Experiential / Reality-based Learning / May 13, 2010

Firms Pay More to High-Skill Foreign IT Professionals than to their U.S. Colleagues, Shows Management Insights Study

HANOVER, MD, May 13, 2010 – Contrary to public assertions, IT professionals in the U.S. who are not citizens actually earned more than their American colleagues from 2000-2005 and therefore did not depress the salaries of American citizens, according to the Management Insights feature in the current issue of Management Science, the flagship journal of the Institute for Operations Research and the Management Sciences (INFORMS®).

“Are Foreign IT Workers Cheaper? U.S. Visa Policies and Compensation of Information Technology Professionals” is by Professors Sunil Mithas and Henry C. Lucas, Jr. of the Robert H. Smith School of Business, University of Maryland, College Park.

Management Insights, a regular feature of the journal, is a digest of important research in business, management, operations research, and management science. It appears in every issue of the monthly journal.

Their study, the authors maintain, “provides indirect evidence that visa and immigration policies so far have not had any adverse impact on the wages of American IT professionals due to any relatively lower compensation of foreign IT professionals.”

A word from study co-author Hank Lucas, 
Smith Professor of Information Systems

"We knew when we undertook this research that the results would be controversial and that individuals who are unopen to new ideas and evidence would attack our work from every possible angle. In terms of judging the criticism, it is important to remember that this paper appears in Management Science, one of the top academic journals in business schools and operations research departments. The paper was rigorously peer reviewed by an associate editor and individual reviewers who are anonymous to the authors. The paper went through a number of revisions before all of the reviewers were satisfied that the results were valid.

We agree that there is anecdotal evidence that some firms do hire H1B visa holders for lower wages than U.S. born workers. However, we believe our study clearly shows that this is not always the case, that there are a significant number of foreign-born workers in the U.S. with H1B and other visas and green cards who receive a premium over U.S. workers for their skills. An open research question would be to determine how many high skill foreign workers are underpaid and then to estimate if there are enough people in this category to have an impact on the wages of the large number of individuals working in the IT industry.

We believe our study provides information that is useful for managers and policy-makers and hope that it will be useful in framing important discussions about immigration and visa policies."

Download the research 

The paper, which relies on salary data on more than 50,000 IT professionals, puts into doubt calls for more restrictive policies for workers in the United States on H-1B visas. H-1B is a temporary work visa issued to employers allowing them to hire professionals in occupations that require a bachelor’s degree and highly specialized skills.

The authors warn that enacting policies that restrict the number of skilled IT professionals reaching the United States may actually hurt American workers by leading American companies to off-shore, hiring IT pros to work outside the U.S. Reports about hiring of foreign IT professionals in Canada by Microsoft who were denied visas to work in the U.S., they say, suggest that this damage may already be occurring.

In a worst case scenario, they warn, policies restricting immigration of specialized workers will hurt the long-term competitiveness of U.S. firms and the domestic economy.

The authors argue that higher quotas for specialized workers benefit American companies.

“A culturally and globally diverse workforce,” they write, “even if it comes at a higher price and means paying higher wages for foreign IT professionals, may prove highly effective in capitalizing on opportunities for leveraging foreign countries as source or as markets for improved competitiveness.”

The current issue of Management Insights is available here. The full papers associated with the Insights are available to Management Sciencesubscribers. Individual papers can be purchased at institutions.informs.org. Additional issues ofManagement Insights can be accessed here.

The other Insights in the current issue are:

  • Ordering Behavior in Retail Stores and Implications for Automated Replenishment by Karel H. van Donselaar, Vishal Gaur, Tom van Woensel, Rob A. C. M. Broekmeulen, Jan C. Fransoo
  • Reality Check: Combining Choice Experiments with Market Data to Estimate the Importance of Product Attributes by Eleanor McDonnell Feit, Mark A. Beltramo, Fred M. Feinberg
  • Dynamic Programming Models and Algorithms for the Mutual Fund Cash Balance Problem by Juliana Nascimento, Warren Powell
  • Valuing Money and Things: Why a $20 Item Can Be Worth More and Less Than $20 by A. Peter McGraw, Eldar Shafir, Alexander Todorov
  • Hierarchical Structure and Search in Complex Organizations by Jürgen Mihm, Christoph H. Loch, Dennis Wilkinson, Bernardo A. Huberman
  • Contracting for Collaborative Services by Guillaume Roels, Uday S. Karmarkar, Scott Carr
  • Optimal Windows for Aggregating Ratings in Electronic Marketplaces by Christina Aperjis, Ramesh Johari
  • Markets for Inventors: Learning-by-Hiring as a Driver of Mobility by Neus Palomeras, Eduardo Melero
  • On the Optimal Product Line Selection Problem with Price Discrimination by Cornelia Schön

INFORMS journals are strongly cited in Journal Citation Reports, an industry source. In the JCR subject category “operations research and management science,” Management Science ranks in the top 10.

The special MBA issue published by BusinessWeek includes Management Science and three other INFORMS journals in its list of 20 top academic journals that are used to evaluate business school programs. Financial Times includes Management Science and four other INFORMS journals in its list of academic journals used to evaluate MBA programs.

The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, financial engineering, and telecommunications. The INFORMS website iswww.informs.org. More information about operations research is at www.scienceofbetter.org

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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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