A new GLO Discussion Paper reviews employers’ violations of the wage contracts of workers on H-1B temporary work visas to the US; higher labor market power is associated with fewer violations, higher unemployment rates and subcontractor firms are associated with more.

GLO Discussion Paper No. 855, 2021

Wage Theft, Economic Conditions, and Market Power: The Case of H-1B Workers – Download PDF
by DeVaro, Jed & Norlander, Peter

GLO Fellow Peter Norlander

Author Abstract: This study explores what determines employers’ violations of the wage contracts of workers on H-1B temporary work visas, which occur when firms pay those workers below the promised prevailing or “market” wage. A theoretical framework is proposed that predicts more violations during economic downturns, fewer violations when firms have more labor-market power, and more violations by subcontractor firms. Empirical analysis is based on a firm-level matched dataset of wage and hour violations and the firms that sponsor H-1Bs. Higher labor market power, measured by the Herfindahl-Hirschman Index, is associated with fewer violations. Higher unemployment rates and subcontractor firms are associated with more violations. The effects of the unemployment rate and labor market power are amplified in subcontractor firms.

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