To: H-1B/L-1/offshoring e-newsletter Mon May 6 20:23:07 PDT 2013 On Friday, KCBS radio, the CBS affiliate in San Francisco, held a "debate" between me and my colleague Giovanni Peri of the UC Davis Economics Dept. I use quotation marks here because there was no back-and-forth, simply a 15-minute interview of me and one of Giovanni. You can listen to the tape at http://www.podtrac.com/pts/redirect.mp3/nyc.podcast.play.it/media/d0/d0/d1/d2/dQ/dS/d9/12QS9_3.MP3?authtok=5562096334139101648_LzULyUCl0r3HrAGijwWLKUFrXPA I know Giovanni slightly. I first met him when I invited him to serve as a guest lecturer for the Freshman Seminar I was teaching on immigration, http://heather.cs.ucdavis.edu/~matloff/frs.html I found him to be outgoing, friendly and provocative. I also had another UCD colleague and a major figure in the field, Phil Martin, serve as a guest lecturer on the other side. And that is a key point. Most economists who work on immigration issues are known, at least in the research community, to have a definite viewpoint, either positive or negative, on the issue as to what benefits immigration has to the nation--fiscal, economic, cultural, etc. Phil is, I believe it is fair to say, viewed as moderately negative, while Giovanni, the relatively new kid on the block, is already viewed as very strongly positive. At the time I first met Giovanni, in 2006, he had not done any research on the issue of skilled immigration. When I asked his opinion on it at the time, he said that the fact that the industry was hiring H-1Bs must mean that the employers need them. I was a bit taken aback to see an economist ignore the issue of price, but I assumed that he would eventually do research in the area, and I looked forward to seeing it. That day has now come. Giovanni, together with his graduate student and a colleague at Colgate University, now has a working paper (econ academic jargon for a draft shared for comments, not yet a peer-reviewed published paper) on H-1Bs, which you can download at http://econpapers.repec.org/paper/norwpaper/2013009.htm I plan to do a detailed review of the paper at some point (I first will review one by the Kerrs and Wm. Lincoln, with input from Bill Kerr), so in the current posting I will focus on the radio "debate," and even then address only a few points. Giovanni had suggested that he and I get together to trade views before the debate, but it came much sooner than we had thought, no time for meeting. We did chat by e-mail. He asked me a number of questions on my views, which I answered in summary form but referred him to my recent published paper in Migration Letters, http://heather.cs.ucdavis.edu/MigLtrs.pdf for details. Since I was already aware of his working paper on H-1B, I only had one question for him, which asked whether he favored the provision in the Gang of 8 bill to grant unlimited, automatic green cards to all foreign STEM grad students. He replied that he does favor it, which surprised me in spite of my knowing that he is very strongly in the pro-immigration camp. As noted, I'll comment on just a few points Giovanni made in the radio show: 1. He claimed that H-1Bs are not underpaid, and as evidence he said that he had found the mean salary in the computer field for natives to be about $71,000, compared to $79,000 for the foreign-born. I'm sure many of you can see the flaws in that, but here are a few: (a) The category "foreign-born" is of course way, way too broad, much, much broader than just H-1Bs. Obviously, it includes those who came to the U.S. as children under family immigration laws. But even among those who started work in the U.S. as H-1Bs, most of them are now U.S. citizens or permanent residents--and thus not subject to exploitation. In other words, only a very small minority of the foreign-born in Giovanni's wage statistics are currently H-1Bs, and thus his numbers aren't relevant to the H-1B underpayment issue. (b) What is Giovanni including in his category, "computer" jobs? There are lots of different kinds of computer jobs that H-1Bs are not eligible to fill, such as technician jobs. The category that the computer-related H-1Bs typically fill, Software Engineer, has a median salary nationwide of $90,060, according to the OES data. So, Giovanni is clearly including far more job categories than he should in a paper about H-1B. He is, in significant part, comparing native technicians to foreign software engineers, which is invalid. (c) Again we have the issue of differential education levels, as was the case of my critique of industry lobbyist Robert Hoffman's blog in my e-newsletter posting this afternoon, archived at http://heather.cs.ucdavis.edu/Archive/HoffmanDistortion.txt Oddly, Giovanni agrees with me that the H-1Bs being sponsored for green cards are essentially immobile. But that in turn shows that they tend to be underpaid: As any economist, surely including Giovanni, will tell you, on average immobile workers make less than mobile ones, since the immobile ones can swing the best salary deal by moving freely in the laobr market. 2. Giovanni says that since the H-1B quota for an entire year is often exhausted within just a few days, that shows that employers really need the H-1Bs. Of course, once one shows that the H-1Bs tend to be underpaid, that argument pretty much goes away. 3. Giovanni says that Americans avoid STEM jobs, because jobs in the law, management and finance are much more lucrative. This of course raises the obvious question as to WHY that is the case. Given the supreme economic importance STEM supposedly has--as stated repeatedly by members of Congress and President Obama--why are STEM careers not financially "competitive" in attracting our own best and brightest young people? The answer is obvious: The foreign influx is holding STEM wages down. And this is exactly the effect that the famous internal NSF report advocated, and which former Fed Chair Alan Greenspan has repeatedly called for. It has also been shown by academic researchers. 4. Giovanni says that the number of H-1Bs at a university is highly correlated with the ranking of the university, thus showing that H-1Bs at universities are of high quality. This again is fallacious. The more highly ranked universities have more researchers, thus more H-1Bs; it say nothing about the quality of the H-1Bs. And Point 3 is probably the most important one, going right to the issue of just what it is we want from immigration, and for our nation. It is here where Giovanni and I have fundamentally different views. During my part of the show, I raised the question, "Do we want to have a policy that incentivizes our own best and brightest to avoid STEM careers?" I treated this as a rhetorical question, taking it for granted that the answer was no. Yet Giovanni has no problem whatsoever with having the nation permanently, and indeed mainly, rely on foreign influx for STEM. (He brought up the "let them be lawyers" remark regarding Americans in his e-mail exchange with me as well.) Well, happy listening. :-) Norm Archived at http://heather.cs.ucdavis.edu/Archive/MatloffVsPeri.txt