Date: Thu, 27 May 2010 16:39:24 -0700 From: Norm Matloff To: Norm Matloff Subject: Mithas/Lucas, "conspiracy" etc. To: H-1B/L-1/offshoring e-newsletter Enclosed below are two items on Mithas/Lucas paper that I've reported on recently (http://heather.cs.ucdavis.edu/Archive/MithasLucas3.txt): (a) Don Tennant's blog, and (b) an eWeek interview of me. I like Tennant's summary: Lucas and Mithas got a lot of press as a result of their controversial report. That may be good for their careers in academia, where the pressure to maintain a high research profile is intense. But it's as if they went on a hunt for data to back a pre-ordained conclusion, and they settled for the best they could find. Their report is a disservice to the H-1B discussion. But his opening sentence is a bit odd: The contention of H-1B haters that the visa program is a conspiracy by government interests, big business and liberal media to import cheap labor is ignorant, distracting and tiresome. Tennant must be getting some bizarre e-mail. :-) The word "conspiracy" is not one I would use. But I must say, the ingredients are there. Big business certainly does act in concert--"conspire," if you will--to lobby Congress on the H-1B issue. Just look at http://www.competeamerica.org/whoweare/coalition/index.html for instance to see that. Granted, that's out in the open, and thus should not count as "conspiracy." But there's a whole lot going on that's not in the open. An excellent example is the topic at hand, academic studies. For instance, Austin Fragomen is one of the most prominent immigration attorneys in the U.S. His firm is the largest immigration law firm in the nation; he writes standard-setting books on immigration law practice, most notably on H-1B., and most importantly, he has been a major player in immigration politics. It is most illuminating, then, to see what Fragomen told Workforce Magazine in March 1996 (emphasis added): "The business community mobilized [in response to congressional proposals to cut back on H-1B], forming American Business for Legal Immigration (ABLI), a Washington, D.C.-based lobbying group that represents a number of associations and employers, and COMMISSIONS ACADEMIC STUDIES TO SUPPORT ITS POSITION." The professors who run such a study then shop it to the press (the "shopping" is done by their universities in many cases), the press publicizes the study, the industry lobbyists show Congress the press coverage, etc. The gullible press trusts academia and reports on the study. The innocent readers (and the putably innocent members of Congress) see a study coming out of a university, and have no idea that it had a hidden agenda. Please note that I am NOT saying that this is the case for Mithas and Lucas. Instead, I'm using this as an example for Don Tennant as to why the word "conspiracy" is not so far off base after all. Or consider the case of Dan Siciliano, a lecturer at the Stanford Law School. Here's what I reported last year, after the Wall Street Journal quoted him lavishly extolling the virtues of increasing the yearly H-1B cap: So, what is Siciliano's background for making such strong claims about the innovative quality of the H-1Bs? Has he done research on H-1Bs, innovation and so on? Well, no. Here are his "qualifications": Siciliano was previously an immigration lawyer with Bacon and Dear, one of the most prominent immigration law firms in the nation (www.sinoedu.com/stanford-cg05.htm). Siciliano also is CEO of LawLogix, a firm that develops software systems for immigration lawyers. To top it off, Siciliano is on the Board of Trustees of, and is a research fellow at, the American Immigration Law Foundation, the research arm of the American Immigration Lawyers Association... So Siciliano has a vested interest in H-1B, to put it mildly. Unfortunately, he doesn't seem to mention these things when he talks to the press. In the above WSJ article, for instance, he was described as "a Stanford economist." When he was on CNBC on March 6, he was asked his views "as an educator," and though his affiliation with the Immigration Policy Center was mentioned, there was no mention of IPC's connection to AILA/AILF, so IPC seemed neutral to viewers. As one more example, consider the Association for Computing Machinery, the main professional organization for computer science, run largely by academics. The ACM was alarmed at the decline in computer science enrollment in U.S. universities, a huge problem for them, since numbers are power in academia. They attributed the decline to student fear of offshoring, so they set up a large study with the express goal of assuring students that offshoring is not a problem. So, the outcome was a forgone conclusion. Here's what I reported at the time the "study" came out: One member of the ACM study team, Rob Ramer (whom I'm quoting with permission here) even contacted me, saying that the atmosphere was such that anyone dissenting from the pro-outsourcing line was gently marginalized. This member said, "Our sub-committee was often seen as alternatively right-wing or anti-business extremists...because we kept raising dissenting voices about the pro-offshoring mantra. It was a pretty much a consensus among the rest of the committees that we were the 'spoil-sports,' even though we repeatedly stated that few to none of us were 'anti-outsourcing' in all situations, all we were calling for was an examination of the problems as well as the glowing success stories. Of course, factual examination is 'spoiling the sport' of spin." Yet, once again, when this study was reported on in the press, the innocent readers knew none of this. They didn't know that the outcome