None of the Arguments for Singling Out the IT Services Firms Works

A number of my writings and blog posts have mentioned what I consider a misplaced focus in discussions of foreign tech worker programs on the IT services firms.  That focus is counter to the very clear evidence that abuse of these programs is industrywide, not limited to one segment. Moreover, the mainstream industry has engaged in scapegoating such firms, unfortunately with the unwitting complicity of some critics of the H-1B work visa, to divert attention away from the abuse practiced by the mainstream. I’ve been predicting that the result will be legislation that takes a (likely cosmetic) punitive approach toward the IT services firms to justify an INCREASE in foreign worker programs.

In this post, I will list the standard arguments of those who single out the IT services firms, and will explain why each such argument is invalid.  In quoting each argument below, the word “they” will refer to the IT services firms, and I’ll usually use H-1B as my main example program.

1.  “They use the program for cheap labor.”

Of course they do — but so does everyone else in the industry. This has been shown in multiple studies, and significantly, in two employer surveys commissioned by Congress, one by the National Research Council and the other by the GAO.  The NRC report in particular was very broad, sampling firms representing various segments of the industry, all with the same results:  The foreign IT workers “… received lower wages, less senior job titles, smaller signing bonuses, and smaller pay and compensation increases than would be typical for the work they actually did.” Note that while the mainstream firms tend to hire higher-quality workers than do the IT services firms, they are both underpaying at their respective levels.

2. “Their use of the program to place workers at third-party firms was not the intent of the H-1B statute.”

Although I’m told that the framers of the statute had big companies like Microsoft in mind, the fact is that the ostensible goal of H-1B was to remedy labor shortages. If there really were a labor shortage, remedying it through agents that provide “labor for hire,” i.e. the IT services firms, would be quite reasonable. The fact that someone is going through an agent to remedy the shortage is irrelevant. So the whole notion of “labor for hire” somehow being contrary to the spirit of the law is false to begin with.

3. “They don’t sponsor their foreign workers for green cards.”

The argument here is that if these workers were so valuable, the employers would want to keep them permanently, and would thus sponsor them for green cards.  But the fact is that firms that do sponsor their foreign workers for green cards don’t expect them to stay permanently either.  Indeed, a DOL audit once showed that H-1Bs typically leave their employers soon after their green cards come through.

4. “They don’t hire many Americans.”

Almost all the workers in an IT services firm are programmers, and it is true that almost all of them are foreign.  But almost all the programmers hired by mainstream firms are foreign too (see Hal Salzman’s research), so there really is no difference.  The fact that the mainstream firms hire American secretaries is irrelevant.

Anyone who has seen the “TubeGate” video can see that the mainstream firms don’t want to hire American programmes and engineers either.  In the video, a partner in a prominent immigration law firm shows how to legally avoid hiring Americans when sponsoring a foreign worker for a green card, saying “And our goal is clearly, not to find a qualified and interested U.S. worker…We’re going to try to find a place [to advertise the job] where we can comply with the law, and hoping, and likely, not to find…[U.S.] worker applicants.” Remember, these are mainstream firms, not IT services companies.

5. “To solve the cheap labor problem, all we need to do is increase the $60,000 wage floor for the H-1B Dependent Employer category.”

Senator Hatch was basically making this argument in last week’s Senate hearing. Here is what he was referring to.

The 1998 law, once again reacting to all the hoopla regarding the IT services firms, included a provision aimed at those companies.  Any firm at which more than 15% of the workforce are H-1Bs is defined to be H-1B Dependent, subject to additional requirements such as recruitment of American workers.  However, those paying their workers more than $60,000 per year were exempt.

Hatch pointed out that that wage floor has not been adjusted over the years for inflation, and implied that making such an adjustment would solve the cheap labor problem. But not so fast, Hatch! Even though the $60,000 figure is out of date, the IT services firms are still subject to the same prevailing wage requirement as H-1B employers in general, and prevailing wage does follow inflation. So, if those IT services firms are legally hiring cheap foreign labor, as the senator agrees, then the real problem is the definition of prevailing wage. Indeed, the legal prevailing wage is typically well below the market wage that the worker would command if he/she had a green card or citizenship.

In other words, the real solution is to raise the legal prevailing wage to market levels for ALL employers, not just the IT services firms.

So, readers, watch for these arguments in the continuing Great H-1B Debate.  As Senator Grassley once said, “No one should be fooled.”

