Date: Sun, 25 Jun 2006 00:20:57 -0700 From: Norm Matloff To: Norm Matloff Subject: congressional hearing misleading, harmful To: H-1B/L-1/offshoring e-newsletter This past Thursday, the House Judiciary Immigration Subcommittee held a hearing on the H-1B work visa program titled, "Is the Labor Department Doing Enough to Protect U.S. Workers?" Even though I am highly critical of the H-1B program, I had hoped that the hearing would NOT take place. Careful readers of this e-newsletter know why: (a) The problems with H-1B are due to loopholes, NOT lack of enforcement. (b) The industry lobbyists will claim vindication, saying "We said all along that the vast majority of employers play by the rules and pay H-1Bs market rates"--when in fact the rules do NOT require paying market rates. As I've explained many times, the answer to the hearing's theme question, "Is the Labor Department doing enough to protect U.S. workers?" is that there is almost nothing that DOL can do. The law ITSELF is the problem, not lax enforcement. If the law were to allow drivers to go 80 mph in a residential neighborhood, you wouldn't blame the police for lax enforcement, would you? The law itself would be the problem, not the police. The official legal definition of the required _prevailing wage_ allows figures which are well below market levels. In other words, the organizers of the hearing are fundamentally incorrect in their implicit theme that the problems of the H-1B program are due mainly to lack of aggressive enforcement of the law. It is basically a loophole problem, not an enforcement problem. So when the GAO report presented at this hearing says that the law is being obeyed 99.7% of the time, that's an irrelevant statement, because the law is so riddled with loopholes that it is useless. And GAO should know better. In their 2003 report, they said, "Some employers said that they hired H-1B workers in part because these workers would often accept lower salaries than similarly qualified U.S. workers; however, these employers said they never paid H-1B workers less than the required wage." Get it? They paid H-1Bs less than Americans but not less than the prevailing wage. In other words, the prevailing wage is not the market wage, again due to huge loopholes. Yet the GAO testimony this week mentions nothing about this absolutely key finding that they had made earlier. I'm not saying this is deliberate deception on the GAO's part. The GAO does have a reputation for impartiality, and though there was some evidence of some political pressure by the industry in the 2003 study, I doubt that that was at work here. Instead, it was just sloppiness. The clearest, most succinct illustration of the loopholes in the prevailing wage law remains How to Underpay H-1B Workers, Programmers Guild Web site, http://www.programmersguild.org/archives/howtounderpay.htm John Miano, founder of the Programmers Guild and one of the four witnesses in the hearing. I highly recommend it. It shows how an employer can pay an H-1B $39,000 for a job that Americans normally get paid $70-90,000 for--yet be in full compliance of the law. The DOL is required to approve an H-1B application if the wage to be paid is at least the prevailing wage. Again, the prevailing wage can be absurdly low, but the DOL has no choice but to approve the application, just as the police officer would have no choice but to let those drivers zoom 80 mph by your house. So OF COURSE 99.7% of the applications are approved, and the 99.7% figure is non-news. In the Programmers Guild case study I mentioned earlier, in which H-1Bs were paid $39,000 for work normally paying $70,000-90,000, these H-1Bs would be in that 99.7% category too. So, the basic theme of the hearing was pointless in the first place. But worse than that, it gave the industry lobbyists a major opportunity to strengthen their case. Yes, it will strengthen the industry lobbyists' case, though of course not legitimately; again careful readers of this e-newsletter know why: As I explained above, the GAO report presented at this hearing and highlighted in the press reports is irrelevant. But it's even worse than irrelevant, because it is manna from heaven for the industry lobbyists. They can now say, "See, the critics of H-1B were screaming for nothing. Only 0.3% of the employers are abusing the system; 99.7% of the employers are playing by the rules." Again, that's completely misleading, because those rules themselves are the problem. But the industry lobbyists will claim vindication. The saddest part of this is that a number of activist programmers who've worked to reform H-1B mistakenly think they've won a victory. They don't understand that the industry lobbyists, not they, are the victors. The industry lobbyists will send a one-sentence summary of the GAO report, with the figure 99.7% highlighted, to every office on Capitol Hill. As I said (sorry to be so repetitive), that 99.7% figure is egregiously misleading, but Congress will happily accept it, as will the press. Indeed, it is certainly possible that the industry lobbyists planned things this way. If I had been advising them and if I didn't have any scruples, I certainly would have suggested this as a sure-fire way to get the H-1B critics off Congress' back. It would be