and spun aluminum kitchen utensils. For these goods, we estimate the impact of a 1% increase in aluminum input prices using an orthogonalized impulse response function, with results summarized in the final column of Appendix Table 1. For each end-use good, the shock from an initial change in aluminum prices reaches its maximum impact on end-use prices in the following one to three months, then gradually dissipates to zero over the ensuing months, meaning there is no permanent effect on prices.

These were not the only statistically significant causal relationships identified in the VAR modeling. In a majority of the models, Granger analysis finds that the effective federal funds interest rate has a causal effect on aluminum price levels, by moderating aggregate demand, as theory would predict.

Appendix Table 1

Table notes

Table 1, U.S. aluminum restarts/expansions since Section 232 implementation, February 2018–April 2021

The sources for each plant announcement are as follows:

Primary aluminum plants

Alcoa (Warrick, Indiana): Business Facilities, “Alcoa Restarting Indiana Aluminum Smelting Operations,” July 12, 2017.

Century Aluminum Company (Mount Holly, South Carolina): Terri Errico Griffis, “Century Aluminum rebuilds with 3-year power agreement,” Charleston Regional Business Journal, March 3, 2021.

Century Aluminum Company (Sebree, Kentucky): Michelle Fox, “Trump’s tariffs allow us to invest $100 million and hire hundreds: Century Aluminum CEO,” CNBC Online, March 1, 2018.

Magnitude 7 Metals (Marston, Missouri): David Jenkins, “Magnitude 7 Metals CEO praises reinstatement of import tax,” Standard Democrat, August 7, 2020.

Secondary aluminum facilities

Aleris (Lewisport, Kentucky): Lane Report, “Aleris opens $40M aluminum rolling mill expansion in Hancock County,” November 16, 2017.

Alexandria Industries (Alexandria, Minnesota): Dee DePass, “Minnesota aluminum plant breaks ground on $16 million expansion,” Star Tribune, May 14, 2019.

Arconic (Knoxville, Tennessee): Jim Gaines, “Arconic to bring 70 new jobs to Alcoa plant,” Knox News, February 13, 2019.

Arconic (Texarkana, Texas): Junius Stone, “Arconic to add 35 jobs next year,” Texarkana Gazette, August 7, 2018.

Ardagh Metal Beverage (Huron, Ohio): Michael Harrington, “Company to create 200 jobs in Huron,” Sandusky Register, December 10, 2020.

Ardagh Metal Beverage (Winston-Salem, North Carolina): Ardagh Group, “Ardagh Group S.A.—fourth quarter and full year 2020 results,” n.d.

Ardagh Metal Beverage (Olive Branch, Mississippi): Area Development News Desk, “Ardagh Group expands manufacturing at Olive Branch, Mississippi factory,” November 11, 2020.

Ball Corporation (Goodyear, Arizona): City of Goodyear Arizona Economic Development, “Largest capital investment in Goodyear’s history,” July 30, 2018.

Ball Corporation (Pittston, Pennsylvania): Melina Druga, “Ball Corporation to build packing plant in Pittston,” Pennsylvania Business Report, September 4, 2020.

Ball Corporation (Rome, Georgia): Staff reports, “Aluminum packaging manufacturer to expand Rome operation,” Albany Herald,  October 16, 2019.

Benada Aluminum (Sanford, Florida): Bill Zimmerman, “Benada expands Sanford aluminum plant, says tariffs boost demand,” Orlando Sentinel, July 18, 2018.

Bharat Forge Aluminum USA (Sanford, North Carolina): North Carolina Department of Commerce, “Global automotive parts manufacturer selects Lee County for major aluminum forging facility in North Carolina,” September 17, 2019.

Bodine Aluminum (Troy, Missouri): John Raby and Bruce Schreiner, “Toyota investing $750 million at 5 U.S. plants, including its Troy aluminum plant,” St. Louis Post-Dispatch, March 14, 2019.

Bodine Aluminum (Jackson, Tennessee): John Raby and Bruce Schreiner, “Toyota investing $750 million at 5 U.S. plants, including its Troy aluminum plant,” St. Louis Post-Dispatch, March 14, 2019.

Bonnell Aluminum (Niles, Michigan): Business Wire, “Bonnell Aluminum announces start-up of new extrusion line,” June 14, 2017.

BR Metal Products (Livingston, Tennessee): Tennessee Department of Economic & Community Development, “Governor Less, Comissioner Rolfe announce BR Metal Products to expand Livingston operations,” September 21, 2020.

Braidy Industries (Ashland, Kentucky): Morgan Watkins, “Braidy Industries breaks ground on Bevin-backed, $1.5B aluminum mill,” Courier Journal, June 1, 2018.

Central Motor Wheel of America (Paris, Kentucky): Lane Report, “CMWA announces $112M expansion in Paris, Ky.; 145 full-time jobs,” June 27, 2019.

Century Aluminum (Sebree, Kentucky): Global News Wire, “Century Aluminum announces expansion of Sebree casthouse,” November 28, 2018.

Crown Holdings (Henry Count, Virginia): Crown, “Crown holdings to build new beverage can plant in Henry County, Virginia,” January 28, 2021.

Crown Holdings (Bowling Green, Kentucky): Business Facilities, “Crown Holdings begins building $148M plant in Kentucky,” May 15, 2020.

Crown Holdings (Olympia, Washington): Zacks Equity Research, “Here’s why should you retain Crown Holdings at the moment,” NASDAQ September 15, 2020.

Dajcor Aluminum (Perry County, Kentucky): KAM, “Dajcor aluminum to create 265 full-time jobs in eastern Kentucky,” May 13, 2019.

Elixir Extrusions (Douglas-Coffee County, Georgia): Area Development News Desk, “Elixir Extrusions expands Douglas-Coffee County, Georgia, plant,” August 23, 2018.

Ellwood Group (Hubbard, Pennsylvania): Business Journal Daily, “Ellwood Group to build $60M aluminum plant in Hubbard,” September 19, 2018.

Florida Can Manufacturing (Winter Haven, Florida): Kevin Bouffard, “Winter Haven clears way for can manufacturing plant—110 jobs,” December 6, 2019.

Gateway Extrusions (Union, Missouri): The USGlass News Network, “Gateway Extrusions marks expansion and 15th year,” October 10, 2018.

Granco Clark (Belding, Michigan): Brandon Schreur, “‘Misunderstood industry’: Lt. Gov. Brian Calley visits Belding’s Granco Clark in light of expansion,” The Daily News, May 26, 2018.

Gränges (Huntingdon, Tennessee): Brian Taylor, “Gränges to expand aluminum casting capacity in Tennessee,” Recycling Today, March 26, 2021.

Gränges (Huntingdon, Tennessee): Gränges Innovative Aluminum Engineering, “Gränges to invest USD 110 million in US capacity expansion,” September 15, 2017.

Gränges (Newport, Arkansas): George Jared, “Gränges to restart Newport plant, hire 100 new employees,” Talk Business & Politics, May 3, 2018.

Hydro (Schuylkill, Pennsylvania): Stacy Wescoe, “Aluminum manufacturer announces $100M expansion; 60 jobs could be added,” Lehigh Valley Business, September 28, 2018.

Jupiter Aluminum (Brooke County, West Virginia): Connor Griffith, “Jupiter Aluminum announces expansion of Brooke County presence,” West Virginia News, March 27, 2019.

JW Aluminum (Goose Creek, South Carolina): Aluminum Insider, “First phase of JW Aluminum’s US$300MM expansion at SE South Carolina plant nearing completion,” August 28, 2019.

JW Aluminum (Russellville, Arkansas): Global News Wire, “JW Aluminum to invest over $30 million in equipment upgrades for foil production,” September 20, 2018.

Kobelco Aluminum Products & Extrusions (Bowling Green, Kentucky): Team Kentucky, “Newly opened Kobelco Aluminum plant in Bowling Green to grow by $42 million,” December 19, 2018.

Kobelco Aluminum Products & Extrusions (Bowling Green, Kentucky): Don Sergent, “Kobelco Aluminum expanding, adding 90 employees,” Big Daily News, December 19, 2018.

Logan Aluminum (Logan County, Kentucky): Sydny Anderson, “Tri-Arrows Aluminum to invest $125 million in Logan County Facility,” 91.3WKMS Murray State’s NPR Station, May 25, 2017.

Magnode (Butler County, Ohio): Eric Schwartzberg, “It’s already been a big month for this 70-year-old Butler County company, and a $13M expansion is coming,” Journal-News, January 24, 2018.

Matalco (Franklin, Kentucky): Brian Taylor, “Matalco to add Kentucky location,” Recycling Today, March 22, 2021.

Matalco (Wisconsin Rapids, Wisconsin): Caitlin Shuda, “Aluminum manufacturer Matalco to build plant in Wisconsin Rapids, hire 80 full-timers,” Wisconsin Rapids Daily Tribune, January 30, 2019.

Matalco (Various): Matalco, “Matalco Inc announces multiple Greenfield aluminum plants for production in Q-3, 2019,” March 6, 2018.

Mid-States Aluminum (Fond du Lac, Wisconsin): Mid-States Aluminum Corp., “Mid-States Aluminum invests in new press line and expands facility,” December 6, 2017.

Nippon Light Metal Georgia (Adairsville, Georgia): Georgia Office of the Governor, “Nippon Light Metal Georgia to build facility, create 110 jobs in Bartow Co.,” November 21, 2019.

Northern Indian Anodize (Fort Wayne, Indiana): 96.3 XKE Fort Wayne’s Classic Rock, “Startup aluminum company will create up to 48 new jobs,” June 20, 2018.

Novelis (Guthrie, Kentucky): Novelis, “Guthrie, Kentucky,” n.d.

Novelis (Greensboro, Georgia): PR Newswire, “Novelis invest $36 million to expand, upgrade aluminum recycling capabilities in Greensboro, Ga.,” October 30, 2019.

Owl’s Head Alloys (Bowling Green, Kentucky): Nicole Burton and Jack Mazurak, “Owl’s Head, aluminum recycler, expanding in Bowling Green,” Columbia Magazine, February 22, 2018.

Pennex Aluminum (Columbiana County, Ohio): Tom Giambroni, “Pennex Aluminum moves ahead with expansion,” Morning Journal News, September 30, 2019.

Service Center Metals (Prince George County, Virginia): John Reid Blackwell, “Prince George-based Service Center Metals plans $45 million expansion, creating 58 jobs,” Richmond Times-Dispatch, January 11, 2018.

