Date: Sat, 27 Aug 2005 00:25:20 -0700 From: Norm Matloff To: Norm Matloff Subject: the big companies abuse H-1B too To: H-1B/L-1/offshoring e-newsletter I am enclosing below an editorial and article from the San Jose Mercury News of August 13, as well as an article from the Sacramento Business Journal back in May. I will also be presenting an analysis I performed on data from the Dept. of Labor H-1B database. First major point: The Merc's editorial is rather open-minded compared to the past, but they still don't get it. They say, in essence, "Well, maybe there is a problem with H-1B, but we need to have more data in order to tell what is really going on." It's simply not true. There's plenty of data. Start with the huge Dept. of Labor H-1B database, for instance. There is no question that this is the most labor-sympathetic editorial the Merc has ever run on the H-1B issue. Consider, for example, this paragraph: But if H-1B visas are being used to import low-paid foreign workers for jobs that American workers easily could fill, the negative impact on the U.S. economy will be both immediate and long lasting. Not only will U.S. engineers remain unemployed, but young people also will be discouraged from pursuing science and engineering degrees, further undermining U.S. competitiveness and leadership in technology. I couldn't have said it better myself. :-) Nevertheless, at various points in the editorial, the industry party line does show up, with some of the industry lobbyists favorite propanda lines--we shouldn't send back home the foreign students we've educated, if we don't increase the H-1B cap it business will send jobs overseas, etc. (Concerning the latter line, a quote of labor analyst Eileen Appelbaum put it quite succinctly in an article last week: "Industry said in 2001, `Let us have the H-1B visas and we'll do the work here, or you can say no and we'll just move the work offshore.' Well, they got all the H-1Bs they wanted, and they still moved work offshore. In 2005, that's an argument industry can't make with a straight face." See that article and my commentary on the connection to age discrimination at http://heather.cs.ucdavis.edu/Archive/H1BToolForAgeDiscrim.txt ) And here is one industry line that most readers, even of this e-newsletter, may miss: The U.S. worker groups say the visas are being misused by some companies, which bring in foreign workers at lower wages while qualified U.S. workers remain unemployed or underemployed. You may ask, "Where is the industry party line here? Isn't this a quote of labor groups?" For the most part, yes, but the key word in that passage is "some." It has always been the contention of the big players in Silicon Valley that there is some abuse of H-1B, but only by the Indian "body shops." Even Rep. Zoe Lofgren, Silicon Valley Big Business' best friend on Capitol Hill, uses this line. But it simply NOT true. This is my second major point. I will use Intel as my example here, but I'd like to make a disclaimer first: My use of Intel as an example doesn't mean Intel is any worse than other firms. I've long held that virtually EVERY tech firm, small or large, is misusing the H-1B program (and the employer-based green card programs). I only use Intel as an example here because their statements that they hire H-1Bs mainly because they can't find Americans with Master's or PhD degrees make it easier to analyze their H-1B data. You'll see why that's important below, but my point right now is that I'm not picking on Intel. I believe that Intel is overall a good place to work at, and have generally advised students to accept jobs with Intel if they are offered. Now that I have that out of the way, let's look at the Dept. of Labor data on H-1B workers (http://archive.flcdatacenter.com/casesearch.asp), for the case of Intel. Intel has repeatedly stated that most of the H-1Bs it hires have Master's or PhD degrees, and that it hires them only because not enough Americans have that level of education. It's made such statements to the press on numerous occasions, and most significantly, in its testimony to the Senate, September 16, 2003 (Patrick Duffy, Intel Human Resources Attorney; see http://judiciary.senate.gov/testimony.cfm?id=913&wit_id=2610): Intel's overall external hiring has decreased dramatically since the beginning of the economic slowdown in 2001 and so has our hiring of employees who require sponsorship for H-1B status. We do, however, continue to hire a limited number of employees requiring sponsorship for those positions where we cannot find enough qualified U.S. workers with the advanced education, skills and expertise we need to compete in this global economy. These positions include Design Engineers at the Master's and Ph.D. levels in fields such as Electrical and Computer Engineering, as well as Process Engineers at the Masters and Ph.D. levels in fields such as Chemical or Materials Engineering. The vast majority of the H-1B workers we sponsor are educated at U.S. universities. We expect that we will continue to sponsor H-1B employees in the future for the simple reason that we cannot find enough U.S. workers with the advanced education, skills, and expertise we need. Both the problem and the solution are found in U.S. university graduation statistics. Today, about half of the graduate students in the physical sciences in U.S. universities are foreign nationals... Indeed, on Intel's employment Web page, they state: Intel hires qualified candidates who are authorized to work in the U.S.