was a forgone conclusion, that dissenting voices had been suppressed, etc. Here was an august mainstream organization, with a largely academic leadership (the then-president was at UC Berkeley), solemnly telling the public that, don't worry, there are tons of jobs in the field, offshoring is nothing to fear, etc., and the poor readers probably took the report at face value. One more academic example (there are many): The Wall Street Journal's "Numbers Guy," Carl Bialik, ran a good analysis of the claim by NFAP that the hiring of each H-1B creates five new jobs. Bialik got much more into the statistical methodology aspects than usual, and raised good questions about the validity of the NFAP claim. Here's what I reported at the time: Now this one really intrigued me: # Some researchers find the general premise of the study # persuasive, even if the study didn't prove it. Duke University # statistician David Banks said correlation can't prove causation, # but he did think the study "corroborates the idea that H-1B visas # support job creation." It does so, he says, by contradicting the # theory that companies seek foreign workers to replace domestic # ones. In reading this, I wondered, "Who is this guy Banks, and why was he interviewed by Bialik, out of the literally thousands of statistics professors in the nation? What in the world does he have to do with H-1B?" Well, it turns out that he works with outspoken immigration attorney Bruce Hake! In fact, Banks has coauthored chapters with Hake in AILA publications. So Banks is certainly not the impartial observer ("finds the study persuasive"!) that Bialik apparently thought him to be. If even the astute Bialik can be fooled, certainly the vast majority of readers were too. Concerning Congress, in spite of the fact that most of the populace know that money talks in DC, most people don't realize the huge impact money has on H-1B politics. In 2000, for instance, the Senate voted 96-1 to raise the H-1B cap, in spite of the fact that the GAO had just issued a report criticizing the program. The GAO study was not mentioned even once during the floor "debate" on the Bill. Afterward, Sen. Robert Bennett (R-Utah) remarked, "Once it's clear (the visa bill) is going to get through, everybody signs up so nobody can be in the position of being accused of being against high tech. There were, in fact, a whole lot of folks against it, but because they are tapping the high-tech community for campaign contributions, they don't want to admit that in public." Rep. Tom Davis (R-Va.), chair of the Republican Congressional Campaign Committee. said, "This is not a popular bill with the public. It's popular with the CEOs...This is a very important issue for the high-tech executives who give the money." Again, though these statements were public, the vast majority of voters didn't hear them. Meanwhile members of Congress tell the populace that they support an H-1B increase because they are convinced that there's a tech labor shortage, with H-1B the short-run solution but long-term being--a favorite excuse--improvements to the educational system. How about supporting improvements to the political system? So yes, there is a concerted effort on the part of industry and Congress to expand H-1B, and no, it's not in the open. Many people WOULD consider this a conspiracy. The Tennant blog and the eWeek interview of me follow below. Norm http://www.itbusinessedge.com/cm/blogs/tennant/h-1bs-earn-more-than-us-counterparts-not-so-fast/?cs=41343 H-1Bs Earn More Than U.S. Counterparts? Not So Fast Posted by Don Tennant May 24, 2010 12:54:33 PM The contention of H-1B haters that the visa program is a conspiracy by government interests, big business and liberal media to import cheap labor is ignorant, distracting and tiresome. But a new report arguing that H-1B visa holders earn more than their U.S counterparts is equally distracting, and almost as ignorant. The report, prepared by two professors at the University of Maryland's Robert H. Smith School of Business, challenges the commonly held understanding that if anything, H-1B visa holders tend to be paid below-market wages in violation of U.S. law. A May 21 article on eWEEK quoted this from the report: "IT professionals without U.S. citizenship earn approximately 8.1% more than those with U.S. citizenship; IT professionals on an H-1B or other work visa earn approximately 7.9% more than those with U.S. citizenship; and IT professionals with a green card earn approximately 13.6% more than those with U.S. citizenship or work visa holders." "The salary premiums for non-U.S. citizens and for those on work visas fluctuate in response to supply shocks created by the annual caps on new H-1B visas. Setting lower and fully utilized annual caps results in higher salary premiums for non-U.S. citizens and those with work visas." The eWEEK article included a short Q&A with the report's authors, Professors Hank Lucas and Sunil Mithas, but didn't question their findings or provide a counter view. Fortunately, a May 20 article on CIO.com did. According to the CIO.com piece, the University of Maryland report was based on data collected from online salary surveys conducted by InformationWeek and Hewitt Associates from 2000 to 2005. Check this out: The Lucas-Mithas research deviates from the findings of other studies investigating the effect of temporary visa programs on the salaries of U.S. IT professionals. According to Lucas and Mithas, H-1B visa holders earned an average of $75,358 from 2000 to 2003, compared with the average U.S. citizen's salary of $66,836. (The InformationWeek survey did not ask about visa status in 2004 and 