New L-1 Rules: Why Don’t They Just Say Who They Mean?

Today, the USCIS released its tentative new policy on the L-1B work visa, which is for intracompany transfers.  There are a number of interesting issues involved.

The starting point is that the L-1 visas have no required wage floor, unlike the H-1B work visa and employer-sponsored green cards.  Of course, the wage floors in the latter two ways of hiring foreign workers are little more than window dressing, but politics is politics, and USCIS clearly feels it must (appear to) address the issue.

Significantly, USCIS doesn’t even propose that Congress impose a wage floor on L-1, let alone attempt to do so.  On the contrary, they say in the above memo, “there may be valid business reasons for the wage discrepancy” between the L-1s and the other workers at the firm’s U.S. operations.  But while holding to that (questionable) view, the agency still wants to appear to be protecting the American worker.  Thus they (and the 2004 legislation) take a “labor shortage” approach:  To be admissible, the foreign worker must possess (by implication rare, though this is not in the statute) “specialized knowledge,” a term that appears 86 times in the document.

USCIS’ problem is, as with Congress and H-1B, that they want to (at least appear to) punish the Indian IT services firms, the rent-a-programmer companies, while facilitating business as usual for the American firms (including the American IT services firms, such as IBM). I disagree with singling out those firms, but again, the politics of the situation mean they have to dance around this, as they can’t simply name the firms.

So a vital issue is whether the foreign worker constitutes “labor for hire.”  A key facet of the Indian IT services firms is that, as noted, they in effect “rent” programmers to client firms.  The 2004 Act said this was fine, as long as the arrangement with the IT services firm has all the trappings of an employee-employer relationship, i.e. “the [foreign worker] will continue to be controlled and supervised principally by [the IT services firm].” Clearly, this is not a high bar to set, and can be (nominally) satisfied with minimal effort on the part of the IT services firm.

By the way, a few years ago I pointed out how easy it was for Tata Consultancy Services to claim that its foreign workers had specialized knowledge — TCS had set up its own propriety software development platform, thus automatically achieving “specialized knowledge” status for all its foreign workers.

It is interesting that at various points in the memo, USCIS seems to take an apologetic tone, along the lines of “The statute doesn’t protect American workers well, but we can’t change the law, so our hands are tied.”  If this indeed is what they are saying, it is the height of hypocrisy, as they have recently taken the law into their own hands multiple times, e.g. granting spouses of H-1Bs the right to work.

The sad truth is that USCIS is quite happy to have its hands tied in this regard.  Neither they nor Congress want to reduce the flow of foreign tech labor into the country, but they do want to give the appearance of taking action. I predicted several years ago that in the end Congress will raise the H-1B (including indirectly, via special green cards for foreign STEM students), while justifying it by seeming to punish the Indian firms, yet not actually doing even that.

Researchers As Hired Guns

I hate to put it this way, but not only do vested interests “buy” Congress, but they also buy the research Congress cites to support legislation desired by those vested interests.  (And as an added bonus, the vested interests will also draft the legislation itself.)

In this post I’ll discuss the industry funding of pro-H-1B research, giving various examples. But first, I must raise the question of what impact the money has on the findings of industry-funded researchers.  I want to make it clear that I am sure that  all of these researchers sincerely believe an expansive H-1B program is good for the nation. On the other hand, I want to make it clear that, YES, the money has an impact on the analyses these researchers develop.

Here is a concrete example:  Several of the industry-funded researchers make claims regarding supposed job-creating powers of the H-1Bs.  Putting aside the serious methodological problems with such studies, I have asked, why don’t these researchers also try to measure the job-creating powers of the American workers?  If the American job-creation rate were higher than that of the H-1Bs, wouldn’t that be an argument AGAINST expanding the H-1B program?  But if you as a researcher have an industrial patron, you will not calculate the American rate, as it may turn out to be counter to your patron’s agenda.  (In fact, even if this particular project is not funded by the patron, you still will need to avoid the patron’s displeasure anyway.)

The other point I wish to make before getting to the funding examples is that even those of you readers who are not statisticians or economists can easily spot pro-H-1B bias, in the following simple way:  Just look at the bibliography section of the researcher’s papers.  If the researcher either never or rarely cites papers that are critical of H-1B, then there is a clear bias.  (It also is a violation of a central tenet of academia.  One is supposed to cite all major relevant work; one may explain why disagree with such work, but one can’t ignore it.)  I’ve found that most of the pro-H-1B researchers fall into this category.