guaranteed to work, because the clerks at DOL are not supposed to approve an H-1B Labor Condition Application (LCA) if the wage to be paid (item C in the LCA form) is less than the officially defined prevailing wage (item E); it's a purely mechanical procedure. Sure, a clerk will miss it in a small number of cases, but the procedure guarantees that you'll have a success rate very near 100%. What a plan! The GAO announces a near-100% compliance rate, and so Congress can say, "It is now proved that H-1Bs are paid as much as Americans, so we can expand the program"--thereby completely sidestepping the real problems. It's funny. If I tell someone that big corporations and some wealthy individuals pay rather little in taxes, he won't say that the IRS isn't enforcing the law well enough. He will readily understand that the problem is the gaping loopholes in the tax code, rather than weak enforcement. It's the same with H-1B--i.e. the problem is loopholes, not enforcement--but no matter how often Rob Sanchez and I repeat this simple fact in our respective e-newsletter, people just don't get it. And WHY don't they get it? I believe that the answer is that people tend to naively trust Congress. No matter how much they hear about corruption, they still assume that Congress would not be THAT corrupt as to enact laws which allow employers to bring in cheap labor to replace U.S. citizens and permanent residents. And yet that is exactly what Congress has done. And it is indeed due to corruption, the campaign contributions by the industry lobbyists. Amazingly, some members of Congress have even publicly admitted it (see http://heather.cs.ucdavis.edu/Archive/StealthBill.txt). Note once again that it is not just the small firms that underpay the H-1Bs. The above Web page is for Bank of America workers, and my analysis of Intel's saving money by hiring H-1Bs is at http://heather.cs.ucdavis.edu/Archive/IntelH1BWages.txt I'm enclosing two articles on the hearing, plus John Miano's own notes. Miano has done outstanding work on the wage issue, but the scope of this hearing served to totally obscure that work. He did mention in his testimony that a major problem was loopholes in the legal definition of prevailing wage, but this was clearly lost on the press: Neither of the two articles below, nor the Dobbs show, mentioned it. The GAO report, sadly, eclipsed Miano's testimony. I should point out that even though it is perfectly legal to pay an H-1B below market wages, and it is perfectly legal to hire an H-1B without making any attempt to recruit U.S. citizen/permanent resident workers, it is NOT legal to say you prefer or even insist on H-1B applicants. Miano and the Guild recently filed a complaint in the Dept. of Justice on this, and it will be interesting to see how that plays out. But for the most part, as I said, the problem with H-1B is loopholes, not lack of enforcement. One interesting part of Miano's notes is the point about Rep. Jackson-Lee (D-Texas). She has been one of the staunchest supports of the industry's view on H-1B in the House, but I must say that she has outdone herself here. As I have been saying throughout this posting, giving the DOL more enforcement powers would have almost no value, but Jackson-Lee does not want to throw American workers even that tiny bone. Amazing. Lee would seem to have a number of reasons to back the industry on H-1B: she reportedly had strong ties to Enron; her predecessor had made enemies of Enron and the business community by opposing NAFTA; and her husband is a high-ranking administrator at the University of Houston (academia is a huge source of support for H-1B). By the way, though she is African-American and she portrays herself as a fighter in support of black people, she has refused the entreaties of black leaders who point out to her that black engineers are being harmed by the H-1B program. You can access the hearing testimony, including a video, at http://judiciary.house.gov/oversight.aspx?ID=247 If you are interested in seeing my analysis of the 2003 GAO report (which, in spite of the useful employer survey, also included a flawed analysis of the CPS data), see http://heather.cs.ucdavis.edu/Archive/GAO03.txt Norm ********************************************************************* http://www.informationweek.com/outsourcing/showArticle.jhtml?articleID=189600737 Thousands Of H-1B Workers Are Underpaid, GAO Says But the 3,229 petitions cited represent a miniscule percentage of all H-1B applications. By Eric Chabrow InformationWeek Jun 22, 2006 05:51 PM Thousands of foreign nationals hired under the H-1B visa program have been paid less than prevailing wages, congressional auditors reported Thursday. But the percentage of those being underpaid is small. The Government Accountability Office, the investigative arm of Congress, found that the Labor Department certified 3,229 H-1B visa applications from from January 2002 to September 2005, even though the wage the employer promised to pay on the application was lower than the prevailing salary for that occupation. GAO didn't specify which occupation. In one example from fiscal year 2005, the wage the employer agreed to pay was $55,000 a year, though the prevailing rate for that job was $75,000--a 37% difference. In