Date: Sun, 1 Apr 2007 16:46:59 -0700 From: Norm Matloff To: Norm Matloff Subject: long SF Chronicle article on H-1B To: H-1B/L-1/offshoring e-newsletter The San Francisco Chronicle has given good, thoughtful coverage to the H-1B visa issue over the years. Most newspapers do give balanced accounts, all right, but their approach has often been formulaic. The Chron's articles have had more subtlety, more meat to them, and I would note that once the paper even wrote an editorial sympathetic to those of us who are critical of the H-1B program. Today's edition included a fairly long piece about H-1B, which I am enclosing below. As usual, I have some comments. # A similar rush last year forced Seth Sternberg, chief executive of Meebo, to # delay some hiring plans. Meebo, a Mountain View developer of a Web site for # instant messaging from anywhere, had hoped to add two foreign programmers to # its 15-person staff last year. On May 27, the startup filed the paperwork to # hire the two people, one from the United Kingdom and the other from Italy. # But it turned out that last year's quota had been exhausted the day before # Meebo's requests arrived. The Dept. of Labor Web page shows the applications Meebo made for those two programmers. Meebo lists the prevailing wage for both positions as $69,700. The term "prevailing wage" means the salary that this firm could legally pay these programmers, as defined by the law and regulations. Though the firm states that it will pay them at least $75,000 and for all we know it could be much more, this example illustrates the core problem with the law. Average salaries for programmers in Silicon Valley are well above $75,000, and for "the best and the brightest," they are WAY above that amount. (The Meebo CEO says on his blog that the two people he wants to sponsor for H-1B are "absolutely exceptional.") So a firm could pay this amount and be FULLY COMPLIANT WITH THE LAW. In other words, H-1Bs can LEGALLY brought in as cheap labor. This is due to the huge loopholes in the law and regs--which are basically written by the industry lobbyists themselves. I'm told, by the way, that this evening's 60 Minutes will discuss this very problem, though not in the H-1B context. (By the way, from Meebo's team list and a Web search, the two would-be H-1Bs are David Vignoni, www.icon-king.com/files/resume_david_vignoni.pdf who is working for Meebo from Italy, and Paul Sowden, http://delete.me.uk) Here is something which the article rather gets wrong: # But H1-B critics -- led by older American-born programmers and their # academic allies -- say even if U.S. high-tech firms need employees from # overseas to stay competitive, the program is flawed in a way that leads to # the loss of jobs through outsourcing. Yes, as Prof. Hira has shown (see below), H-1B is indeed used as a vehicle to facilitate offshoring. However, although this is definitely important, it is a secondary usage of the visa. The primary usage to import cheap labor to work here, so the above passage is somewhat misleading from my point of view. # Such frustrations have made an overhaul of the H1-B system a top priority of # high-tech leaders. Microsoft Chairman Bill Gates has questioned the wisdom # of putting any restrictions on hiring "the best and the brightest" in a # global, knowledge-based economy -- although his company's chief lobbyist, I have actively supported the notion of bringing in "the best and the brightest" from all over the world. But the average H-1B makes bottom-level wages, and even accounting for the fact that they are underpaid, it is clear that most H-1Bs are not geniuses. By the way, there is another work visa which is specially for geniuses, the O-1. It has NO cap. If these workers were indeed outstanding talents, they'd have this visa to use. # Ron Hira, a professor of public policy at the Rochester Institute of # Technology, cited the most recent U.S. immigration data that show 44 percent # of all H1-B visas were issued to people from India. Other government data # show that Indian programming companies, including Infosys Technologies and # show that Indian programming companies, including Infosys Technologies and # Tata Consultancy, are among the biggest seekers of H1-Bs. Based on these # facts, and reports from disgruntled Americans, Hira argues that the Indian # companies hire H1-Bs from home, and use these temporary workers to learn # their way around U.S. data centers in order to ship processes to India. # "The people who dominate the H1-B process now are engaging in offshore # outsourcing," Hira said. Prof. Hira's work consists of a lot more than simply looking at per-country H-1B counts and hearing anecdotes from American workers. He has done a thorough academic study of the use of H-1B (and the L-1 work visa as well) to facilitate offshoring. See R. Hira, U.S. Immigration Regulations and India's Information Technology Industry, Technological Forecasting & Social Change, 2004. By the way, the congressionally