Date: Tue, 1 Jul 2008 23:36:43 -0700 From: Norm Matloff To: Norm Matloff Subject: InformationWeek blogs (kind of) get it right, but... To: H-1B/L-1/offshoring e-newsletter Two blogs are enclosed here, by Alexander Wolfe and Paul McDougall of InformationWeek, both with "new" solutions to the problems with the H-1B work visa. Neither proposal is new, of course, and there are some mischaracterizations and oversimplifications of the problems, as well as various minor inaccuracies. Nevertheless, "it's the thought that counts"...except that one of those thoughts is an egregious insult to critics of the H-1B program. The Wolfe/McDougall point/counterpoint can be summarized as this: Wolfe: H-1Bs are hired as cheap labor. So, if the prevailing wage requirement in H-1B law were really enforced, only the legitimate employers would hire H-1Bs and the yearly H-1B cap would not need to be raised. McDougall: No, cheap labor is not really an issue, as it's really hard to hire H-1Bs at below-market wages. Instead, the real problem is that H-1Bs are tied to their employers, which is of huge appeal to employers. So if we give the H-1Bs freedom to move freely in the marketplace, only the legitimate employers would hire H-1Bs and the yearly H-1B cap would not need to be raised. Wolfe has the right idea--make the employers pay market wage and the current H-1B cap would be quite ample for the few employers who would still want to hire H-1Bs--but he errs in assuming the underpayment of H-1Bs is due to lack of enforcement of the law; it isn't. The real problem is the gaping LOOPHOLES in the law, which enable employers to UNDERPAY H-1BS WHILE COMPLYING FULLY WITH THE LAW. See http://heather.cs.ucdavis.edu/PrevWage.pdf for details. So, to remove the cheap-labor incentive that Wolfe correctly points out is driving the current high demand for the program, the law itself must be changed, rather than beefing up enforcement. The sad truth is that the law is so riddled with loopholes that there is really nothing to enforce. The Durbin/Grassley bill currently in the Senate contains a a provision that would plug these loopholes, but of course the bill has just been languishing, due to industry lobbyist pressure. McDougall thinks that current safeguards make it very difficult to underpay H-1Bs. That's just plain false, as shown by several university studies that demonstrate that the H-1Bs are paid less, and--even more importantly, in my view--by two congressionally commissioned employer surveys. Yes, you read correctly--employer surveys, in which bosses actually admitted to underpaying the H-1Bs. Imagine how many more were doing the same thing but had the sense NOT to admit it. The GAO survey found that % 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. If you just skimmed through that quote, read it again. The first part says that employers had admitted to paying H-1Bs less than U.S. citizens and permanent residents, and the second part says that the employers did this in full compliance with the law. The problem is loopholes in the law, not lack of enforcement of the law. Again, see the details at the above URL. But McDougall is spot on in his point that employers love the de facto indentured servitude of the H-1Bs. (They do have some freedom of movement, but those who are being sponsored for green cards are basically stuck.) Indeed, immigration attorneys have publicly admitted that employers love the, ahem, "loyalty," of the H-1Bs. See my University of Michigan law journal article for details, http://heather.cs.ucdavis.edu/MichJLawReform.pdf Unfortunately, merely giving H-1Bs full freedom of movement in the labor market would not solve the cheap-labor problem. That's because cheap labor comes in two forms: (a) Type I, in which the employer pays the H-1B less than he would pay to Americans of the same experience, education and so on, and (b) Type II, in which the employer hires young H-1Bs instead of older (i.e. over age 35 or 40) Americans. Giving H-1Bs unfettered access to the marketplace would solve (a) but not (b). And (b) is big, often enabling employers savings of 50% or more. Now, what about that insult I mentioned? Here it is, in Wolfe's blog: # As a colleague of mine e-mailed me: "Actually, a lot of people don't # know there's a wage requirement, it's something the anti-H-1B people # don't talk about because it undercuts their argument." Apparently if you're a journalist with a major magazine, you can say anything without evidence, even if your claim is shown false by articles in your own magazine. The "colleague's" claim here is absurd. Take for example the Programmers Guild, the organization most quoted (including by InformationWeek) regarding problems with H-1B. Go to their Web page, http://www.programmersguild.org and plug "prevailing wage" (the legal term for the wage requirement) into their search engine. You'll find that prevailing wage is discussed throughout their site. Most importantly, look at their section titled "How to Underpay an H-1B," an excellent case study of how employers exploit loopholes in the prevailing wage law. Indeed, check InformationWeek's article of July 13, 2006, in which reporter Marianne McGee goes into detail on the Programmers