New H-1B wage rules may lift foreign worker pay by $14,000 a year

The United States has proposed a major overhaul of visa wage rules that could increase annual pay for foreign workers by about $14,000, as authorities move to address a long-standing pay gap with American workers and concerns over the use of lower-cost labour.

The proposal, issued by the Department of Labor, follows a presidential directive and targets wage-setting mechanisms across key visa programmes including H-1B and PERM.

Presidential push behind the wage reset

The proposal stems from a September 2025 Presidential Proclamation that asked the Department of Labor to revise prevailing wage levels under the H-1B programme. The proclamation said the system has been used in ways that undermine US labour standards and create downward pressure on wages.

Officials said the current wage structure may incentivise employers to hire foreign workers at lower wages than their US counterparts, which goes against the intended design of the programme.

“Replacing, not supplementing” US workers
The Department has taken a strong position on how the system is functioning. It said employers have been using visa programmes to “replace, rather than supplement, US workers”.

The report links this practice to wage gaps and hiring patterns, particularly in high-skill sectors such as technology.

A detailed analysis by the Department shows that H-1B workers earn, on average, $10,191 less than similarly employed US workers.

In some sectors, especially computer-related occupations, the gap is even higher. Officials said this difference reflects structural issues in how wages are calculated and applied.

Why wages are lower under current rules
The report identifies a key flaw in the prevailing wage system. Wage benchmarks are derived from broad labour market data that includes workers with varying levels of education, experience and responsibility.

However, visa programmes such as H-1B are designed for “specialty occupations” that require highly specialised knowledge and at least a bachelor’s degree. Despite this, wage calculations often include workers who do not meet these criteria.

In addition, entry-level wages are currently based on the lower end of the wage distribution, which pulls down the minimum pay threshold. This results in wages that do not reflect the qualifications of the workers being hired.

Majority of jobs clustered in low wage bands
Data from FY2024 shows that 63% of certified H-1B positions fall under Level I and Level II, the lowest wage categories.

These levels correspond to entry and early-career roles, but the Department said many of these positions still require specialised skills. The classification system allows employers to place jobs in lower wage tiers, reducing salary obligations.

Scale of the programme amplifies impact
The wage changes are significant given the scale of the H-1B programme. In FY2024 alone, the Department certified 502,374 H-1B applications, accounting for the bulk of temporary foreign worker approvals.

This means any change in wage rules could affect a large segment of the workforce and employer hiring practices.

Link to permanent immigration pathway
The proposal also highlights the connection between temporary visas and permanent residency. It notes that 57.6% of PERM applications are filed for workers already on H-1B visas.

This overlap means wage policies under temporary visa programmes have a direct bearing on long-term immigration outcomes.

New wage structure raises thresholds across levels
The Department has proposed a revised four-tier wage system that shifts pay benchmarks upward:

• Level I (entry): from 17th percentile to 34th percentile
• Level II: to 52nd percentile
• Level III: to 70th percentile
• Level IV (highest): to 88th percentile

The current system, introduced through earlier guidance, places Level I near the bottom of the wage distribution and Level IV below the top end, which the Department said does not accurately reflect skill levels.

Officials described the existing wage levels as “artificially low” and said they allow employers to pay foreign workers below market rates.

Expected impact on wages and costs
The Department estimates that the revised structure would increase average wages by about $14,000 per worker annually. Overall, the changes could result in annual wage transfers of up to $6.56 billion from employers to workers. Officials said these transfers reflect higher mandated wages rather than increased employment.

The report also found that employers often pay above the required minimum. The average wage offered under H-1B applications was $121,908, compared to a prevailing wage of $111,717.

This suggests that actual market wages are higher than regulatory thresholds, reinforcing the need to revise the wage system.

The Department linked the proposal to wider labour market trends. It noted that the supply of US workers with relevant qualifications has increased, particularly in technology fields, while demand patterns have shifted due to factors such as automation and artificial intelligence.

It also cited evidence of companies laying off US workers while continuing to hire foreign workers, raising concerns about wage competition and job displacement.

Implementation limited to new applications
The revised wage rules will apply only to new applications for prevailing wage determinations and labour condition applications.

Existing approvals and ongoing employment arrangements will remain unaffected, allowing employers time to adjust to the new framework.

Objective: align wages with US labour standards

The Department said the primary objective is to ensure that hiring foreign workers does not “adversely affect the wages and working conditions of US workers”.

By aligning wage levels with actual labour market conditions, the government aims to reduce incentives for employers to rely on lower-cost foreign labour and ensure that visa programmes operate as intended.

The proposal is open for public comment, after which the Department will decide on final implementation.