Date: Fri, 1 Apr 2011 17:28:01 -0700 From: Norm Matloff To: Norm Matloff Subject: he STILL would have been replaced by foreign workers To: H-1B/L-1/offshoring e-newsletter Yesterday's House Immigration Subcommittee hearing on H-1B could turn out to be a major turning point--in the wrong direction. The general themes were (a) a long-overdue recognition of the fact that U.S. citizens and permanent residents are being squeezed out of jobs by the H-1B program and (b) an assumption that a program to give automatic green cards to new foreign STEM graduates at U.S. universities ("Staple a green card to their diplomas") would remedy the problem. Well, (a) is nice but (b) is flat out wrong. The proposed green card program would NOT help American workers like Brendan Kavanagh, quoted in the NYT and Computerworld articles below. He was replaced by workers from Wipro, the large Indian "bodyshop" firm, but absent Wipro, he still would have been replaced by other foreign workers, clutching their newly-stapled green cards. Here's why: Though as I will explain later the discussion at the hearing seems to indicate remarkable progress by Congress in understanding the H-1B problem, they remain ignorant of the central issue, which is AGE. Even on the (very shaky, at best) assumption that Congress finally wants to "do the right thing" regarding H-1B, there is no way they could enact an effective remedy without comprehending the fundamental nature of the problem: Employers (yes, including the big mainstream ones) use the H-1B program as a means of expanding the young (i.e. under 35) labor pool, because young workers earn less than older ones. The staple-a-green-card proposals, by targeting new graduates, would expand that young labor pool in exactly the same manner as H-1B does, thus not solving the central problem. (No, it's not an issue of older workers lacking up-to-date skills. I've shown extensively that this is not the issue; see http://heather.cs.ucdavis.edu/MichJLawReform.pdf For the same reason, training programs are not the answer, as I've also shown.) Yes, young H-1Bs are cheaper than young Americans too, but the central issue is age. Staple-a-green-card would NOT be a good substitute for H-1B. (It wouldn't be a substitute anyway. No one is proposing replacing H-1B by staple-a-green-card; they want both.) But needless to say, staple-a-green-card would adversely impact our young new grads too; the tech job market is still running in low gear, as the flat starting salary data of NACE show, so the last thing they need is more competition, courtesy of the U.S. Congress. Unfortunately, the push for staple-a-green-card is strongly supported by IEEE-USA. Since the latter is a professional organization for professional engineers, Congress now gets the impression that even the American workers support staple-a-green-card. But of course that's not true. IEEE-USA has never taken a vote among its members on this issue, and indeed, most members are probably not even aware of the organization's lobbying in favor of more foreign workers. On the contrary, IEEE-USA adopted the staple-a-green-card stance after heavy pressure by the highly pro-H-1B IEEE parent organization. The latter, dominated by industry and academia (both of which have highly vested interests in H-1B), insisted that IEEE-USA muffle its previously strong stance against H-1B. And it is clearly no coincidence that when IEEE-USA started extolling staple-a-green-card, it took down its excellent Misfortune 500 Web page, which had profiled 500 older engineers who could not find engineering work in spite of excellent qualifications. So, IEEE-USA's word should not be taken as representating U.S. engineers. Yet the image given is, as the National Journal article below puts it, that staple-a-green-card is "a recommendation from the engineering community"! As lobbyist Bruce Morrison said in his testimony (emphasis added), Today the bipartisan leadership of the Judiciary Committee and this Subcommittee received a joint letter from IEEE-USA and the Semiconductor Industry Association (SIA). It is remarkable. Organizations composed of the largest high tech employers on the one hand, and THE LARGEST ORGANIZATION OF HIGH-TECH WORKERS on the other, agree that Congress should focus on green cards, not guest worker visas. This is a sign pointing in the direction that we hope this Subcommittee will go. So Morrison claims that high-tech workers support staple-a-green-card! Slick, very slick. Morrison is certainly earning the fee he's been charging IEEE-USA, which reportedly is shown as $125,000 in the Senate lobbying database. I haven't checked this myself, but I'm told that this shows up when you go to http://soprweb.senate.gov/index.cfm?event=chooseFields and plug in "Morrison, Bruce." There are two underlying premises in staple-a-green-card. First, there is the thinking that unlike the de facto indentured servant H-1Bs, the staple-a-green-card