Date: Fri, 5 Aug 2011 00:14:10 -0700 From: Norm Matloff To: Norm Matloff Subject: the wrong and the right ways to reform H-1B To: H-1B/L-1/offshoring e-newsletter Last week the Senate Judiciary Immigration Subcommittee held a hearing on immigration, largely focusing on H-1B and green card issues. While the results were predictable--there was only one panelist critical of H-1B, most of the senators served up softball questions to pro-H-1B panelists, and so on--there were some interesting exchanges I'll discuss, and a noteworthy statistic that I'll mention. A few days later a related Computerworld article came out, "A Guide to H-1B, Green Card Reform," July 29, 2011. Starting from that article, the Senate hearing, and some inquiries I've made in DC (something I seldom do, by the way), I'll give you my analysis of what appears to be the thinking of people on the Hill in terms of reforming H-1B and employer-sponsored green cards. I've previously given an item-by-item analysis of the Lofgren bill, at http://heather.cs.ucdavis.edu/Archive/LofgrenIDEAAct.txt but in the posting here I will re-analyze that through the lens of new information on the ostensible motivation for the green card provision, including a new statistic that is quite relevant. As most of you know, I consider the Lofgren bill to be based on invalid premises, and to likely make the situation worse instead of better for U.S. citizen and permanent resident workers. Most of the other bills are similarly unattractive. By the way, the Lofgren bill would also create some "perverse effects," i.e. unintended consequences, under which even the putative beneficiaries, such as university research programs, would lose to some degree. I'll discuss some of the perverse effects here. You can read written testimony, and view a video of the hearing, at http://judiciary.senate.gov/hearings/hearing.cfm?id=3d9031b47812de2592c3baeba62beeb0 The Computerworld article is at http://www.infoworld.com/d/the-industry-standard/guide-h-1b-green-card-reform-168463 Other than skimming through Prof. Ron Hira's written testimony and glancing somewhat through Microsoft's Brad Smith's, I didn't pay much attention to the written stuff, and in the video I fast-forwarded altogether over the verbal presentations. Nothing surprising there, and I simply have no patience for Schumer's obfuscations. (Prime example: Claiming that we're forcing foreign students back home after they graduate, when in fact they can stay up to 29 months under OPT, during which time most obtain an H-1B or other visa, etc.) So, I went straight to the Q-and-A session, my favorite part of any congressional hearing or academic talk. There were rather interesting exchanges between H-1B-skeptic Senators Grassley and Sessions on the one hand, and pro-H-1B witnesses on the other. Sessions was entertaining, pressing for a Canadian-style point system in spite of the witness' many attempts to duck the question. (The witness may have been Smith, not sure.) But when the witness said he wanted employers, not government, to make decisions as to who can immigrate, Sessions got serious and pointedly replied, no sir, this is fundamentally a governmental issue. Grassley asked Smith why the industry was opposed to H-1B adding a requirement that the employer attest to having first sought an American to fill job. Smith gave the standard, "We don't want any more red tape" answer, transparently weak (what's so onerous about simply signing an attestation, no supporting evidence required?), but Grassley let it go. Smith offered a statistic that he likely thought convincing, but isn't: He noted that it's taking an average of 65 days for Microsoft to fill core tech positions. His meaning, of course, was that that was supposed to indicate a labor shortage. But in Silicon Valley in 1999, the figure was 3.7 months, or about 111 days, approaching double that current 65 figure. In view of the fact that no study in the 1990s, other than one sponsored by the industry, ever showed a labor shortage, Smith's figure for the current situation doesn't indicate a shortage either. Similarly, Smith said Microsoft has 4,500 openings now. Out of Microsoft's 89,000 employees, that's about 5%; but in the late 90s, the industry was quoting vacancy rates of over 10%. So again, Smith's shortage numbers can be viewed as actually showing that we DON'T have a shortage. As I reported in my last posting, I was saddened to see Schumer make the claim that all sides of the H-1B issue at least agree that Congress should enact special automatic fast-track green cards for holders of graduate degrees from U.S. universities. (I'll call these "autogreen cards" for brevity here.) I strongly disagree, and believe that the effect of such a program would actually be worse than an increase in the yearly H-1B cap. Much of the remainder of this posting will be devoted discussing this in light of new information I've learned this week. What I had not realized earlier is that a key issue seems to be research. President Obama has said several times that tech innovation is our ticket to a revived economy, and you may have noticed that in the big budget deal this week, Obama emphasized that no matter what, federal research funding wouldn't be