US Companies Save $100,000 Per H-1B Worker Due to Significant Wage Gap
American corporations are achieving substantial payroll savings of close to $100,000 for every H-1B visa worker they employ over the duration of the visa, according to a groundbreaking economic analysis that scrutinized wage data across hundreds of thousands of hires. The study, published by the National Bureau of Economic Research, meticulously examined more than 340,000 H-1B hires made by for-profit firms between 2021 and 2024.
Adjusted Data Reveals Stark Wage Disparity
After adjusting for critical factors such as education, occupation, age, gender, and geographic location, the research uncovered that H-1B workers are paid approximately 16% less than comparable US employees. This finding starkly contrasts with unadjusted figures, which initially suggested H-1B workers earned about 13% more than their American peers, largely because many are concentrated in high-paying technology hubs like Silicon Valley.
Once job roles and geography are properly factored in, the pattern completely reverses, resulting in what researchers describe as a 16% wage disadvantage. This represents a dramatic 29 percentage-point swing, highlighting the profound impact of contextual adjustments on wage comparisons.
"There is a very large wage gap between H-1Bs and comparable natives. Everybody sort of 'knew' that, but it's nice to document it with credible wage data," remarked George J. Borjas, as quoted by Newsweek. He further noted that apart from major American technology giants, "a lot of the other firms underpay their H-1Bs."
Borjas expressed surprise at the widespread use of the program, observing that most companies hired only one, two, or three H-1B workers during the four-year sample period. "Those firms also have large wage gaps," he added in comments reported by Newsweek.
Substantial Cost Savings for Employers
Given that salaries in the examined occupations typically exceed $100,000 annually, the paper estimates that employers save nearly $100,000 over the six-year period an H-1B visa holder may remain in the United States. This significant financial advantage helps explain the persistent and intense demand for these visas despite limited availability.
Between 2021 and 2026, more than 450,000 unique beneficiaries registered annually for just 85,000 available H-1B slots. Technology employers, outsourcing firms, and multinational contractors have consistently reported struggling to meet their hiring needs within this restrictive cap.
The study argues that the level of payroll savings is a key driver of this demand. It notes that "the average payroll savings accruing to a firm that wins an H-1B visa in the lottery are large," as reported by Newsweek, with figures approaching six digits over the visa term.
Challenging Prevailing Narratives
Kevin Lynn, founder of US Tech Workers, told Newsweek that these findings directly challenge the common claim that employers rely on the H-1B visa only when no qualified US workers can be found. "In practice, any one-time fee is trivial compared to the compounding long-term labour cost savings the visa provides," he stated, according to Newsweek.
Lynn also emphasized, in comments published by Newsweek, that the visa is held by the employer rather than the worker, effectively tying the employee to the firm and altering labor market dynamics. An H-1B worker "largely cannot" move freely for better opportunities, he said, as quoted by Newsweek, which further suppresses wage competition.
Higher Fees Unlikely to Deter Hiring
Starting from Fiscal Year 2027, companies awarded an H-1B slot will be required to pay a $100,000 fee, a policy announced by US President Donald Trump. This measure was intended to curb potential abuse and fund immigration services.
However, the NBER analysis suggests this fee could be set much higher without significantly reducing demand. As reported by Newsweek, researchers estimated the charge could range from $118,000 to $264,000, depending on assumptions about productivity and turnover, while all 85,000 visas would likely still be filled annually.
Under these projections, annual federal revenue could range between $6.2 billion and $22.4 billion, the study found, according to Newsweek. This indicates that even substantial fee increases may not dampen employer enthusiasm for the program, given the considerable long-term savings involved.
The comprehensive analysis provides robust evidence of systemic wage disparities, offering new insights into the economic motivations behind H-1B visa usage and its implications for both American workers and immigration policy.
