[WorldMaker]

It's a bit of a catch-22 because if you add enough lower compensated employees you shift the local median lower. If "everyone" in the local area is hiring more cheaper H-1Bs that gives you a chance to hire even more H-1Bs for even cheaper. Averages can be a fun game that way.

Even if you try to pin it to the median that does not include H-1Bs, you still are letting the market compete on labor cost and that competition can still affect the local median. Companies decide all the time that they could hire, for example, 2 H-1Bs for the cost of one "senior" local developer, encouraging that local developer to maybe only ask for 1.5x "an H-1B" to remain competitive in that market. Iterate that enough in hiring decisions and companies still have more control of that local median than labor does.

I don't know if there is a "fair" way to set the cost of labor for an H-1B, but "local median" or any other average-based math is probably not it.