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January 2006, Volume 13, Number 1

Mexican Workers, H-1B, Wal-Mart

US employment rose by two million in 2005 to 143 million, making job growth in 2005 about the same as 2004. The unemployment rate averaged 5.1 percent in 2005, down from 5.5 percent in 2004. Average hourly earnings of private sector workers were $16.34 an hour or $550 a week at the end of 2005.

IBM began the latest US icon to announce the end of its defined benefit pension system, which promises workers retirement benefits based on their years of service and earnings. The number of US companies offering defined-benefit schemes in the US has fallen from 112,000 in 1985 to 30,000 in 2005.

About 40 percent of US workers are classified as salaried, with an especially large recent rise in salaried caregivers. Labor advocates say that the rising share of salaried workers reflects new interpretations of the Fair Labor Standards Act that allow employers to mis-classify employees in order to avoid having to pay overtime wages.

Labor. The Pew Hispanic Center surveyed 4,800 Mexicans in the US from July 2004 to January 2005 and reported that only five percent were unemployed in Mexico. This seemingly low unemployment rate before emigration may be due to the fact that Mexico has a thin social safety net; its unemployment rate is about three percent, the lowest among OECD countries. The Pew survey estimated that 55 percent of the unauthorized foreign workers in the US were born in Mexico, and that the unauthorized Mexicans were 20 percent of the US Hispanic work force.

Median US earnings of those surveyed were $300 a week, twice the migrants' Mexican earnings. After six months in the US, the unemployment rate was 15 percent, about the same as for US teens, but afterward dropped toward the five percent US average. Migrants in Atlanta and Dallas earned the most, and those in Fresno the least. A third of the migrants said they had worked in agriculture in Mexico, followed by 15 percent who worked in industry.

Pew estimated that 61 percent or 6.3 million of the 10.3 million unauthorized foreigners are in the labor force, compared to half of the 298 million US residents.

Denver in 2006 became the third US city to make nonpayment of wages a crime, joining Austin, Texas and Kansas City, Missouri as cities that allow day laborers and others to complain to local police if employers do not pay promised wages. Under the law, the Denver district attorney may file felony charges against employers who fail to pay more than $500 in wages.

H-1B. About 60 percent of the foreigners who received H-1B visas in FY05 were already in the US; the quota was used up on the first day of the new fiscal year. In FY03, about 28 percent of H-2B visas were issued to foreigners in computer occupations, followed by 14 percent in education, 13 percent in administrative occupations, and 12 percent in engineering. About 36 percent of FY03 H-1B recipients had Indian nationality.

Most US employers can obtain H-1B foreign workers with a BA or more to fill US jobs requiring a BA or more by "attesting" on a government form that they need the foreigner and are paying the prevailing wage- there is no requirement for most US employers to seek US workers. Indeed, most US employers may lawfully lay off US workers and hire H-1B workers by "outsourcing" their jobs to a "bodyshop" that hires H-1B workers, as when Tata workers are employed at Intel but paid by Tata. Some bodyshops bring H-1B workers to the US and then advertise their availability to US firms.

When the Immigration Act of 1990 renamed the H-1 visa the H-1B visa, the Wall Street Journal reported on September 27, 1991 that immigration lawyers were urging clients to use the old H-1 visa because it was faster to obtain and did not require the payment of prevailing wages. One predicted that unions would examine the prevailing wage reports filed by employers and challenge them. This has not happened.

Miano's analysis of the prevailing wages listed on approved employer requests for H-1B workers, called Labor Condition Applications (LCAs), found that most were near the bottom of the pay scale, and that firms employing more than an average number of H-1B workers paid them less, suggesting little government oversight of wages. Most employers filing LCAs for computer jobs use their own prevailing wage surveys to set the wages of the programmers they hire (SOC code 15-1021), and many of the wages in LCAs are obviously understated.

In FY04, the average prevailing wage offered to H-1B programmers was $52,300, while the average wage in DOL's Occupational Employment Statistics (OES) for programmers was $67,700. OES data, obtained from employers, rank wages paid from lowest to highest; most employers requesting H-1Bs reported prevailing wages near the bottom of the range. Most employers used DOL's OES database, which lists mean, median and other indicators of wages for over 700 occupations, and Miano concluded that most use the lowest OES wage, which is for entry-level workers. Another source of entry-level wage data, aimed at recent college graduates, is also used by employers.

Miano concluded that "the H-1B program is used to import workers at the very bottom of the wage scale." The concentration of prevailing wages near the bottom of the wage distribution, combined with the expectation that wages rise with productivity, belies the assertion that the H-1B program is attracting the world's "best and brightest" to the US.

It is often asserted that the US graduates 70,000 engineers a year, while India graduates 350,000 and China 600,000 a year. However, the US graduates 137, 400 engineers from four-year colleges each year, compared to 112,000 in India, suggesting that many of those counted as engineers abroad are graduates of two-year programs.

Is the US losing its competitive edge in a globalizing world? Can immigration policy reverse any perceived losses of US advantage? Several organizations lobby for more H-1B visas, including Compete America, The Alliance for a Competitive Workforce at

However, the country's capacity for innovation, defined as the successful commercial introduction of a novel product, service or business model, is hard to measure. The US has about a quarter of the world's scientists and engineers doing about a third of the world's research and earning a third of the new patents, and the largest private venture-capital industry helps to turn inventions into innovations.