examples from the three previous fiscal years, the difference between the employer wage rate and the prevailing salary ranged from 9% to 40%. The percentage of petitions not paying the prevailing wage is miniscule, considering that from 2000 to 2005 the government approved nearly 1.57 million petitions, the vast majority being renewals of H-1B visa holders already working in the United States. GAO's analysis shows that the government approved 96% of petitions. Still, GAO recommended that the Labor Department improve its checks of employers' applications. But the Labor Department suggested that would require too much effort for too little payback. "The error rate was extremely low compared to the universe of applications processed, about three-tenths of 1%," Emily Stover DeRocco, assistant Labor Secretary for employment and training, said in a written response to the GAO report. "By most standards [the error rate] does not signal a significant program weakness. ... There is some question as to whether GAO's recommendation for more stringent measures to achieve a lower (or zero) incidence of error is supported by the magnitude of the error rate that was found. It is unclear whether the added benefits of instituting more stringent measures would equal or exceed the added cost of implementing them." IT jobs represented two of the top five occupations for H-1B visa petitions: 674,805 for systems analysts and programs and 58,429 for other computer-related occupations. Other top five occupations seeking H-1B visas: college professors and researchers, 94,685; accountants and auditors, 68,256; and electrical and electronics engineers, 65,974. The GAO also discovered 993 certified applications with invalid employer identification number prefixes, which it says could indicate a fraudulent application. Labor officials told GAO that the department matches the applications' employer identification number to a database with valid employer identification numbers in other programs, such as the permanent employment program, but doesn't formally do so with H-1B applications because its an attestation and not a verification process. As part of its enforcement efforts, the department's Wage and Hour division investigates complaints against H-1B employers, and it received 1,026 complaints for the six years ended in fiscal 2005. In 2000, the department required employers to pay $1.2 million to 226 H-1B workers in back pay. By 2005, those figures rose to $5.2 million for 604 workers. Better enforcement isn't necessarily the reason for the sharp increase. "Program changes, such as a higher visa cap in some years, could have been a contributing factor," Sigurd Nilsen, GAO director of education, workforce, and income security issues, wrote in the 57-page report, prepared for the House Judiciary Committee and its Subcommittee on Immigration, Border Security, and Claims. Though the departments of Labor, Homeland Security, and Justice share responsibilities for the H-1B program, GAO said Labor and Homeland Security could better address the challenges they face by sharing information. Homeland Security reviews Labor's certified application but can't easily verify whether employers submitted petitions for more workers than originally requested on the application because the government's Citizens and Immigration Services database can't match each petition with Labor's application case number. It's during that process of reviewing petitions that staff might find evidence that employers fail to meet their H-1B obligations, GAO says. For instance, Homeland Security could discover that a worker's income on a W-2 wage statement is less than the wage quoted on the original application, which could lead to Homeland Security denying the petition if an employer can't explain the discrepancy. Yet, GAO says, there's no formal process for Homeland Security to report the discrepancy to the Labor Department. GAO recommended that the Citizenship and Immigration Services include Labor's application case number in its new information technology system. Homeland Security agreed with GAO's recommendations, but Labor said it believes Congress intentionally limited Labor's role and placed program integrity with USCIS. Indeed, current law bars Labor's Wage and Hour Division from using this information to initiate an investigation of the employer. GAO suggested that Congress should consider eliminating the restriction on Labor using information from Homeland Security to initiate an investigation, directing the two departments to share information on employers that may not be fulfilling program requirements. The GAO report also revealed that the government upheld very few complaints by Americans claiming they were displaced by H-1B workers. >From 2000 through 2005, the Justice department discriminatory conduct in six of the 97 investigations closed and assessed $7,200 in penalties. ********************************************************************* http://news.zdnet.com/2100-3513_22-6087367.html Some H-1B workers underpaid, federal auditors say By Anne Broache, CNET News.com Published on ZDNet News: June 23, 2006, 10:03 AM PT More than 3,200 petitions for the H-1B visa workers much used by technology companies have gained approval even though the employers