Sundaram-Clayton Limited (Dorchester County, South Carolina): Business Facilities, “Sundaram-Clayton Limited investing $40M in South Carolina expansion,” November 29, 2018.

Superior Extrusion (Gwinn, Michigan): Lisa Bowers, “U.P. company solidies expansion plans with $10.5 million investment,” The Mining Journal, September 28, 2017.

Texarkana Aluminum (Texarkana, Texas): Rob Sitterley, “Texarkana Aluminum highlights record facility investment,” ARTX Regional Economic Development Inc. (REDI), October 17, 2019.

Western Extrusion (Carrollton, Texas): Light Metal Age, “Western Extrusions order complete billet casthouse,” August 22, 2019.

Western Extrusion (Carrollton, Texas): Western Extrusion, “Western Extrusion announces expansion to include new 5,100 ton 14-inch press,” January 24, 2018.

Endnotes

1. Section 232 provisions allow for the imposition of tariffs if the Commerce Department finds that imports are threatening America’s industrial base. See Commerce 2018.

2. Employment effects data in this report measure February 2018 through February 2020, except as otherwise noted.

3. Data are reported jointly for U.S. and Canadian shipments of semi-finished aluminum products, due to the closely integrated nature of the North American industry; however, U.S. production of semi-finished goods far outstrips Canadian production, and market shares have remained in stable proportion in recent years. See USITC 2017, Tables 2.4–2.7.

4. In fact, the consultant’s finding of 5.7% aluminum content in the canned beer industry is lower than the 10% content reported in official U.S. industry input-output analysis data. Still, we find zero statistical evidence of a causal relationship in assessing whether aluminum prices lead to price increases in canned beer and other products.

5. The Federal Funds Rate—the interest rate at which depository institutions borrow and lend federal balances held at Federal Reserve Banks—is the primary target for Federal Reserve monetary policy actions, and is linked both in theory and in practice to changes in price levels, as well as to the level of demand for goods and services across the economy.

6. In fact, the market for secondary semi-finished aluminum products—extrusions and sheet that will be consumed as inputs to further downstream manufactured products—are typically produced at a “conversion price,” a fixed rate above the market price for aluminum combining the global London Metal Exchange (LME) price and the U.S. Midwest premium. Although increases in primary aluminum pass through to semi-finished products mechanically due to this market structure, the evidence presented here shows negligible effects on downstream consumers of these intermediate aluminum products.

7. The Trade Partnership produced two studies of the effects of the steel and aluminum tariffs. The first, published in March, covered the tariffs only, and the second, published in June, considered the possible impacts of retaliation on U.S. employment, by industry.

8. Estimates of agricultural employment are available only on an annual basis. No comparative data are available yet for trends in farm employment. Employment data for some sectors (NAICS four-digit and lower) is available only through September 2018, as shown in Table 2.

References

Aluminum Association. 2021a. “U.S. and Canadian Producer Shipments of Aluminum Extruded Products.” [Excel file] Accessed April 4, 2021.

Aluminum Association. 2021b. “U.S. and Canadian Producer Shipments of Aluminum Sheet and Plate.” [Excel file] Accessed April 4, 2021.

Beverage Information Group. 2018. “Beer Volume Declines Continue, Despite Gains in Craft and Imported Brews” (press release). October 10, 2018.

Bureau of Industry and Security (BIS). 2021. “232 Exclusions Portal: Published Exclusion Requests.” Accessed May 1, 2021.

Bureau of Labor Statistics (BLS). 2021a. Employment, Hours, and Earnings from the Current Employment Statistics Survey (National). Accessed April 4, 2021.

Bureau of Labor Statistics (BLS). 2021b. “Inter-Industry Relationships (Input-Output Data for the U.S. Economy for the Historical Years 1997–2019, and for the Projected Year 2029 Matrix)” [zipped Excel file]. Accessed April 4, 2021.

Bureau of Labor Statistics (BLS). 2021c. Labor Force Statistics from the Current Population Survey. Accessed April 4, 2021.

Bureau of Labor Statistics (BLS). 2021d. “Producer Price Index by Commodity: Processed Foods and Feeds: Canned Beer and Ale.” Federal Reserve Bank of St. Louis. Accessed April 29, 2021.

Census Bureau (Census). 2021. “Monthly Wholesale Trade: Sales and Inventories.” Federal Reserve Bank of St. Louis. Accessed April 29, 2021.

Cheung, Yin-Wong, and Kon S. Lai. 1995. “Lag Order and Critical Values of a Modified Dickey-Fuller Test.” Oxford Bulletin of Economics and Statistics 57:411–419.

Commerce Department (Commerce). 2018. “Secretary Ross Releases Steel and Aluminum 232 Reports in Coordination with White House” (press release).” February 16, 2018.

CRU Group (CRU). 2021. “Primary Aluminium Production by Region, by Country and by Smelter.” Accessed April 4.

Distilled Spirits Council of the United States. 2021. “On America’s Whiskey Trail.” February 2021.

Federal Reserve Board of Governors (Federal Reserve). 2021. Industrial Production and Capacity Utilization–G.17. Last updated April 15, 2021.

Francois, Joseph, and Laura M. Baughman. 2018. Does Import Protection Save Jobs? The Estimated Impacts of Proposed Tariffs on Imports of U.S. Steel and Aluminum. Trade Partnership. March 2018.

Francois, Joseph, Laura M. Baughman, and Daniel Anthony. 2018. ‘Trade Discussion’ or ‘Trade War’? The Estimated Impacts of Tariffs on Steel and Aluminum. Trade Partnership. June 2018.

Granger, Clive. 1969. “Investigating Causal Relations by Econometric Models and Cross-Spectral Methods.” Econometrica 37, no. 3 (August): 424–438.

Hersh, Adam, and Robert Scott. 2021. Why Global Steel Surpluses Warrant U.S. Section 232 Import Measures. Economic Policy Institute. March 24.

Johansen, Søren. 1995. Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press.

John Dunham & Associates. 2018. The Impact of Potential Aluminum Import Tariffs or Quotas on America’s Malt Beverage Industry. Prepared for the Beer Institute, Washington, D.C. March 2018.

Lütkepohl, Helmut. 2005. New Introduction to Multiple Time Series Analysis. New York: Springer.

Naughton, Keith. 2018. “Ford Calls Rising Steel, Aluminum Prices ‘Significant Headwind.’” Bloomberg. August 8, 2018.

Neilsen, Brent. 2001. “Order Determination in General Vector Autoregressions.” Economics Papers 2001–W10, Economics Group, Nuffield College, University of Oxford.

Organisation for Economic Co-operation and Development (OECD). 2019. Measuring Distortions in International Markets: The Aluminum Value Chain. OECD Trade Policy Papers No. 218. January 2019.

Reiley, Laura. 2020. “We Have Too Much Beer (and Soda, and Seltzer), and Not Enough Cans.” Washington Post. October 8, 2020.

Scott, Robert E. 2017. “Testimony Before the U.S. Department of Commerce on Aluminum Imports.” Washington, D.C. June 22, 2017.

Scott, Robert E. 2018a, Aluminum Tariffs Have Led to a Strong Recovery in Employment, Production, and Investment in Primary Aluminum and Downstream Industries. Economic Policy Institute. December 2018.

Scott, Robert E. 2018b. Estimates of Jobs Lost and Economic Harm Done by Steel and Aluminum Tariffs Are Wildly Exaggerated. Economic Policy Institute. March 2018.

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Amy DeBisschop
Acting Director of the Division of Regulations, Legislation, and Interpretation
Wage and Hour Division
U.S. Department of Labor
200 Constitution Avenue N.W., Room S-3502
Washington, DC 20210

Re: RIN 1235-AA21, Comments in Response to Proposed Rule, Tip Regulations Under the Fair Labor Standard Act (FLSA); Partial Withdrawal

The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-income workers, and assesses policies with respect to how well they further those goals. EPI submits these comments on the Department of Labor’s (DOL/Department) request for comment on the proposal to withdraw and repropose portions of the rule entitled “Tip Regulations Under the Fair Labor Standards Act” (2020 Tip Final Rule/Tip Rule).1

In the notice of proposed rulemaking (NPRM), the Department proposes to withdraw and repropose portions of the rule that narrow the circumstances in which DOL can assess civil money penalties for violations. Further, the Department seeks comment on whether to revise the portion of the 2020 Tip Final Rule that addresses “managers or supervisors.” Finally, the Department requests comments on how to improve the recordkeeping requirements in the 2020 Tip Final Rule in a future rulemaking.

For thirty years, the federal wage for tipped workers has been frozen at a meager $2.13, with median hourly earnings for workers in common tipped jobs—such as restaurant servers and bartenders—at $12 per hour or less.2 Women—disproportionately women of color—represent nearly 70% of tipped workers nationwide and are more likely to experience poverty than their male counterparts.3 Further, tipped workers’ economic security is precarious given that they are especially vulnerable to wage theft.4 For these reasons, strengthening protections for tipped workers should be a priority for the Department of Labor.

EPI supports the Department’s withdrawal of the portion of the 2020 Tip Final Rule requiring that violations of Section 3(m)(2)(B) of the Fair Labor Standards Act (FLSA) be willful or repeated for the Department to impose civil monetary penalties. The original implementation of this requirement in the 2020 Tip Final Rule contradicted Congress’s legislative intent. This intent was made clear when Congress deliberately required in the civil penalties section of the FLSA that minimum wage and overtime violations occur “repeatedly and willfully” before penalties apply but declined to include this heightened requirement for violations when adding Section 3(m)(2)(B), which bars employers from taking workers’ tips.5 The NPRM’s withdrawal of the willful or repeated requirement correctly restores Congress’s intent for imposing civil monetary penalties for Section 3(m)(2)(B) of the FLSA.