workers would be free agents and thus not exploitable. True, but irrelevant--they still would be YOUNG, which once again, is a key factor in the displacement of the Americans by the foreign workers. The second premise is that the staple-a-green-card workers, as foreign students in the U.S., are "the best and the brightest," brilliant people who will revive our economy. But I showed this to be false in my recent Georgetown talk, http://heather.cs.ucdavis.edu/georgetown.pdf Keep in mind, most of my analyses there were specifically about the foreign students, not for immigrant engineers in general. (And one of the analyses was specifically for foreign PhD students). The former foreign students now working in tech in the U.S. turned out to be of average ability, not the "innovative geniuses" portrayed by the industry lobbyists. As I've emphasized, H-1B has caused, and staple-a-green-card would greatly exacerbate, an internal brain drain of our own domestic best and brightest. I know of at least three subscribers to this e-newsletter who are graduates of MIT, who are having trouble finding engineering work, and lots of others from various highly prestigious schools. Gene Nelson, a vocal critic of H-1B, is a PhD who won a national science fair award back in high school. Another subscriber was so innovative that his work for a major mainstream engineering firm was written up in the Wall Street Journal; yet after struggling to get sporadic work, he reluctantly left the engineering field. Interestingly, there seems to be a third premise, a darker, hidden one. One of the attendees at my Georgetown talk was a very sharp young guy from the USCIS (the former INS). He asked some good questions during my talk, but I was floored by what he said to me afterward, which was (this is fairly close to verbatim), "I don't see why it matters whether they are the best and the brightest. I thought the whole idea was to steal China's engineers away from China." He made it sound like this was the real motivation, the consensus in DC, and given Obama's obsession with China in his State of the Union Address, it may well be true; see http://heather.cs.ucdavis.edu/ObamaStateOfUnion.txt I know I did see public statements like this in Congress during the discussion of the Chinese Student Protection Act in 1992, which gave automatic green cards to Chinese students at the time. Well, if this is the motivation, I'm pretty sure that most Americans would disagree with sacrificing American engineers for that "goal." And in any case, "stealing" wouldn't work anyway; UCB professor AnnaLee Saxenian's research shows that immigrant Chinese engineers in Silicon Valley tend to be very involved in tech firms back home in China, as founders, consultants and investors. In other words, if Congress really is paranoid about China (which I disagree with), "stealing" the Chinese engineers actually backfires. Most interesting to me are the statements by Rep. Zoe Lofgren at the hearing. She shocked me even more than the man from USCIS by actually saying what I always say: Legal prevaling wage is far below true market wage. Here's an excerpt from the Computerworld piecee: > 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." Hey, Zoe, was that $92K with or without Python experience? :-) As my e-mail smiley sign indicates, I'm saying this tongue-in-cheek; as I stated above and in my last posting (on Python) that the skills issue is a red herring. Anyway, here is Zoe Lofgren, the most strident advocate of H-1B Congress has ever had, admitting that H-1Bs are "undercutting" (her word) Americans, due to underpayment which is entirely LEGAL, an amazing, sea change statement for her to make. I couldn't have stated it better myself. When I said above the young H-1Bs are cheaper than young Americans, this is the way employers can legally make this work. Both the statute and regulations enable LEGAL undercutting of American workers. And that is why Stuart Anderson's statement in the Mercury News/AP article below is incorrect. Even prominent immigration attorney Angelo Paparelli has agreed that the legal prevailing wage is far below the true market wage; see http://heather.cs.ucdavis.edu/Archive/GAO11.txt (including the comments on the legal term "actual wage"). Lofgren's statement represents tremendous progress in my view, but as I said, the central issue is age. Moreover, LET'S SEE IF SHE TRIES TO FIX THIS GLARING HOLE when she introduces her legislation; I'll bet dollars to doughnuts that she doesn't. I was also pleased to see Rep. Gallegly's rebutting the industry lobbyists' frequent line that employers can't be hiring H-1Bs as a source of cheap labor, as they have to pay H-1B user fees. Gallegly noted, as I have, that the employers could save much more in salary (especially over a period of years) than they spend in fees. Obvious, isn't it? Yet I've never seen such statements from members of Congress before. Former congressman Bruce Morrison, "father of H-1B," testified, representing IEEE-USA. He argued strongly for staple-a-green-card, which he said would be restricted to "graduates of quality universities." I have been told that what he meant by that was universities whose students qualify for federal financial aid. This "restriction," if that is what Morrison has in mind, would of course be extremely minimal, disqualifying only some "fly by night" for-profit little schools. 