-- that is, authorized to work without restriction as to a particular employer. This includes U.S. citizens or nationals, U.S. legal permanent residents, temporary residents granted legalization under the Immigration Reform and Control Act of 1986, asylees, and refugees. For foreign nationals who do not fall in one of the above categories, we limit our hiring of persons requiring visa sponsorship or individuals currently on a non-immigrant visa (e.g., H-1, J-1, L-1, F-1, B-1, TN) to candidates at the MS and PhD levels (or those who have equivalent work experience) who are applying for positions for which there is a demonstrated shortage of qualified U.S. candidates Now I disagree with the basic notion that so many people with graduate degrees are needed in the first place, and I also always point out all the American engineers with advanced degrees who can't find engineering work. See http://heather.cs.ucdavis.edu/Archive/ProposedMSPhDExemption.txt But let's focus on Intel's statement that its H-1B hires are mainly people with Master's and PhD degrees. Let's see how much Intel pays these people with advanced degrees (or at least what Intel claims is "prevailing wage" for them). I used the Dept. of Labor H-1B database, at http://archive.flcdatacenter.com/casesearch.asp which lists Labor Condition Applications by company, with data through Sept. 03. Note that Intel's submitting an LCA for N foreign workers does not necessarily mean that Intel actually N of them. An LCA is simply a request for permission to hire. There is a general correlation between the two, but not a perfect one. In any case, though, what counts is what Intel claims is the prevailing wage for those who hold advanced degrees, and the wages paid. I first looked at those LCAs for jobs with Engineer titles. It turned out that the median salary was only $64,480. This is in the Wage Rate I column, the "wage rate to be paid to the nonimmigrant [H-1B worker]," in the CA form. (The form is ETA 9035CP, at http://workforcesecurity.doleta.gov/foreign/preh1bform.asp). Compare that to the national median salary for American workers with a Master's in engineering, $82,333, and the median for an engineering PhD, $105,500. (See reference to 2002 NSPE data at http://www.soe.stevens-tech.edu/seem/UG/SalaryArticle.pdf) Even for new graduates at that time, the median Master's salary was around $65K and the mean PhD salary was $80,000. Recall that in discussing the hiring of H-1Bs in order to save salary costs, I distinguish between what I call Type I and Type II savings: Type I consists of paying H-1Bs less than Americans of comparable experience, education etc., while Type II consists of hiring younger (thus cheaper) H-1Bs instead of older (thus more expensive Americans). Note that both types are perfectly legal, due to huge loopholes in the Type I case, and a total lack of applicable law in the Type II case. Unfortunately, the H-1B debate focuses only on Type I salary savings, but Type II is just as important if not more so. (There are also other types, e.g. getting "more bang for your buck" by making the H-1Bs work longer hours.) The data above show that Intel is using H-1Bs to attain either Type I or II salary savings, probably both. Again, this is typical throughout the industry. By the way, speaking of Type II salary savings, i.e. H-1B's role in enabling legal age discrimination, Programmers Guild president Kim Berry, after reading the Merc editorial and article, published an analysis of Intel's current job openings. I noticed that one of the openings stated that the applicant must have "recent IT experience." I've seen a number of job ads like that. This is yet another way to screen out the older workers. If you have been out of the engineering field for a year or two, you're not "recent." That's an example of why many analyses of the IT labor market are so badly inaccurate. They assume it's like the auto industry, in which workers are laid off during slow periods, then hired back when things pick up. Not true for engineers and programmers. The figures Intel cites in the Prevailing Wage column are 5% lower than those of the Wage Rate I column. This 5% difference reflects the fact that it was legal to pay 5% below official prevailing wage. This is only a small part of their cost savings, but it does illustrate that Intel aggressively makes use of the loopholes. The other main statistic I sought from the DOL data for Intel arose from the following passage in the Sacramento Business Journal article: [Intel spokesperson] Dundas said unemployed U.S. techies who have complained they've been pushed out of jobs [by foreign workers] are "typically software engineers -- we're not hiring that type." Yet the DOL data show that during Oct. 2000 to Sept. 2003, Intel filed 239 separate LCAs for H-1Bs to fill a total of 7540 Software Engineer jobs. Again, as explained earlier, LCAs do not equate to actual hires, and the data unfortunately are a bit old. But it does suggest that Dundas' statement is not accurate. www.mercurynews.com/mld/mercurynews/business/technology/12375452.htm More or fewer? Let's get some facts and then decide Mercury News Editorial Silicon Valley employers seeking to bring in skilled foreign workers in 2006 will find a ``sold out'' sign at the U.S. Citizenship and Immigration Service, the agency that grants visas. As of Friday, two months before the start of fiscal 2006, all of the 65,000 H-1B visas allowed for the year had been taken. Like last year, the visas, which are used by engineers, computer programmers and other knowledge workers, will have been gone by Oct. 1, the first day of the next fiscal year. This will reignite a years-old debate between the tech industry and groups representing U.S. engineers and other information technology workers. The industry says it can't find enough skilled workers here and argues that Congress should raise the visa cap. The U.S. worker groups say the visas are being misused by some companies, which bring in foreign workers at lower wages while qualified U.S. workers remain unemployed or underemployed. The debate won't be settled until Congress agrees to shed