2005). But according to the U.S. Citizenship and Immigration Service (USCIS), the median salary for H-1B visa holders in computing professions during the 2000 to 2003 period was just over $50,000. "It [seems] strange to me that the authors would depend on sampled data when we have the whole census of new H-1B recipients' salaries reported [by] the USCIS, at least in aggregate terms," says Ron Hira, associate professor of public policy at the Rochester Institute of Technology. "For computing occupations those data show low wages relative to Bureau of Labor Statistics wages for Americans. The median salary for new H-1Bs is comparable to the entry-level wages for freshly minted bachelors in computer science, as reported by the National Association of Colleges & Employers. So half the new H-1Bs are being paid at- or below entry-level wages." Moreover, the CIO.com article pointed out that the report's findings were potentially flawed because of the self-selective nature of the data: Hira suggests there may be a self-selection bias at play when using a sample population. The data Lucas and Mithas used comes from 50,000 IT professionals, including 809 temporary visa holders, who opted to participate in an online salary survey. The researchers say the overall sample and sample of non-U.S. citizen foreign-born IT professionals in their study is reasonably representative of the U.S. population. While those numbers may line up, it's unlikely that H-1B or L-1 grantees who depend on their employers for their visas and who earn lower than average wages would participate in such a survey, says Hira. "The [Lucas-Mithas] report may be able to control for some additional factors that affect wages, but there is no doubting the USCIS characteristics data," says Hira. "It is a census, not a sample." The professors are sticking to their guns, but come on. When you publish research that turns conventional wisdom on its head, you need to do a much better job of validating your data. Lucas and Mithas got a lot of press as a result of their controversial report. That may be good for their careers in academia, where the pressure to maintain a high research profile is intense. But it's as if they went on a hunt for data to back a pre-ordained conclusion, and they settled for the best they could find. Their report is a disservice to the H-1B discussion. http://www.eweek.com/c/a/IT-Management/Professor-Blasts-Research-on-H1B-Visa-Workers-Earning-Higher-Wages-266591/ Don E. Sears eWeek May 27, 2010 Professor Blasts Research on H-1B Visa Workers Earning Higher Wages A University of California professor refutes claims made in a recent University of Maryland study that H-1B visa holders make more money than U.S. technology workers. Professor Norman Matloff dissects the wage numbers used, finds what he claims are critical omissions and discusses his own studies and others which found the majority of H-1B visa holders earn 15 to 20 percent less than U.S. workers. In response to a recently published University of Maryland study, eWEEK interviewed Norman Matloff of the University of California, Davis, to get his perspective on the findings. The Maryland findings claim H-1B visa holders typically earn more in wages in the U.S. when you control for education level and several other factors. eWEEK interviewed the Maryland study's authors, Assistant Professor Sunil Mithas and Professor Henry Lucas, last week. Why are H-1B visa holders earning more than U.S. workers? According to the Maryland study, "because of their intangible human capital, rigorous screening and selection processes and willingness to work across borders, [foreign visa workers] are likely to earn higher wages than U.S. citizen IT professionals." Matloff believes after evaluating the Maryland research that there is a substantial conflict in the findings with other academic research. Matloff sat down with eWEEK to discuss the plethora of problems he calls "disturbing" in the Maryland study. The following is the question-and-answer interview with Matloff that occurred on May 26 over e-mail. eWEEK: What are your main problems with the University of Maryland study that found H-1B visa holders are being paid more than U.S. citizens? The study is fatally flawed, because its data source is grossly unrepresentative of H-1Bs in the computer field. The readership of InformationWeek [a good portion of the University of Maryland's research is based on a 2006 study done by Information Week and the staffing firm Hewlitt Associates] tends to be much more managerial and less technical, so the survey is not picking up the typical H-1B computer professionals. The Maryland study's own data shows this. In years of experience, for instance, the H-1B respondents in the study are much more experienced than the government H-1B data show. Not surprisingly, then, the H-1B wages in the Maryland study don't match those of the government H-1B data either, with the InformationWeek respondents earning much higher wages. The median for H-1Bs in computer-related occupations was about $60,000 (in 2003, the middle of the authors' data period), according to the U.S. Citizen and Immigration Services (the former INS). This is far short of the Maryland authors' mean of $79,087. Even the 75th percentile in USCIS was only $72,815. The data do vary from year to year, but all of the years of USCIS show that the authors' claimed wage figures simply do not jibe with those of the USCIS. Again, this shows that the InformationWeek sample involves the wrong population. In addition, as an academic I'm very disturbed at the appalling lack of even-handedness on the part of the Maryland authors. Their