99% of all schools would count as "quality." In any case, staple-a-green-card is simply the wrong way to go. The hearing Web page, http://judiciary.house.gov/hearings/hear_03312011.html includes written versions of the oral testimonies, though it does not have the other written statements submitted to the committee. I'm enclosing several press reports below. (Due to restrictions, I am not providing the Computerworld article in full.) Norm Outsourcers Are Criticized on Visa Use By JULIA PRESTON Published: March 31, 2011 Major outsourcing companies from India have been the biggest recipients of visas in recent years under a program intended to allow American companies to bring highly skilled foreign workers temporarily to the United States, an immigration scholar testified Thursday before a House of Representatives judiciary panel. Loopholes in the visa program have made it easy for the outsourcers "to bring in cheaper foreign workers, with ordinary skills, who directly substitute for, rather than complement, workers in America," the scholar, Ronil Hira, a professor at Rochester Institute of Technology who has studied the program, told the House Subcommittee on Immigration Policy and Enforcement. Four of the five biggest users of the program from 2007 to 2009 were Indian outsourcing companies: Infosys, Wipro, Mahindra Satyam and Tata, Mr. Hira said. Microsoft was the only company with headquarters in the United States among the top five users, he said. Among them, the Indian companies sent 22,766 workers to the United States on temporary visas during the two deepest years of the recession. The hearing marked a new round in a rancorous tug of war over the visas, known as H-1B visas. Granted to foreign workers with at least a bachelor's degree to work in the United States for up to three years, they have been used by computer companies to bring in technology experts. American companies are requesting an increase in the annual national limit of 65,000 temporary visas, saying it is too low and inflexible to meet their needs for engineers and scientists during unpredictable variations in the economy. But numerous cases have come to light of American workers who were ousted from jobs and replaced by workers from Indian outsourcing companies, often at lower wages. As a measure of the frustration among American technology businesses and workers, a representative from an engineers' association urged lawmakers to set aside the H-1B debate entirely and to focus instead on providing permanent residence visas, known as green cards, to foreign students graduating with advanced degrees in science and mathematics from American universities. "We are asking this subcommittee to change the subject, from H-1B to green cards," said the representative, Bruce Morrison of the Institute of Electrical and Electronics Engineers. He urged the legislators to change the law quickly to make green cards available to students who will get their degrees in June. His plea was supported in a letter from the Semiconductor Industry Association, which represents many large technology employers. Thousands of foreign students who get advanced science degrees in the United States do not remain because permanent work visas are not available. Donald Neufeld, a Citizenship and Immigration Services official, testified that auditors had found fraud in about 7 percent of visa petitions, down from 21 percent in 2008. But Mr. Hira said that because of low wage requirements in the program, employers were using it to legally hire foreign workers at significantly lower pay than Americans. Brendan Kavanagh, who runs a small technology consulting company in Miami Lakes, Fla., said that he had experienced the competition directly, after his contract with a major pharmaceutical company in Illinois was abruptly terminated last September. He was replaced by three Wipro employees on temporary visas, he said in an interview. Mr. Kavanagh, who attended the hearing to press his case with lawmakers, said that he had been hired by the company to overhaul a major software system, and that many of the workers he managed were Indians with H-1B visas. "They absolutely misrepresented their skills," he said. "They are working with very critical software, and they don't understand the nature of it -- these are patients' lives." He said the time he took to train the temporary workers had slowed the project and led to disputes with the company, which finally