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October 2017, Volume 23, Number 4

Labor, Wages, H-1B

The US unemployment rate was 4.2 percent in September 2017, and lost 33,000 in a month marked by hurricanes in Texas and Florida. The labor force participation rate was 63 percent.

Many employers report difficulty finding workers, and one reason is more tests that exclude applicants from consideration. Up to half of applicants for low-skilled jobs fail drug tests, typically because of marijuana use. Potential workers who know they will have to pass a drug test may not apply, reducing the pool of applicants.

Employees of Three Square Market in River Falls, Wisconsin can volunteer to have a micro chip the size of a grain of rice injected between their thumb and index finger to open doors at the tech firm. Swedish chip maker Biohax International believes that the market for implanted chips will grow rapidly. There are many other types of wearable technology that allow employers to track employees.

In January 2017, there were 19 states with minimum wages higher than the federal minimum wage of $7.25 an hour, the federal minimum wage since 2009.

Wages. With unemployment rates at their lowest levels in years, wages might be expected to rise faster than their 2.5 percent increase in 2016-17. In the US and other OECD countries, the shares of low- and high-skilled jobs increased between 1995 and 2015, but the share of middle-skilled jobs decreased.

An Omaha roofing contractor said the average re-roofing job cost $8,000. She aims for a 40 percent or $3,200 profit per job, and preferred to hire $17 an hour "loyal" H-2B workers rather than US workers who may leave for other jobs. In roofing, insurance and payroll taxes add 40 percent to wages.

Americans are changing jobs less often than they did in the past for reasons that range from more non-compete agreements to the need to obtain occupational licenses that are valid in only one jurisdiction. Over 1,100 occupations are licensed in at least one state, but only 60 are licensed in all 50 states, suggesting that incumbent barbers, hairdressers, interior designers and schools providing training to obtain licenses cooperate to reduce competition from new entrants.

About 20 percent of US workers have signed non-compete agreements, which are clauses in employment contracts that prohibit employees from leaving for competitors within two or three years. Many states are following the lead of California, which prohibits non-compete agreements. Some say that job hopping has fueled innovation in Silicon Valley.

Changing jobs is normally associated with rising wages, and non-compete agreements may be one factor to explain slow wage growth. In Idaho, the legislature in 2016 enacted pro-employer non-compete laws. Under Idaho's law, departing employees sued by their ex-employer must prove they have "no ability to adversely affect the employer's legitimate business interests." Critics believe most employees who sign non-compete agreements in Idaho will be unable to switch jobs in the same industry.

The New York Times on September 4, 2017 contrasted the experiences of two janitors: a direct-hire at Kodak in the 1980s who later rose to become chief technology officer and an employee today of the unionized contractor cleaning Apple offices. Hourly wages are similar in real terms: $16.60 an hour in 2017 dollars, but there are fewer benefits and opportunities for advancement for the contractor employee today than were available to the direct hire two decades ago.

Kodak made George Eastman rich and supported middle-class families in Rochester, New York, while Apple made Steve Jobs rich but did not support middle-class families in Cupertino, California. Kodak, IBM and ATT in 1993 had 675,000 employees worldwide to generate less revenue than Apple, Alphabet, and Facebook with 200,000 employees, in dollar-adjusted terms.

Technology reduced the number of workers needed and outsourcing reduced labor costs, which enabled stockholders of tech firms to share far more profits today than did shareholders of firms in earlier eras. Many of those who work in tech firms are provided by contractors, who pay $60,000 a year or more but do not provide job security.

Tech companies hiring superstars tend to offer high wages and extensive benefits, and many of these benefits are provided to all direct hires. By turning to contractors for other workers, tech companies save money even if hourly wages are similar between direct hires and contractor workers because they save on benefit costs for the contractor workers.

Some 4.3 million workers are employed in about 275,000 US fast-food restaurants. Wages for full-time fast-food workers average $300 a week or $7.50 an hour, prompting the question of why fast-food wages have not risen faster in response to calls for at least $15 an hour.

One reason may be rules in franchise agreements that prevent franchisees from hiring workers from one another, so that an employee of one McDonald's franchisee cannot switch to a restaurant owned by another. Health clubs and auto repair chains also block workers from changing between franchisee, which may help to limit wage growth.

One study found that 32 of 40 fast-food chains, including Burger King, Domino's and Pizza Hut, prevented workers from switching between franchisee outlets without written permission. Fast-food chains say that they invest in low-skilled workers, justifying limits on their mobility.

Driverless trucks are coming faster than some expected. Scania AB announced that it would deploy driverless trucks that follow a manned lead vehicle to transport freight between ports in Singapore; such platooning allows trucks to follow each other closely. There are 1.8 million long-haul truckers in the US, and the Teamsters Union is trying to slow the deployment of driverless trucks in the US; driver costs average about 40 percent of costs for long-distance trucking companies.

H-1B. Candidate Trump in March 2016 said that "The H-1B program is neither high-skilled nor immigration: these are temporary foreign workers, imported from abroad, for the explicit purpose of substituting for American workers at lower pay." DOL in August 2017 modified its forms to require employers of H-1B workers who place them in other firms to name the firms where H-1B workers are employed.

Most H-1B visa holders are from India, and over a third earned $50,000 to $75,000 in 2017. Another third earned $75,000 to $100,000. Almost 10 percent earned less than $25,000, and 10 percent earned more than $175,000.

Employers in summer 2017 reported that USCIS was sending them more requests for evidence to justify the wages they are offering to H-1B workers. Elissa Taub of Siskind Susser in Memphis said that H-1B regulations require the job to be filled by a foreigner to be complex enough to be considered a "specialty occupation."

USCIS often asks why, if the job is so complex, the employer is paying only an entry-level wage. Employers say that, if they are hiring fresh foreign graduates of US universities, they offer Level 1 entry-level wages; in FY15, over 40 percent of approved H-1Bs were for Level 1 wages. In 2017, the Level 1 wage in Santa Clara county was $55,200 a year, while the Level 4 wage was $117,400 a year.

Many employers hire fresh graduates via the Optional Practical Training program, which does not have a minimum wage requirement. About 17 percent of all US workers, and 24 percent of workers in science, technology, engineering and math or STEM occupations, were born abroad in 2016.

Workers 40 and older are protected from age discrimination. Spirit AeroSystems of Wichita laid off 360 workers in summer 2013, including half who were 40 or older and many with spouses who had serious medical conditions. The Equal Employment Opportunity Commission allowed their case to proceed to federal court, where a trial began in August 2017. Workers must prove that age discrimination was the motivating factor for their dismissals, a high bar to overcome. Many age discrimination cases are settled before or during trial.

The US has an estimated 500,000 apprentices. President Trump wants to expand the number of apprentices to five million by increasing federal support and reducing standards for "registered" apprenticeships that require a mentor, wages that increase with experience, and minimum hours of formal instruction in both the classroom and the workplace. Some say that reducing apprenticeship requirements would create more low-wage jobs, as with British fast-food chains that offer lower-than-minimum wage apprenticeships.