Date: Tue, 14 Mar 2006 23:47:29 -0800 From: Norm Matloff To: Norm Matloff Subject: Stuart Anderson criticizes Miano study To: H-1B/L-1/offshoring e-newsletter BACKGROUND: Stuart Anderson has come out with another defense of the H-1B program, including a critique of John Miano's H-1B wage study, published by the Center for Immigration Studies. The two reports are at http://www.nfap.com and www.cis.org/articles/2005/back1305.html I will first discuss Anderson's background, because he makes a point of the fact that Miano has been a prominent critic of the H-1B program. It's fine to mention this, but the reader should know Anderson's history too. The National Foundation for American Policy is apparently one of those Beltway organizations that have grandiose names but in actuality are one-man shows. The one man here is Stuart Anderson, a long-time lobbyist and activist in favor of a liberal H-1B program. Anderson began these activities by writing pro-H-1B articles for Jack Kemp's Empower America, then for the Cato Institute, a libertarian think tank. He also was the author of the 1997 study by the ITAA, the industry lobbying group, that convinced Congress to enact the first expansion of the H-1B program in 1998. He then went to work for then-Senator Spencer Abraham, in which job Anderson authored the 2000 legislation which expanded the H-1B program. He's also a favorite author in the house magazine of the National Association of Foreign Student Advisers, one of the most ardent lobbying groups on Capitol Hill for a liberal H-1B policy. (Anderson was also in tune with them when he lobbied against instituting a system, brought in after 9/11, to track whether foreign students are still attending college.) Most importantly, he served as Executive Associate Commissioner in the INS Office of Policy and Planning during the first term of George W. Bush. A Washington Monthly article at the time (about the foreign student issue; see www.washingtonmonthly.com/features/2001/0205.confessore.html) contained this passage: * "The best analogy I can draw about Stuart Anderson is something that an * INS agent said to me: If you were going to hire someone to run the DEA, * you wouldn't pick somebody who favors legalizing drugs," says a top * Republican aide on the Hill. "And by putting Stuart Anderson in a * ranking position in the INS, you've essentially done the same * thing---you've got somebody who favors open borders running the agency * that regulates the borders." I say this not as an ad hominem attack on Anderson. I've met him on various occasions and he is a genuinely nice guy in "real life." But in his lobbyist, i.e. "shark," mode he is extremely aggressive on immigration and trade issues (both being big libertarian issues). In particular, I suspect that Anderson was the one in the INS who basically shut down data sources at the time he was there. For example, a researcher in the INS who had been helpful to me during the Clinton administration suddenly stopped returning my phone calls and replying to my e-mail messages. Thus it is quite hypocritical, to say the least, that Anderson now bemoans the lack of data. More on this later. I must say that I envy John Miano, as Anderson never wrote a critique of my university law journal article: On the Need for Reform of the H-1B Nonimmigrant Work Visa in Computer-Related Occupations, N. Matloff, University of Michigan Journal of Law Reform, Fall 2003, Vol. 36, Issue 4, 815-914 (available at http://heather.cs.ucdavis.edu/MichJLawReform.pdf). I was expecting one, as over the years Anderson has been quick to jump on every study criticizing the H-1B program. Now, let's take a look at Anderson's critique of the Miano report. Here are his key points. THE FEDERAL RESERVE BANK STUDY: Anderson's lead argument involves a study by Madeline Zavodny of the Federal Reserve Bank (an institution which has been highly pro-H-1B). The Zavodny study's data indicated that the presence of H-1Bs was not harming wages for American (note: not "native," the word Anderson uses) IT workers. Zavodny's study is not of much value, because she didn't study H-1Bs who worked in the main computer-related category occupied by H-1Bs, namely programmers. That's a fatal flaw, a show stopper. See http://heather.cs.ucdavis.edu/Archive/Fed03.txt for further analysis. Anderson may not have realized that, so I can't fault him for it. But his other point on the Zavodny study is outrageous, arguably fraudulent. He quotes Zavodny as saying, "H-1B workers...do not appear to have an adverse impact on contemporaneous unemployment rates." That is indeed an accurate quote--but it's only half the story. Zavodny made that statement for the Oct. 2000-Sept. 2001 data. But she goes on to say, for Oct. 2001-Sept. 2002 "...the results are quite different...The unemployment rate IV regressions indicate a positive relationship between the [number of H-1B applications] and the unemployment rate for IT workers." In other words, in the second year she studied, H-1B did have an adverse impact on American workers. It's hard to view this omission as anything other than deliberate disinformation on Anderson's part. It was stated explicitly in one of the highlighted, set-off quotes in Zavodny's report--"some results do suggest a positive relationship between the number of LCA applications and the unemployment rate a year later." The same quote appears in the Fed's press release. As I said, Anderson is extremely aggressive, which is fine, but he is being egregiously irresponsible here. (Aside from that, if you're wondering why the big discrepancy between the two years in Zavodny's findings, see my analysis of her paper at the above Web address.) THE HARRINGTON AND NSF STUDIES: These studies found that foreign-born and native professionals had about the same average salaries. As I've explained before, these studies must be entirely discounted, because they are not relevant to the H-1B issue. The H-1Bs comprise only a small percentage of the foreign-born category. In other