terminated his contract. He said he could not name the company because of a contractual confidentiality clause. "Employers are using these visas to give away our knowledge," Mr. Kavanagh said. A version of this article appeared in print on April 1, 2011, on page A20 of the New York edition. Tech visas help fund scholarships, anti-fraud efforts, group says By Suzanne Gamboa Associated Press Posted: 03/31/2011 09:54:04 AM PDT Updated: 03/31/2011 04:27:45 PM PDT WASHINGTON -- A group that backs a visa program designed to bring high-skilled foreign workers to the U.S. says that some of the approximately $3 billion in visa fees paid by employers benefits science and math scholarships, U.S. worker training and anti-fraud activities. A report issued this week by the National Foundation for American Policy points to the fees as a reason to maintain the visa program. The foundation supports policies allowing businesses to hire foreign workers. Some opponents say the visas cost Americans jobs. H-1B visas allow foreigners to work in the United States. The visas are temporary, good for up to six years and can lead to a green card if an employer sponsors the worker. Businesses maintain they are important for bringing needed skills that cannot be found in the U.S. and are necessary because the waiting time for green cards, which provide legal residency, is too long. "In addition to being required to pay professionals on H-1B visas the same wage as a comparable U.S. worker, the H1-B fees, the legal costs, the staff time and the uncertainty of the immigration process demonstrate the employers really need these individuals and they're complementing the U.S. workforce rather than taking jobs from U.S. workers," said Stuart Anderson, the foundation's executive director. The organization's report was issued before a House subcommittee's hearing Thursday on H1-B visas. It is one in a series that the subcommittee has had about immigration as Republicans in the House majority try to build support for tougher immigration enforcement amid the slumping U.S. economy and continued high unemployment rates. Rep. Elton Gallegly, chairman of the House Judiciary Committee's immigration enforcement and policy subcommittee, said he wanted to be sure H-1B visas are being awarded to the best and brightest foreign workers. He said there is great dispute over whether there are enough safeguards in place to make sure employers are paying foreign workers sufficiently to protect American workers' jobs. "Theoretically, if an employer hired a H-1B worker and then paid them much lower than what an American worker would make, the fees would be trivial," Gallegly said before the hearing. Other hearings have covered the need for a system that can check whether a person is working legally in the U.S.; the Obama administration's preference for auditing employers who hire illegal immigrants rather than conducting more expensive raids; and whether immigrants are taking jobs from American minorities. According to Anderson's report, businesses that use visas have paid $2.3 billion in scholarship/work training fees and more than $700 million in anti-fraud fees. They also pay visa adjudication fees, and can pay fees to get visas processed more efficiently, legal fees and costs associated with paperwork for the dependent family of the worker. H-1Bs have been criticized as allowing employers to replace American workers with cheaper employees. Thursday's hearing was expected to include discussion of fraud problems in the H-1B program. Sen. Dick Durbin, the Senate's No. 2 Democrat, has teamed up with Sen. Charles Grassley, R-Iowa, on legislation seeking to tighten restrictions on H-1Bs. The districts of House Judiciary Committee Chairman Lamar Smith, R-Texas, and Gallegly, R-Camarillo., are home to high-tech companies. The industry has lobbied heavily for limiting restrictions on H-1B visas and increasing the numbers available. H-1B pay and its impact on U.S. workers is aired by Congress As Congress debates the H-1B visa, an unemployed IT worker sits in the audience to get a feel for its impact on U.S. workers Patrick Thibodeau March 31, 2011 (Computerworld) ... 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 an undercutting the American educated workforce." Kavanagh said he had a job working on a J.D. Edwards system, when he was asked to train workers from an offshore company. He was told at the time that he was being moved to a different project, but instead was laid off once the training was complete. Kavanagh, who said he can't name the client because of confidentiality agreements, doubts he can find a similar ERP job now because of the prevalence of offshore workers doing similar work. ... "There is almost nothing out there -- the Indian body shops have cleaned up," said Kavanagh after the hearing. "Even the ones that don't use the body shops expect to pay the same as when they had one of these body