In regard to the Department’s request for comment on the treatment of tips received by managers and supervisors, EPI recommends that the Department clarify that an employer may either 1) permit a manager and/or supervisor to keep any tips received for service that they directly provide, or 2) require the manager and/or supervisor to share it with other non-managerial and non-supervisory staff. If the Department decides to pursue a policy that requires managers and supervisors who receive tips to pool or share them, but not receive any portion of their colleagues’ tips, EPI recommends that the Department include a compensation level test in addition to a duties test for the purposes of defining managers and supervisors. In doing so, the Department would help ensure that low-paid managers and supervisors are not adversely affected by this rule. Because tip pooling typically arises in restaurant settings, we suggest that the Department set an earnings threshold that corresponds to the median wage for Supervisors of Food Preparation and Serving Workers—35-1010 in the Standard Occupational Classification system—based on the most recent National Occupational Employment and Wage Estimates (OES) from the U.S. Bureau of Labor Statistics, which could be met on an annual or hourly basis. This level should be defined in regulation and should reference the OES source so that it is automatically adjusted each year. The current level, based on May 2020 data, is $35,900 annually, or $17.26 per hour.6

Regarding the Department’s request for comment on how to improve the recordkeeping requirements, EPI supports the Department’s suggestion of “requiring employers to keep a record of the total contributions to an employer-mandated tip pooling or tip sharing arrangement and keep track of the total amount in tips that each employee receives from such an arrangement, in order to ensure that employers are not keeping tips and that all tips are distributed to employees.”7 Implementing this requirement can assist in tracking and alleviating the extensive wage theft that plagues workplaces throughout the country.8 EPI recommends that the Department require employers to record this information regularly or at a frequency for feasible enforcement—ideally, either each day or each workweek.

Further, EPI recommends that the Department provide employees with written notice of the structure of any employer-mandated tip pooling or tip sharing arrangements. This written notice should be provided to employees at the time of their hiring (or when the employer establishes the arrangement) and should outline the following terms: which employees are included in the tip pooling or tip sharing arrangement, the required contribution, the method of distribution, and the employee’s hourly rate of base pay. In addition, employers should be required to provide updated written notice to employees if any of the previously listed terms change.

Thank you for the opportunity to submit comments on this NPRM.

Sincerely,

Heidi Shierholz
Senior Economist and Director of Policy
Economic Policy Institute

Margaret Poydock
Policy Analyst
Economic Policy Institute

Ihna Mangundayao
Policy Assistant
Economic Policy Institute

Endnotes

1. 86 Fed. Reg. 15817.

2. See Bureau of Labor Statistics, “May 2020 National Occupational Employment and Wage Estimates United States,” Occupational Employment and Wage Estimates, last modified on March 31, 2021. In 2020, median hourly wages, including tips, were $11.42 for waiters and waitresses and $12.00 for bartenders, the two largest groups of tipped workers.

3. National Women’s Law Center, One Fair Wage: Women Fare Better in States with Equal Treatment for Tipped Workers, February 2021.

4. David Cooper and Teresa Kroeger, Employers Steal Billions from Workers’ Paychecks Each Year, Economic Policy Institute, May 2017.

5. See 29 U.S.C. §216(e)(2); see also § 216(e)(1)(ii) (providing for doubling of CMP applicable to certain child labor violations “where the violation is a repeated or willful violation”).

6. Bureau of Labor Statistics, “May 2020 National Occupational Employment and Wage Estimates United States,” Occupational Employment and Wage Estimates, last modified on March 31, 2021.

7. 86 Fed. Reg. 15825.

8. David Cooper and Teresa Kroeger, Employers Steal Billions from Workers’ Paychecks Each Year, Economic Policy Institute, May 2017.

We have learned from numerous studies of the pandemic economy that these job losses are not randomly distributed across the labor market. In this year’s edition of our annual State of Working America series, we examine the current state of wages and employment in a set of reports. In our first report, we showed how low-wage workers have been the hardest hit in the recession: In 2020, 80% of job losses were among the lowest quarter of wage earners (Gould and Kandra 2021). In this report, we examine the types of jobs lost in the pandemic recession by industry, occupation, and demographic groups.

What this report finds:

• Between February 2020 and February 2021, employment losses were largest among workers in the leisure and hospitality, government, and education and health services industries. Even with a partial bounceback last summer after losing more than 8 million jobs last spring, the leisure and hospitality sector still faces the largest shortfall, with nearly 3.5 million fewer jobs in February 2021 than a year prior.
• Within the worst-hit sectors, workers in the lowest average wage and lowest average hour occupations were hit the worst and remain most damaged a year later. While aggregate output data (for example, gross domestic product) appears to have rebounded significantly by February 2021, the “output gap”—the difference between actual and potential economic output—that remains represents a far greater share of jobs because the still-jobless workers in the economy previously worked in some of the most disadvantaged sectors in terms of wages and weekly hours.
• Within the hardest-hit sector, leisure and hospitality, Black women, Hispanic women, and Asian Americans and Pacific Islanders (both men and women) saw disproportionate losses. Occupational segregation—the fact that these workers are less likely to be found in higher-paid management professions, even within leisure and hospitality—exposed them to the worst of the job losses.
• Public-sector jobs losses in the pandemic recession occurred largely within the educational services sector. Within educational services, job losses were primarily among teaching professions, although notable losses also occurred in on-site employment (e.g., food and maintenance workers, bus drivers). Higher-paid management occupations saw job gains in 2020, disproportionately accruing to men within that sector.

Job losses by sector

Figure A compares the number of jobs lost in each major sector between February 2020 and February 2021. No matter how you measure it, leisure and hospitality was the hardest hit in the pandemic downturn. After losing 8.2 million jobs during March 2020 and April 2020 combined, the leisure and hospitality sector has seen a modest bounceback, but a large shortfall in jobs remains as of February 2021. Leisure and hospitality lost nearly 3.5 million jobs—or 20.4%—since February 2020.

Government jobs—also known as public-sector employment—has the second-largest shortfall, with 1.4 million fewer jobs in February 2021 than in February 2020. The public-sector jobs shortfall is entirely in state and local governments, and most of those losses (72.0%) are in state and local government education employment. Again, these shortfalls do not account for either the number of jobs that would have been created in a growing economy had the COVID-19 recession not hit or for the growing demands the pandemic placed on education.

A deeper analysis of the two major sectors with the largest jobs shortfall—leisure and hospitality and government—is the subject of this paper.

Figure A

Leisure and hospitality

Let’s start with a look inside the private-sector leisure and hospitality industry. In the prior section and Figure A, we relied on the Current Employment Statistics (CES) from the Bureau of Labor Statistics (BLS) for job losses by major industry between February 2020 and February 2021 (BLS-CES 2021). In the remainder of the paper, we use the Economic Policy Institute’s (EPI’s) Current Population Survey (CPS) Extracts (EPI 2021) for data analysis because it allows for cross-cutting analysis by occupation, race/ethnicity, and gender. All data analysis of the CPS within this report separates the data into two time periods for maximum sample sizes in the immediate year before and during the pandemic downturn. Hereafter, “2019” refers to the 12 months from March 2019 to February 2020 and “2020” refers to the 12 months from March 2020 to February 2021. The data in the CPS are largely consistent with the CES. For example, there were 3.6 million fewer jobs in leisure and hospitality in 2020 than in 2019 using the CPS, compared to 3.5 million fewer using the CES.

Figure B shows the broad demographics of the leisure and hospitality sector and illustrates the shares of each demographic group in that sector in the initial period (2019) and the shares of job losses in the recessionary period (2020). These comparisons allow us to see where the disproportionate losses occurred between 2019 and 2020. Women held just over half (52.1%) of the jobs in leisure and hospitality but experienced 55.7% of the job losses in this sector. Asian American and Pacific Islander (AAPI) workers experienced the most disproportionate losses of any racial/ethnic group. While they represent 7.9% of pre-pandemic employment in leisure and hospitality, they experienced 11.2% of job losses. Black workers also saw mildly disproportionate losses compared to their pre-pandemic levels, while Hispanic workers saw proportionate losses and white workers saw fewer job losses than their proportionate shares would predict.

Figure B

We must analyze the data in an intersectional frame to best capture differences in jobs losses among workers in different demographic groups. Figure C shows that white men suffered less-than-proportionate losses in the leisure and hospitality sector relative to their pre-pandemic employment share, while white women saw close-to-proportionate losses. Black women, Hispanic women, and AAPI workers experienced job losses in excess of their pre-pandemic labor market shares in leisure and hospitality. Both AAPI men and women saw the most disproportionate losses of any group.

Figure C

In 2019, nearly 14 million workers were employed in leisure and hospitality, or about 10% of the total workforce. Many types of jobs or occupations exist within the leisure and hospitality sector. Table 1 lists the nine major occupation categories within the leisure and hospitality sector, alongside their pre-pandemic employment level, share of industry in that occupation category in the pre-pandemic period, 2020 employment level, job losses between 2019 and 2020, and average wage and average weekly work hours in 2019.1

In the 12 months prior to March 2020, nearly two-thirds of employment in leisure and hospitality was in service occupations (64.3%), while service occupations experienced 72.3% of job losses in the pandemic recession. This is not surprising because service occupations generally require face-to-face contact and when businesses across the country shuttered, these jobs were greatly affected. A full 80% of jobs in service occupations within the leisure and hospitality sector were in food preparation and serving-related occupations in 2019.

Table 1

The second-largest occupation category within the leisure and hospitality sector is management, business, and financial occupations, with 12.9% of leisure and hospitality jobs. In 2020, this occupation category lost only 6.0% of the jobs, far fewer than would have been lost if job loss was proportionate across occupation categories. The two major occupation categories within leisure and hospitality differ in two additional ways: average hourly wages and average weekly hours.

Workers in the management occupations are the highest paid in this industry, averaging $28.68 per hour, and they have the most average weekly hours, 43.1. In comparison, service occupations have the lowest average wages in that sector ($12.97) and average only 31.6 hours per week. Combining these data to calculate average weekly wages, workers in management occupations are paid nearly three times as much as workers in service occupations. Not only was the lowest-paying industry hit the hardest by the pandemic recession, but the most vulnerable part of that sector, service occupations, received the greatest impact.

These results are consistent with the conclusions of a team of Bureau of Labor Statistics researchers who find that lower-paid workers within major industries were hardest hit and remain furthest from recovery (Dalton et al. 2021). Researchers at the Federal Reserve Bank of New York find that lower-wage occupations have experienced the sharpest employment losses since February 2020 (Abel and Dietz 2021).

To look deeper within the leisure and hospitality sector by gender and race/ethnicity requires aggregating some of the related occupations to achieve adequate sample sizes for comparison. Service occupations have a sufficient sample size on their own. We combine the two highest-wage occupation categories—management, business, and financial occupations and professional and related occupations—into an aggregate category, management and professional occupations. We also combine two relatively low-wage and low-hour occupation categories—sales and related occupations and office and administrative support occupations—into an aggregate category, sales and office support occupations. These three occupations account for 95.3% of leisure and hospitality jobs. We drop the remaining four sectors, which together make up only 4.7% of employment in the sector overall. Table 2 presents key details of these aggregate occupational groupings.