cut. Obama's thinking appears to be common in DC, among both parties--and has a direct impact on the H-1B/green card debate, as follows. The section of the Lofgren bill on autogreen would grant the green card if the foreign national ...possesses a graduate degree at the level of master's or higher in a field of science, technology, engineering, or mathematics from a United States institution of higher education that has been designated by the Director of the National Science Foundation as a research institution or as otherwise excelling at instruction in such fields... During the recent conference in DC that I've discussed here (http://heather.cs.ucdavis.edu/Archive/SloanDC2.html), we were told that the NSF list mentioned in the bill text above would consist of only about a dozen very elite schools. This would be consistent with facilitating the immigration of "the best and the brightest," but it turns out that that information was in error. I'm now told (from two sources) that the list would likely contain 100 or more "research institutions" in the bill text above, which of course wouldn't be selective at all. And of course many additional schools would press the NSF to be declared as "otherwise excelling" in the bill's language, a demand that the pro-H-1B NSF would likely accede to more often than not. And needless to say, over time the list would always expand, never contract. But what I now realize is that the key word in Lofgren's phrasing above is "research," spiraling back to the Obama comments. In other words, the thinking in DC on autogreen, which was originally billed as being motivated by a "best/brightest" view, is now directed at research. Lofgren, Schumer et al believe that by offering blanket green cards to foreign students from research schools, the U.S. would increase its research output, continue to be a world leader in innovation, etc. So, where does that argument go wrong? Well, first as a tech professor--and as a recipient of federal government research funds--I would say that the vast majority of funding doesn't have the innovative effects Obama has in mind, at least in my fields (computer science, statistics, math). In times when the nation can afford it, the funding is justified for other reasons, but its economic impact is small. Remember, guys like Gates, Jobs, Ellison, Zuckerberg and so on never did research, and indeed never completed even a Bachelor's degree. (Google's Brin did some research as a grad student, but it was quite forgettable stuff and didn't have any role in forming Google.) But let's suppose research does have as much economic impact as Obama thinks it does. That consideration actually argues AGAINST having an autogreen program. For openers, here's a statistic that I don't think I've shared here yet (from a forthcoming article of mine): In the area of computer science and electrical engineering, the former foreign students now working in the U.S. are actually LESS likely to be employed in an R&D (research and development) position than the Americans. Granted, that statistic isn't specifically for the students from research universities, but it certainly is counter to the notion that the foreign students go on to dominate our industrial research labs after graduation. Second, there is the point I often make concerning an "internal brain drain," the direct and indirect displacement by the H-1B program of many of our own American best and brightest. Here I'll use an MIT focus. For instance, one of the readers of this e-newsletter is an MIT grad who went on to obtain a PhD at a major university, worked as a researcher at a top U.S. medical school, but eventually was crowded out in a market dominated by foreign nationals. This person is still invited to give talks at universities around the world, but can't get a job here. There are actually several MIT grads among my readers. None has a good, solid job in tech, a waste of their talent and education. And I would argue that H-1B has played a causal role in that waste, either directly or indirectly. Meanwhile, a Forbes Magazine article found that Between 2003 and 2006 the percentage of graduates from MIT going into financial services rose from 13% to almost 25%...One can hardly blame these young hires. Financial firms offer considerably higher pay, better career prospects and insulation against off-shoring, than traditional science and engineering companies... If MIT students are to be considered our own best and brightest, the above should make my point about an internal brain drain caused by flooding the STEM job market with foreign students. The NSF document I often cite conceded that autogreen would drive U.S. students away from STEM at the PhD level, and it's clear that it would do so at the Master's and Bachelor's level as well. Surely Lofgren and Schumer would not want such a thing, but that's what their reforms would cause. Given that a flair for innovation is the one comparative advantage Americans have over the rest of the world, one can make a good argument that autogreen would thus result in a net LOSS of innovative capacity in the U.S. Research could also suffer from perverse effects of autogreen. There would certainly be unintended consequences of such a blanket giveaway. In 