shops." Afterward, Kavanagh was dismissive of Lofgren's push to expand Green Card access, especially when there is what he called "gross unemployment" of U.S. college graduates. Kavanagh came to the U.S. from the United Kingdom on an L-1 visa some 16 years ago. He was transferred by his employer, a pharmaceutical company, to work on its technology in the U.S. He met his wife here and became a citizen about nine years ago, he said. "I pledged my future to this country," said Kavanagh. "I'm not a dual citizen, I'm an American citizen." Green cards offered as solution for high-tech firms By Fawn Johnson, National Journal 03/31/2011 High-tech companies got a rare opportunity on Thursday to make their case to Congress on the H-1B visa program for temporary skilled foreign workers, but got some interference when other groups argued for an easier green card program instead. The House Judiciary Committee's Immigration Policy and Enforcement Subcommittee also got an earful about foreign workers taking U.S. jobs and the potential misuse of the specialized visas. Judiciary Chairman Lamar Smith, R-Texas, has long been a supporter of bringing skilled foreign workers and students into the United States, and he says the current 65,000-visa quota may have to give. But it will be a tough sell, made more difficult by a recommendation from the engineering community that Congress focus on employment-based green cards for permanent foreign workers rather than the temporary H-1B program. Increasing green card numbers is a more difficult political exercise than tinkering with the H-1B program, as evidenced by this statement from Rep. Steve King, R-Iowa: "There is such a thing as too much legal immigration. Too much legal immigration drives down wages." The Institute of Electrical and Electronics Engineers, a professional association, and the Semiconductor Industry Association, a business group, wrote the House Judiciary Committee to emphasize the value of green cards. "These two groups don't agree on everything.... They see the IT benefit of permanent residents as key," said former Rep. Bruce Morrison, D-Conn., who testified on behalf of IEEE. "When people have permanent residence, they are free to move around the workforce. H-1B workers don't really have that." Democrats on the committee seized on the green card argument, which is more in line with the unions' perspective on foreign workers. (Organized labor is generally opposed to guestworker programs like H-1B.) Rep. Sheila Jackson Lee, D-Texas, asked Morrison to give his "most forceful argument for the value of green cards." Morrison said permanent residency is "our competitive advantage" in terms of attracting foreign workers. Rep. Zoe Lofgren, D-Calif., described "H-1B visa holders who get frozen in place because they can't move, really. How can we capture the permanent visas for the people we want to keep?" Smith recently told National Journal that he can't support increasing the cap on H-1B visas with unemployment bouncing above 9 percent. On Thursday, Smith said the H-1B program "plays a vital role in our economy," but he also said foreign workers with doctorates offer the most "invention" within the United States. Smith worried that the temporary work visas are being used for fashion models and pastry chefs instead, suggesting that lawmakers should tighten the eligibility for H-1B visas rather than increase the annual cap of 65,000. Compete America and the American Council on International Personnel -- groups that have advocated for increases in H-1B and employment-based green cards -- issued statements in advance of the hearing emphasizing the importance of highly educated foreign workers to the economy. "American employers need an immigration system that includes both temporary and permanent visas as well as a timely, consistent and predictable process," ACIP's statement said. Lawmakers wary of constituent backlash for their positions on immigration are perhaps most sympathetic to high-tech and engineering firms wanting to tap foreign labor. Almost everyone agrees that these companies drive economic growth but routinely suffer from shortages of skilled workers. It's easier for politicians to embrace a work visa for an educated computer analyst from India than for an uneducated fruit picker from Mexico. But the difficulty of advocating for any increase in foreign worker visas is best illustrated by complaints routinely offered from both Republicans and Democrats who fear that Americans are being overlooked or replaced for certain jobs in favor of foreign workers. Ron Hira of the Rochester Institute of Technology described the "knowledge transfer" phenomenon, in which U.S. workers are asked to train their foreign replacements, brought in on temporary work visas, for their own jobs. "That worker may stay right there on site or take [the skills] back to their home country. It's common enough to have its own term," Hira said.