statements to the press do not jibe with their own findings, and their coverage of previous research is severely one-sided. I'll cite three (of many) examples: First, the Maryland authors have failed to tell the press that they correctly recognize the basic economic principle that the H-1Bs, due to mobility limitations, will be paid less than comparable Americans. A U.S. citizen or permanent resident can move to another employer if offered more money, whereas an H-1B faces major obstacles. Mithas and Lucas do say this in their paper, noting that this is the reason why they found green card holder wages to be higher than H-1Bs. In other words, the authors agree with those of us whose research has found that H-1Bs are paid less than comparable (key word) Americans, Yet the authors' statements to the press don't mention this, nor do they even mention it in their paper's Abstract and Conclusions section. A second example concerns controlling for relevant variables. The authors correctly state that this must be done, and indeed in one small section of their paper they do control for job location and job title, two crucial variables. They find that the claimed wage premiums for H-1Bs are greatly reduced once these variables are accounted for: Their calculated premium is 6.8 percent without factoring in these variables, but it shrinks down to 2.3 percent with these controls included. The former figure is almost three times as large as the latter, yet they've cited only the larger figure in the press interviews I've seen. Again, given the emphasis they place, correctly, on controlling for relevant variables, it is irresponsible to cite the larger number and not the smaller--but more accurate--one. Third, a central component of academic research is proper reporting of prior research. The Maryland authors' paper is sorely lacking in this regard. They give detailed criticism of previous work that finds problems with the H-1B program, while never offering any criticism at all of the work they cite that portrays the program in a positive light. For instance, they fault some research showing wage problems for H-1Bs for not reporting the results of statistical significance tests, while not mentioning that many of the papers they highlight as supporting H-1B don't present those test results either. Moreover, the authors do not mention at all the fact that two Congressional-commissioned employer surveys have found that H-1Bs are indeed often paid less than comparable Americans. These surveys are far more relevant than regression analysis (the tool used by the authors, myself and others), as regression can only attempt an indirect, approximate answer to the questions at hand. Employer surveys address this question directly, and thus are very important. It was unconscionable for the Maryland authors to omit discussion of these official employer surveys. In short, this paper was not the evenhanded treatment that is expected in academia. eWEEK: What data have you looked at to compare the findings in the University of Maryland study? I have my own studies, published in the University of Michigan Journal of Law Reform, in which I found a 15-20 percent underpayment for H-1Bs. Other studies, such as the one done at UCLA, have found underpayment of as much as 33 percent. Mithas and Lucas do cite that article of mine, but incorrectly give readers the impression that I only analyze studies done by others, and they don't cite the UCLA study at all. There are also the two government employer surveys I cited above, the Miano studies (cited but incorrectly analyzed). eWEEK: The University of Maryland study uses data compiled by technology-publisher Information Week and Hewlitt Associates (a staffing firm) with data from 2000 to 2005. Does this data hold up to statistical scrutiny? Why or why not? As I stated above, this is simply the wrong population for the question at hand. eWEEK: In a recent Q&A with the University of Maryland professors, eWEEK asked their opinion on the current visa cap in 2010 on H1-B holders. They responded that `The current quota of 85,000 may be too low because it is almost always fully utilized. We argue in the paper that setting the quota too low may be more harmful than setting it too high because if the economy does not need workers, the quote will go unfilled as has happened before.' Do you have thoughts on this? Of course the quota is filled during years where there is substantial hiring. If someone sells new Ferraris at $10,000 each, with a quota of 1,000 cars, of course that quota will be fully utilized! That would be a bargain for Ferraris, and H-1Bs are a bargain for employers too. One very important point is that employers save money by hiring H-1Bs in two ways, what I call Type I and Type II. Type I is the one always mentioned, in which employers pay H-1Bs less than comparable Americans. But in Type II, the employers save money by hiring younger (thus cheaper) H-1Bs in lieu of older (thus more expensive) Americans. In my writings, I've emphasized that Type II is just as important as Type I. eWEEK: What is your view of the H-1B visa program in 2010? Is there value in having skilled technical professionals brought in on visas from other countries to help U.S. companies? I have always strongly supported bringing in "the best and the brightest" from around the world, and facilitating their work visas and green cards. But the vast majority of H-1Bs are not in that league; they are ordinary people, doing ordinary work--and doing so more cheaply than Americans. It is absurd that there are so many H-1B hires when qualified Americans cannot find IT work and must change professions.