Introduction
This morning, the Department of Homeland Security proposed replacing the H-1B lottery with a weighted system that favors workers certified at higher Department of Labor (DOL) “Wage Levels.”1 On the surface, this seems like a merit-based reform: higher wages should mean higher skills. In reality, DOL’s Wage Levels are very different from actual wages. The Wage Level framework was never designed to compare wages across occupations because it measures relative seniority within a job category, not actual pay. There are many workers paid at the highest DOL Wage Level but making below the median American wage, while some of the lowest DOL Wage Level are among the best-paid in the economy.
Using recently released FOIA data on all H-1B registrations and petitions filed from FY2021–2024, linked with Department of Labor data showing those individual workers’ Wage Levels, I show that the proposed Wage Level system would not prioritize the highest-skilled or best-paid workers. Instead, it would have three surprising consequences:
1. A windfall for outsourcers. Large IT outsourcing firms (Wipro, Infosys, Tata, Cognizant, etc.) would actually gain under the rule, receiving 8% more visas, because they systematically register mid-career workers classified at higher Wage Levels despite paying comparatively low salaries. By contrast, a system based on actual pay would reduce visas for outsourcers by over 60%.
2. A setback for US-educated talent. International students graduating from American universities earn higher salaries on average than other H-1B workers, but because they are early-career, they are overwhelmingly classified at the lowest Wage Levels. The proposed rule would cut visas to F-1 graduates by 7%. A compensation-ranking would increase their share by 7%.
3. Minimal skill gains. DHS justifies the rule as raising skill levels, but the effect is trivial: the weighted lottery would lift median H-1B salaries by just 3% (from $92,000 to $95,000). By contrast, a compensation-based system would raise the median by a 52% jump to $140,000. It would also vastly increase the share of PhDs selected by a whopping 148%.
The Wage Level system was created to enforce minimum pay rules, but is ill-equipped to rank workers. Using it as a prioritization tool produces perverse results: rewarding outsourcing firms and older workers in lower-skill occupations while penalizing genuinely high-wage, high-skill talent, especially students trained in the US.
The Wage Level Mirage
DOL’s Wage Level framework was designed as a compliance mechanism to enforce the Immigration and Nationality Act’s (INA) requirement that H-1B workers be paid at or above the “prevailing wage” for their occupation and geographical area. To operationalize this, DOL uses the Occupational Employment and Wage Statistics (OEWS) survey to distinguish between four Wage Levels, intended to approximate the relative seniority of the offered position within a given occupation. The four Wage Levels are Level I (“entry”), Level II (“qualified”), Level III (“experienced”), and Level IV (“fully competent”).
Currently, there are two random lotteries conducted each year: first an unreserved lottery for all registered H-1B petitions including those for beneficiaries who have earned a US Master’s or above, and then a reserved lottery only for US Master’s and above graduates.
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