How the Trump Administration's New H-1B Wage-Increase Rule Affects International Students

Published: Oct 15, 2020

 Education       Finance       Grad School       International Students       MBA       Salary & Benefits       Technology       
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On October 8, the U.S. Department of Labor published its controversial interim final rule on wage requirements for temporary visa programs and permanent labor certification programs. The rule, called “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States,” raises wages that visa-sponsoring employers must pay to holders of H-1B, H-1B1, and E-3 visas.

To understand the rule’s implications to international students looking to work in the U.S. after graduation and what students need to do in the wake of the rule, Vault reached out to International Student Career Expert Marcelo Barros. Below is an excerpt of that conversation.

Vault: Why did the government decide to raise wages that H-1B sponsoring employers must pay visa holders? And are you surprised by the new rule? 

Barros: I’m not surprised at all. The Trump administration has a history of attempting to tweak aspects of the H-1B program to make it make harder for U.S. firms to hire international workers. This recent rule is just another example of this strategy. Specifically, this time around, the angle the U.S. government has taken is to mandate employers to pay absurdly higher wages to H-1B professionals in an attempt to price H-1B professionals out of the U.S. labor market. The government is artificially playing with the prevailing wage, pushing it well above what the real number should be.

Higher wages aren’t desirable for professionals with H-B visas?

The main goal of this rule is to the keep employers from hiring foreign workers. The message is simple. The government is trying to tell U.S. firms that if they want to hire international students or anyone via an H-1B program, it will cost them a lot. The ultimate goal is to dissuade U.S. employers from hiring international workers. It will hurt, not help, international workers.  

How much higher are wages under the new rule?

A National Foundation for American Policy analysis found that the new D.O.L. rule might require an employer to pay an entry-level software developer in Los Angeles approximately $31,000 more per year—a 36 percent increase over the previous D.O.L. prevailing wage. The entry-level wage of a software developer would be 30 percent higher in Chicago under the new rule and 48 percent higher in New York. These are huge increases that outpace the realities of the market based on the analysis of several organizations that have looked closely at the new rule.

How will the new rule affect international students?

That will very much depend on the industry and the type of role. The International Advantage has been in touch with several recruiters in the NYC/Wall Street area who’ve told us that this rule might not decrease their appetite to hire international students. And that’s because salaries for junior bankers in front-office jobs (M&A, sales and trading, etc.) typically exceed the new H-1B salary limits imposed by this new rule. So, students looking to work for these firms, depending on the role they’d be looking for, might be in the clear. In other words, those seeking  analyst or associate jobs might be somewhat protected.

To be more specific, in the six-month period ending this past June, data from 2020’s H-1B visa applications that predated the salary rule showed that Goldman Sachs hired at least 15 analysts on annual salaries of $120,000, JPMorgan hired 29 analysts on annual salaries averaging $89,000, and Morgan Stanley hired 75 analysts on salaries averaging $94,000.

What about international students seeking roles outside of investment banking?

For sure there might be a lot of firms and smaller organizations currently using the H-1B system that might not be able to participate in the H-1B program under this new rule. As a result of prevailing wage inflation, the rule is likely to have an adverse effect on smaller U.S. employers, especially cost-sensitive entities like nonprofits, universities, hospitals, and startups. Perhaps mid-size firms as well—which might still be working to strengthen their financials.

Our international students enrolled at U.S. universities who often have limited work experience could get terribly hurt due to this rule, as typical starting salaries (right out of college) will often not be high enough to meet this new H-1B wage bar, even at entry-level (Level 1) wages. Most H-1B workers are recent graduates with little work experience. Data shows that the job market in the U.S. needs these types of workers as well. Ask Amazon and others!

Also, we must all remember that smaller firms, particularly those operating in the STEM space, are just as dependent on the H-1B program as large firms. We have data that proves that. But because they offer salaries that are often not as competitive compared to large, established firms, they could be priced out of the H-1B program going forward—if this rule sticks.

What do you recommend that international students do now in the wake of the new rule?

They must not overreact. They must stay the course and continue to try to get hired. It would be a terrible mistake for international students, or any of us for that matter, to read too much into this new announcement. International students must not lose momentum when job searching. We already have Covid to worry about, and that’s enough.  

The fall recruiting season is under way, and many U.S. firms have been extending offers to international students who can provide them with superior value. The International Advantage doesn’t predict that the pace of international student hiring will be impacted in the short term due to this new rule. It’s way too early for anyone to draw any conclusions about what might happen. We must not speculate.

I can confirm to you that we’ve reached out to a diverse group of 68 employers that hire international students and have discussed with them their hiring needs going forward, and their views of this new rule. The general message from the employers we’ve talked to is this: If they need to hire an international student who can get on their payroll via OPT (optional practical training), they’ll move forward with the hiring process and pray for the best when the H-1B lottery time comes next year.

In the short term, we don’t get the impression that this new rule will play a factor in deciding if a U.S. employer will hire an international student or not. Let’s not get ahead of ourselves. The next H-1B filing season in 2021 might give us a better idea of the true impact of this rule.

What can we expect to see happen in the near future as a result of this new rule?

The International Advantage and other organizations have met over the past three days to discuss this recent wage rule and specifically the “formula” used by the government to determine its proposed wage increases. The initial read from experts is that the government’s assumptions are plain wrong and the D.O.L. has adopted a fundamentally flawed methodology as its basis to inflate the prevailing wage. Their motivation? Political, of course. There seems to be no standard guidelines that would warrant these incomprehensible wage increases. And that’s just one of the aspects being explored. The private sector has started to mobilize as well, and the biggest names in Silicon Valley are aware of this new rule and have started to take action.

This is all to say that international students have more support than they realize, and what can be done is being done. This issue is being addressed. The plaintiff group is being assembled. It will be diverse and will include top global U.S employers and associations. This new D.O.L. wage rule seems strange, to say the least, and might be unlawful. Expect a court challenge.

Marcelo Barros is the founder of The International Advantage, a firm specializing in providing job search training for international students who seek U.S. jobs. International students who seek U.S. jobs or internships can enroll in The International Advantage Get Hired Video Course, designed to help international students beat visa odds and secure U.S. employment. Marcelo Barros partners with over 50 U.S. universities to assist their international students with their quest to get hired.