Have Indian IT Companies Been Gouging H-1B Workers With Low Wages?

A recent report conducted by research outfit IHS Markit and commissioned by the Indian software industry lobby group National Association of Software and Services Companies (Nasscom) has shown that India-origin firms paid US-based software programmers an average wage of $96,300 in 2017. These wages included both domestic workers and H-1B visa holders and were reportedly around 2% more than the median wage of $94,800 that is given to software programmers in the US. IHS Markit apparently used figures from the US Bureau of Labor Statistics as well as other government data for its number crunching.

Now there will be some significant eye-rolling upon the realisation that the report was funded by Nasscom. And despite industry veteran Peter Bendor-Samuel, the CEO of Everest Group, telling the Economic Times that the report "demonstrates that Indian firms are not systematically underpaying their US-based employees," this does not fully allay the scepticism around those figures.

Afterall, the $96,300 figure contradicts the ones compiled by Ron Hira, an academic at Howard University and a crusader against Indian H-1B visas. Hira showed that wages paid to employees of outsourcing firms -- whose employees are almost always Indian -- were in a band between the low $60,000s to mid $70,000s and in the case of many Indian firms, these employees often earned just a little above $60,000. 

Incidentally, US firms such as IBM and Deloitte that have shipped in Indian workers on H-1B visas are not very different in terms of their wage distribution. Critics like Hira contend that Indian IT workers, most of whom are armed with bachelor's degrees, have displaced American workers because they are willing to work for rock-bottom rates set by Indian employers who are exploiting them to pad their margins.

Firstly, a couple of related details in the way of explanation. Indian firms such as TCS and Infosys were originally allowed to set up shop in the US via H-1B visas as long as they had demonstrated their workers would not displace American tech workers. However, companies are exempt from this requirement if their H-1B workers are paid at least $60,000 a year.

Also: India rocked by rumors of H-1B caps, but Pompeo visit allays fears

Secondly, how do so many Indian firms get these H-1B slots in the first place? After all, there are only 85,000 slots each year, including 20,000 set aside for graduate students, but Indian companies have been bagging up to 30% of them in a computer-generated lottery which is an abnormal win ratio. They have managed to do this as companies can technically use one labour condition application for more than one Indian worker. This means Indian companies have applied for one application for as many as 10 H-1B visa applicants to up their probability ratios. Of course, US clients are more than happy to go along with this approach as it means cheaper costs for services.

Anyways, back to the issue of wage gouging. Company and salary review site Glassdoor conducted a study that took a large sample of salaries from publicly recorded H-1B applications in 2016 and compared them to US salaries across 10 cities and came up with a startling conclusion. H-1B wages were actually 2.8% higher than US salaries for comparable occupations found on Glassdoor. How could this be?

Simply put, no singular H-1B job is the same. Project manager H-1B workers got at least the same, if not significantly more, as the median salaries of US counterparts in every city -- they earned over 21% more than the median salary in Boston, for example. However, data scientists and software engineers earned at least the same or significantly less than their US counterparts in every city that was examined -- they earned 17% less than the median US salary for computer engineers in Chicago. Other jobs such as java developers and web developers, meanwhile, were paid on par with US counterparts.

See: With H-1B rejection rates approaching 40%, Indian IT will urgently need a new service delivery model

Glassdoor found that their study matched other ones such as this one from researchers at the public policy institute of California who found that their study "fail[ed] to find support for the notion that H-1Bs are paid less than observationally similar US-born workers; in fact, they appear to have higher earnings in some key STEM occupations, including information technology."

Whichever side of the debate you find yourself on, you will probably find this fact absurd: The minimum threshold wage of $60,000 has gone unchanged ever since it was set in 1990. Just inflation compounded annually would bring that value to $115,274 and I would bet my bottom dollar that most Indian H-1Bs would not have been hired at such a high wage.

From looking at starting salaries for workers in many professions today compared to 25 years ago, it seems amply clear that companies pay most of their workforce today with wages that are frozen like relics from the past, but people feel lucky to just have a job. As for Indian IT firms, a fundamental change in their business model will create a need for more US-based, better-paid, agile, customer-facing teams that will probably render the lower-end, imported H-1B workers into being more or less a thing of the past.

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