How H-1B Visas Became a Tool for Cheap Labor

The H-1B visa was sold as a way to import workers no American could replace. The Labor Department's own records describe something else. In a typical year, 60% of H-1B jobs are certified at wages below the median for the same work in the same city.^[1] The workers are not the rarest talent on earth. They are cheaper versions of people already here.

That is the entire story of the program. A company that wanted exceptional talent would pay a premium for it. Instead, employers reach for the visa to fill ordinary jobs at below-ordinary pay, and they have built the hiring pipeline to match.

A bar that dropped

Before 1990 the visa was called the H-1. The law required "distinguished merit and ability." In practice that meant a renowned physicist, a specialist surgeon, a leading engineer. Across every industry, the country issued roughly 48,000 of these visas in 1989.^[2]

The Immigration Act of 1990 rewrote the standard. It replaced "distinguished merit and ability" with "specialty occupation," defined as a job that requires a bachelor's degree. A 22-year-old with a generic computer science degree now qualified. Millions of Americans hold the same degree.

The cap was set at 65,000, later stretched with exemptions and renewals into a far larger flow.

Cheaper, not better

Employers, not the government, choose how much an H-1B worker gets paid. The prevailing-wage system has four levels. Pick Level 1 and the law lets a company pay at the 17th percentile for the occupation. Pick Level 2 and it pays at the 34th. The Economic Policy Institute found that 60% of all H-1B positions are certified at these two below-median levels.^[1]

The median H-1B salary is about $118,000.^[3] That is real money, above the $80,600 a typical American household earns. It is also below what the same work commands on the open market. A worker who must be sponsored, tied to one employer, and threatened with removal if laid off does not negotiate from strength.

The selection process rewards quantity. In 2024 employers filed 780,900 registrations for 85,000 slots.^[4] The more applications a company submits, the more it wins. And 65% of approvals that year were renewals, not new arrivals.^[5] The program keeps an existing workforce in place rather than reaching for scarce new talent.

Why companies stopped training Americans

A firm that can sponsor a foreign engineer at the 34th percentile has little reason to train an American for the same desk. The cheaper worker arrives credentialed, compliant, and unable to leave. The investment in domestic talent stops paying.

The displacement is documented. Major technology companies have laid off American staff and filed for thousands of H-1B workers in the same year. One software company was approved for more than 5,000 H-1B positions in 2025 while announcing over 15,000 layoffs.

The claim that drives the program is that America cannot produce enough skilled graduates. The numbers do not support it. Among recent college graduates ages 22 to 27, computer science majors face 6.1% unemployment and computer engineering majors 7.5%.^[6] Those rates run higher than the unemployment of art history and biology graduates. The country is not short of computer scientists. It is short of jobs that go to them.

Into the most expensive cities

The visa does not spread its arrivals evenly. 72% of H-1B approvals go to workers from India, channeled through a small set of Indian outsourcing firms and a handful of large tech employers.^[5] Those jobs sit in a few metros.

Silicon Valley shows the result. About 30% of its engineers were foreign-born in 1990. By 2023 the figure reached 66%.^[7] The same pattern repeats in Seattle, New York, and Northern Virginia.

These are not temporary guests. H-1B workers bring spouses and children, then convert to green cards and stay. The visa is a front door to permanent settlement, and it deposits that settlement into the exact cities with the worst housing costs. Roughly 64% of all foreign-born residents already live in just 20 metropolitan areas.^[8] Adding more demand to those markets raises rents and home prices for the Americans who were there first.

The program is described as a benefit to the economy. For the metros absorbing it, the bill arrives as higher housing costs and a professional class American graduates can no longer enter.

What reform looks like

The fix is to make the visa do what it claimed to do. Require every H-1B job to pay above the local median, so price proves the talent is genuinely scarce. End the lottery-by-volume and award visas to the highest-paid positions first. Cap the years a worker can stay, so "temporary" means temporary. Require employers to recruit Americans first.

The Center's position is narrower still. The old H-1 standard, "distinguished merit and ability," was the right one. A visa for skilled foreign workers should be reserved for the rare best-in-world talent that no American can supply, which means the program shrinks to a small fraction of its current size. Everything above that line is labor arbitrage, and it has cost Americans the best jobs the economy produces.

Sources

1. Economic Policy Institute: H-1B visas and prevailing wage levels
2. The Conversation: What's an H-1B visa? A brief history
3. USCIS: Characteristics of H-1B Specialty Occupation Workers
4. USCIS: H-1B Electronic Registration Process
5. Pew Research Center: What we know about the US H-1B visa program
6. Federal Reserve Bank of New York: Labor Market for Recent College Graduates
7. Joint Venture Silicon Valley: Silicon Valley Index
8. Migration Policy Institute: U.S. Immigrant Population by Metropolitan Area