more light on the H-1B visa program. It should require reporting on the number, wages, educational background, job categories and length of stay of H-1B workers at each firm. With this data each year, any misuse would quickly come to light, and the need for the visas -- or lack of need -- would become clearer. The impact of guest workers on the U.S. labor market would be easier to analyze. And if guest workers really are needed, tech companies would have an easier time making their case. This is an important issue for the valley and for the American economy. If there is a shortage of qualified tech workers here, then failing to allow foreign workers to fill the gap will only accelerate the shift of jobs overseas and further erode American competitiveness in technology. Shutting out highly skilled foreigners who were trained at U.S. universities, often at taxpayers' expense, would be particularly stupid. But if H-1B visas are being used to import low-paid foreign workers for jobs that American workers easily could fill, the negative impact on the U.S. economy will be both immediate and long lasting. Not only will U.S. engineers remain unemployed, but young people also will be discouraged from pursuing science and engineering degrees, further undermining U.S. competitiveness and leadership in technology. Striking the right balance is critical. It will be impossible without better data, and only H-1B Visa Limits Reached for '06 - Businesses seek more positions San Jose Mercury News August 13, 2005 By Steve Johnson, Mercury News Federal officials said Friday that all 65,000 of next fiscal year's H-1B visas for skilled foreign workers have been snapped up, the earliest that has ever happened. The announcement immediately prompted business interests to call for expanding the number of visas offered, while opponents argued that the program should be significantly scaled back.The U.S. Citizenship and Immigration Service said it has received petitions for all of the fiscal 2006 H-1B visas that become valid Oct. 1. Last year, the cap for the visa program -- which is designed for foreigners with engineering,computer science and other technical specialties -- wasn't hit until October. Tracy Koon, director of corporate affairs for Intel of Santa Clara, said it is seeking a number of highly educated computer engineers and others and can't find them in this country. ''We don't have enough U.S. students going into these programs,'' she said. ''This is a competitiveness issue for us.'' A lot of other U.S. companies are in the same boat, according to Harris Miller, president of the Virginia-based Information Technology Association of America. ''The H-1B visa program is important to U.S. competitiveness in high technology,'' Miller said in a statement issued Friday. ''We believe a significant increase is required to meet the need for specialized skills and keep companies -- and, as a result, jobs for U.S. workers -- growing at a steady pace.'' But Ira Mehlman, a spokesman with the Federation for American Immigration Reform, said it's wrong for U.S. companies to be wooing foreigners when there are so many skilled U.S. workers who have been laid off in recent years. ''Something is not right,'' Mehlman said. ''That's not the way the system ought to work. Go find them, get them back, before you start looking all over the world for workers.'' Congress has adjusted the annual limit on H-1B workers several times in recent years in conjunction with the rise and fall of the economy. It boosted the cap to 115,000 in 2000 and 195,000 in 2001, but then dropped it to 65,000 in 2004. Under a law enacted last year, an additional 20,000 H-1B visas can be used for foreign workers with master's or higher degrees from U.S. colleges and universities. So far, 8,000 of those H-1B visas have been allocated for the 2006 fiscal year. Sacramento Business Journal - May 16, 2005 http://sacramento.bizjournals.com/sacramento/stories/2005/05/16/story7.html May 13, 2005 (print edition) Most 'green card' requests come from Intel Mark Larson Staff Writer Over the past five years, companies based or active in Greater Sacramento applied for more than 2,000 permanent worker certifications for foreign-born employees -- known as "green cards" -- and about 75 percent of them have been granted, according to federal applications data obtained by the Business Journal. Nearly three-fourths of all the applications came from a single company, but some major employers didn't show up at all. It's unclear whether that's because they filed their applications from other sites, had other companies handle their applications, or simply didn't seek green cards. The application data covered companies that listed an address in Sacramento, Davis, Folsom or Roseville, and a period from Oct. 1, 1999 to Sept. 30, 2004. The numbers add some definition to a continuing industry debate over how extensively tech employers use foreign workers to fill U.S. jobs. Critics call the practice a source of inexpensive labor, while tech industry leaders say they need green-card workers to have full access to the world's most talented scientists, and sometimes to fill specialized jobs that would otherwise go empty. The Folsom campus of Intel Corp. applied for the lion's share locally, seeking green cards from that site for foreign workers in California and seven other states. Nearly 800 were for workers at Intel's California sites -- more than half of the 1,494 it filed during the period -- but the federal data don't specify whether they worked at the Santa Clara headquarters, in Folsom or elsewhere. Intel did not respond when asked to estimate its green-card tally for its Folsom campus, which employs 6,500 workers handling research and development, marketing and other tasks. Of 798 applications for California workers during the five-year