commissioned National Research Council study, which included interviews with employers, found the same thing. (National Research Council, Building a Workforce for the Information Economy, National Academies Press, 2001, p.185.) # "That argument is not one I buy into,'' Lande said. "Companies, regardless # of where they are headquartered, are facing a serious skills shortage here # in the United States." There is no shortage. Starting salaries for new graduates in computer science and electrical engineering, adjusted for inflation, have been flat since 1999 (Economics Unbound, Good time to learn accounting? Michael Mandel, BusinessWeek, September 15, 2005). An employer survey by Vivek Wadhwa, a former tech CEO and now an adjunct professor at Duke University, showed the same thing--no shortage. Indeed, an attorney quoted in the article says we have no shortage as of now: # Shirish Gupta, president of the South Asian Bar Association of Northern # California, said Congress should double the limit on H1-Bs. "The need for # highly qualified engineers has not decreased,'' he said. "I think we might # be facing a supply crunch. The U.S. should not be hamstrung." Next the industry lobbyists bring out one of their standard lines.: # "In practically every graduate program in math, science or engineering in # major U.S. universities, about half or more of graduates are foreign born," The reader--and much more importantly, the member of Congress--is supposed to make the inference that there is "something wrong" with Americans for not pursuing graduate study. But the truth is very different. As shown in the article, most of the H-1Bs don't have graduate degrees. But concerning the cited statistic, what the lobbyist isn't telling you that this high percentage of foreign graduate students was a PLANNED GOAL OF THE H-1B PROGRAM. The governmental National Science Foundation, in pushing Congress to establish the H-1B program back in 1989, explicitly stated that PhD salaries in science and engineering were too high, and advocated bringing in foreign students to hold down wages. It also stated that a consequence of this would be that Americans would not find PhD study financial attractive and thus would not pursue it. The NSF stated - A growing influx of foreign PhDs into U.S. labor markets will hold down - the level of PhD salaries to the extent that foreign students are - attracted to U.S. doctoral programs as a way of immigrating to the U.S. - A related point is that for this group the PhD salary premium is much - higher [than it is for Americans], because it is based on BS-level pay - in students' home nations versus PhD-level pay in the U.S... - [If] doctoral studies are failing to appeal to a large (or growing) - percentage of the best citizen baccalaureates, then a key issue is - pay...A number of [the Americans] will select alternative career - paths...For these baccalaureates, the effective premium for acquiring a - PhD may actually be negative. And it worked just like the NSF wanted. The H-1B program was enacted by Congress in 1990 and implemented in 1991. Consider this: Since 1996, starting salaries for new PhDs in computer science have gone up about 30%. Meanwhile, starting salaries for new law school graduates have gone up 100%. And that gap grows rapidly with experience. Here you have two professions requiring similar traits--logical thinking, attention to detail, problem-solving ability, willingness to work long hours--and yet a stark disparity between them in rate of salary growth. Again, this was a planned consequence of H-1B. Recently the industry has been asking for another work visa aimed at foreign graduates of U.S. universities. (It was called F-4 when proposed in the last Congress, but in the new STRIVE Act introduced last week in Congress, it has a different name.) Given that H-1B itself was used to make graduate student unattractive to Americans, creating a visa specially for foreign students would be absolutely unconscionable. I wonder how many members of Congress know that suppression of wages was one of the original goals of H-1B. For that matter, how many know that former Fed Chair Alan Greenspan just last month stated the same thing (and he said more generally, not just for PhDs). Bloomberg News reported on March 14: % Allowing more skilled workers into the country would bring down the % salaries of top earners in the United States, easing tensions over the % mounting wage gap, Greenspan said. % "Our skilled wages are higher than anywhere in the world," he said. "If % we open up a significant window for skilled workers, that would suppress % the skilled-wage level and end the concentration of income." Returning to our present article, note this passage: # Ironically, the H1-B quota peaked during the dot-com bust, when tech hiring # was weakest, The quota was not fully used at its peak, but it is definitely true that H-1B usage increased AFTER the dot-com bust. In 2001, 163,000 H-1B visas were issued, a