To: H-1B/L-1/offshoring e-newsletter Wed Mar 27 21:04:10 PDT 2013 After I made my posting today regarding the Anderson critique of the Grassley bill, I received e-mail from some people who felt that some of it was unclear. So, I've revised it, adding some explanatory comments in some spots; as before, it is at http://heather.cs.ucdavis.edu/Archive/GrassleyForbes.txt Judging from the comments, I see that many people, even those who follow the topic closely, are not clear on what the basic problems are, and how the various proposals would or would not fix them. "You can't tell the players without a scorecard," and this posting is aimed at serving as your H-1B/green card scorecard. THE PROBLEMS The basic problems are actually very easy to state: 1. Salary savings: Employers use H-1B and green cards (yes, AND green cards, due to Type II savings) as a way to save on labor costs. I've always delineated two types of cost savings accruing to hiring a foreign worker: Type I savings, in which the employer hires a foreign worker more cheaply than a comparable American (same age, education level, skill set and so on), and Type II savings, in which the employer hires a young foreign worker in lieu of an older (35+), thus more expensive American. As I explained in my posting earlier today, both Type I and II savings are enabled by the legal definition of prevailing wage, the legally required wage: * Type I is enabled because prevailing wage is merely the AVERAGE wage in a given experience level, occupation and region; since the employers claim to be hiring H-1Bs who are ABOVE-AVERAGE, e.g. because they have some "hot" skill like Android programming that commands a premium wage in the open market, that means they are often underpaying their foreign workers. * Type II is enabled because the prevailing wage takes into account experience level. The young foreign worker is compared only to young American workers, not to the occupation in general. Thus, legally speaking, the employer is not underpaying the foreign worker, even though the employer's intention is to save money by hiring the young foreigner in lieu of the older American. In my posting today, I mentioned an example brought up by a major U.S. firm (a real company, a household name, though I kept it anonymous), in which a worker with a master's degree in engineering from MIT with two years of work experience would still count as only Level II. This is an example of Type I wage savings. Another example I've mentioned before was brought up by none other than Rep. Zoe Lofgren. She is the most vociferous supporter of H-1B in Congress, yet even she noted to Computerworld that the average wage for computer systems analysts in her district was $92,000, while the legal prevailing wage was only $52,000. This is probably a mixture of Type I and Type II wage savings. (Technical note: Though the formal definitions of the experience levels are couched in terms of degrees of responsibility, in actuality the cutoffs between the levels are done through wage percentiles. Either way, the lower levels are cheaper.) 2. "Handcuffed" workers: An employer suffers a big hit if an engineer leaves for another company in the midst of an urgent project. Thus employers would like to "handcuff" their workers, prevent them from leaving. They can't do that with Americans, but they CAN do so with foreign workers who are being sponsored for a green card, and to some extent even for other foreign workers (say, who hope to be sponsored for a green card). THIS ABUSE IS VERY COMMON, especially in Silicon Valley, and for many employers it's even more attractive than the salary savings. By the way, the employer is required to pay the higher of the prevailing and the actual wage, the latter being the average pay of "similar" workers in the same firm. This too has various loopholes, and in any case it's irrelevant, as my analysis has shown that most employers pay at or near the prevailing wage. So, the legal definition of prevailing wage is key. SOLUTIONS AND NONSOLUTIONS So, among the various proposals made, which would work, and which wouldn't? I'll start with the good ones, then bring up others. (Note: Just because I cite some aspect of a bill as being beneficial, it doesn't necessarily mean I like the bill's other provisions.) The good: 1. The Grassley Bill: By eliminating the experience levels from the calculation of prevailing wage, this bill would go a long way to solving the Type II salary savings problem. It would define prevailing wage as the 50th percentile salary OVERALL in the given occupation (again, NOT using experience level), for the given region. DPE has made the same proposal, but at the 75th percentile, even better, but Grassley would work well. 2. The Moran bill: This would do a lot to solve the handcuffed-worker problem, and the Type I problem. It would take the green card process entirely out of the employer's hands. The worker would be fully free to move around the labor market. I won't go into the details here as to how this would be done under Moran, but it is rather similar to a proposal I made in the past. Unfortunately, Moran's green card process would be in addition to the current process (a problem, as noted below), rather than replacing it, but it is far better than the other green card proposals. The bad/ugly: 1. The bills that set up "STEM visas": These are basically end runs around the H-1B cap. Many of them would have even fewer restrictions than H-1B, and some would have no cap. Net result--MORE foreign workers than before. And by targeting new foreign graduates with advanced degrees, these bills would worsen the age discrimination problem, since the new grads are mostly young. Also, by targeting this population, these bills would even further reduce the salary premiums for advanced degrees, thus giving Americans even less incentive to pursue graduate work. In other words, these bills would MAKE THINGS WORSE. 2. The bills that target the Indian outsourcing firms: There are two problems with these bills. First, as I've shown, abuse of H-1B pervades the entire industry, not just the bodyshops. Second, the current clients of the bodyshops would STILL want to hire cheap, temporary labor, and there would be lots of other ways to do this. The most obvious way is to hire the foreign temps directly; the Intels could form their own in-house bodyshops, rather than renting from the Infosyses as they do now. (Siemens and IBM already have them.) Another, much less obvious but very doable approach, would be to hire minimally trained students holding the STEM visas! If you haven't read http://blogs.kqed.org/newsfix/2013/03/22/tech-companies-push-to-expand-skilled-worker-visas-rankles-critics/ yet, you will find it quite illuminating in this regard. And of course, the bills would insert some loopholes into the legislation for the Indian bodyshops anyway. Note by the way that a GOOD bill would not need to address the issue of the H-1B cap. With proper solutions to the Type I, Type II and handcuffing issues, the cap would never be reached, not even close. Norm Archived at http://heather.cs.ucdavis.edu/Archive/WhatWouldWorkOrNot.txt