1992, the Chinese Student Protection Act was enacted, giving automatic green cards to all Chinese nationals who were in the U.S. during the student revolt in Beijing in 1989, and a lot of odd stuff ensued from the legislation. A number of romantic relationships broke up, for instance, due to one partner suddenly not needing to rely on the other for a green card. That made for interesting gossip, but much more to the point, many Chinese students quit their grad programs, as they no longer needed that steppingstone to a green card. A few years ago (and thus not related to the CSPA), I served on the PhD dissertation examining committee of a top student from China, who was on his way to writing an outstanding thesis. Longtime readers have heard me state often my support for facilitating the immigration of the best/brightest, and he would certainly would have qualified in my view. But then suddenly I got a call from an employer for a reference on the guy, whom the employer wanted to hire. I of course praised the student highly, but I practically fell off my chair when the caller told me what position the student was being hired for--system administrator! Here he's a top engineering PhD student, yet he's quitting the doctoral program to take a job which involves maintaining user accounts, installing new machines etc. But he really wanted to start his green card process, so he left our program. I have no doubt that passage of an autogreen law would result in many foreign post docs in U.S. university science labs suddenly quitting too. The post doc situation suffers from a surplus, as I've explained before, so this action would not be entirely negative, but the universities would find themselves left in the lurch, at least in the short term. Before leaving the topic of autogreen, let me repeat that the central problem with it is that it would exacerbate what is already rampant age discrimination in the tech industry, since most of the new foreign student graduates would be young. This is, once again, the central issue with H-1B and autogreen, AGE. Unfortunately, this was not brought up at the Senate hearing. Before I get to the topic of what SHOULD be done to reform H-1B and green cards, I'll briefly remind readers the issue of the Indian "bodyshops" (IBs). I've written quite a bit recently that Lofgren's bill, along with the views Schumer has expressed, wrongly focuses on the IBs. As I showed in my recent DC talk, the mainstream U.S. employers also often pay their H-1Bs below-market wages. So it's both unfair and ineffective to just pick on the Indians, when they have only 12% of the market and the abuse pervades the entire industry. In this regard, I wanted to point out a recent McKinsey report to show just how entrenched the Lofgren/Schumer thinking is. The report (at http://ltg.ca.gov/docs/LGN_Econ_Agenda.pdf) states California also benefits from the H1-B guest worker visas to attract skilled workers for the innovation economy. However, the program suffers from a massive oversubscription of the 65,000 quota limit, as well as apparent loopholes in the program that bring in workers with "ordinary skills" rather than the intended engineers and scientists needed to grow California businesses. For FY2011, enough H1-B petitions were received to reach the annual quota within four months. The state must press for reforms. On the one hand, these are amazing statements for McKinsey to make, given the highly pro-H-1B, pro-offshoring stance it's taken over the years. One can see in that phrasing echoes of the work of Ron Hira, John Miano and myself. But the implied message is still that the IBs are the core problem, which as noted is not the case. What about instituting a Canadian-style point system, as Sen. Sessions asked? The idea would be that if we are short on STEM graduates, then STEM applicants for immigration would get extra points. This presumes there is such a shortage, which we don't have, but surely the industry would support it, right? Well no; they've opposed proposals for point systems in the past. Their stated reason has been that they need workers with really specific, narrow skill sets, rather than needing STEM workers in general. That of course is completely at odds with the industry's constant claims that they need H-1Bs because U.S. universities aren't producing enough STEM workers in general. Well, then, what does industry really want? The answer is once again that they want YOUNG STEM workers, and H-1B greatly expands the YOUNG STEM labor pool. As many of you know, I've strongly endorsed the Durbin/Grassley bill in the past, and continue to support it. (I'm told it will be reintroduced.) I regard the portions of the bill dealing with enforcement to be unnecessary, but the prevailing wage aspect of that bill, would go a long way to solving the H-1B and green card problems, in an extremely simple, clean matter. Instead of having four experience levels as we have now, there would be just one, which would do a lot to address the age problem. The wage floor would be at the 50th percentile of the overall market for that occupation. Even better is the proposal of the Dept. of Professional Employees of the AFL-CIO, which would set the floor at the 75th percentile. Norm