big increase from the year before. See the very appropriately titled article, Industry Downturn Hasn't Killed Tech's Big Appetite for Top Talent, Los Angeles Times, December 9, 2001. # and in fiscal 2004 it reverted back to 65,000 -- just as the Web 2.0 # phenomenon was rekindling the competition for programming talent. This just isn't true. Web 2.0 is not that big a deal, and the vast majority of H-1Bs are not working on it. And again, the data show that we don't have a shortage. # Sacramento software engineer Kim Berry, president of the Programmers Guild # -- which he describes as "disproportionately over age 40 and # disproportionately underemployed" -- said it's tough for U.S. tech workers # to see jobs going to H1-Bs. Yes, as I've explained (e.g. in my California State Bar Assoc. article, http://heather.cs.ucdavis.edu/CLER.pdf), the dirty little secret about H-1B is that it is used to avoid hiring older (age 40+) U.S. citizens and permanent residents. When the employers run out of young Americans to hire, they hire young H-1Bs (in addition to the many employers who don't even hire the young Americans). Ironically, because the H-1B cap was reached so quickly this year, the market for American programmers is not too bad--if they're young. But once Congress ups the cap this year, even many of the young ones will suddenly run into brick walls. Let's look at the article's poster company, Meebo. They've got pictures of all their staff (http://blog.meebo.com/team), and all the engineers are clearly young. Then look at their opening for a C/C++ programmer (http://blog.meebo.com/?page_id=255). They want "3-5+ years of C/C++ software development experience on Linux/Unix." That's very typical. The industry wants people with 3-7 years of experience--and typically not more than that. Beyond that, people are just too expensive. The job description is filled with what might be taken to be code words for "young": "We’re seeking a bright, energetic, and dedicated team player ...While the environment is fun and friendly, it’s really fast paced: schedules are measured in days not weeks and our team is obsessed with delivering the best user experience possible." I can't say whether this particular firm is concentrating on hiring young people, but this is the usual pattern. Some of you may be interested in reading Meebo CEO Sternberg's rant against the H-1B cap in his blog, at http://blog.meebo.com/?p=147 Nice to see attorney Gupta's candor about the nonshortage, shown above. Here is another candid immigration lawyer: # Inderpreet Sawhney, an immigration attorney in Santa Clara, agreed that "the # U.S. economy will only benefit from skilled people coming here." Her # practice lets her see the flip side of the H1-B story -- the people who come # to the United States on temporary work permits with the hope of getting # permanent residency and find themselves trapped. # If they later on apply for a green card, they tend to stay with the # same employer because if you chance changing employers during that # time, you have to start all over again," she said, adding "they get # locked in." Yes, absolutely, and it is that trapped status that makes them exploitable. If you can't freely move around in the labor market, you're not going to command as high a salary. And the employers WANT it that way, both to keep salaries down and to avoid the disruption that comes to a project when someone jumps ship. In 2000, Congress made some small technical corrections that gave H-1Bs a bit more mobility, but the trapped nature basically remained. Indeed, immediately after that legislation was enacted, immigration attorney Jose Latour hastened to assure nervous employers that things would indeed continue to be business as usual in terms of indentured servitude. An employer had asked him, ``Won't this [new bill] mean that H-1B employees will start jumping from job to job more often?'' Latour answered that there may be some reduction in green card time, but assured the employers that ``the labor certainly process...[still] requires a trusting relationship between employer and employee...the need for stable employment for the realization of permanent residency remains unchanged,'' i.e. H-1Bs will continue to need to stick with their employers for the several years while the green card is pending (http://www.usvisanews.com/articles/edit80.html). And finally, consider this passage: # Late last week Sen. Dick Durbin, D-Ill., introduced a bill more to the # liking of H1-B critics that would tighten provisions that are supposed to # ensure that foreign workers don't undercut American job applicants -- and # leaving the present cap in place. Yes, Durbin's bill is apparently the one introduced by Rep. Bill Pascrell of NJ in the last session. The Pascrell bill was excellent, most notably because it fixed the core problem with H-1B--the outrageously loophole-riddled definition of prevailing. This would eliminate the vast majority of H-1B hirings. But I use the