April 25, 2011

Wage Methodology for the Temporary Non-Agricultural Employment H2-B Program

Proposed Rule
Summary

Score: 24 / 60

Additional details
Agency
Department of Labor
Regulatory Identification Number
1205-AB61
Agency Name
Department of Labor
Rule Publication Date
10/05/2010
Comment Closing Date
11/12/2010

RULE SUMMARY

The Department of Labor (the Department or DOL) proposes to amend its regulations governing the certification of the employment of nonimmigrant workers in temporary or seasonal nonagricultural employment and the enforcement of the obligations applicable to employers of such nonimmigrant workers. This Notice of Proposed Rulemaking (NPRM or proposed rule) proposes to revise, and solicits comments on, the methodology by which the Department calculates the prevailing wages to be paid to H–2B workers and U.S. workers recruited in connection with a temporary labor certification for use in petitioning the Department of Homeland Security (DHS) to employ a nonimmigrant worker in H–2B status.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
Proposed rule appears in regulations.gov with either a RIN search or a keyword search. A link to the NOPR is available 4 clicks from the department's home page. The RIA is in the Federal Register notice.
5/5
2. How verifiable are the data used in the analysis?
Complete source information given for some data. For some data used in key calculations, internal data sources are mentioned, but it is not clear how readers could access these data.
2/5
3. How verifiable are the models and assumptions used in the analysis?
Some assumptions (eg labor demand elasticity) are supported by citations; others not. Description of calculations is a very high level overview, so it would be hard to verify or try to recreate the methodology.
2/5
4. Was the analysis comprehensible to an informed layperson?
Regulation and analysis are short and relatively readable. Acronyms detract from this. The RIA and other analysis in the preamble is so short that it sometimes comes across as assertions rather than a chain of reasoning supported by evidence, so it takes some work to understand how analysis could have led to the department's conclusions.
3/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
3/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The purpose of the regulation is "to ensure US workers are not adversely affected by the employment of H2-B workers." It characterizes the increase in wages mandated by the regulation as a transfer. This seems to have a pretty clear effect on (some) US workers' quality of life, though the overall effect on Americans' standard of living via effects on economic growth is not addressed. Other results that aren't direct outcomes are also mentioned.
4/5
Does the analysis identify how these outcomes are to be measured?
More specifically, the regulation mandates an increase in H2-B workers' wages that will also allow US workers competing for these jobs to earn higher wages. Average hourly wage for these workers is estimated to increase by $4.38. Other "results" not measured.
4/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The analysis shows how the regulation will increase wages. It makes a case for a benchmark based on the Occupational Employment Statistics wage survey, because this would equalize wages on average, but it provides no theoretical justification for why collective bargaining, Davis-Bacon or Service Contract Act wages must also be used to achieve the result.
3/5
Does the analysis present credible empirical support for the theory?
The analysis calculates how wages will increase if all H2-B workers are paid the wages indicated by the Occupational Employment Statistics Survey, so there is empirical support in this sense.It does not calculate how use of Davis-Bacon wages will increase payments above this level.
3/5
Does the analysis adequately assess uncertainty about the outcomes?
A few perfunctory comments about lack of data and other aspects that make it hard to predict things with 100% accuracy, but no uncertainty analysis. The analysis doesn't even present wage calculations in a range.
1/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
3/5
Does the analysis identify a market failure or other systemic problem?
A court invalidated the department's previous wage methodology because the department had not sought comment on it. While this explains the legal motivation for proposing the regulation, it does not indicate a market failure or systemic problem. The underlying problem is a concern that H2-B workers will undermine US workers' wages. There are concerns that the existing methodology does not adequately reflect the appropriate wage necessary to ensure that U.S. workers wouldn't be adversely harmed.
5/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
The preamble outlines a theory of how the current 4-tiered skill level reduces H2-B wages below wages of US workers in the same occupations. It is not obvious why "stratified" wages are really a problem; the real problem seems to be that the permitted wages are simply too low. The department claims that this in turn creates pressure to reduce wages for the US workers.
3/5
Does the analysis present credible empirical support for the theory?
The RIA finds that H2-B wages are usually lower than wages earned by US workers in similar occupations. It does not adjust for any differences between H2-B and US workers.
3/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
No relevant content.
0/5
7. How well does the analysis assess the effectiveness of alternative approaches?
2/5
Does the analysis enumerate other alternatives to address the problem?
Analysis mentions that the department considered some other alternatives, and it lists them. They are somewhat vague for non-specialist readers.
4/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
All options considered are different ways to calculate a wage benchmark using different methods or data.
2/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
No relevant content. Some alternatives were dismissed with a bit of reasoning for reasons other than outcomes, and the department admits it did not analyze some of them.
0/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
Baseline is assumed to be the wages established by the current regulation, but these are not extrapolated into the future.
2/5
8. How well does the analysis assess costs and benefits?
1/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
Analysis partially calculated the transfers associated with the alternative the department chose. Costs of other options not analyzed. It did not identify the incremental cost of using Davis-Bacon wages.
3/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
Principal expenditure appears to be increased wages. This was calculated based on the assumption that wages would increase only to levels indicated in the Occupational Employment Statistics wage survey. But if Davis-Bacon wages are higher than the survey wages, then the regulation will lead to wage increases larger than the department estimates.
2/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
Analysis acknowledges that some employers could pass on high labor costs in the form of price increases but does not estimate these.
1/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
Potential for deadweight loss is explained theoretically. Analysis argues that the regulation will not lead to reduced output because employers usually demand more H2-B workers than the annual cap of 66,000 allows. So, employers will simply pay more for the limited supply of H2-B workers. No discussion of the distortions caused by limiting H2-B visas to 66,000 annually. Analysis also says it's too hard to quantify those changes based on exisiting data.
2/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
No relevant content.
0/5
Does the analysis identify the alternative that maximizes net benefits?
Net benefits are not calculated. The analysis does not even consider whether different alternatives would lead to different amounts of transfers.
0/5
Does the analysis identify the cost-effectiveness of each alternative considered?
No relevant discussion.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Analysis explains theoretically that the regulation transfers income from employers and some H2-B workers to US employees and other H2-B workers, but declines to calculate this. It calculates the costs on small businesses in the industries most affected by the regulation. It breaks down the higher wages by industry and also gives a sense of what percentage of each industry will be affected.
2/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
There is a perfunctory statement about the workers in those industries being the beneficiaries, but there isn't much analysis.
1/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The department has the option of providing a better justification for the current 4-tier wage system, so the department does have choices; the option selected was not determined by the court decision. RIA reads as if the calculations were performed to calculate transfers that result from decisions that were made for other reasons. Requirements for wages above the Occupational Employment Survey wage levels are not analyzed at all.
1/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
Net benefits are not calculated, and there is insufficient information in the regulatory analysis to calculate them. The department did not even calculate wage (transfer) effects of alternative approaches, which could have been very useful given the nature of the regulation.
0/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
No commitment to do this. The anticipated wage changes from bringing wages up to averages in the Occupational Employment Survey could have been used as goals or targets.
1/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
No commitment to measure future effects, but the Occupational Employment Survey could be used to track one result.
1/5
 
Total 24 / 60