An excellent example of how insidious the process is can be found in Tuesday’s press release by Senators Hatch and Flake, citing a string of pro-H-1B research papers to justify the senators’ bill to greatly expand H-1B. Every one of these papers is authored by people with industry funding. And other than Bill Kerr’s work (which I’ve generally praised, though with some criticism as well), none of the papers cite any work that questions whether H-1B is working well.  And sadly, the mainstream media won’t call Hatch and Flake out on such deception.

These days the work of my UCD colleague Giovanni Peri is often cited in support for H-1B, but his funding by Microsoft and PNAE is not mentioned. The press also overlooks Madeline Zavodny’s funding by the American Enterprise Institute.  Similarly, the press didn’t seem to know that pro-H-1B Matthew Slaughter of Dartmouth’s Tuck School of Business (now dean of the school) has financial ties to a number of entities in the business community.

Let’s not forget the Brookings Institution.  Brookings, a major advocate of H-1B, has been accused of a “research for sale” policy.  Microsoft and the Bill and Melinda Gates Foundation have been among the most generous donors to Brookings, according to the latter’s annual reports, and most of the seminars held by Brookings on the H-1B issue have included a panelist from Microsoft.

Over the years, University of Washington computer science professor Ed Lazowska has been quite outspoken in his support of H-1B.  Again, I am sure he is sincere, but one cannot ignore the financial implications, both for his department (he is former chair) and himself personally.  As I wrote in my University of Michigan Journal of Law Reform article,

The Web page of the Computer Science Department at the University of Washington, a leading supporter of industry’s labor shortage claims, showed the following as of March 16, 2000: $1.5 milion from Ford Motor Co. in research funds; “several million dollars” in equipment from Intel; $500,000 from Boeing for an endowed faculty chair; another $500,000 chair from Microsoft; another chair from Boeing; and finally, $3 million from the Bill and Melinda Gates Foundation for two endowed chairs. Department chair Ed Lazowska, who has been an outspoken supporter of the H-1B program, personally benefits financially from a cozy relationship with industry too. According to his personal Web page, http://lazowska.cs.washington.edu/, he is “member of the Technical Advisory Boards for Microsoft Research, Voyager Capital, Ignition, Frazier Technology Ventures, Madrona Venture Group, and Impinj, and of the Boards of Directors of Data I/O Corporation and Lguide.com.”

Even an insightful Wall Street Journal column that questioned research claiming special job-creation powers for H-1Bs dropped the ball in this regard, failing to note that one of the statisticians it cited has ties to the American Immigration Lawyers Association.  Augustus Fragomen, probably the most prominent immigration lawyer in the U.S.A., once wrote that the AILA “commissions academic studies to support our positions.”

Think twice before accepting “research” cited by politicians.

Aargh! I Too Am the Victim of Age Discrimination!

Today I was at GTC, a large conference in San Jose on graphics processing units, a form of hardware to do parallel computation.  It is sponsored (not sure to what degree) by NVIDIA, one of the major makers of GPUs.  Part of my research and teaching involves GPUs.

While I was waiting to watch a talk, a recently-graduated young man from NVIDIA struck up a conversation with me.  At one point, he praised me for attending the conference, saying, “Good that you’re keeping the brain moving.” From the context, it was clear that he finds it odd that someone of my age would be involved with GPUs, or for that matter with any newer technology.

I found the incident amusing, rather than being offensive.  But it was certainly ironic, given that I write about age discrimination in the tech industry.

And it was even more ironic in that the defendant in one of the age discrimination cases I’ve served on as an expert witness was NVIDIA!

Recently a middle-aged specialist in data science with a Master’s degree and a considerable amount of relevant job experience, but no permanent job for over a year, told me,

…people like [his friend, a department chair at a major university] who brings in dozens of young foreign students each year is now annoyed with me. She sees my job problems as my fault. Her student [from China] did not believe that there is discrimination against older American workers. From his view there are an unlimited number of possibilities out there.

So for me, today’s incident with the kid from NVIDIA was just fodder for my lighthearted posting title above.  But for many others less fortunate than I, it is not funny.

Now Hiring — Foreign Students Preferred

In my comments yesterday on the Senate hearing, I noted that most of the senators were viewing the issue of foreign tech workers through an “Intels are heroes while Infosyses are scoundrels” lens.  They believe that mainstream firms like Intel use H-1B and green card programs responsibly, while the IT services (rent-a-programmer) firms such as Infosys abuse it. Most senators at the hearing seemed in particular to support granting special immigration privileges to foreign students, the favored group of the “Intels.”