Table 2 shows that while management and professional occupations experienced losses, these losses were far from proportionate to their share of the leisure and hospitality industry overall. Management and professional occupations also have the highest average wages and highest average weekly hours. Proportionate losses were found in sales and office support occupations, the category with the lowest average weekly hours. Disproportionately larger job losses were found in service occupations. This category represents nearly two-thirds of pre-pandemic jobs in the leisure and hospitality industry but nearly three-quarters of the job losses. Workers in this occupation category have notoriously low wages and weekly hours.

The fact that job losses were more likely to occur among low-wage and low-hour portions of the leisure and hospitality sector, a sector already fraught with low wages and low hours overall, helps explain why the output gap is smaller than the employment gap. Therefore, it is important to hold any excitement over aggregate gains, such as growth in aggregate hours or GDP, at bay (Rugaber 2021). The remaining output gap is associated with larger losses in employment, because those hurt the most in the pandemic recession work in lower-paid, lower-hour, and labor-intensive sectors (Bivens 2020).

Table 2

Aggregating five occupation groups within the leisure and hospitality sector into three groups allows us to examine pandemic job losses by certain demographic groups. Table 3 provides the baseline share of employment in 2019 for each occupation group by gender and race/ethnicity categories and then provides the share of job losses within each group for each demographic category. This allows us to better explain the job losses illustrated in Figure B and Figure C.

The losses by race/ethnicity and gender discussed above are most likely a function of occupational segregation, which is the increased probability that some workers are more likely to be found in certain jobs than other workers. We see that white men are more likely to be in higher-paid management and professional occupations than in lower-paid service or sales and office support occupations, but they have significantly less job loss than other workers. White men held about one-third of management and professional occupations within the leisure and hospitality sector but experienced only one-quarter of the job losses. In comparison, Black women, Hispanic men, and AAPI workers experienced disproportionate job losses in those jobs, even though they were less likely to be found in management and professional occupations than other occupations within the leisure and hospitality sector.

White men’s pre-pandemic employment share in service occupations was smaller than their share in management occupations, but they experienced less-than-proportionate job losses in service occupations as well. Hispanic women and AAPI men experienced disproportionate job losses in service occupations. In sales and office support occupations, Black men and AAPI workers experienced the most disproportionate losses compared with their pre-pandemic share of jobs in that occupation. Historically, AAPI workers have lower unemployment rates than white workers on average, because of their higher average levels of educational attainment, but AAPI workers in the pandemic recession appear to be facing a more difficult labor market (Kim et al. 2021). While the overall share of AAPI workers within occupations is lower than any other group within leisure and hospitality because of their lower population shares overall, we find that both male and female AAPI workers face disproportionate job losses in all leisure and hospitality occupations and, in most of these occupations, their share of job losses was more than 20% of their proportionate share of pre-pandemic jobs. Research from the Federal Reserve Bank of Chicago suggests that racial bias may be a factor in the worse labor market outcomes for AAPI workers, particularly those with lower levels of educational attainment, and cannot be explained by their occupational employment patterns (Honoré and Hu 2020).

Table 3

Public sector

Government jobs—also known as public-sector employment—experienced the second-largest shortfall, with 1.4 million fewer jobs in February 2021 than in February 2020 (see Figure A). The public-sector jobs shortfall is entirely in state and local governments, and the vast majority of those losses (72.0%) were in state and local government education employment. We find similar results using the Current Population Survey. In 2019, the largest industrial sector within the public sector was in the educational services industry (42.3%), and the vast majority (88.6%) of public-sector losses between 2019 and 2020 were in this sector.2

Our analysis of public-sector educational services employment begins with a look inside the five major occupation categories that represent more than 98% of employment within this industry.3 Table 4 displays labor market statistics for each of these major occupation categories within the educational services sector as well as selected specific occupations within three of the major occupation categories. Of the five main occupation categories within educational services, only management, business, and financial occupations—the highest-wage occupation category within educational services—experienced employment gains between 2019 and 2020. Our analysis finds that men disproportionately benefited from these job gains. Even though men represent only 35% of employment in management, business, and financial occupations, they experienced 63% of the employment gains.

Professional and related occupations make up by far the largest occupation category within the public-sector educational services industry (71.2%). Within professional and related occupations, education instruction and library occupations has the largest share (61.5%), with K–12 teachers (preschool and kindergarten, elementary and middle school, secondary school, and special education teachers) having about two-thirds of these education instruction and library jobs. K–12 teachers also experienced the largest number of net job losses. Postsecondary teachers also experienced large losses, but these were largely offset by the increase in teaching assistants.4 Here it appears that employment losses are greatest among the higher-wage workers within education instruction (notably postsecondary teachers, but also K–12 teachers), while the gains were among the lower-wage teaching assistants. As with so many other labor market phenomena in this recession, the pandemic recession may have accelerated the already established phenomenon of shifting teaching duties away from regular faculty and onto the shoulders of lower-paid workers, such as graduate teaching assistants (McNicholas, Poydock, and Wolfe 2019). It is also possible that many of those postsecondary teachers who lost their jobs in 2020 were adjunct instructors as opposed to higher-paid full professors (Kroger 2021).

Service occupations within the public-sector educational services industry account for 9.9% of the jobs but experienced about 35% of the losses in educational services overall, second only to professional and related occupations. This is not surprising given that these service jobs require on-site employment and many schools were closed. The losses include jobs in food preparation and serving as well as building and grounds maintenance. The largest job losses within service occupations occurred in personal care and service occupations; most were from losses in child care employment, which fell by 59%. Service occupations are the lowest-paid within the public-sector education services industry.

As with service occupations, it is not surprising that transportation and material moving occupations also experienced losses while schools were closed. Although transportation and material moving occupations make up only 2.4% of public-sector educational services employment, this category had significant job losses of 25.8% between 2019 and 2020, primarily from bus drivers.

Table 4

As schools continue to reopen this spring, it is likely that public-sector educational services employment will experience a significant uptick. While it seems most obvious that on-site operations will need to rehire food services workers, grounds crew, and bus drivers, school systems will also need to hire more teaching professionals to help students recover from learning loss during the pandemic (García and Weiss 2020a). This need for more (not fewer) teachers is made even more difficult because the U.S. already faces a teacher shortage (García and Weiss 2020b). Fortunately, provisions in the American Rescue Plan extend much-needed relief to state and local governments as they try to retool their education systems to meet the needs of the students (Cooper, Wolfe, and Hickey 2021).

It is also worth noting that the industry with the third-largest job loss is education and health services, which has 1.3 million fewer jobs in February 2021 than in February 2020 (see Figure A). As with public-sector job losses, these private-sector jobs losses within education and health services were disproportionately found in the education portion of this sector. In 2020, education services accounted for 20.7% of jobs in this sector but 28.0% of job losses. While a thorough analysis of these industry losses is outside the scope of this report, we think it likely that private-sector education jobs are facing similar issues to public-sector education services and hopefully will rebound significantly as schools (including community colleges and four-year colleges and universities) fully reopen.

Conclusion

The pandemic recession is unusual in how focused its job losses were on low-wage workers. Lower-wage and lower-hour occupations within the leisure and hospitality sector were hit the hardest, which hurt certain demographic groups more than others. Education professions within the public sector were decimated. As public health experts deem it safe to reopen businesses and schools, employment should see a significant recovery. We will need to continue tracking the data to see whether the recovery in jobs is across the board or if certain groups continue to be left out of the recovery. Will some groups—e.g., Black or Latinx women, who are disproportionately found in certain jobs—be the last to be rehired? Or will the recovery reach them sooner? Will AAPI men and women see a rebound in line with their losses? Or will they take longer to recover? Will schools have enough resources to meet growing student needs as students return to in-person instruction? The American Rescue Plan makes important strides toward improving outcomes in coming months, but more will need to be done to make sure the most vulnerable and historically disadvantaged in our labor market realize the benefits of a growing economy and are better protected during the next disaster.

Notes

1. The farming, fishing, and forestry occupation category is removed from this chart because sample sizes were insufficient for analysis.

2. In this analysis, we have combined all levels of public-sector employment because (1) nearly all educational services employment is at the state and local levels, and (2) there is a nontrivial share of public education employment that appears to be misclassified as state when it should be local and vice versa.

3. Within educational services, the following occupation categories each represent less than 1% of employment, for a total of 1.7%: Sales and related occupations; farming, fishing, and forestry occupations; construction and extraction occupations; installation, maintenance, and repair occupations; and production occupations.

4. Even though most teaching assistants are at the local level, the gains were 96% at the state level, making up for about 90% of the postsecondary teacher losses.

References

Abel, Jaison R., and Richard Deitz. 2021. Some Workers Have Been Hit Much Harder than Others by the Pandemic. Federal Reserve Bank of New York, February 2021.

Bivens, Josh. 2020. “Curb Your Enthusiasm: Rapid Third Quarter GDP Growth Won’t Mean the Economy Has Healed.” Working Economics Blog (Economic Policy Institute), October 26, 2020.

Bureau of Labor Statistics, Current Employment Statistics (BLS-CES). 2021. Public data series for various years accessed through the CES National Databases and through series reports. Accessed March 2021.

Cooper, David, Julia Wolfe, and Sebastian Martinez Hickey. 2021. “The American Rescue Plan Clears a Path to Recovery for State and Local Governments and the Communities They Serve.” Working Economics Blog (Economic Policy Institute), March 15, 2021.

Dalton, Michael, Jeffrey A. Groen, Mark A. Loewenstein, David S. Piccone Jr., and Anne E. Polivka. 2021. “The K-Shaped Recovery: Examining the Diverging Fortunes of Workers in the Recovery from the COVID-19 Pandemic Using Business and Household Survey Microdata.” Covid Economics, no. 71: 19–58.

Economic Policy Institute (EPI). 2021. Current Population Survey Extracts, Version 1.0.15 (2021), https://microdata.epi.org.

García, Emma, and Elaine Weiss. 2020a. “Learning During the Pandemic: What Decreased Learning Time in School Means for Student Learning.” Working Economics Blog (Economic Policy Institute), November 18, 2020.

