To: H-1B/L-1/offshoring e-newsletter Sat May 10 23:20:53 PDT 2014 In his recent EPI talk http://www.epi.org/event/falling-boom-bust-global-race-scientific/ Michael Teitelbaum discussed his new book, "Falling Behind? Boom, Bust, and the Global Race for Scientific Talent," in which he disputes the claim made by the tech industry and other vested interests that we have a STEM labor shortage. Though I have not seen Michael's book, I highly recommend that you view the video of his talk; there is thought-provoking material in virtually every sentence. However, he did say that there are spot shortages, and cited Silicon Valley as a "hothouse," with a genuine shortages. I'm not sure the basis on which he came to that conclusion (he mentiond having friends in Silicon Valley who apprise him of the situation there), but it didn't really jibe with what I know. I do know that the market in Silicon Valley--where most of my students get their first job--has been strong for new graduates, as I have reported many times. But I have been loosely following the OES wage data for the area, and haven't seen any big rises. And most important, I know that OLDER WORKERS (35+) still have a difficult time in that supposedly-booming region. I'll come back to this point later in this posting. So, what is the real situation? I've gathered some data from a few sources, and the net result seems to me that there has NOT been a strong upward trend in (real) wages in the last few years. First, here are the OES data. This data (including CPI) is for the job category, Software Engineer, Applications, in the San Jose/Sunnyvale/Santa Clara region: time median hr wg CPI change from prev yr 05/13 61.15 2.60 05/12 55.80 2.64 05/11 56.44 2.43 05/10 56.16 1.07 05/09 55.89 1.07 05/08 51.71 4.19 05/07 50.27 3.36 05/06 49.16 3.93 05/05 46.73 1.11 Except for the 9.6% increase in 2013, Silicon Valley wages have been flat, actually losing ground relative to inflation. Even the 9.6% figure doesn't seem consistent with the "desperate to hire" claims made by employers, and as discussed below, the 9.6% figure itself may be somewhat misleading. Note that the inflation figures above use the usual "market basket" measure, https://www.sanjoseca.gov/index.aspx?NID=2417 If one homes in (pun intended) on housing, one sees an even worse picture. The San Francisco Chronicle reports that apartment rentals jumped 21% in San Francisco in the past year. (The big firms such as Google, Facebook, Apple and so on bus in workers from San Francisco, where it is fashionable among Silicon Valley tech workers to live these days.) From personal experience, I know that apartment rents in Sunnyvale and Mountain View are currently in the $2,500-$5,000 per month range. (No, you didn't read that wrong.) Michael has also cited Bay Area housing prices as responsible for whatever "shortage" of labor Silicon Valley has; who wants to PAY MORE for a SMALLER house? Speaking of housing prices, anyone who has studied real estate markets knows that the mix matters (condos, 3-bedroom homes, 4-bedroom etc.), rather than overall averages. That is certainly true for programmer salaries, and the Dice.com report, http://resources.dice.com/report/dice-tech-salary-survey-results-2014/ makes a very interesting comment. It found a 7.2% wage increase in Silicon Valley from 2013 to 2014, but upon a finer breakdown found this: "The seven percent year-over-year increase in salary was partially driven by those tech professionals earning more than $250,000 being included in this year's results. Excluding those highly paid professionals, Silicon Valley salaries still increased at a greater rate than the national average or five percent year-over-year." Presumably the 9.6% figure I displayed above is also substantially lower when one removes the super-earners. As all of you know, I have continually stressed the points that the primary reasons employers find it attractive to hire H-1Bs are that (a) it allows them to avoid hiring the older workers, who are more expensive in both wages and benefits, and (b) the H-1Bs, at least those being sponsored for green cards, are immobile and thus in no danger of jumping ship to another firm. In view of (a) and my "real estate mix" example, it would not be numerically inconsistent for employers to increase wages somewhat for the younger workers while still shunning the older ones. In that vein, recall what I reported here a few weeks ago, in http://heather.cs.ucdavis.edu/CandidTalkWithCEOsEtc.txt I mentioned in that post that I was opting to not disclose the names of the participants or their affiliations, even though no one had asked me to do so. Well, I now think it's important to loosen that slightly, and reveal that "Firm Y" was Dropbox. VP X had said that most of his work involves hiring, and that he was "desperate" to hire. But I replied that a friend with excellent qualifications--except for age--had applied to Dropbox on their Web site just the previous week, and was rejected the very next day, without even a phone call. VP X then admitted frankly that he didn't have time to go through the mountains of applicants his firm receives. And...based on what I know of tech industry HR practices, it's likely that in order to reduce the size of those mountains to mere knolls, Dropbox filters OUT most older workers upon receipt of their applications. This is vital to keep in mind when you hear employers say--and sincerely, I believe in VP X's case--that they are "desperate" to hire. Desperate, maybe, but only desperate to hire the young and the foreign. I should mention that this same rejected friend ("A") had applied for a position with another friend of mine ("B"), who at the time was Director-level in a small but thriving firm in San Francisco. "B" gave "A" a trial period, and told me that "A" had done work of a quality commensurate with his other (younger) workers, but that "A" was perceived as too expensive by the boss. "B" added that he doesn't have trouble hiring software engineers, and that he doesn't think there is a shortage. Getting back to Michael, he of course focused on the national scale, and concluded that we don't have a national shortage, and that there is no justification for raising the H-1B cap. But I think it's important to understand that even the exceptional regions may not be exceptions after all. Norm Archived at http://heather.cs.ucdavis.edu/Archive/SiliconValleyWageTrends.txt