This view is incorrect; actually, abuse of the foreign tech worker programs pervades the entire industry.  My theme in this posting is that the “Intels” often give hiring preference to foreign students and other foreign workers over Americans.

Following are a number of illustrations and examples for this point.  Before beginning, I wish to note that though some of the items below involve anonymous workers or firms, I’d be happy to discuss details with interested congressional staffers on a confidential basis.  Also, note carefully that almost all of these items relate either directly to foreign students or to employer-sponsored green cards; thus these items do NOT apply to the “Infosyses,” which rarely hire foreign students or engage in green card sponsorship.

  • Many firms prefer to hire foreign students in lieu of Americans,
    due to the immobility that students incur due to green card sponsorship. Employers don’t want engineers to leave them in the lurch during an urgent project, and while one can’t prevent Americans from leaving, green card sponsorship allows the employer to immobilize the foreign students.
  • Managers in at least two name-brand Silicon Valley firms have privately volunteered the information that they engage in this practice. One of the managers added that his firm requires at least x% of all hires to be foreign.
  • During the hearing, witness John Miano showed an IBM job ad that was restricted to foreign students.
  • A manager at another name-brand Silicon Valley firm complained,

    …[hiring managers] get a lot of H-1B  re’sume’s. I had to go out myself, instead of relying on [HR], to go and advertise at several colleges…I found a very good [American]

  • An American worker responded to a job ad at yet another famous Silicon Valley firm, and learned that person named in the ad didn’t work for the tech firm at all.  Instead, she worked for a nationally prominent immigration law firm that represents numerous Fortune 500 companies.  The ad stated that only U.S. citizens and permanent residents could apply, but that turned out to be a smokescreen. Apparently the firm was collecting American applicants to REJECT, so that it could satisfy legal requirements in sponsoring a foreign national for a green card.  A Dept. of Labor investigation ensued, ultimately finding that the law firm had stepped over the line in some cases.
  • In the infamous “TubeGate” incident, another prominent immigration law firm placed onto YouTube a set of videos of an event the firm had held for its clients, describing how to legally avoid hiring American workers (and, in another video in the series, to legally circumvent prevailing wage requirements).  The intent was for the videos to serve as promotion devices, but the Programmers Guild pounced on them. In one of the videos, a partner in the firm says,

And our goal is clearly, not to find a qualified and interested U.S. worker. And you know in a sense that sounds funny, but it’s what we’re trying to do here. We are complying with the law fully, but ah, our objective is to get this person a green card, and get through the labor certification process. So certainly we are not going to try to find a place [at which to advertise the job] where the applicants are the most numerous. We’re going to try to find a place where we can comply with the law, and hoping, and likely, not to find qualified and interested worker applicants.

  • Articles on ILW.com, a popular Web portal for immigration lawyers, have called the green card process a “charade”; the foreign worker already holds the job, typically hired earlier as an H-1B, so the employer doesn’t want to find an American to fill the position.  Yet of course the immigration lawyers don’t want a law requiring employers to give hiring priority to Americans at the initial hiring stage either. Writing on ILW, green card expert Joel Stewart, wrote “Employers who favor aliens have an arsenal of legal means to reject all U.S. workers who apply.”
  • Immigration lawyers openly make pitches to employers to hire foreign workers instead of Americans, citing the “attractive” immobility of the former. For example, immigration attorney David Swaim, whose firm biography states that he designed immigration policy for Texas Instruments, one of the most active lobbyists for H-1B expansion on Capitol Hill, repeatedly cites this advantage accruing from hiring foreign students in his Web page, naturally titled hiref-1students.com. (F-1 is the name of the student visa.)  Dartmouth University’s Tuck Business School makes the same pitch to employers, pointing out that “Because it can be difficult for [foreign] employees on a work visa to change jobs, international employees are less likely to leave unexpectedly. This lowers your costs for talent recruitment in the long-term while also creating loyalty among your employees.”
  • Legislation in 2000 slightly shortened the immobility time for the foreign workers. Immigration lawyer Jose Latour responded to employers worried that the immobility would be lost by saying, “the labor cert process…[still] requires a trusting relationship between employer and employee…the need for stable employment for the realization of permanent residency remains unchanged,” i.e. H-1Bs will continue to need to stick with their employers for years while the green card is pending.
  • A February 28, 2005 article in Computerworld reported that “Most of the students enrolled in the New Jersey Institute of Technology’s graduate program are foreign nationals…Stephen Seideman, dean of the school’s college of computing science [notes the exploitability of the foreign students, in that they] will do everything they can to stay [in the U.S.]”

