Professor Norm Matloff's H-1B Web Page

Overview:

The H-1B work visa is fundamentally about cheap, de facto indentured labor.

The tech industry lobbyists portray H-1B as a remedy for labor shortages and as a means of hiring "the best and the brightest" from around the world. Though I strongly support that latter goal, the lobbyists' "best and brightest" claims are not valid.

The vast majority of H-1Bs, including those hired from U.S. universities, are ordinary people doing ordinary work, not the best and the brightest. On the contrary, the average quality of the H-1Bs is LOWER than that of the Americans.

Furthermore, vast majority of H-1Bs, again including those hired from U.S. universities, are not doing work for which qualifed Americans are unavailable.

Instead of being about talent, H-1B is about cheap, immobile labor:

• Employers accrue Type I wage savings by paying H-1Bs less than comparable Americans (U.S. citizens and permanent residents).
• Employers accrue Type II wage savings by hiring younger, thus cheaper, H-1Bs in lieu of older, thus more expensive (age 35+) Americans.
• Both types of wage savings are fully LEGAL, due to loopholes in the law and regulations. The problem is NOT one of lack of enforcement.
• For many tech employers, having immobile workers is even more important than having cheap labor. If an engineer leaves an employer in the midst of an urgent project, this can be a major problem for the employer. The H-1B and green card programs give the employer heavy leverage to force workers to stay.
• Abuse of H-1B extends across the industry, including the large U.S. mainstream firms., facilitated by the nation's top immigration law firms. It does NOT occur primarily in the Indian "body shops," and it DOES occur in the hiring of international students from U.S. university campuses.

The underpayment of H-1Bs is well-established fact, not rumor, anecdote or ideology. It has been confirmed by two congressionally-commissioned reports, and a number of academic studies, in both statistical and qualitative analyses.

Even former software industry entrepreneur CEO Vivek Wadhwa, now a defender of foreign worker programs who is quoted often in the press and who has testified to Congress in favor of expansion of the programs, has confessed,

I know from my experience as a tech CEO that H-1Bs are cheaper than domestic hires. Technically, these workers are supposed to be paid a "prevailing wage," but this mechanism is riddled with loopholes.

Wadhwa has also stated

I was one of the first [CEOs] to use H-1B visas to bring workers to the U.S.A. Why did I do that? Because it was cheaper.

Even Rep. Zoe Lofgren, the most strident advocate of the H-1B program Congress has ever had, now realizes that H-1B is used for cheap labor, in full compliance with the law. She concedes that the program is undercutting American workers:

U.S. Rep. Zoe Lofgren, a Democrat whose Congressional district includes Silicon Valley, framed the wage issue at the hearing, sharing the response to her request for some wage numbers from the U.S. Department of Labor.

Lofgren said that the average wage for computer systems analysts in her district is $92,000, but the U.S. government prevailing wage rate for H-1B workers in the same job currently stands at $52,000, or $40,000 less.

"Small wonder there's a problem here," said Lofgren. "We can't have people coming in and undercutting the American educated workforce."

(Lofgren's 2011 reform bill, however, would not fix the situation, and would add an equally-harmful automatic green card program. In addition, Lofgren's bill implicitly singles out the Indian IT services as the main offender, disgraceful and absolutely inaccurate scapegoating.)

Contents of this site:

• One-minute outline of issues.
• Overview in the form of brief quotes
• Ten-minute summary.
• Click here to view some of my major writings on these topics. These range from short newspaper op-eds to lengthy articles in academic journals.
• Click here for my biography.

Ten-minute summary:

• Age is THE core H-1B issue. Most H-1Bs are under 30, and since younger workers are cheaper than older ones (in both wages and health care costs), employers use the H-1B program to avoid hiring older Americans. (Note: "old" is age 35!)
• Another major attraction for employers, especially in Silicon Valley, is the "handcuffed" status of H-1Bs. In practical terms, foreign tech workers have serious mobility issues. In particular, if the worker is being sponsored by the employer for a green card, the worker dare not switch jobs, as that would entail starting the multiyear green card process all over again. Employers value this immobility very highly, since the exit of an engineer in the midst of an urgent project is very harmful. Immigration lawyers extol this as a major "benefit" of hiring H-1Bs. Thus employers tend to give preference to the foreign workers over similarly-qualified Americans when hiring,
• In addition, two congressional reports and a number of academic studies have shown that H-1Bs are often paid less than comparable Americans, i.e. those of the same age, education and so on.