García, Emma, and Elaine Weiss. 2020b. “Policy Solutions to Deal with the Nation’s Teacher Shortage—a Crisis Made Worse by COVID-19.” Working Economics Blog (Economic Policy Institute), October 16, 2020.

Gould, Elise. 2021. Jobs Report Shows More Than 25 Million Workers Are Directly Harmed by the COVID Labor Market: Congress Must Pass the Full $1.9 Trillion Relief Package Immediately. Economic Policy Institute (economic indicators), March 2021.

Gould, Elise, and Jori Kandra. 2021. Wages Grew in 2020 Because the Bottom Fell Out of the Low-Wage Labor Market: The State of Working America 2020 Wages Report. Economic Policy Institute, February 2021.

Honoré, Bo E., and Luojia Hu. 2020. “The Covid-19 Pandemic and Asian American Employment.” Federal Reserve Bank of Chicago Working Paper, November 2020. https://doi.org/10.21033/wp-2020-19.

Kim, Andre Taeho, ChangHwan Kim, Scott E. Tuttle, and Yurong Zhang. 2021. “COVID-19 and the Decline in Asian American Employment.” Research in Social Stratification and Mobility 71, no. 100563.

Kroger, John. 2021. “650,000 Colleagues Have Lost Their Jobs: A Moral Issue for Higher Education.” Inside Higher Ed. February 19, 2021.

McNicholas, Celine, Margaret Poydock, and Julia Wolfe. 2019. Graduate Student Workers’ Rights to Unionize Are Threatened by Trump Administration Proposal. Economic Policy Institute, December 2019.

Rugaber, Christopher. 2021. “Sign of Inequality: US Salaries Recover Even as Jobs Haven’t.” AP News website, February 12, 2021.

Samantha Deshommes
Chief, Regulatory Coordination Division, Office of Policy and Strategy
U.S. Citizenship and Immigration Services
U.S. Department of Homeland Security
5900 Capital Gateway Drive
Camp Springs, MD 20746

Re: EPI and JiM Comment on Identifying Barriers Across U.S. Citizenship and Immigration Services (USCIS) Benefits and Services (DHS Docket No. USCIS-2021-0004)

Dear Ms. Deshommes,

The Economic Policy Institute (EPI) and Justice in Motion (JiM) appreciate the opportunity to submit a comment on ways that the United States Citizenship and Immigration Services (USCIS) can eliminate barriers, improve its services, and promote equity and inclusion through its processes.

EPI is a nonprofit, nonpartisan think tank established in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-income workers—regardless of immigration status—and assesses policies with respect to how well they further those goals. EPI has researched, written, and commented extensively on the U.S. system for labor migration—through public comments, publications, and testimony—including in particular, with respect to the immigrant and nonimmigrant visas that USCIS and other components of DHS are responsible for managing and overseeing. EPI submits these comments to USCIS, as well as related agencies within the U.S. Department of Homeland Security (DHS), in response to their request for public input.

Justice in Motion is a U.S. based NGO dedicated to protecting migrant rights by ensuring justice across borders. Justice in Motion is deeply involved in training and supporting a Defender Network, comprised of human rights advocates in migrants’ countries of origin. The Network educates workers on their rights before they migrate, partners with advocates in the countries of employment on specific cases of labor exploitation, and advocates for systemic change. Justice in Motion provides training, advice, referrals, and case facilitation support to U.S. and Canadian advocates after their migrant clients return home. Justice in Motion also engages in policy advocacy, both nationally and internationally, adding insight into how various temporary work programs operate, from the perspective of both the countries of employment and origin. We have projects in the United States, Mexico, Guatemala, El Salvador, Honduras, and Nicaragua. Justice in Motion submits these comments as part of the public input solicited by USCIS.

EPI and Justice in Motion have been frequent users of data from various agencies within DHS, sometimes having to partner with academics and organizations to acquire it via Freedom of Information Act request, and have argued frequently that USCIS and other subagencies in DHS should make the data it collects and stores more readily available to the public, in particular when those data would help protect U.S. labor standards, benefit migrant and American workers, as well as help prevent abuses like human trafficking. As multiple advocacy groups have revealed, many cases of human trafficking are often facilitated through the U.S. legal immigration system, in part because of insufficient oversight and the lack of transparency.1 These comments are motivated by the need for DHS to do more to protect the migrants that interface with the U.S. immigration system and to provide more transparency about the benefits it grants so they can be better evaluated by the public, to ensure they are consistent with uplifting labor standards for all workers in the U.S. labor force, regardless of immigration status.

I. DHS SHOULD TRANSITION TOWARDS ELECTRONIC COLLECTION OF INFORMATION AND FILING FOR IMMIGRANT AND NONIMMIGRANT PETITIONS.

The ability of agencies to collect the key information on immigrant and nonimmigrant visas, and ultimately make that information public, would be much easier if applications for immigration benefits were electronic rather than filled out and submitted on paper forms. This would streamline the entire application and adjudication process and lower expenses, while also making the process easier and more accessible to employers and other stakeholders. Former USCIS director Francis Cissna stated publicly in 2018 that his “top priority” was to convert USCIS into an agency that is paperless when it comes to the agency’s intake forms, which would include electronic applications and petitions. Director Cissna told Bloomberg Law in an interview that “it’s going to happen before the end of 2020,” but that goal never became a reality.2

One of the top priorities with respect to transitioning DHS into an electronic versus a paper-based agency should be to digitize the collection and submission of USCIS Form I-129. USCIS processes 500,000 to one million petitions each year on the Form I-129 alone, which are submitted on paper, sometimes arriving by the ”truckload.”3 Making the form electronic would save the agency and employers significant amounts of time and money. In addition, since a large share of the most valuable information on nonimmigrant work visas comes from the USCIS Form I-129, transitioning to an electronic Form I-129 will ensure that most of the key data on nonimmigrant visas is collected and stored electronically. That in turn will reduce the need for staff time and resources to be spent on preparing annual reports on nonimmigrant visa data or compiling spreadsheets to respond to Freedom of Information Act (FOIA) requests.

II. DHS SHOULD IMPROVE TRANSPARENCY IN NONIMMIGRANT, TEMPORARY WORK VISA PROGRAMS TO PROTECT WORKERS AND AID ANTI-TRAFFICKING EFFORTS.

Urgent reforms to data collection and publication processes are needed at USCIS and other subagencies within DHS in order to more broadly protect labor standards and modernize the immigration system. Such reforms would help DHS meet statutory obligations and regulatory objectives and requirements in both immigrant and nonimmigrant visa programs that are intended to protect migrant workers from abuse and exploitation and to prevent adverse impacts on the U.S. labor market. Making the reforms we suggest would also reduce burdens on the public and stakeholders and reduce confusion and save time for those who interface with DHS and/or utilize its data. Many of the changes we discuss would be simple and inexpensive, while some could be automated entirely if USCIS would also focus on updating the forms and technologies it utilizes to collect information and grant immigration benefits, as discussed in the previous section.

To begin and in the broadest terms, there should be much more transparency in nonimmigrant visa classifications that authorize employment.

Over the past several decades, millions of temporary migrant workers have come to the United States through nonimmigrant visa programs.4 The programs have grown exponentially since passage of the Immigration Act of 1990, and business groups lobby extensively to expand and deregulate them, meaning they are likely to continue to grow. But there is a severe lack of transparency about how the programs operate, while there are concrete examples of human trafficking facilitated by almost every nonimmigrant work visa classification. Different advocacy groups estimate that 40-70 percent of the potential and known victims of human trafficking were abused while participating in a U.S. visa program. Despite this clear evidence of nonimmigrant visa holders being victims of human trafficking, there is a lack of publicly available information about the visa programs that are being used. Although DHS—through its subagency, USCIS—currently collects a significant amount of data on nonimmigrant visas that authorize employment through its various applications and administrative forms—the vast majority of the information is not published and does not become public unless obtained through a FOIA request.

The operation and governance of some nonimmigrant work visas are essentially “hidden,” in the sense that very little is known about them. An example that is currently in the news is the R-1 nonimmigrant visa for religious workers. The NY Times this month reported on a potential case of forced labor in New Jersey, where Indian workers were recruited through R-1 visas, where they have been working as construction workers building a religious temple, while being paid only $1 per hour and confined to the trailers on the grounds where they work.5 Neither journalists nor migrant worker advocates are able to obtain more information about the employer and the terms and conditions that were promised to the Indian workers, because the data are not made public.

And in some cases involving nonimmigrant workers, the work takes place in private homes, behind closed doors. For example, little is known publicly about the employers and workers in the B-1 domestic servant category because DHS does not publish data on the employers hiring B-1 domestic servants, despite the fact that there have been several potential cases alleging the trafficking of B-1 domestic workers that have come to light. B-1 domestic servants are a subcategory of the B-1 nonimmigrant visa that normally does not permit employment (the domestic servant category being a rare exception). This combined with the fact that these visa-holders work in private residences, makes it difficult to know how the visa is used and to take actions to protect these workers who are in private workplaces and vulnerable as a result. J-1 nonimmigrants employed in the au pair program are also employed inside of private homes, and no data are made available about the program, while multiple news exposés and government reports have revealed how the program is a “poorly regulated, exploitative system that fails to act on allegations of physical and sexual abuse.”6

Having DHS report on these lesser-known visas would shed light on the programs and what the government is doing, if anything, to ensure that the terms and conditions of employment offered to nonimmigrant workers are fair and that their rights are protected.

Furthermore, too little is known about how temporary work visa programs are being used, in part because data on visas are collected on paper forms and applications rather than electronically (as discussed above), and even most of the digitized information collected is not made public or requires lengthy and costly FOIA requests to obtain. Migrant worker advocates have pressed for years for more and better government data and transparency in work visa programs to ensure that migrants are being paid fairly, and that the immigration system is not being co-opted in ways that allow employers to discriminate and segregate the workforce. More data would also serve as a tool that could aid the organizations and advocates who are fighting human trafficking. Bipartisan legislation has been introduced to achieve this, most recently as the Visa Transparency Anti-Trafficking Act, 7 but opposition by employers has caused it to stall.

Transparency has been a declared priority for the federal government at different points in the last few administrations. The Obama administration announced in January of 2009 that transparency would be a priority going forward. The President declared that the government should be transparent, participatory, and collaborative. With the idea that openness strengthens democracy and promotes efficiency and effectiveness in government, President Obama ordered all executive departments and agencies to employ new technology to disseminate information about operations and decisions on the internet, easily accessible to the public.8 Though these goals weren’t entirely accomplished during Obama’s time as president, they were marked as priorities during those eight years. On April 18, 2017, President Trump signed the Buy American and Hire American (BAHA) Executive Order, which led to the creation of the BAHA data website, which published extensive new data on the H-1B, H-2B, and L-1 visa programs, even though publication was not an explicit requirement of the Executive Order.