Guild's criticism of the loopholes in the prevailing wage law. Clearly, the colleague is way off base in claiming the "anti-H-1B people" don't want the public to know about the wage requirement. Again, remember that the problem is that the wage requirement is full of loopholes, not that it doesn't exist. The other major professional organization criticizing H-1B is IEEE-USA. Again, you can find information about the prevailing wage requirement throughout their Web page, prominently featured in their arguments. I'm sure the major general immigration reform organizations, FAIR and NumbersUSA, get it right too; I've never seen them claim that there is no wage requirement. Granted, the colleague's remark was made privately to Wolfe (who then publicized it). But that makes it all the more insidious, as it makes one wonder just how many other journalists are engaging in such whispering campaigns against H-1B critics. InformationWeek ought to be ashamed of itself, and owes the Programmers Guild et al an apology. As to the George Will column mentioned by Wolfe, Will blew it big time, apparently relying on one of the industry lobbyists' slick "educational packages" rather than doing his homework. See my critique at http://heather.cs.ucdavis.edu/Archive/GeorgeWill.txt Norm http://www.informationweek.com/blog/main/archives/2008/06/time_for_congre.html InformationWeek Wolfe's Den Blog Time For Congress To Enforce 'Prevailing Wage' H-1B Posted by Alexander Wolfe, Jun 30, 2008 03:48 PM A great idea hit me after reading George Will's column last Friday, lamenting our shortage of qualified high-tech workers. Sadly, Will sidestepped the controversial issue of whether foreign nationals undercut U.S. engineers by working for less under the H-1B visa program. So why not enforce domestic pay levels for these folks, and lift the current annual cap of 140,000 H-1B green cards? Under my plan, everybody would be happy. Here's the problem, though. The law already mandates that H-1B workers be paid at the prevailing wage for U.S. citizens. The Heritage Foundation think-tank says that this is indeed occurring, that H-1B tech salaries are comparable to those of U.S.-born workers. (If this is truly the case, then why are there any H-1B caps?) However, 25 years of anecdotal experience tells me -- and many engineers I know -- differently. My argument is that, if we lifted and H-1B cap and truly enforced the comparable-pay provision, we'd see if there really is a shortage of qualified tech personnel, or if this is just a complaint manufactured by companies looking for trained people willing to work for cut-rate salaries. (The sad part is, anecdotal evidence indicates that many American engineers thrown overboard during the post-bubble period would be willing to come back for less, but that's not how the employment game is played.) The problem in setting forth an argument like mine is that you get everyone mad at you. Business owners really believe there are no trained people out there, and you can't tell them otherwise. The reality is, there are thousands of perfectly capable, albeit unemployed, IT workers out there. (Many of the post-bubble layoffees have by now left the field entirely.) Try this quick thought experiment: Has the nation that invented the long playing record, the laser, the semiconductor, and the integrated circuit suddenly become a country of doofuses in the space of two generations? Not really plausible, is it? The truth is, at any one time there are never a whole lot of kids who can do calculus or hack a sci/tech major in college. If there's a currently a shortage of entry-level tech grads, that'd be because kids have wised up and are less inclined nowadays to enter a field where your present for years of hard work is a pink slip 'round about the time your children are entering college. As for the imagined shortage of experienced IT people, that's only because employers are too dense to comprehend that a techie who's accumulated 20 years of solid experience need not have spent the last six months doing some skill du jour (be it Java, C#, J2EE, or whatever) to be capable of picking it up, post haste. But, hey, that horse left the barn ages ago. OK, I'm belaboring a point that seems pretty obvious to me. But when Bill Gates goes before Congress and states that there's an acute shortage of scientists and engineers, these are some of the reasons why. Looking at it from the opposite angle, from the perspective of engineers and IT workers, their complaints are typically that outsourcing has killed their profession. Well, welcome to the modern world. Outsourcing is a part of the global economy, and it isn't going away. Indeed, if you have half a brain, you realize that, if you are employed, the surest way to lose that job is to make a big stink about this new reality, because the chances are 99.44% positive that your company is using outsourced tech help, too. In his column, Will wisely avoids both the shortage question and outsourcing. Instead, he takes a reasonable melting-pot stance that it makes no sense for the United States to become a kind of educational pit stop for foreign tech workers. Will submits that we're screwing ourselves by training foreign nationals