To: H-1B/L-1/offshoring e-newsletter Mon May 13 10:56:19 PDT 2013 I should say at the outset that this will not be your usual, "business executive likes H-1B" posting. This one is different, because the executive in question made quite a slip, as you'll see at the end. Indeed, I've titled a couple of my recent postings to this e-newsletter as "case studies," and this current one indeed fits that description. It will demonstrate two points: 1. Those employers who are the most adamant in denying they use H-1B for cheap labor are sometimes the ones who are most clearly doing exactly that, hiring foreign workers to save in wages. 2. Those employers who are the most adamant in claiming we have a "shortage" of American programmers and engineers are sometimes the ones who most clearly DON'T WANT TO HIRE AMERICANS. Don Tennant has written an interesting, indeed provocative article, titled "Corporate Turnaround Exec: Raising H-1B Visa Cap Just Makes Economic Sense," at http://www.itbusinessedge.com/blogs/from-under-the-rug/corporate-turnaround-exec-raising-h-1b-visa-cap-just-makes-economic-sense.html He e-mailed me that he had referenced me in the article, and he asked me to comment. In the article, Don interviews Kathleen Brush, who describes herself as a "global business consultant" on her Web page, http://www.kathleenbrush.com/ Before I discuss Ms. Brush's comments, I do have to express some reservations I have right off the bat, looking at her LinkedIn page. Brush is basically not a techie. She did work as a systems programmer 30 years ago, good, but even then she did not do work of the type typically done by people with graduate degrees, the focus of her comments (see below). She does not have any STEM degree, which by itself is no barrier to doing well in tech, but it is very relevant here since she discusses STEM students. These are not strong reservations, but I do think her statements below should be read in the above context. Now, let's take a look at one of the key passages: ************************************************************* We need to raise the cap on the H-1B visas. I don't think Americans are being robbed of jobs. I've spent a fair amount of time studying the graduation rates, and I have a lot of statistics on it. When you look at the people who are graduating with STEM degrees, in graduate school it's something like 60 percent are foreign; most of them are Asian. When you look at the shortages of engineers in the United States, the shortage of IT workers, you can tie that back to which ethnicities study which types of subjects. Without question, it’s the Asians. It's not all Asians, but it's a lot of them—that includes the Chinese and the Indians, which is the vast majority. Those are the ethnic groups that are most likely to study for any type of STEM degree. There has been a marked trend in—let's call them the European Americans—moving away from studying the STEM programs. Latin Americans and African Americans have never really had strong percentages studying in the STEM programs. So we've got a bit of a challenge here. For some reason, we have made it more attractive for students to study political science or sociology or other non-STEM fields. And that's a problem. ************************************************************* Brush seems to be confusing Asians with Asian-Americans here, but let's concentrate on her statement about graduate school. It's debatable whether a graduate degree is that useful, say in the computer fields. But if Brush thinks it's necessary, then there is an easy answer to her question as to why "For some reason, we have made it more attractive for students to study political science or sociology or other non-STEM fields." Yes, indeed, "we" have done exactly that! I'll give the short version, because readers of this e-newsletter have seen me say it so often: The large foreign influx has suppressed PhD wage growth so much that it is a financial loser to study for a PhD, due to 5-6 years of lost industry-level earnings. This was recognized in the congressionally-commissioned NRC report, and elsewhere. And, back in 1989, an internal position paper in the federal NSF forecast this effect of the foreign influx suppressing wages, and also accurately forecast that the Americans would then switch to more lucrative fields such as law and business--which is exactly what happened. Worse, the NSF paper actually ADVOCATED this. So, if the underrepresentation of Americans in STEM doctoral programs is considered bad, then H-1B is the CAUSE of the problem, not the SOLUTION. In other words, if Brush wants to see more Americans in grad school, "we" need to reduce H-1B, not expand it. Note by the way that the typical undergrad major for those who later wish to attend law school is political science, one of the fields Brush cites. Brush then says: ************************************************************* I've had a lot of H-1B visa folks working for me. They made the same salaries as everyone else. We didn't pay them any less. ************************************************************* Really? A