involved didn't commit to paying wages at the prevailing rate, government auditors have reported. Those certifications represented far less than 1 percent of the approximately 960,000 H-1B applications approved by the U.S. Department of Labor between 2002 and 2005, according to a 20-page report released Thursday by the Government Accountability Office (GAO). "This error rate, by most standards, does not signal a significant program weakness," Assistant Secretary of Labor Emily Stover DeRocco said in a written response to the report. Despite the tiny fraction of violations, the auditors indicated that the situation poses concerns. "As Congress deliberates changes to U.S. immigration policy, it is essential to ensure that employers comply with program requirements designed to protect both domestic and H-1B workers," the report said. The H-1B program permits foreigners with at least a bachelor's degree in their area of specialty to be employed in the United States for up to six years. Under federal regulations, all such workers must receive pay equal or higher to the "local prevailing wage," and employers are supposed to ensure that they're not displacing qualified Americans in the process. The GAO report didn't name which employers or industries were at fault. Kara Calvert, the director of government relations for the Information Technology Industry Council, emphasized that her organization's member companies don't abuse the system and use the visas only for "legitimate purposes." ITIC's members include Apple Computer, Dell, Cisco Systems, IBM, Intel and Microsoft. Four examples cited in the report showed that Labor Department officials in recent years have approved applications even though the salaries listed on the forms ranged from $3,000 to nearly $24,000 lower than the annual prevailing rate. In fiscal year 2005, for instance, a petition for an employee who should have been paid at least $75,000 went through even though the application listed an offer of only $55,000. The Labor Department reviews the vast majority of its applications through an electronic system that promises results in minutes but "does not consistently identify all obvious inaccuracies," the report said. Labor officials, for their part, told GAO investigators that "if they conducted a more in-depth review of the applications, they could overreach their legal authority and increase the processing time for applications." The number of complaints filed against H-1B employers by the visa holders or others also has climbed slightly, from 117 in 2000 to 173 in 2005, according to the GAO's findings. The most common violation determined by Labor Department investigators was failure to pay the prevailing wage. Companies owed $5.2 million in back pay to 604 employees in 2005, as opposed to $1.2 million owed in back wages to 226 employees in 2000. Earlier this week, the Programmers Guild, which represents information technology workers, said it filed more than 300 complaints of its own this year with the Justice Department alleging discrimination against U.S. workers in favor of H-1B holders. Those complaints target online job postings that the organization claims demonstrate a clear preference toward hiring foreign workers. Other critics of the visa program said the GAO report's findings demonstrate what they've been charging for years--that the system allows companies to recruit foreign labor on the cheap. "Implementation of the H-1B program fails every test of the principles its advocates have asserted," said Ralph Wyndrum Jr., the president of IEEE-USA, an organization that represents high-tech professionals. "Employers can and do give preference to H-1Bs over U.S. workers." The organization urged Congress to pass new laws that would impose greater oversight over the application process. A number of pending proposals already address that issue, though they haven't yet proceeded to votes. One of them is the USA Jobs Protection Act, introduced last summer in the House of Representatives, which would require employers to certify that they're paying foreign workers at least the prevailing wage and are not displacing any Americans in the process. The ITIC's Calvert said her organization agrees fully that stronger enforcement tools are also needed. "One visa used up by companies abusing the system is one less visa (our companies) can use for scientists and engineers to help them innovate," she said. Large high-tech companies have been pressuring Congress to elevate the existing H-1B limit, saying access to additional foreign workers is the only sure way to fill key gaps in their staffs. The cap on such visas, which was recently exhausted for fiscal year 2007, currently stands at 65,000, a far cry from its peak of 195,000 between 2001 and 2003. Microsoft Chairman Bill Gates, for one, has been a proponent of eradicating the restrictions entirely. The U.S. Senate voted recently to raise the cap to 115,000 as part of a sweeping immigration bill, but that measure has stalled so far in the House. Date: Sat, 24 Jun 2006 12:32:11 -0400 From: "John M. Miano" Subject: Re: Hearing today To: Norm Matloff Let write them down now that I have some sleep: My observations on the hearing. 