The 2005 National Academy of Sciences report, Rising Above the Gathering Storm, urges more support for science and engineering education as well as more visas for foreign science and engineering students and workers.

Wal-Mart. Wal-Mart, with 1.3 million US employees the nation's largest private employer, in October 2005 announced that it would offer a low-cost health insurance plan with premiums as low as $65 a month for a family, with a $1,000 deductible. Wal-Mart is also introducing health savings accounts, which allow workers to make tax-deductible payments to a health care fund, and proposing in-store clinics to reduce emergency room visits by its employees and patients.

About 49 percent of Wal-Mart workers, 638,000, compared to 80 percent of Costco employees, have company-provided health insurance (about 80 percent of Wal-Mart employees are eligible, and 60 percent sign up). Unions in states around the US are pushing legislation that would require their largest private employers to devote 10 percent of their payroll to health insurance or contribute a fee to a state fund.

An internal Wal-Mart memo said that over 40 percent of the children of Wal-Mart's US employees were uninsured, and five percent were on Medicaid. The memo noted ways that Wal-Mart could appear to be employee-friendly but still keep labor costs in check by using part-time workers, cutting life-insurance payouts, and trying to dissuade unhealthy or older people from seeking jobs at Wal-Mart by requiring that some physical activity such as collecting carts be part of all jobs. Some lawyers predicted that the memo would be used in suits against Wal-Mart alleging discrimination.

A small fraction of persons covered by health care plans account for most spending. WellPoint Inc., covering 29 million people, reported that seven percent of those it insures account for 63 percent of the medical costs it pays. Some worker advocates complain that adding requirements to jobs that otherwise do not require them is discriminatory.

Wal-Mart pays its workers an average $9.68 an hour. In October 2005, Wal-Mart called for an increase in the federal minimum wage, which has been $5.15 an hour since 1997. Wal-Mart had sales of $285 billion in 2004, and is planning to expand into urban areas, where unions have protested its low-wage policy. A film, "Wal-Mart: The High Cost of Low Prices," has been countered by a second film, "Why Wal-Mart Works & Why That Makes Some People Crazy."

In October 2005, the US Department of Labor was criticized for allowing Wal-Mart to prepare part of the consent agreement that resulted from 85 child labor violations. Wal-Mart agreed to pay a $135,000 fine, but won an agreement from DOL to provide 15-day notices of inspections, and give Wal-Mart 10 days to fix violations of labor laws before issuing citations, which should keep Wal-Mart out of trouble.

Health. The AARP Public Policy Institute issued a report in October 2005 predicting that more nurses and nurses' aides in US homes for the elderly would be from China. About 64,000 immigrant nurses worked in US nursing homes in 2003, along with 145,000 foreign-born nursing aides; in each case, these foreign-born workers were a sixth of the total.

The number of illegal migrants working as caregivers in nursing homes is thought to be relatively low because states require employees who deal with patients to undergo background checks. However, the traditional pool of US-born caregivers, women 25 to 50 without college degrees, is shrinking, while the number of elderly is rising sharply.

English-only rules in the workplace, permissible for business necessity and safety reasons, are coming under scrutiny when applied in other settings. The U.S. Equal Employment Opportunity Commission filed a suit against Sephora USA, a division of luxury-goods maker LVMH Mo‰t Hennessy Louis Vuitton, after workers alleged that they were encouraged to speak Spanish to customers but not to each other in the break room. The number of complaints to the EEOC about language discrimination rose from 32 in 1996 to 155 in 2004.

About half of the 33,000 employees of Jack in the Box are Hispanic, and the restaurant chain provides them with "Sed de Saber" (Thirst for Knowledge) interactive devices to teach English via a record-and-playback program. Retention Education developed the device, and the Multicultural Food Service and Hospitality Alliance promotes its use, which, it claims, can bring Spanish speakers to a functional level of English conversation and comprehension in about four months. Some 17,000 of the $275 devices were distributed to fast-food restaurants in the first 10 months of 2005.

A UCLA analysis of the National Health Interview Survey reported that 10 percent of foreigners who arrived in the 1990s used hospital emergency rooms at least once in 2000, compared to 20 percent of the US-born. Over half of the 11 million Mexican-born US residents do not have health insurance, and most are young, which makes them most likely to use emergency rooms for accidents. The US-born children of recent immigrants are more likely to use emergency rooms than comparable children with US-born parents.

Steven Greenhouse, "Wal-Mart Memo Suggests Ways to Cut Employee Benefit Costs," New York Times, October 26, 2005. Ricardo Alonso-Zaldivar, "Care Homes Hiring More Foreigners," Los Angeles Times, October 20, 2005. Kleiner, Morris. 2005. Licensing Occupations: Enhancing Quality or Restricting Competition? W.E. Upjohn Institute. Lichtenstein, Nelson. 2006. Wal-Mart: The Face of 21st Century Capitalism. Kochhar, Rakesh. 2005. Survey of Mexican Migrants. Pew Hispanic Center. December 6. Miano, John. 2005. The Bottom of the Pay Scale: Wages for H-1B Computer Programmers.