Date: Wed, 4 Apr 2007 19:53:56 -0700 From: Norm Matloff To: Norm Matloff Subject: today's Wall Street Journal editorial To: H-1B/L-1/offshoring e-newsletter Today's WSJ includes an editorial whose lead paragraphs are: # While politicians haggle over immigration reform, the U.S. economy's # demand for workers foreign and domestic continues to grow. On Monday # U.S. officials began accepting applications for the 85,000 available # H-1b visas -- the kind that go to foreign professionals -- for the # fiscal year starting in October. By Tuesday, the quota had been filled, # making this the third straight year that the cap was reached before the # fiscal year had even begun. # It's another example of the disconnect between immigration policy and # labor market realities. A common assumption of immigration critics is # that alien workers are either stealing American jobs or reducing # home-grown wages. But both notions are flawed, according to a new and # illuminating study by economist Giovanni Peri for the Public Policy # Institute of California. Giovanni Peri is my colleague at UCD, and is a very friendly, pleasant fellow. He is in the earlier part of his career, and I predict he will gradually make his mark in the economics community. But the editorial is completely wrong to cite him regarding H-1B, for the following reasons: 1. First and foremost, PERI'S STUDY WAS NOT ABOUT H-1B. It was a study about immigration in general, the rich, poor and middle, all mixed together. There is really nothing in his study which sheds light on H-1B. 2. Second, Peri has not studied H-1B or related issues otherwise. I asked him to give a guest lecture in my freshman seminar class on immigration last Fall. (http://heather.cs.ucdavis.edu/~matloff/frs.html) He showed some slides about his study, and we chatted afterwards. He readily admitted that he doesn't know much about H-1B or tech immigrants in general. He said that he just assumes that if the employers hire H-1Bs, there must be a shortage of workers. When I said that the "shortage" is one of cheap labor, he was surprised and seemed interested (odd for an economist not to be aware that price can be a factor), but this is not a topic on which he has any expertise. 3. For our purposes, Reasons 1 and 2 above are quite enough to show the irrelevance of the study to the H-1B issue, but as an academic I do feel the need to explain how academic research works. Peri's study is not yet published academically. He will submit it to a scholarly economics journal, which will assign two or more reviewers who are experts in the field. If they believe his methods and conclusions are sound, and his results are useful, the journal will publish it. This is the case, for instance, when you see a news report which starts out with "The new issue of the New England Journal of Medicine has an article..." That medical article will have gone through the academic review process to verify that it is correct. If Peri's paper is rejected, he will either heed the negative comments and submit a modified version to another journal, or will simply move on to something else. (Update: As of October 22, 2008, Peri's study has still not been published.) The reason that Peri's study is getting so much press is that it is a message that lobbyists want to transmit to the American populace and especially to Congress. That's why the pro-H-1B Wall Street Journal (which once called for a constitutional amendment instituting fully open borders) is citing his study, and it's why the industry lobbying group Compete America has a copy of the WSJ editorial on their Web page (http://www.competeamerica.org/editorials/20070404_jobs_immigrants.html). Note that you can't get it on the WSJ site if you're not a subscriber, but Compete America is happy to provide it. 4. Peri's thesis is that immigrants and natives play complementary roles with respect to each other, rather than competing with each other. He makes this conclusion by observing certain patterns in the data, but actually the conclusion is invalid. Let me explain why, using something the WSJ cites from the study, which is that larger percentages of immigrants have PhDs than do natives. Peri's point is that the data patterns show that a higher percentage of immigrants want to study for a PhD while a lesser percentage of natives don, so that they are complementing each other. But as readers of this e-newsletter know, the governmental National Science Foundation brought in foreign students and foreign professionals for the express purpose of keeping PhD wages down. And most significantly, the NSF projected, quite correctly, that this suppression of wages would drive away Americans from pursuing doctoral study. So the immigrants and natives aren't playing complementary roles at all. Norm