Prevailing Wage Analysis

Overview

Prevailing wage analysis is implicated in two immigration processes: H-1B skilled worker visas, and labor certification for permanent residency based on employment.   The Employment and Training Administration of the US Department of Labor is responsible for administering DOL functions relating to prevailing wages.  Congress imposed prevailing wage requirements in the late 1980s after a 60 Minutes expose about an IT firm on the East Coast that was laying off US workers for the purpose of hiring foreign workers at lower wages.  Those policies resulted in a major change in employment-based immigration law with the Immigration Act of 1990.

These rules require employers to pay at least the prevailing wage to H-1B workers and permanent resident applicants.  The prevailing wage is the weighted mean average wage received in a defined occupation for a certain geographical area.  Initially state employment services agencies administered the prevailing wage regime by gathering and analyzing wage data.  This system proved expensive and resulted in unacceptably inconsistent data.  In 1995 the Department of Labor issued General Administration Letter 2-95 which mandated the current two tier wage data system administered by the Bureau of Labor Statistics (BLS) and known as the Occupational Employment Survey (OES).

This system also produced inaccurate data resulting in the Department of Labor issuing another letter clarifying the use of OES data as well as guidelines for employers wishing to compile and submit independent wage survey data.  This letter, General Administration Letter 2-98, is reprinted here.

Similarly Employed

The employer must pay the candidate at least the prevailing wage for those "similarly employed."  Similarly employed means having substantially comparable jobs in the occupational category in the area of intended employment.  An occupational description should sufficiently describe to Occupations are described in the Department of Labor Publication, The Dictionary of Occupational Titles.

Skill Levels

For reasons of economy, the OES system divides occupations into two skill levels: Level I and Level II.  These skill levels are defined by the amount of supervision required and not by experience or education.  An employee who requires "close supervision" falls under Level I.  An employee who requires less or little supervision falls under Level II.  Unfortunately, Level I and Level II wages are very disparate.  This disparity often results in very experienced candidates being underpaid and very inexperienced candidates being overpaid.

Mean or Weighted Average Wages

A mean or weighted average wage simply refers to a common mean rather than a mode or median.  The mean is the sum of the group's wages divided by the number in the group (e.g. for a sample of three employees with wages of $30,000, $50,000 and $70,000, the sum [$150,000] divided by the number in the sample [3] equals the mean wage of $50,000).   The employer is bound to pay at least this mean wage for a defined occupation in the same area of intended employment.

Geographical Areas

The Bureau of Labor Statistics defines statistical areas by population density and area.  The three common designations for these areas are Primary Metropolitan Statistical Areas (PMSA), Metropolitan Statistical Areas (MSA), and Consolidated Metropolitan Statistical Areas (CMSA).

A Metropolitan Statistical Area must contain either a minimum population of 50,000 or a Census Bureau-defined urbanized area and a total MSA population of at least 100,000.   An MSA comprises one or more counties and may also include one or more outlying counties that have close economic and social relationships with the central county.   If an MSA has more than one million persons, Primary Metropolitan Statistical Areas may be defined within it.  When PMSAs are established, the larger area of which they are component parts is designated a Consolidated Metropolitan Statistical Area (CMSA).   When PMSAs have been defined within a CMSA, that CMSA is not a sufficiently narrow area for compiling wage data.  When CMSAs have been defined, only wage data restricted to the component PMSAs will be acceptable under GAL-2-98.

Employers must pay at least the prevailing wage for the geographical "area of intended employment" which is defined at 10 CFR 656 as the area "within normal commuting distance."  Areas within an MSA or PMSA are deemed within normal commuting distance, but areas merely within a CMSA are not.  Counties falling outside of an MSA are usually relegated to the statistical purgatory known as the "Balance of State."  Positions offered within these areas are deemed within normal commuting distance from other positions in that Balance of State.

Attention to geographical issues is very important for H-1B consultants who may work in more than one statistical area.  In these cases, employers often must acquire wage data from both statistical areas and pay the higher wage.  In the Silicon Valley, for example, San Francisco and other areas of the north peninsula comprise a different MSA than Santa Clara County and San Jose.  Those employing H-1B consultants working in both areas may be subject to additional wage analysis burdens.