words, the vast majority of the foreign-born are not H-1Bs, and are thus not exploitable. Thus studies of the foreign-born as a whole will not show the exploitability of H-1Bs. For example, the foreign-born category includes those who immigrated to the U.S. as children with their families, and thus were not exploitable when they reached working age. Even for those who start work as an H-1B, their window of vulnerability is only the 3-6 years it takes to get a green card, which is a very short period compared to a career which spans 30 or 40 years. So, any effect of exploitation would be washed out. AGE ISSUES: Anderson says it's unfair for Miano to compare the H-1Bs to the median salaries across all age groups. More experienced people cost more. But that in fact is one of the major reasons why employers see as the ADVANTAGE of hiring H-1Bs--it's a way to save in labor costs. Recall that I call this Type II salary savings. As the IT director at a large law firm put it, "I'd love to have somebody with 20 years of experience, but unfortunately I'm only paying for three or four" (Margaret Steen, "Many Older IT Workers are Fishing for Jobs Despite Labor Shortage," InfoWorld, July 23, 1998). When employers run out of young Americans to hire, they turn to hiring young H-1Bs instead of older Americans. The Indian IT giant Tata Consultancy Services states that 50 percent of its H-1B programmers are under age 25, and 88 percent are under 30. Moreover, even when one controls for age (and education), one sees substantial savings in labor costs (which I call Type I). See for example the study by Ong and Blumenthal, and my two studies; all are discussed in my university law journal article that I cited above. Using census data, Ong and Blumenthal found that the immigrant engineers made 33% less than comparable Americans, including controlling for age. (Anderson later tried to "spin" that study, claiming that Ong never meant that the immigrant engineers were underpaid. This is a ridiculous claim for Anderson to make, since Ong told the Electrical Engineering Times, "Companies took advantage of immigrants." See my university law journal article for details.) My own studies also involved the census data (1990 and 2000). I found that the H-1Bs were paid between 15 and 20% less than comparable Americans (again, holding age constant). ENFORCEMENT ISSUES: As I've said many times, the problem of underpayment of H-1Bs is NOT an enforcement issue. The problem is in the law itself, not in the enforcement of it. There are huge, gaping loopholes. All the immigration attorneys and HR people know about those loopholes (of course they know, since they put them there), and they make full use of them. For example, on the open market employers must pay a premium for "hot skills." But the employers are not required to factor in hot skills in calculating the prevailing wage. Another example is that an employer can hire an H-1B who has a Master's degree and yet pay him a Bachelor's-level salary if the job only requires a Bachelor's. In other words, the employers can underpay H-1Bs and yet still be in full compliance with the law and regulations. The 2003 GAO study unwittingly illustrated this. Concerning the employer survey GAO conducted, the report said, * 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. See the point? They were paying the H-1Bs below market rates but were still in compliance with the law. Remember, the industry lobbyists and the American Immigration Attorneys Association basically wrote the laws on hiring foreign nationals, and they put in loopholes everywhere. Concerning the requirement in the green card process that employers give hiring priority over foreign nationals, immigration attorney Joel Stewart said, "Employers who favor aliens have an arsenal of legal means to reject all U.S. workers who apply" ("Legal Rejection of U.S. Workers," Immigration Daily, April 24, 2000; available at www.ilw.com/articles/2000,0424-Stewart.shtm). Anderson writes, * One way to obtain an upper-bound estimate of possible underpayment of * wages to H-1B professionals is to examine Department of Labor (DOL) * enforcement actions against employers. What he means is that when the DOL has found violations of the law, the amount of underpayment found has been small. This is correct. But it is again due to the fact that the underpayment is being calculated relative to the prevailing wage, which as we have seen, is well below market wage. The true underpayment is much larger. CLAIMED DETERRENT EFFECT OF LEGAL FEES AND OTHER RELATED EXPENSES: Anderson calculates that hiring an H-1B costs $5,900 in legal and other fees. He then says, "Critics rarely take into account that companies incur many additional expenses beyond simply the wages paid to H-1B visa holders." It's an old, old argument, and contrary to Anderson's statement here, we "critics" have rebutted it countless times. The answer is obvious: That $5900 or whatever it is pales in comparison with the savings the employer incurs by hiring the H-1B. For a conservative comparison, let's take the 20% underpayment that I found for Type I savings--much less than Ong's 33% figure, and much less than the figure one would get by combining Types I and II savings. Say the job would have paid $75,000. So the employer is saving $15,000 per year. Say the H-1B works for the employer for four years. That $60,000, which is 10 times those fees Anderson discusses. MOBILITY: Anderson says, * A myth has been perpetuated that H-1B visa holders are "indentured * servants." This is far from the truth. An NFAP sampling of U.S. * employers and immigration lawyers found that individuals on H-1B visas * change companies frequently. The primary situation in which H-1Bs become de facto indentured servants is that in which the employer is sponsoring the H-1B for a green card. The H-1B has the legal right to change employers, but dare not do so, since that would mean starting the green card process all over again from scratch. This is established fact, not "perpetuated myth." Even the very pro-industry National Research Council report, commissioned by Congress, noted this: * Foreign nationals dislike [labor certification, one of the stages in * obtaining a green card] because the process is so lengthy (often 3 years * or longer in some areas of the country) and prevents them (on pain of * having to begin the process all over again) from changing employers... Murali Devarakonda, a member of the Board of Directors of the Immigrant Support Network, an H-1B organization which became quite influential in Congress in 2000, said, * This is legal human rights violation in America...You [as an * H-1B] are an indentured servant, a modern-day slave... (Straight Talk [weekly television program produced by Santa Clara County Democratic Club], June 10, 2000.