  Some other studies claim to show that the H-1Bs are not underpaid, but they suffer from methodological problems. In any case, one can readily see the underpayment, by noting that the H-1Bs are largely unable to move freely in the labor market--if one cannot move, one cannot find the best salary among competing employers. Thus the H-1Bs are on average paid below-market wages. Note also the material on prevailing wage below.

  As mentioned above, even H-1B advocate and former tech CEO Vivek Wadhwa has admitted underpaying H-1Bs himself.
• Underpayment of H-1Bs is usually done in full compliance with the law. The problem is primarily NOT one of lack of enforcement or fraud. Instead, recall from above that even Vivek Wadhwa and Rep. Zoe Lofgren--two extremely vociferous suppporters of foreign worker programs--admit that abuse of the H-1B program is legal, due to gaping loopholes in H-1B law.

For example: The law and regulations require that employers pay H-1Bs the prevailing wage--but the latter does NOT account for "hot" technical skills, say Android programming. These command a premium of 15-25% in the open market. Thus one can see immediately that the legal prevailing wage is typically lower than the true market wage. This is what Rep. Lofgren was referring to in the above quote (though her numbers are not quite correct).

The law also requires the employer to pay the "actual wage," a misnamed term that refers to the wage earned by other "similar" workers employed at the firm, in the same job. Clearly this is rife with loopholes too. The employer can claim the foreign worker is unique in terms of skills, experience and job, so the actual wage is actually his wage (Dept. of Labor written policy recognizes this). And of course if most or all of the "similar" workers are foreign too, the statute loses all meaning.

Furthermore, the DOL PERM data (for green card applications, which operate with the same wage rules as H-1B) show that most employers pay only the prevailing wage or very near it, NOT the actual wage. Since the legal prevailing wage is below market rates, it is clear that most employers are underpaying their H-1Bs.

• Abuse of foreign worker programs pervades the entire tech industry, INCLUDING the large, mainstream U.S. firms, and INCLUDING the foreign workers hired from U.S. universities. It is NOT limited to the Indian "bodyshops." The large U.S. firms do tend to hire better-qualified workers than do the bodyshops, but BOTH the mainstream firms AND the bodyshops are hiring at a discount relative to their market sector.

  By the way, Microsoft has claimed on a number of occasions that their H-1Bs are paid over $100,000 per year, but government data show this to be false.

• Legal fees are tiny compared to the wages savings the employer accrues by hiring the foreign worker. H-1B sponsorship costs about $2,000 in legal and other fees; for a green card, it may be $10,00. But these are one-time costs, compared to the employer's saving tends of thousands of dollars EVERY YEAR, FOR THE 6 YEARS OF THE H-1B PERIOD.
• There is no tech labor shortage.
  • No study, other than those sponsored by the industry, has ever shown a shortage.
  • Wages, both for new graduates and established professionals, have been stable in the engineering and programming fields. Starting salaries for new computer science graduates were up about 3% in Spring 2011, according to NACE; a 2011 DICE report, in spite of claiming a shortage, concedes that overall tech salaries are up 1%; a San Jose Mercury News article in July 2011 reports a strong job market in Silicon Valley, but also states that wages are up only 3% since 2009. None of these figures indicates a labor shortage.
  • Low unemployment figures are not good measures of a shortage. The real issue is underemployment, occurring for instance (a) when an engineer or programmer is forced to leave the field, becoming "employed" elsewhere, typically at a lesser wage, or (b) when those who work as independent consultants (a large chunk of the programming profession) find contracts hard to get and rates lower than before. None of this shows up in unemployment data.
  • A 2007 Urban Institute study found that the universities are producing more than enough graduates at the bachelor's level in STEM.
  • Figures for students graduating with computer science degrees cannot be used to determine whether we have a shortage of people qualified for computer science jobs. Most people in the computer field, including those in software development, have their degrees in fields other than computer science.
  • In 2012 congressional testimony, Texas Instruments admitted that they have plenty of American engineering job applicants at the bachelor's level.
  • American STEM bachelor's degree holders tend not to pursue graduate study because the pay is not high enough--and that in turn is due to the large influx of foreign STEM graduate students.
  • This was actually forecast in an NSF internal report back in 1989. (More on this below.)
  • A blue-ribbon commission appointed by the federal National Institutes of Health found that there is a huge glut of workers in lab science research. Moreover, the commission found that the glut was largely due to a heavy influx of foreign workers, and that it has led to dismal working conditions that has caused talented young Americans to avoid lab science.