span, Intel won certification for 659, about 83 percent. Intel's success rate approached 86 percent for job sites in other states, with 597 approvals out of 696 applications. Local companies in high-tech consulting, dentistry, energy and the two largest local universities -- California State University Sacramento and UC Davis -- filled out the top 10, but their combined total was dwarfed by Intel's tally. Hewlett-Packard Co., the Palo Alto-based tech giant which employs fewer than 4,000 people in Roseville, was conspicuously absent from the local applications; H-P makes such filings from its human resources center in Sunnyvale, but comparable green-card application data for the company were not immediately available. A company spokeswoman did not respond when asked how many Roseville employees have green-card certifications or whether companies supplying H-P with contract employees apply for green cards for foreign workers. Permanent status Applying for a green card is the next logical step for foreign workers with temporary work visas -- dubbed H-1B visas -- which are good for three to six years. Federal records show that Greater Sacramento employers sought at least 2,700 H-1B applications from October 2001 to October 2004. One reason Intel employs a lot of foreign-born tech workers, said spokeswoman Gail Dundas, is because the science programs of U.S. colleges and universities are full of them. "More than 50 percent of the folks coming out of U.S. universities are foreign nationals to start with," she said. "Those would have been the people we would sponsor for green cards." Dundas is quick to note that Intel sees a need to get more science and math students coming up through the American education system. She said that's why it spends more than $100 million annually on schools. The idea is to help inspire more U.S. kids to pursue a math and science-based career. She also rejects the notion that companies like Intel can get more brain-power for their buck by hiring foreign nationals. "The argument that you could pay less just doesn't hold water," she said. "We certainly pay them competitively with those that do not hold H-1B visas." Dundas said unemployed U.S. techies who have complained they've been pushed out of jobs are "typically software engineers -- we're not hiring that type." Green-card applications by Intel covered engineering jobs in software, electronics, electronics design, systems software, electrical design and computer hardware, and programmer analysts, computer system analysts, computer programmers, database design analysts, testing, industrial, manufacturing, mechanical, packaging, quality control, sales, systems analyst and tech support. "Frankly, these people are very sought after because of their highly specialized level of skill and education," Dundas said, adding that Intel makes extensive efforts to hire Americans for its jobs. If it can't, a foreign national with those skills is hired. Sparring over ads Those efforts are a point of contention. The government requires companies seeking a green card for a worker to post ads for the job the worker would hold. The notices go up at the job site and in local newspapers. For workers who need a degree, companies advertise with on-campus recruiters, in professional journals, with employee referral programs, in radio and TV announcements, on the employer's Web page and at other job sites. If the company deems it has no qualified applicants from the ads, it documents that and asks the government to approve a green card. Kim Berry, a local engineer and tech labor activist, believes the advertising requirements are a sham, part of a virtual rubber-stamping of applications by the government. He suspects that the job ads are written by attorneys hired to craft a description matching the exact qualifications of the foreign national already on the job, likely on a temporary work visa. That would let the company dismiss local applicants as unqualified and seek a green card for the foreign worker. Berry says there is no shortage of qualified U.S. tech workers. "These are American jobs that they are giving away," he said. Berry closely tracks technology job ads in The Sacramento Bee, and said he's seen "dozens" in recent years that have all the characteristics of ones designed to exclude American workers. As for Intel, he said, "There have been no Intel help-wanted ads in the Sunday Bee for at least two years." Joel Stewart, a Miami attorney who specializes in foreign labor law, defends the recently updated green-card application system as a legitimate way for companies to staff when American workers can't meet their needs. On the pay issue, he said, "There is absolutely no way an H-1B or (green-card) worker can be paid less than the prevailing wage. The prevailing wage is very strictly and rigorously determined and applied" by the U.S. Labor Department. "Everyone in the business" considers the prevailing wages too high, he said, rather than too low. Stewart also said the tailoring of job ads to a foreign national's resume, in order to get that person a green card, is scrutinized by the government. Applications from companies that do that, he said, "cannot be approved, in my view." "In all honesty," he said, the Department of Labor "has made the immigration process very difficult and restrictive. Those that prevail are the ones with the most motivation, highest qualifications, and (who) wish to work honestly in the United States." A 2000 article available on the ILW.com immigration law site, entitled "Legal Rejection of U.S. Workers" and credited to Stewart, concludes "When employers feel the need to legalize aliens, it may be due to a shortage of suitable U.S. workers, but even in a depressed economy, employers who favor aliens have an arsenal of legal means to reject all U.S. workers who apply."