These initiatives show that transparency and the use of the technology necessary for transparency are not new ideas and enjoy some bipartisan support across vastly different administrations.

However, recent reports have suggested that—disturbingly—the Biden administration is considering scaling back on the data it currently releases on work visas programs, noting that “The types of visa data released to the public are likely to change now … particularly when it comes to employer participation in hiring visa workers.”9 This is an unfortunate and unjustified development. As researchers and advocates, we urge the Department to reconsider its position and to take concrete steps towards more transparency, rather than towards the concealment of information that should be freely available, because of its utility for improving the governance of the U.S. immigration system.

Below, in this section we discuss some of the relevant data that are currently housed within USCIS and other subagencies at DHS, and then list some of the specific actions that DHS could take to promote transparency and achieve some of the related goals it has identified in the request for public input.

United States Citizenship and Immigration Services Data

United States Citizenship and Immigration Services (USCIS) collects key information on many of the major nonimmigrant work visas, particularly through information provided by employers on Form I-129, Petition for a Nonimmigrant Worker. Most of the data from the Form I-129 are not currently made public. Beginning in 2017, data that were previously unpublished began to be made publicly available on the Buy American, Hire American (BAHA) page on USCIS’s website, but in 2021 the order was been repealed and the site appears to have been put into an archival status by the Biden administration.10 Other data that are available can be found in the Characteristics of H-1B Specialty Occupation Workers reports and Characteristics of H-2B Nonagricultural Temporary Workers reports, although some other bits of information are scattered in USCIS’s website.

The USCIS “Reading Room” makes certain data and documents available to the public, noting that it is “providing access to information that had been requested at least three times and had been provided under the Freedom of Information Act,”11 for all data requests. However, multiple data sets we have reviewed are incomplete. For example, in the document available in the USCIS Reading Room titled, “I-129 Approvals for FY 2019,” there should be approximately records for 130,000 H-1B approvals, which was the number of new H-1B approvals in fiscal year 2019. However, there are only records for about 79,000 approvals, which means the data in the excel file likely only represent two fiscal year quarters-worth of H-1B approvals.12

Through the Form I-129, data are collected that describes both employers (company name, location, and denial/approval) and visa beneficiaries (gender, country of origin, and occupation). However, the information that is published by USCIS in the aforementioned locations is not uniform between visa classifications. For example, gender information is available for H-1B workers, but not for H-2B workers.

Immigration and Customs Enforcement Data

U.S. Immigration and Customs Enforcement (ICE) collects key information on M-1, F-1, and J-1 nonimmigrant visas through the Student and Exchange Visitor Information System (SEVIS). Some nonimmigrants in these visa classifications are either eligible to be employed under the terms of their visa or eligible to receive Employment Authorization Documents (EADs) from USCIS. ICE also has data on programs that allow F-1 nonimmigrant students to be employed: the Optional Practical Training (OPT) program; the OPT program for graduates with degrees in science, technology, engineering, and mathematics (STEM OPT); and the Curricular Practical Training (CPT) program. ICE’s SEVIS data are published on the Student and Exchange Visitor (SEVP) Data Library page of their website, and the information provided includes aggregated information on the total number of EADs issued to F-1 nonimmigrants in OPT, STEM-OPT, and CPT. Data on the top employers of F-1 nonimmigrants in OPT, STEM-OPT, and CPT were previously published, but the 2021 data update from the Biden administration did not publish information on the employers using these programs. (Individual-level data on OPT or CPT have never been published but have been acquired by FOIA request.)

Specific actions DHS should take to improve data transparency with the goal of protecting workers and aiding anti-trafficking efforts

1. Improve the data available on the USCIS Electronic Reading Room.

Data in the USCIS Electronic Reading Room are often not easy to find and as noted above, multiple data sets are incomplete. USCIS should ensure that data sets posted are complete and cover all visa classifications that are available and/or have been requested through FOIA.

2. Do not backtrack on transparency by no longer publishing the data that were available on the BAHA data page.

As noted above, the USCIS BAHA data page has been archived and it does not appear that USCIS will be updating the data published there, which included multiple data sets that were available for the first time, including petition data on H-2B and EADs, as well as numerous data sets on H-1B, including gender, the number of H-1B workers that are able to change jobs, data on F-1 foreign graduates who are able to adjust to H-1B status, as well as the number and percentages of H-1B petitions that were required to submit requests for evidence (RFEs) and the denial and approval rates of those petitions.

While we understand that it was the Biden administration’s prerogative to repeal the BAHA Executive Order, the issue of data transparency should be kept separate, and the Executive Order does not have to be in force for USCIS to publish those data. If USCIS decides that it does not wish to continue create a new page to replace the BAHA data page with the same information, it could simply begin posting the same data, along with updated data for FY 2020 and beyond, on the USCIS Electronic Reading Room. This would be a cost-effective option using available infrastructure that would benefit the public and assist migrant worker and anti-human trafficking advocates in fulfilling their missions.

3. USCIS should make data on individual H-2A and H-2B petitions available consistent with its practice for H-1B.

The individual level (microdata) sets available for H-1B on the USCIS Electronic Reading Room contain individual records on H-1B that list information from petitions, including:

• Fiscal Year the petition was submitted in,
• Whether the petition was approved or denied,
• Date the petition was received,
• Date the petition was approved,
• Whether the petition was subject to the annual cap or exempt from the cap,
• Employer name,
• Employer Zip code,
• Employer state,
• Occupation,
• Occupation code,
• Whether the beneficiary was formerly on an F-1 student visa,
• Whether the beneficiary holds a master’s degree or higher from a US university,
• The name of the US university attended,
• Salary,
• The beneficiary’s country of birth,
• The beneficiary’s education level,
• The beneficiary’s gender, and
• The expected employment start and end dates.

While many of these are not applicable to H-2A and H-2B, the relevant data from the USCIS Form I-129 for H-2A and H-2B should be published. USCIS petition data on H-2B have only been published for one year, 2017, on the BAHA data page, and at the aggerate level. The only H-2A petition data that are public are the names of employers with approved H-2A petitions (although the number of workers approved for each employer is not reported).

We know that USCIS collects and stores microdata on individual H-2A and H-2B petitions because we have reviewed those records after being acquired through a FOIA request, but they should be made available publicly on a regular basis, and include at least:

• Fiscal Year the petition was submitted in,
• Whether the petition was approved or denied,
• Date the petition was received,
• Date the petition was approved,
• Employer name,
• Employer Zip code,
• Employer state,
• Occupation,
• Occupation code,
• Worksite state
• The number of beneficiaries (workers);
• Salary,
• The beneficiary’s country of birth,
• The expected employment start and end dates.

Publishing these data on H-2A and H-2B on the Electronic Reading Room would make USCIS’s data practices more consistent across visa classifications and be a cost-effective option using available infrastructure that would benefit the public and assist migrant worker and anti-human trafficking advocates in fulfilling their missions.

4. USCIS should no longer use Dictionary of Occupational Titles (DOT) occupation codes for nonimmigrant workers and should begin classifying occupations using Standard Occupational Classification codes.

Data that are made public by the U.S. Department of Labor (DOL) on the H-2A, H-2B, and H-1B work visa programs, as well as for permanent labor certifications, is quite detailed. Those DOL data all utilize Standard Occupational Classification (SOC) codes to classify job occupations that will be filled by migrant workers in those nonimmigrant and immigrant programs, because they are the best and most modern method the government has available to classify occupations. However, those DOL data do not reflect actual approved petitions for immigrant or nonimmigrant workers, they are just the first step in the process when hiring an immigrant or nonimmigrant worker. To illustrate, every year there are approximately one million H-1B jobs certified by DOL, but in fiscal year 2019, only about 130,000 petitions for new employment for H-1B workers were approved by USCIS (the highest total on record for one fiscal year). The data on those 130,000 petitions are the most useful information for analysts and advocates, because they represent actual workers, rather than the DOL information on labor certifications or labor condition applications. But USCIS uses outdated codes for classifying occupations; it uses the Directory of Occupational Titles system (or DOT codes), which are old and outdated, and much broader. As a result, dozens of occupations in the SOC fall could fall under each single DOT code.

There are 867 detailed occupations in the SOC. In the last version of DOT codes (from 1999), there were about 100. There is no rhyme or reason to why USCIS uses the DOT codes, other than the fact that they were already using them before the SOC codes were published. The Government Accountability Office (GAO), in a report about abuses suffered by migrant workers in the context of foreign labor recruitment, titled “H-2A and H-2B Visa Programs: Increased Protections Needed for Foreign Workers,”13 pointed out that their investigative work was more difficult than it had to be when they were reviewing the H-2A and H-2B programs because of USCIS’s use of the DOT codes. Instead of relying on the better USCIS data on petitions, GAO had to rely instead on the DOL data which is not as reliable because it does not represent actual workers.

Here are some of the relevant passages from the GAO report:

While DHS’s USCIS petition data are more accurate than DOL data in terms of the number of workers requested, information about the type of occupations those workers are requested to fill is not coded and maintained electronically using a standard occupational classification system… Instead, they recode the job title from the employer’s petition using an occupational classification system with 15 broad categories. These categories may be further divided into 1 to 12 occupational codes for a total of 83 detailed occupations, as opposed to DOL’s 840 detailed occupations… Officials said USCIS’s current occupational system predates DOL’s use of the SOC system to classify occupations on labor applications. However, the broad and overlapping categories within USCIS’s occupational classification system make it difficult to distinguish the occupations filled by H-2A workers versus H-2B workers even though these programs are targeted to fill occupations in different sectors of the economy.

USCIS plans to change its occupational coding system during its transformation from a paper-based processing of immigration benefits to an electronic processing system, but it has not yet determined which occupational classification system it will use…

By using a nonstandard occupational classification system, the usefulness of USCIS’s data is limited. Ensuring that the electronic petition for H-2A and H-2B visas uses a standardized occupation classification system will better position USCIS to report more reliable data to Congress on the H-2B workers U.S. employers use to fill specific occupations.14

GAO mentioned that USCIS is considering changing their occupational classification system once they move to electronic applications but has not yet decided what it will be changed to. We urge USCIS to abandon the use of DOT codes and begin using SOC codes, consistent with DOL. Doing so will create consistency among key federal agencies in charge of immigration and provide researchers and advocates with a better understanding of the specific occupations that employers are requesting nonimmigrant workers for.