• Employers hire only a tiny fraction of those who apply. HR departments routinely exclude CVs of applicants they deem "too expensive"--those that are over age 35. (So managers never see these CVs, and mistakenly believe there are no applicants.)
• Shortage arguments based on analysis of American K-12 math/science scores to those of other nations are red herrings, based on misleading averages. It is also rank hypocrisy, since the same employers who claim that "Johnny can't do math" are laying off tens of thousands of Americans who had been top math/science students when they were kids.

  Indeed, as noted above, Texas Instruments, stated that there is no shortage of American engineers at the bachelor's degree level. (For a point about the graduate level, see NSF material below.)

• The world's "best and brightest" should be welcomed, but only a tiny percentage of H-1Bs are in that league. Even among the former former students now in the worforce--the group the industry claims are especially talented--the immigrants on average produce fewer patents per capita, are less likely to work in R&D, and have their U.S. degrees from lower-ranked schools than Americans of the same education, age and so on.

  Meanwhile, the H-1B program results in many of our own best and brightest U.S. citizens and permanent residents being squeezed out of the market once they accumulate 10 years or so of experience, and worse, many top college students are discouraged by H-1B and offshoring from pursuing the field in the first place.

  In other words, H-1B is causing an internal brain drain of the best and brightest American talents. This has been explicitly recognized by UC Berkeley researchers, and as noted earlier, by a blue ribbon commission in the National Institutes of Health. The latter focused on the PhD level.

• The industry lobbyists claim that the industry needs H-1Bs because 50% of engineering doctorates in the U.S. are awarded to foreign students. But almost no jobs in the computer industry need a PhD; even Intel recruiters have told me that their firm has very little interest in hiring PhDs.

  Moreover, an internal report in the National Science Foundation, a key government agency, actually advocated the use of the H-1B program as a means of holding down PhD salaries, by flooding the job market with foreign students. The NSF added that the stagnation of salaries would push domestic students away from PhD study, which is exactly what has happened. Former Fed chair Alan Greenspan has also explicitly advocated the use of H-1B to hold down tech salaries.

In other words, H-1B is the cause of the relative lack of Americans getting PhDs, not the solution to that "problem" as claimed by the industry.

• The per-capita rates of patents among immigrant engineers have been similar to, or lower than, those of natives. Indeed, Prof. Jennifer Hunt, much cited by the industry, found that

  After I control for field of study, in the middle graph, and education, in the bottom graph, both main work visa groups [i.e. H-1Bs who came directly to the U.S.] and student/trainee visa holders [H-1Bs who first came to the U.S. as students and later entered the job market under the visa] have statistically significantly lower patenting probabilities than natives...

  This is directly contrary to the industry lobbyists' claim that the H-1B program is needed for innovation. On the contrary, the displacement of the American workers has produced a net loss in innovation.

• Proposals to establish fast-track green card programs to retain the foreign workers are misguided. First, in the EB-1 green card category, which is for outstanding talents, waits are already short. Second, and more importantly, the foreign workers are mostly young, and would still crowd out American workers of age 35+ even with green cards.

• A rallying cry of those who promote the "automatic green card" proposals is "If we send the foreign students home, they'll work for our competitors!" This is a bizarre justification for displacing American workers. Moreover, even if the foreign students do acquire green cards and stay in the U.S., many will STILL "help our competitors"; research by UC Berkeley professor AnnaLee Saxenian showed that most Asian immigrants were involved with tech firms back home, through consulting, investment and so on.

• Other than a minuscule exceptional category, H-1B employers are NOT required to try to fill the jobs with Americans before hiring the foreign workers.
• The claims that each H-1B creates four new jobs are based on fallacious statistical analysis. This has been exposed by the Wall Street Journal, and the claims are obviously invalid anyway--Filling the jobs with qualified Americans would have the same job-generating effects.
• The foreign STEM students at U.S. universities are generally NOT being "sent home after they graduate," contrary to political rhetoric. Among those who wish to work in the U.S. after graduation and have an American employer willing to hire them, the overwhelming majority do stay.
• WHAT SHOULD BE DONE: The bipartisan Durbin/Grassley bill in the Senate is an excellent bill. However, note that some parts are extremely useful while others are rather useless. The most useful provision would redefine the legal term prevailing wage so that it would reflect the true market wage, which is NOT the case currently. The provision extending the H-1B-dependency restrictions to all employers would also be of value. By contrast, the portions of the bill dealing with fraud and enforcement are NOT useful, since (as stated earlier), the problems with H-1B are loopholes, not enforcement. In addition, for reasons give above, green card programs should NOT be expanded or liberalized; the IDEA Act by Rep. Lofgren would be a step backwards, not forwards.