} The ISN convinced Congress to make some small technical improvements in the process, but the "indentured servant" situation remains as before. Indeed, immediately after that legislation was enacted, immigration attorney 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, which is exactly what has happened (www.usvisanews.com/edit80.html). Without seeing the details of Anderson's "sampling," I obviously can't comment much, but basically what he is seeing is the situations in which the H-1B moves because he is NOT being sponsored for a green card. An example is the situation in which the company at which an H-1B had been working goes out of business or lays the H-1B off. This occurs often. Also, many H-1Bs first work in jobs which are short-term contracts while they are trying to find an employer who will sponsor them for a green card. In all of these scenarios, the H-1B's ability to get a green card ceased or wasn't there to begin with, so the H-1B can move to another job without loss. (Anderson's respondents may also be counting acquisitions as "other companies.") Again, it is the green card that is central here. Over the years, most H-1Bs have been sponsored for green cards (Alexander Nguyen, "High Tech Migrant Labor," The American Prospect, December 20, 1999). Anderson concedes this point, but says that the industry has supported proposals to expedite green card processing, thus reducing the duration of the immobility period. But in fact the industry has OPPOSED such measures in private, according to a Capitol Hill insider's account, and given the employer who worriedly sought immigration attorney Latour's advice, described above, you can see why: Employers LIKE the immobility of the H-1Bs. Indeed, that immobility has been extolled by the immigration attorneys as a major benefit for hiring H-1Bs. For example, the Dayton Daily News reported that "[Attorney Sherry] Neal said foreign nationals may appear to be more loyal workers because they aren't as mobile as other in-demand tech workers" (July 11, 1999). Similarly, an article in a magazine for HR executives said that a virtue of hiring H-1Bs is that if the H-1B were to leave the employer, "...he or she has to start the immigration process all over again. As a result, most H-1B visa holders demonstrate remarkable loyalty" (John Wentworth, "Stop-gap Measures for the IT Staffing Crunch," Workforce Magazine, May 1999). To many employers, that "loyalty" is even more important than the salary savings. ON THE MIANO STUDY: Anderson says, * The key flaw in the CIS [i.e. Miano] study is that it utilized data that * do not reveal what employers actually pay individuals on H-1B visas. The * data showing what an employer pays an H-1B visa holder is contained on * the I-129 form filed with U.S. Citizenship and Immigration Services. * However, the information on that form is not publicly available. Did you catch that last sentence? Recall what I said at the outset of this posting concerning the fact that the BCIS stopped making detailed data available to us researchers around the time Anderson became a BCIS official. I can't say for sure that this stonewalling was his doing, but in view of his position at BCIS, his statement about Miano's study above is real chutzpah. Anderson goes on to say: * Instead, the CIS paper used the prevailing wage data that employers file * with the Department of Labor ­ even though employers do not necessarily * pay H-1B visa holders just the prevailing wage indicated on the filing * to DOL. In fact, the prevailing wage is a minimum requirement and is * usually lower than what the H-1B visa holder actually receives, which * makes it impossible for the CIS paper to conclude much of anything with * regard to H-1B wages. Contrary to Anderson's claim, in most cases the wage reported on the LCA is indeed what the H-1B is actually being paid. Miano's LCA data track quite well with the INS (now BCIS) data. For example, Miano found that the LCAs indicated that 85% of the computer-related H-1Bs were paid less than the overall median for their occupations. My analysis, using actual aggregate INS data for 2001, indicated that the figure was around 90%. Second, Anderson is missing an even more important point, which is that the LCA data at least say what employers are reporting as the prevailing wage--and those prevailing wages, Miano shows, are far below the occupational median. In other words, one of the most important findings of Miano's study is to show, once again, that the prevailing wage law is riddled with huge loopholes, so that the official prevailing wage levels do NOT reflect true market values. Keep in mind that IN TWO CONGRESSIONALLY-SPONSORED SURVEYS, MANY EMPLOYERS ACTUALLY ADMITTED TO PAYING THE H-1BS LESS THAN COMPARABLE Americans. I have the quote from the GAO study above, and there is a similar quote in the NRC study. In addition, there is the Ong/Blumenthal study, as well as my own study, both of which used census data, so that we are working with actual wages, not proxies. (This also answers a point Anderson makes about bonus pay.) In other words, the underpayment of H-1Bs has been established over and over again, including in the two congressional studies.