5. ICE should make OPT data on employers from SEVIS available to the public.

As discussed above, data on the top employers of F-1 nonimmigrants in OPT, STEM-OPT, and CPT were previously published, but the 2021 data update from the Biden administration did not publish information on the employers using these programs, and individual-level microdata on OPT or CPT have never been published (but have been acquired by FOIA request). As multiple investigative reports have revealed,15 OPT is a de facto work visa program that operates with virtually no rules to protect nonimmigrant workers or U.S. labor standards, and with no oversight from DOL, resulting in migrant workers being exploited and “in virtual servitude.”16 In order to protect OPT workers and U.S. labor standards, ICE should restart the practice of publishing the top employers in OPT, and begin making public the microdata on OPT employers, so they can be inspected by the public without needing to file a FOIA request.

6. ICE should make J-1 microdata from SEVIS available to the public.

The J-1 nonimmigrant visa has roughly 14 different programs, and technically exists for the purpose of facilitating cultural, educational, and scientific exchanges, but many of the programs authorize employment. There have been numerous cases of worker abuses—like wage theft and substandard housing—as well as human trafficking, including J-1 workers being forced into the sex industry. Some of these cases were so extreme that they were front page news in major newspapers like the NY Times.17 One of the reasons these cases are so common is because J-1 is managed by the State Department, an agency that has no expertise or mandate in labor standards enforcement.

However, ICE controls the data on J-1 employers and workers in the SEVIS database, in partnership with the State Department. In order to promote transparency, protect migrant workers, and U.S. labor standards, ICE should begin publishing those data, so that the public and advocates can improve and target efforts to protect J-1 workers. Only one FOIA that we know of has been successful—and the one year of data that were made available contained useful information that was used to produce a report on how to protect J-1 workers and reform the J-1 Summer Work Travel program.18

III. IMPROVING DATA TRANSPARENCY AT DHS WOULD SAVE MONEY AND INCREASE EFFICIENCY AND REDUCE STAFF TIME SPENT ON FOIA REQUESTS AND LITIGATION.

In the absence of transparency when it comes to data about nonimmigrant work visa programs, advocates are forced to request data from DHS through FOIA requests to the appropriate agency (or subagency) and hope that their request is granted. The lengthy, inefficient FOIA process is burdensome for requestors and government agencies alike. The processing time and uncertainty surrounding FOIA requests present substantial obstacles for advocates, researchers, journalists, and other stakeholders seeking information about these public programs. At USCIS and other agencies, for example, responses to FOIA requests can sometimes take an entire year or more to process, and the requests might still be denied. These delays and the possibility of denial make it difficult for advocates to put the requested information to good use within a reasonable amount of time.

The FOIA process often ends up being very expensive for DHS as well. Processing FOIA requests requires the full-time effort of hundreds of employees. At DHS in 2017, the equivalent of 552 full-time employees were dedicated to receiving, processing, and releasing FOIA requests. 19 Inevitably, the government rejects some portion of the FOIA requests.

In order to obtain information requested, some portion of FOIA petitioners file suit against the agency that denied that request. Defending those FOIA lawsuits is an expensive proposition. In the case of the DHS, a report is released every year detailing the costs of litigating FOIA lawsuits. In 2017, FOIA litigation cost the DHS nearly $3.4 million dollars. Together with general administration costs of FOIA requests, the DHS spent $56.6 million in 2017.20 The FOIA process as currently constructed is incredibly expensive for the federal government.

Even when FOIA requests are granted, there may be problems with the data released by the government that make the information less than useful. For example, the federal agency may redact key bits of information, claiming a privacy exemption, or some of the data may appear unreliable, inconsistent, or difficult to interpret. The record-keeping practices of the agency may also be an obstacle. One example is USCIS, which stores much of the information it collects on nonimmigrant work visas on paper files, rather than electronically. As a result, even when USCIS grants a FOIA request, it may only be able to release the parts that have been transferred manually to an electronic format.

As a result, DHS should electronically collect petition data electronically and allow electronic filing (as discussed above) and publish the individual level petition microdata regularly, rather than processing multiple FOIA requests and spending time and resources litigating those requests.

IV. USCIS SHOULD USE ALL AVAILABLE AVENUES TO STREAMLINE RENEWAL AND EXTENSION OF NONIMMIGRANT STATUS AND EADs AS AN EMERGENCY MEASURE BECAUSE OF THE PROCESSING BACKLOG, SO THAT NONIMMIGRANTS AND SPOUSES DO NOT LOSE THEIR JOBS.

The processing backlog at USCIS, which has been announced by USCIS and reported on by multiple news outlets, has already endangered the ability of many nonimmigrant workers and their spouses—who are authorized to be employed with EADs—as well as DACA recipients and other EAD applicants, from maintaining their employment status in their current jobs, due to the inability of USCIS to process visa and EAD renewals in a timely fashion.21 While recent actions have been taken to speed up the process by suspending the biometrics submission requirement for certain applicants filing Form I-539, Application To Extend/Change Nonimmigrant Status, nevertheless many nonimmigrants and other migrants are reliant on having valid a visa or EAD status to work, and will thus be out of work and unable to procure new employment, and many will even be out of status, rendering them removable by immigration enforcement. Those in nonimmigrant status were recruited to work by U.S. employers and may fall out of status through no fault of their own, thus, USCIS has an obligation to ensure they are able to continue earning money to survive during their time in the United States.

To protect the ability of nonimmigrants and those in other statuses who rely on EADs to work and continue earning a living and residing in the United States without fear, USCIS should use its existing legal authority to the fullest extent possible in order to automatically renew nonimmigrant statues and EADs, or in the alternative, extend the filing deadlines for nonimmigrant statues and EADs for one year, or until USCIS has managed to cope with the current backlog (whichever is longer). Similar measures were proposed in the HEROES Act legislation in 2020;22 a piece of legislation which President Biden expressed support for. While the HEROES Act did not become law, USCIS has significant authority to take at least some measures to help keep visas and EADs from expiring because of the backlog.

V. USCIS SHOULD RESCIND THE TRUMP ADMINISTRATION’S REGULATIONS THAT DOUBLED EAD WAIT TIMES FOR ASYLUM APPLICANTS AND ISSUE NEW REGULATIONS IMPLEMENTING THE PREVIOUS RULES.

In 2019 and 2020, the Trump administration proposed and finalized rules that would (1) double the amount of time an asylum applicant must wait before they become eligible to receive a work permit, from 180 days to 365 days, and (2) removed a regulatory provision that required USCIS to grant or deny an initial EAD application within 30 days after an asylum applicant files the initial Form I-765, Application for Employment Authorization.23 The result of these rules is that asylum seekers have gone from waiting six months before they can work lawfully in the United States to waiting one year—just to apply—and are then expected to endure an unknown and indefinite wait time before they are authorized to work. In the meantime, asylum seekers waiting for work authorization do not have access to the social safety net but will somehow need to find food and clothing for themselves and their families, plus a roof to put over their heads.

The few estimates DHS has provided in the proposed rule suggest that the financial hardships to asylum applicants due to loss of income will be significant—and their income will not be easily replaced, if at all, leaving asylum applicants desperate for food and basic necessities, and perhaps even homeless on American streets. It should not be U.S. policy to force persons fleeing persecution into the informal labor market in order to survive. Therefore, USCIS should take measures to make lawful employment more readily available to asylum applicants, by rescinding the 2020 regulations requiring a 365-day wait period and removing the 30-day processing timeline, issuing new regulations that ensure asylum applicants in most cases do not have to wait longer than 180 days to receive work authorization.

VI. USCIS SHOULD WORK WITH OTHER AGENCIES TO CREATE AN INTERAGENCY PROCESS FOR MIGRANT WORKERS TO COME FORWARD AND REQUEST AFFIRMATIVE RELIEF IF THEY ARE IN LABOR DISPUTES.

We encourage USCIS to work with ICE and other subagencies within DHS, and DOL, in an interagency effort to protect the rights of all migrant workers, regardless of immigration status. This should begin with the creation of a process by which any worker who is involved in a labor dispute can access affirmative relief so that immigration status can never be used to undermine the rights of migrant workers and their coworkers. Such an interagency process should also include a review of current rules and new rulemaking where necessary to better protect workers’ rights.

This process would benefit both unauthorized immigrant workers and migrants employed through on temporary work visa programs. The former can be threatened with deportation by employers and the latter are at risk for exploitation because employers control their ability to live and work in the United States. This dynamic also means that individuals’ immigration statuses can be used against them in retaliation for blowing the whistle on workplace crimes. When this happens, unscrupulous employers lower standards for all working people, including U.S. workers.

We also urge USCIS to also join in a broader interagency effort similar to the Interagency Working Group for the Consistent Enforcement of Federal Labor, Employment, and Immigration Laws that existed at the end of the Obama Administration. An interagency working group will improve communications between the labor, employment, and immigration agencies, and also send a signal to low-road employers that immigration laws cannot be used to threaten or intimidate employees for exercising their workplace rights.

VII. USCIS SHOULD PROMULGATE A NEW REGULATION ESTABLISHING A PREFERENCE ALLOCATION SYSTEM FOR H-1B PETITIONS BY PREVAILING WAGE LEVEL.

USCIS has the authority to determine how the government selects H-1B petitions subject to the annual numerical limit. The statute requires the agency to select petitions in the order in which they are filed, which is practically impossible when USCIS receives more petitions than available visas over the course of a few days. When this occurs currently, USCIS uses a random lottery process that was never formalized through the regulatory process.

We urge USCIS to reissue, through proper notice and comment, a new regulation that adopts a petition allocation process that is more formalized and transparent, and that prioritizes the petitions of employers paying the highest wages, rather than the existing method of an ad hoc random lottery.24 Establishing a wage-based allocation system will provide certainty to employers, while increasing the number of international graduates from U.S. colleges and universities hired on H- 1B visas since education, experience, and time in the U.S. should command higher salaries. At the same time, a wage-based allocation system will advantage direct-hire employers, including start-ups and small businesses, over the large outsourcers whose business model is built on gaming the random lottery to increase their chances of “winning” large shares of H-1B visas every year.25

VIII. USCIS SHOULD UPDATE THE L-1 CLASSIFICATION WITH A PREVAILING WAGE REGULATION OR NEW GUIDANCE ON APPROPRIATE COMMENSURATE WAGES FOR L-1 NONIMMIGRANT WORKERS.