Again, I must remind readers that we are talking NOT about the “Infosyses” but instead about the “Intels,” especially the group extolled by both the “Intels” and most of the senators at yesterday’s hearing, the foreign students.  It is clear that the claims made by the “Intels” that “We would much prefer to hire Americans if we could find qualified ones” are often hollow, and that no special immigration deals should be enacted for the foreign students.

Today’s Senate Hearing

In spite of my posting title here, I won’t go into detail on the hearing.  I haven’t watched the whole thing yet, and won’t post a detailed analysis until I do so.

Before I get to my main point, which will concern H-1B wages, I’ll say that the hearing apparently turned out exactly as I expected: Praise the Intels and blame the Infosyses.  This is the tactic the mainstream industry lobbyists have been using since back in the 1990s, designed to deflect attention away from their own abuse of foreign tech worker programs, and various senators employed this tried-and-true approach. The H-1B critics — researchers Hira, Miano and Salzman, and H-1B victim Jay Palmer — did a great job during the portion I’ve watched so far, with Palmer being especially good for a “non-pro.”  Nevertheless, people hear what they expect/want to hear, and I predict that most of the senators came away thinking (incorrectly) that the four critics believe in the “Intels are good, Infosyses are bad” dichotomy.

My main point in this posting, though, is to discuss the Intels-vs.-Infosyses issue in terms of wages and other kinds of abuse.

First, there is no doubt that the Intels pay their H-1Bs higher wages than the Infosyses pay theirs.  However, that doesn’t mean that the Intels don’t underpay their foreign workers.  The two types of companies hire quite different H-1Bs, with the Intels typically hiring workers who have a Master’s degree from a U.S. school and the Infosyses hiring people with three-year Bachelor’s degrees from India.  But both are underpaying for their respective levels of workers.  See my Migration Letters paper for details. (By the way, I did a quick analysis of the 2014 green card data this evening, and it was pretty much the same as the 2011 data I used in that paper.)

The other point is that for many of the Intels, the immobility of the foreign workers is much more important than saving in wages.  If you are an employer, having an engineer leave you in the lurch during an urgent project is disastrous.  Immigration attorneys openly urge employers to give hiring preference to foreign students over Americans for this reason.  So the entire notion that the Intels are “better” because they hire foreign students turns the truth on its head.

By the way, the committee invited me to submit a letter discussing my views. You can download it here.

The SCEs of the Future

Let me put it as succinctly as I can.

Recently Southern California Edison was exposed as laying off its American IT workers and replacing them with workers imported from India.  After Congress “reforms” the H-1B and employer-sponsored green card programs, that will change:  Now firms like SCE will lay off their American workers and replace them with newly-graduated foreign students hired from U.S. colleges, instead of hiring them directly from India.  Whoopee!

Pardon that last sarcasm, but my meaning should be clear:  After the “reform,” firms like SCE will still be hiring foreign workers, just sourced differently.

I’m referring, of course, to a common theme of mine — the inaccurate and destructive distinction made between the “Intels” and “Infosyses,” the former meaning companies that hire foreign workers from U.S. campuses and the latter meaning the IT service firms that bring in foreign workers directly from abroad.  The claim is that the “Intels” use the H-1B program responsibly while the “Infosyses” abuse it.  The fact is that BOTH types of firms abuse the program, with the result being reduced job opportunities, reduced wages and increased misery for U.S. citizens and permanent residents.

Various bills introduced in Congress in recent years have been based on this Intels vs. Infosyses (false) dichotomy, and have proposed rewarding the Intels by devising special immigration deals for the foreign students.  Unfortunately, even many critics of H-1B have bought into that dichotomy, and I’m beginning to hear things coming out of DC that suggest that we may well see legislation enacted featuring sweet deals for foreign students.

What people keep forgetting is the intimate connection of H-1B to age.  Younger workers are cheaper, and giving special privileges to foreign students means adding thousands of YOUNG workers to a labor market already suffering grievously from age discrimination.

If such legislation does go through, SCE will have lots of YOUNG foreign workers to hire to displace its expensive older American workers. The only difference is that it now will be able to hire them from local colleges.