Issues for H-1B and Green Cards: a Minimal Outline

Norm Matloff

Below is an outline. If you prefer quotes form ("sound bites"), click here .

• Don't scapegoat the Indians! Abuse of H-1B is across the board, not just in the Indian outsourcing firms. The mainstream U.S. firms are culpable too, including in their hiring of foreign students from U.S. universities.
• Core issues:
  • Type I cheap labor: Legally required wage for H-1B below true market wage for the given worker.
  • Type II cheap labor: Employers hire young H-1Bs instead of older (35+) Americans.
  • No STEM labor shortage.
  • Employers want foreign workers in order to "handcuff" them.
  • Quality of the foreign workers lower on average than Americans; glut of foreign workers is causing an internal brain drain, thus real damage to economy.
  • What should be done/should not be done to reform.

• Prevailing wage (legally-required wage for H-1Bs):
  • Legal definition makes it UNDERVALUED.
  • The industry says it hires H-1Bs because they are special, in some way, yet the prevailing wage is defined as the AVERAGE wage. It doesn't account for "hot skills" (e.g.Android), degree from top U.S. university, etc., etc., etc. On the open market, an employer would have to pay extra for those, 20% or more.
  • Thus prevailing wage easily undervalued by 20% or more.

• My analysis of government data:
• PERM (green card) data.
• Mainstream U.S. firms; excludes the Indian outsourcing firms.
• Shows the vast majority in CS/EE are paid at or near the prevailing wage.
• Prevailing wage is 20% or more too low.
• Therefore, vast majority paid approximately 20% below their true market value.

• Age issue:
• "Older workers" means 35+.
• Vast majority of H-1Bs young.
• Employers save money, typically about 50%, by hiring young H-1Bs instead of older Americans.
• Skills issue ("Older workers don't have the latest skills") is a red herring. (Americans training their foreign replacements; Wadhwa quote; my University of Michigan paper.)

• Immobile workers:
• H-1Bs are often sponsored by their employers for green cards.
• This makes them effectively immobile.
• Many employers, especially in Silicon Valley, LIKE this de facto indentured servitude, even more than the cheap-labor aspect.

• Lack of a STEM shortage:
• 2007 Urban Institute report (bachelor's level).
• 2013 EPI study (bachelor's level).
• 2011 Texas Instruments House testimony (bachelor's level).
• NSF report, NIH report, CRA report, UCB Brown's research (graduate level).
• Unemployment rates not meaningful, since people are forced to leave the profession.

• Quality issue, internal brain drain:
• Former foreign computer science students who went on to work in the U.S.: On average, FILE FEWER PATENT APPLICATIONS per capita, are less likely to work in R&D, and get their degrees from lower-ranked schools, compared to Americans of the same age, educational level etc. (But the truly outstanding should have U.S. immigration facilitated.)
• Internal brain drain: Foreign workers cause stagnant wages, shorter careers for Americans; so Americans leave the field or avoid it in the first place.
• Damage to economy: Losing the higher-quality Americans, replaced by lower-quality foreign workers.

• What should/should NOT be done to reform:
• "The Devil is in the details."
• The H-1B and green card caps are irrelevant. If the cheap and immobile labor incentives for employers were removed, the caps would never come close to filling.
• Don't focus on the Indian bodyshops; the problem pervades the entire industry.
• DON'T set up a new visa type for STEM foreign graduates of U.S. universities; they are young, so such visas would still cause the age problem, and on average they are of lesser talent than the Americans.
• I support the Grassley/Brown bill. But NOT its enforcement provisions, irrelevant. Abuse is mainly due to loopholes, legal; they must be plugged. Core provision of G/B is the legal definition of prevailing wage. G/B puts it at median, WITHOUT breaking down into experience categories. That latter point (no breakdown by experience) is crucial.
• I support one particular aspect of the Moran bill: Taking green card sponsorship out of the hands of the employers.

• Scapegoating of Indians:
• Unwarranted; H-1Bs underpaid across the board, not just in the Indian firms.
• "Infosyses" buy "Corollas" for 20% discount; "Intels" buy "Camrys" for 20% discount. Same thing!
• Yes, many of the bodyshops send work offshore. But so what? Whether a job is sent abroad or it is filled by an H-1B in the U.S., either way that job is not available to Americans (U.S. citizens and permanent residents).
• Mainstream firms actually worse, as they use the green card process to handcuff their workers.
• Racial overtones, e.g. Schumer "chopshop" remark, "rats" comment by Compete America's Scoot Corley.

• details:
• My recent peer-reviewed paper in an academic journal. Covers cheap labor issue; lack of STEM labor shortage; internal brain drain.
• My recent EPI paper. Debunks the "genius" myth; internal brain drain.
• 2013 EPI study by Salzman et al
• My paper in a publication of the California State Bar Assoc. H-1B and problems of older U.S. workers:
• An older academic paper, in the University of Michigan Journal of Law Reform.
• A more detailed outline of the issues. Many issues; Wadhwa quotes; etc.
• My bio.