Unfortunately, the L-1 nonimmigrant visa has not been adequately regulated since its creation in 1970, despite being a large visa programs where the biggest employers of L-1 workers are also some of the biggest H-1B employers, which include major U.S. tech firms and outsourcing firms.26 However, the L-1 program has fewer rules and no formal oversight from DOL. As a result, multinational employers have been able to take advantage of inadequate regulatory guidance, oversight, and enforcement in the L-1 visa program. Reports,27 government audits,28 and congressional testimony29 have criticized many flaws and weaknesses in the L-1 program, and media reports have documented cases of fraud and abuse.30

But the most damaging programmatic flaw in the L-1 program is that it lacks a minimum or prevailing wage requirement for incoming L-1 nonimmigrant workers. While USCIS a few years ago updated its guidance with respect to the issuance of L-1B visas, there are no rules that prevent L-1 workers from being underpaid and that protect U.S. wage standards. This is the case despite the fact that news reports and DOL investigations have revealed cases of U.S. workers lawfully being laid off and being replaced by L-1 workers, but not before being required to train the L-1 on how to do their former job,31 as well as a Silicon Valley technology company in Fremont, California, that was paying less than $2 an hour to skilled migrant workers from India on L-1 visas who were working up to 122 hours per week installing computers.32

The most impactful action USCIS could take to improve the L-1 visa would be to issue an L-1 minimum wage regulation, or new interpretive guidance on the minimum allowable wage levels that petitioning employers must pay their L-1 employees. A new L-1 wage regulation could be quite simple, for example requiring that employers pay their L-1 workers a specified minimum wage: Requiring that L-1 workers be paid the local median wage, according to occupation and job location, would be the easiest way to do this, and employers could rely on existing public databases like the Foreign Labor Certification Data Center database, which provides the employers of H-1B and H-2B workers with the applicable prevailing wage they must pay their nonimmigrant workers. (An L-1 wage rule requiring that workers be paid at least the local median wage has been proposed in bipartisan legislation, but USCIS has the authority to promulgate a regulation that would create a similar rule.)33

While a regulatory approach would be preferable because it would provide certainty for petitioner/employers and promote consistency in adjudications, in the alternative, USCIS could issue new interpretive guidance instructing its adjudicators to use annual salary or hourly wage levels that petitioners promise to pay L-1 workers as a significant factor in determining whether the worker will be employed in an executive, managerial, or specialized knowledge capacity.

IX. DHS SHOULD DO A COMPREHENSIVE REVIEW OF REGULATIONS AND GUIDANCE WITH THE GOAL OF PROTECTING WORKERS AND SAFEGUARDING U.S. LABOR STANDARDS.

We also encourage DHS to work across subagencies and with other federal agencies to ensure that wages and labor protections for those on nonimmigrant visas—and other workers who are employed through EADs issued by DHS—are as strong as possible and are being enforced. This includes creating and updating the computation of prevailing wage levels for various visa programs and categories within visa programs; prioritizing wages when allocating visas in oversubscribed visa programs; prohibiting exorbitant recruiter fees and abusive labor contracts; and creating more avenues for workers to be able to change jobs and employers on their own, as well as self-petition for work authorization and legal permanent residence, without having to rely on their employers.

Sincerely,

Daniel Costa
Economic Policy Institute

Jeremy McLean
Justice in Motion

Cathleen Caron
Justice in Motion

Endnotes

1. See, for example, Jeremy McLean, The Case for Transparency: Using Data to Combat Human Trafficking Under Temporary Foreign Worker Visas, Justice in Motion, September 2020; Sara Crowe, Human Trafficking on Temporary Work Visas: A Data Analysis 2015-2017, Polaris, June 1, 2018.

2. Laura Francis, “Paperless Intake Is Immigration Agency Director’s Top Priority,” Bloomberg Law, October 17, 2018.

3. See discussion of truckloads of paper applications for temporary work visas arriving at USCIS, in Miriam Jordan, “Visa Applications Pour in by Truckload Before Door Slams Shut,” New York Times, April 3, 2017.

4. See for example, Daniel Costa, Temporary work visa programs and the need for reform: A briefing on program frameworks, policy issues and fixes, and the impact of COVID-19, Economic Policy Institute, February 3, 2021.

5. Annie Correal, “Hindu Sect Is Accused of Using Forced Labor to Build N.J. Temple,” NY Times, May 11, 2021.

6. Zack Kopplin, “Au Pairs Come To The U.S. Seeking Cultural Exchange, But The State Department Often Fails To Protect Them,” Huffington Post, July 31, 2020.

7. Rep. Lois Frankel, “Frankel, Deutch, Blumenthal, & Cruz Introduce Bipartisan, Bicameral Bill to Bring Transparency to Temporary Worker Visa Programs & Combat Human Trafficking” (press release), July 23, 2019; Visa Transparency Anti-Trafficking Act of 2019, H.R. 3881, 116th Cong. (2019); Visa Transparency Anti-Trafficking Act of 2019, S. 2224, 116th Cong. (2019).

8. Obama White House, “Transparency and Open Government Memorandum for the Heads of Executive Departments and Agencies,” January 21, 2009.

9. Genevieve Douglas, “Visa Data Changes Coming With New Biden Immigration Priorities,” Bloomberg Law, May 12, 2021.

10. USCIS, “Buy American and Hire American: Putting American Workers First,” [data hosting page], archived content, https://www.uscis.gov/archive/buy-american-and-hire-american-putting-american-workers-first.

11. USCIS, Reading Room, https://www.uscis.gov/archive/uscis-electronic-reading-room-opens-the-door-to-transparency.

12. See USCIS Reading Room, “I-129 Approvals for FY 2019,” https://www.uscis.gov/sites/default/files/document/data/I-129_Approvals_for_FY_2019.xlsx.

13. U.S. Government Accountability Office, H-2A and H-2B Visa Programs: Increased Protections Needed for Foreign Workers, GAO-15-154, Published: March 06, 2015, [Reissued on May 30, 2017].

14. U.S. Government Accountability Office, H-2A and H-2B Visa Programs: Increased Protections Needed for Foreign Workers, GAO-15-154, Published: March 06, 2015, [Reissued on May 30, 2017], at 22-24. (Emphasis added.)

15. Rachel Rosenthal, “The STEM Graduate System Is Broken. Here’s How to Fix It.” Bloomberg Opinion, March 10, 2021; Nikhil Swaminathan, “Inside the growing guest worker program trapping Indian students in virtual servitude,” Mother Jones, September/October 2017 issue.

16. Nikhil Swaminathan, “Inside the growing guest worker program trapping Indian students in virtual servitude,” Mother Jones, September/October 2017 issue.

17. See for example, Julia Preston, “Foreign Students in Work Visa Program Stage Walkout at Plant,” NY Times, August 11, 2011.

18. International Labor Recruitment Working Group, Shining a light on summer work: A first look at the employers using the J-1 Summer Work Travel visa, July 30, 2019 [the International Labor Recruitment Working Group has been renamed Migration that Works].

19. Jeremy McLean, The Case for Transparency: Using Data to Combat Human Trafficking Under Temporary Foreign Worker Visas, Justice in Motion, September 2020.

20. Department of Homeland Security, 2017 Chief Freedom of Information Act Officer Report to the Attorney General of the United States and the Director of the Office of Government Information Services, February 2018.

21. See for example, Michelle Hackman, “Work-Permit Backlog for Immigrant Spouses Takes Toll on Professional Women,” Wall Street Journal, April 17, 2021.

22. Tanvi Misra, “House aid package contains key immigration measures,” Roll Call, May 12, 2020.

23. See Department of Homeland Security, Asylum Application, Interview, and Employment Authorization for Applicants (Final Rule), 85 FR 38532, June 26, 2020; and Removal of 30-Day Processing Provision for Asylum Applicant-Related Form I-765 Employment Authorization Applications, 85 FR 37502, June 22, 2020.

24. See previous public comment submitted by EPI: Daniel Costa and Ron Hira, “EPI comments on USCIS preference allocation system for H-1B visas by prevailing wage level,” Economic Policy Institute, December 2, 2020.

25. Julia Preston, “Large Companies Game H-1B Visa Program, Costing the U.S. Jobs,” New York Times, November 10, 2015.

26. See for example, Ron Hira and Daniel Costa, “The H-1B visa program remains the “outsourcing visa”: More than half of the top 30 H-1B employers were outsourcing firms,” Working Economics blog (Economic Policy Institute), March 31, 2021; USCIS, “Approved L-1 Petitions by Employer Fiscal Year 2019,” Buy American and Hire American: Putting American Workers First,” [data hosting page], archived content, https://www.uscis.gov/archive/buy-american-and-hire-american-putting-american-workers-first.

27. See for example, Gaming the System 2012: Guest Worker Visa Programs and Professional and Technical Workers in the U.S., Department of Professional Employees, AFL-CIO (2012).

28. See for example, Department of Homeland Security (DHS), Office of Inspector General (OIG), Review of Vulnerabilities and Potential Abuses of the L-1 Visa Program (OIG-06-22), January 2006.

29. See for example, “The L-1 Visa and American Interests in the 21st Century Global Economy,” Hearing before the Subcommittee on Immigration, Border Security and Citizenship, July 29, 2003.

30. Brian Grow, “A Mainframe-Size Visa Loophole,” Bloomberg Business, March 5, 2003.

31. Bootie Cosgrove-Matherap, “Training Your Own Replacement” Associated Press, August 14, 2003.

32. See, Monte Francis, “Fremont Tech Company Paid Workers $1.21 an Hour: U.S. Dept. of Labor,” NBC Bay Area, Oct. 22, 2014. See also George Avalos, “Workers Paid $1.21 an Hour to Install Fremont Tech Company’s Computers,” Mercury News, Oct. 22, 2014; updated Aug. 12, 2016. L-1 visa status confirmed in an email from George Avalos of Mercury News, Oct. 23, 2014.

33. Senator Chuck Grassley, “Bipartisan Group Of Lawmakers Propose Reforms To Skilled Non-Immigrant Visa Programs To Protect American Workers,” Press Release, May 22, 2020.