cursory look at the PERM (green card application) data for her most recent employer, Openwave Systems, strongly contradicts her claim. In almost all cases, Openwave is paying their foreign workers right at the prevailing wage, the legal minimum. Recall that a KEY point in H-1B wage analysis is that the legally required wage is typically 20% or more below market level, because it does not take into account the "hot" skills that employers say they hire H-1Bs for, and for which they would have to pay a premium in the open market. I go into this in detail in my recent Migration Letters publication as well as my older University of Michigan Journal Law Reform paper. It is also pointed out in the 2003 GAO report, etc. Even the Brookings paper I discussed yesterday (on which more is coming) essentially made this same comment (also with a 20% figure). In other words, Openwave is underpaying its foreign workers by 20% or more, relative to their actual market value. Recall that that is what I term Type I salary savings accrued by employers of foreign tech workers, i.e. paying the latter less than comparable Americans. (Remember, the word "comparable" is crucial, e.g. regarding skill sets.) I also talk about Type II salary savings, obtained by hiring young H-1Bs instead of older Americans. Sure enough, Openwave hires its foreign workers mostly at Level I and II, in essence the younger people. Finally, Brush says: ************************************************************* I'm pretty sure I'm right here, that most Indian workers, and I believe Chinese workers as well, they’re motivated by their paychecks. Their paychecks can provide them with a lot of things they've never had before. In the United States, we sort of take for granted a car, and nice accommodations, etc. In developing countries like India, people are more motivated to get those things. If you look at [famous psychology theorist Abraham] Maslow, they're more motivated towards those lower-order needs, whereas in the U.S. it's the higher order. ************************************************************* Some Asian-Americans would be deeply offended by the above language. Yes, most immigrants do come to the U.S. to improve their economic lot, as for instance my father did, but the language is a little edgy. Let's put that aside, though, and look what Brush is really saying, which is that SHE DOESN'T WANT TO HIRE AMERICANS. Whether you agree with her Maslovian premises or not, her own view is very clear. Americans, including the U.S. born children of those H-1Bs she has hired, are just too comfy for Brush. She wants the "lean and hungry" ones, from India and China. So forget all that talk of hers about a "shortage" of American engineers etc.; she doesn't want them, except maybe for the "talking" jobs, e.g. management, customer interface etc. One final point: I've written a lot on the general level of talent of the H-1Bs, finding that on average, the foreign workers are of weaker talent, relative to the Americans. Some are extremely sharp and innovative, and their immigration should be facilitated, but most H-1Bs, INCLUDING most foreign graduate students, are not in that league. See my EPI paper for the data. I've also written, elsewhere (not in the EPI paper nor in Bloomberg), what I believe are the reasons for the foreign students being less innovative and so on. One of those reasons is that the foreign students tend to come from educational systems that focus on rote memory. For instance, Wen Jiabao, the recent Premier of China, has expressed deep concern about that problem, which he believes is holding his country back. But another reason I've cited (again, not in EPI/Bloomberg) is that the type of person Brush describes above, who comes here ONLY for the nice cars etc., rather than out of a passion for computers, is bringing down OUR country's innovative ability. In that latter light, I found interesting one of the reader comments on my February 11 Bloomberg article. There I had summarized my EPI paper, and there is a reader comment there by one Jerry Chen, possibly a former (or current) foreign student himself: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ I do, however, agree with the notion that innovation comes from those who "want to" go into STEM and not those who "have to." Although the dedication and determination of foreign STEM students do bring competition, which is something valuable, the cultivation of students who like to focus on creativity and innovation may be important as well. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ It's unfortunate that the debate on H-1B focuses on underpayment, a question that, as I pointed out yesterday, is ALREADY SETTLED. I would argue that an even more important issue concerns quality. The displacement, mainly indirect but very real, of Americans by the foreign workers means a net loss in quality, in turn hampering our ability to compete on the world technology stage. Everyone ought to be concerned. Norm Archived at http://heather.cs.ucdavis.edu/Archive/KathleenBrush.txt