Date: Thu, 12 Aug 2010 18:16:04 -0700
From: Norm Matloff <matloff@cs.ucdavis.edu>
To: Norm Matloff <matloff@laura.cs.ucdavis.edu>
Subject: update on Schumer bill

To: H-1B/L-1/offshoring e-newsletter

Yesterday I reported on a bill by Sen. Schumer that would fund
enhancement of border security by a new H-1B employer fee.  See
http://heather.cs.ucdavis.edu/Archive/SchumerScapegoat.txt
I made the following main points:

   1.  Schumer gave the impression that the main abusers of H-1B 
   are the "body shops," the rent-a-programmer firms.  This is FALSE,
   and the mainstream firms are just as culpable.

   2.  Point 1 has been a common theme with industry lobbyists since at
   least as far back as 1998, a strategy by the mainstream firms to
   distract Congress' attention away from them.

   3.  The proposed fee, imposed only on the body shops, would have
   basically NO impact, as employers would still save far more in salary
   costs than the amount of the fee.

Senator Schumer amplified on his bill today in a speech to the Senate.
I urge those of you readers who are concerned about the H-1B program
(many of my readers are not programmers or engineers, but instead are
journalists, academics, congressional staffers and others with a
professional interest in this topic) to watch the video of his speech, 
at

http://cspan.org/Watch/Media/2010/08/12/HP/R/36896/Senate+Passes+Border+Security+Bill+Honors+the+Late+Ted+Stevens.aspx

Schumer's remarks on H-1B start at around 16 minutes or so into the
video.  He spends about 10 minutes on H-1B, trying to justify his fee,
in response to complaints from Indian-American and Indian owners of body
shops.

Almost all of what he says deals with Point 1 above.  He claims that the
mainstream firms (he cites Microsoft, IBM, Intel, Cisco and so on) are
using the the H-1B program responsibly, to the benefit of the American
people.  He contrasts that to the body shops, who he points out don't
produce products of their own and are merely temp employment agencies,
which he regards as an egregious violation of the spirit and intent of
the H-1B program.  (Unlike his remarks of the last few days, in which he
said the body shops are "breaking the rules," he now says that they are
not doing anything technically illegal.) 

Schumer stated repeatedly in his speech today that the body shops hire
the H-1Bs as cheap labor, and claims that the mainstream firms do not do
so.  The mainstream firms are the Good Guys, he keeps saying, while the
Bad Guys are the body shops.

Well, even a 10-year-old would see the fallacy there.  (Which, sadly,
doesn't mean the politicians and the press would see it, though in the
case of the politicians, they don't WANT to see it.)  If the mainstream
firms are the Good Guys, why are they hiring from the Bad Guys????  Just
look, for instance, at a list of clients of TCS, one of the largest body
shops:

http://www.tcs.com/about/corp_facts/clients/Pages/default.aspx

We see Agilent, Cisco, Motorola, Microsoft, Prudential and so on.

And now that Schumer agrees that the body shops are operating lawfully,
how can they get away with paying below-market wages?  The answer, as
I've said, is huge loopholes in the legal definition of prevailing wage.
But again, a 10-year-old would wonder why the mainstream firms don't
make use of those same loopholes, and in fact, they do.  (I've shown
this in dollars-and-cents terms for various mainstream firms, e.g.
Intel.)

Schumer also says in his speech to the body shops, "...you should pay a
higher fee to insuring American workers are not losing their jobs [to
H-1Bs]..."  But again, as they say these days, "Do the math."  The H-1B
employers are saving many tens of thousands of dollars over the six-year
span of an H-1B visa, so $2000 is nothing.  Once again, a 10-year-old
could see that.

As I mentioned, I've been seeing this demonizing of the body shops for
more than 10 years now, and have been warning H-1B reformers that in the
end Congress would come up with cosmetic "reform" that focuses on the
body shops while allowing everyone else to go scot free--and even the
body shops will be able to conduct "business as usual."  (I've warned
H-1B reformers about this partly because some of them are caught up in
that same invalid focus on the body shops.) But this is the most overt
movement I've seen in this direction.

Since I've been expected this, Schumer's remarks in general did not
cause much of a reaction in me.  As I keep saying, although obviously I
have strong opinions on H-1B, it has no personal impact on me.  But two
specific remarks of his really did irk me:

1.  In an obvious allusion to the Durbin/Grassley bill, Schumer
claimed that the authors of that bill agree with him that the body shops
are the Bad Guys and the mainstream firms are the Good Guys.  I know
this claim of Schumer's is false.  At least it used to be, and I hope
nothing has changed.

2.  As many of you readers know, I've emphasized repeatedly that the
underpayment of H-1Bs is done in full compliance with the law, due to
loopholes.  Well, Schumer hijacked that loophole concept, saying that
the loophole was the fact that H-1B law doesn't ban an H-1B employer
from renting his workers out to other firms.  

This is one of the most misleading speeches I've seen in quite a while.

Norm