hypothetical word "would." Pascrell's bill never even got to committee, and thus it would not be surprising at all to see the same thing happen to Durbin's bill. Norm http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/04/01/BUG1VOUJTG1.DTL San Francisco Chronicle Tech firms scramble for visas Monday key in race for limited -- and controversial -- H1-B permits for foreign workers Tom Abate, Chronicle Staff Writer Sunday, April 1, 2007 While most Americans are relaxing today, hiring managers at Microsoft, Oracle, Intel and other high-tech companies will be mailing applications to U.S. immigration officials seeking permission to hire temporary foreign employees under a controversial work permit called an H1-B visa. Since 1990, the H1-B program has allowed U.S. companies to bring in a limited number of foreigners to work in "specialty occupations," which range from rocket science to fashion modeling. The current H1-B quota is 65,000, but a series of exemptions make that a soft number. In 2005, the most recent year for which data are available, the U.S. approved 116,927 H1-B visas. By law, such temporary work permits are normally issued to persons who hold at least a bachelor's degree. Government data show roughly half of people holding H1-Bs meet that minimum. The other half have master's degrees or better, although high school dropouts with vital experience can qualify -- which happened in 2003 when 117 fashion models won H1-B visas. H1-B work permits run on a fiscal year that begins Oct. 1. Immigration officials say Monday is the soonest they'll accept applications, and employers fear that if they don't file their applications as soon as possible, this first-come, first- served system will exhaust its quota quickly -- perhaps within days, which is why hiring managers are pulling post office duty today. A similar rush last year forced Seth Sternberg, chief executive of Meebo, to delay some hiring plans. Meebo, a Mountain View developer of a Web site for instant messaging from anywhere, had hoped to add two foreign programmers to its 15-person staff last year. On May 27, the startup filed the paperwork to hire the two people, one from the United Kingdom and the other from Italy. But it turned out that last year's quota had been exhausted the day before Meebo's requests arrived. "We'll have those applications ready to go day one," Sternberg said last week. He plans to resubmit the visa requests to hire those two same code warriors starting this October. Such frustrations have made an overhaul of the H1-B system a top priority of high-tech leaders. Microsoft Chairman Bill Gates has questioned the wisdom of putting any restrictions on hiring "the best and the brightest" in a global, knowledge-based economy -- although his company's chief lobbyist, Jack Krumholtz, said a boost in the quota is probably all that is politically feasible. But H1-B critics -- led by older American-born programmers and their academic allies -- say even if U.S. high-tech firms need employees from overseas to stay competitive, the program is flawed in a way that leads to the loss of jobs through outsourcing. Ron Hira, a professor of public policy at the Rochester Institute of Technology, cited the most recent U.S. immigration data that show 44 percent of all H1-B visas were issued to people from India. Other government data show that Indian programming companies, including Infosys Technologies and Tata Consultancy, are among the biggest seekers of H1-Bs. Based on these facts, and reports from disgruntled Americans, Hira argues that the Indian companies hire H1-Bs from home, and use these temporary workers to learn their way around U.S. data centers in order to ship processes to India. "The people who dominate the H1-B process now are engaging in offshore outsourcing," Hira said. Infosys and Tata declined to discuss the issue directly, redirecting questions to Jeff Lande, senior vice president of the Information Technology Association of America, which represents many U.S. and foreign-owned companies. "That argument is not one I buy into,'' Lande said. "Companies, regardless of where they are headquartered, are facing a serious skills shortage here in the United States." The skills shortage is the central tech-industry argument for the upward revision or lifting of the H1-B quota. Robert Hoffman, Capitol Hill lobbyist for Oracle Corp., said one example of the scarcity of homegrown brainpower is the number of foreign students attending the nation's top schools. "In practically every graduate program in math, science or engineering in major U.S. universities, about half or more of graduates are foreign born," Hoffman said, arguing that firms like Oracle hire these sought-after specialists on H1-B visas as a prelude to helping them get the green cards that signify permanent residency status or citizenship should they desire. Microsoft's Krumholtz, in reference to these sought-after foreign graduates, said: "We ought to be stapling a green card to