1. The DoL's treatment of "obvious errors and omissions". The GAO report pointed out a number of cases where there were obvious errors but the DoL's automated process approved the LCA anyaway. The GAO pointed out that DoL approved LCAs with: o Promised wages less than the claimed prevailing wage. (What most of the media has latched on to.) o Bad EINs. They could just have well pointed out o Obvious errors in salaries (e.g. Programmer salary listed as $454,000,000 a year) o Errors in job classifications (e.g. classifying Dentists under job code 030 -- computer programming) o Speling erors that corrupt the data (e.g "New Yrok"_ 2. The DoL has just started to audit previous "willful violators" within the past month. 3. In short, these two issues are areas where the DoL could do more but has not. However, this is trivial. So what if 4,000 more LCAs since 2002 had been rejected if the DoL's computer program did some more validation? Still that means 99% of the LCAs are approved. Yes, they could do more validation; it wouldn't take much effort; but it wouldn't change much either. If the DoL changes it computer program, this is what happens: a. Employer submits LCA with wage of $40,000 and prevailing wage of $50,000. b. DoL, following the GAO recommendations, rejects it. c. Employer resubmits the LCA with the wage of $40,000 but puts down the prevailing wage is $25,000. d. The DoL has to approve the LCA. This doesn't change anything, 2. Jackson-Lee (the only D who showed up) was trying to make the point that if the DoL is not doing everything in its power already there was no need to increase its powers. 3. Most of the Congressmen on the committee have no idea that the statute limits the power of DoL to investigate. Nor do they understand why dancer instructors can get H-1B visas. 4. The GAO report noted that the DoL now investigates complaints. However, as my testimony pointed out, they do not seem eager to do so. My submission of 130 job ads from one company stating "H-1B Workers Only" or "H-1B workers preferred" to support an allegation of failing to recruit U.S. workers in good faith was rejected as being "insufficient evidence" of a violation. 5. Most telling quote in the report: "Labor uses education as the primary method of promoting employer compliance with the H-1B program." 6. The report notes that few discrimination complaints filed with the Justice Department found violations. These are the types of complaints I am filing right now. I will say that I have submitted a number of them in the past and only did not result in a settlement. (Funny how you can't remember the number of successes but know the number of failures. Also makes me wonder if the six successes were all mine.) I wish we had more details here to know the nature of the complaints. I suspect that many of the unsuccessful complaints are filed by people who are fired and replaced by H-1B workers. They say to themselves, "How could this possibly happen in America." So they file a complaint. Unfortunately, such firings are usually perfectly legal and their is nothing the DoJ can do. I suspect that is the reason for the low success rate on this path. One casually reading the report might get the impression that most complaints are filed by disgruntled U.S. workers who blame their job loss on H-1B. FWIW....I have over 300 of these same types of complaints in the pipeline and I expect to succeed in nearly all of them. There may be a few that the situation will be as the employer always claims, "I really hire Americans but we got a new person in HR and she created this ad from ads she saw...." and that turns out to be exactly what happened. (Yeh, right.) The report notes that none of these cases actually went to trial. That is my experience as well. All of our successes came from settlements before trial. I doubt any of the 300 here will go to trial either. 7. The bottom line is the GAO recommends: a. Removing the restrictions on enforcement. b. Have USCIS share its data. Both of these are in my H-1B study and in my testimony. ********************************************************************* partial transcript from Lou Dobbs show: http://transcripts.cnn.com/TRANSCRIPTS/0606/23/ldt.01.html ...Even more bizarre, in 1996, the Department of Labor found that the guest-worker visa programs, quote, do not protect U.S. workers' jobs or wages. Ten years later and Congress has done nothing. That inaction has emboldened employers seeking only to hire only H1-B workers to the exclusion of American workers. As members of the House Judiciary Committee learned on Thursday. JOHN MIANO, PROGRAMMER'S GUILD: In the past six weeks I found over 1,500 ads requesting H1-B workers only from 350 employers. There are now Web sites that are virtual visa bazaars. Companies don't advertise jobs. They advertise visas. TUCKER: Other panelists told the elected representatives that fixing the problem is simple and crucial. ANA AVENDANO, AFL-CIO: The best thing we can do is to protect U.S. working standards so that workers can earn a decent wage, work in dignity under decent conditions and not continue to foster systems like the H1-B program that simply provide employers with a steady supply of exploitable workers. TUCKER: But instead of fixing the problems, Congress is ready to expand the program in the name of immigration reform...