at our top engineering schools and then letting them return to their home countries because they're not authorized to work here. On the face of it, he's correct. This is where my plan comes in. It would completely eliminate the torturous annual debate over the Congressional H-1B visa limit, which currently stands at around 140,000. I'd lift the limit entirely on a on H-1B workers paid a real and true prevailing wage." There'd be no need for a cap, because the prevailing wage H-1B wouldn't undercut any existing salaried positions. The real beauty of my idea is that it's truly a free-market solution. It lets the market set H-1B salaries, by removing the artificial restrictions that have tied foreign green-card holders to their sponsoring companies. Note that my plan does not impact outsourcing at all, which could continue unimpeded. I'm actually proposing a method for Silicon Valley to increase its access to domestically based hardware and software talent. All they gotta do is open their wallets for less bucks than it'll cost pretty soon for a round-trip ticket to the typical H-1B's home country. [UPDATE: This post was updated to clarify the fact that the H-1B program already mandates paying a prevailing wage. My belief is that this isn't as widely adhered to as the stats claim. As a colleague of mine e-mailed me: "Actually, a lot of people don't know there's a wage requirement, it's something the anti-H-1B people don't talk about because it undercuts their argument." Me, I'm not so sure that's because it undercuts the argument; it could be 'cause it's so rarely seen in the real world.] What do you think? Also, read my post from January 2007, in which I railed against Thomas Friedman's know-nothing take on the "mounting crisis in science and engineering education," in Google Pitch For Lifting H-1B Visa Limits Heralds 'In-Sourcing' Surge, http://www.informationweek.com/blog/main/archives/2007/06/google_pitch_fo.html;jsessionid=3HYPCRFWVFMHCQSNDLPSKHSCJUNN2JVN http://www.informationweek.com/blog/main/archives/2008/07/why_tech_compan.html Why Tech Companies Really Hire H-1B Workers Posted by Paul McDougall, Jul 1, 2008 10:37 AM The H-1B program puts American workers at a competitive disadvantage vis-à-vis the visa holders, but low-ball salaries arent the reason. Or, at least, not the biggest reason. My colleague Alex Wolfe blogged yesterday about reforming the H-1B program to ensure that its wage parity rules are strictly enforced. Alex argued that such a reform would eliminate the incentive for companies to bring in boatloads of cheap tech labor from India and other countries at the expense of U.S. programmers and engineers. As a result, Congress could eliminate the current cap on H-1Bs and leave the free market to determine how many foreign techies arrive on these shores each year. That sounds like a reasonable proposal, but Im not convinced that its the wage issue that makes the H-1B program unfair to Americans. The prevailing wage rules are difficult, though not impossible, for employers to skirt. In applying for permission to hire an H-1B worker, employers must state the job description, the salary, and provide to the government third-party evidence that the proposed wages are in line with industry standards. The employer also must post a copy of the application at the job site, in a conspicuous area where it will be visible to anyone who wants to see it. If a company is low-balling H-1Bs, someone is going to spot it and blow the whistle -- theres enough disgruntled U.S. workers out there to make that a certainty. Here, in my mind, is whats really wrong with the H-1B rules, and why theyre unfair to both U.S. workers and the foreigners: An H-1B holder is, for all practical purposes, bound to the company that sponsored his or her visa. Sure, they can switch jobs by applying for a new visa once here, but thats expensive, time consuming, and risky. And time spent on the current visa would count against the new H-1B. So for all intents and purposes, an H-1B worker is indentured to his employer for the life of the visa. Thats up to six years if the one-time renewal option is exercised. Who would you rather hire if youre an employer in a hotly competitive labor market like the tech industry? A highly skilled individual who might hang around for a year or so, acquiring even more skills at your expense, before bolting for more money elsewhere? Or, a highly skilled worker who, once hired, has to stick around for at least six years? Obvious, isnt it? In fact, the latter scenario is so appealing to tech companies that they might be willing to offer a higher salary up front to the H-1B worker, knowing that individual wont be going anywhere soon and wont be in a position to ask for a raise later on. To make the H-1B program fair, Congress needs to make the visa specific to the individual worker, rather than the company. If H-1B workers have full job mobility once here, their appeal to tech vendors might decrease drastically. Or not. If there really is a shortage of tech workers, then demand for H-1Bs wouldnt change much. Then we can move to step 2 of Alexs proposal -- eliminate the numeric caps and let market forces take over, and may the best programmer win.