their diplomas," to make sure that they employ their intellects in the United States rather than returning home to compete against us. Both assertions -- about the scarcity of homegrown talent and the need to boost the quota to compensate -- are reruns of debates that occurred in the late 1990s as the tech industry roared toward what ultimately proved to be the dot-com bubble. By 1999, employers had persuaded Congress to temporarily boost the quota of 65,000 H1-Bs to as high as 195,000 in fiscal 2003. Ironically, the H1-B quota peaked during the dot-com bust, when tech hiring was weakest, and in fiscal 2004 it reverted back to 65,000 -- just as the Web 2.0 phenomenon was rekindling the competition for programming talent. But those opposed to lifting the H1-B cap say the present program gives employers all the tools they need to absorb the highly skilled foreign graduates that tech officials talk about, and complain -- with justification -- that the so-called cap of 65,000 is a fiction. A November report from U.S. Citizenship and Immigration Services puts the basic quota of H1-Bs at 65,000. But the law also says the first 20,000 H1-B applications filed for any masters' degree candidate or higher do not count against that quota. So that gets the number to 85,000. The report adds that "petitions for new H1-B employment are exempt" for foreigners hired to work at universities, nonprofit research institutions or governmental laboratories, and that would push the cap above 85,000. According to the report, the United States approved 103,584 H1-B visas in fiscal year 2002; 105,314 in 2003; 130,497 in 2004; and 116, 927 in 2005. "It sure looks like they're issuing a hell of a lot more visas than they ought to be," said John Miano, an attorney and H1-B critic from New Jersey. If hiring the best and brightest is the goal, Miano said, the data show that the current program misses the mark because it awards most H1-B visas to people with bachelor's degrees (45 percent in the most recent year, down from 49 percent the prior year) who come from low-wage countries (India tops at 44.4 percent, China second at 9.2 percent). Sacramento software engineer Kim Berry, president of the Programmers Guild -- which he describes as "disproportionately over age 40 and disproportionately underemployed" -- said it's tough for U.S. tech workers to see jobs going to H1-Bs. "The top users of this (program) are foreign companies that come in and exclusively hire foreign workers and then the industry says we need more H1-Bs because they're all used up," he said. Shirish Gupta, president of the South Asian Bar Association of Northern California, said Congress should double the limit on H1-Bs. "The need for highly qualified engineers has not decreased,'' he said. "I think we might be facing a supply crunch. The U.S. should not be hamstrung." Inderpreet Sawhney, an immigration attorney in Santa Clara, agreed that "the U.S. economy will only benefit from skilled people coming here." Her practice lets her see the flip side of the H1-B story -- the people who come to the United States on temporary work permits with the hope of getting permanent residency and find themselves trapped. "If they later on apply for a green card, they tend to stay with the same employer because if you chance changing employers during that time, you have to start all over again," she said, adding "they get locked in." As this year's quota season opens Monday, Congress is gearing up to take another look at the H1-B issue, but so far Democratic leaders have said they want to address the high-tech worker issue in the context of the larger and far more complex debate over how to reform the immigration system. Three dozen House members recently co-sponsored HR1645, a comprehensive immigration reform bill that includes revisions to the H1-B program favored by the high-tech industry, but those provisions are buried in a larger bill. It's impossible to tell whether the overall package will move, or whether leaders like Rep. Zoe Lofgren, D-San Jose, whose influence stems from her chairing of the House Judiciary Subcommittee on Immigration, will back off from her mantra that reform should be "not only for rocket scientists but strawberry pickers" and push a separate bill for the tech lobby if the larger package fails. Late last week Sen. Dick Durbin, D-Ill., introduced a bill more to the liking of H1-B critics that would tighten provisions that are supposed to ensure that foreign workers don't undercut American job applicants -- and leaving the present cap in place. While policymakers jockey over the issue, employers that want to hire workers on H1-B visas are doing whatever they can to make sure their applications get to the head of the queue. "We're going to mad dash," said Margie Jones, immigration manager for Intel in Santa Clara, adding, "I've got 200 cases that I'm working on." Chronicle staff writer Ralph Hermansson contributed to this report. E-mail Tom Abate at tabate@sfchronicle.com.