Ron Unz Swings and Misses Regarding H-1B

Just a couple of days after I wondered aloud what Ron Unz now thinks of H-1B, today’s San Jose Mercury News ran his op-ed on the subject. Unfortunately, he still thinks Silicon Valley firms (I call them “Intels”) use the visa program responsibly, though he now concedes that the outsourcing firms (“Infosyses”) abuse it. Worse, his solution would not work, I believe.

As a libertarian, Unz instinctively reaches for market-based solutions, in his case an auction system, possibly inspired by FCC auctions for radio/TV bandwidth: The visas would go to the highest bidder, rather than doled out by lottery as at present. On the (false) assumption that the Intels pay their H-1Bs fairly while the Infosyses use H-1Bs for cheap labor, Unz reasons that the Infosyses could not afford to bid; the auction fee would wipe out the cost savings accrued by hiring the foreign workers. This would achieve Unz’s desired goal, which is to give the visas to Intels rather than to the Infosyses.

I do agree that the outcome would be as Unz posits, but I strongly disagree with his premise that this solves the H-1B problem.

The research, both quantitative and qualitative, clearly shows that the Intels do pay below-market salaries to their foreign workers. As I’ve said, although the Intels pay more than the Infosyses do, that is because the two types of employers hire different types of workers. The Intels get a price break on their type of worker, and the Infosyses do so on theirs. But they are BOTH saving money.

So a shift of the allocated visas from the Infosyses to the Intels would not make things any fairer, nor would it reduce the harm the visa brings to U.S. citizens and permanent residents. On the contrary, the notion that “We’ll give the good jobs to the foreign workers but save the mundane ones for Americans” is more than a little disturbing.

As an example, Unz sets a scenario of the Intels being willing to bid $20,000 per visa in the auction. He assumes, just as a rough figure, that the Infosyses are saving $20K in salary, so any bid of at least that much would force the Infosyses out of the bidding. Let’s look at that figure a little more closely.

Actually, both types of employers are saving much more than $20,000. Since the visa is good for six years (more if the employer is sponsoring the worker for a green card, as the Intels tend to do), that $20,000 figure needs to be multiplied by at least 6.

So, would the Intels be willing to bid, say, $100,000 per worker? That looks extremely doubtful to me, for psychological reasons. Unz’s view of “free” markets, which in this case would mean bidding the true value of the worker, is grossly oversimplified. Employers just could not bring themselves to pay such a large fee that simply goes to the government, rather than productive use. I don’t believe they’d even bid $20,000.

And that, of course, is why such legislation would not ever be seriously considered in the first place.

A much better solution, equally market-based, would be to give priority for the visas to the employers offering to pay the foreign worker the highest salary. This approach has been proposed by a number of people.

Moreover, it is something the Obama administration could implement on its own, without Congress. Why haven’t they done so?

 

Ron Unz, Then and Now

If you live in California and follow politics, you may recall Ron Unz,  who became politically prominent in 1994. That year he challenged Republican incumbent governor Pete Wilson, who was championing the ballot initiative Proposition 187, which sought to ban unauthorized immigrants from access to state services such as K-12 education. Unz disagreed, and campaigned vigorously against the measure. Unz lost the primary election, of course, but managed to garner more than 700,000 votes, amazing for someone with essentially zero prior name recognition. (Prop. 187 passed, but was immediately challenged in federal court, and Wilson declined to mount a real defense of it.)

Unz is a libertarian, a philosophy whose adherents tend to interpret as meaning very liberal immigration policies. Some even advocate completely open borders. At a conference at Stanford in 1996, I recall Unz speaking with an academic (can’t remember the name), a fellow libertarian. Unz said, “Illegal immigrants are fine…” and the academic finished his sentence for him “…because they don’t use welfare!” They had a good laugh over that, which I found disturbing.

Then in 1998, Unz launched a ballot initiative, Prop. 227, to greatly curtail bilingual education. Note that this does not refer to something like Spanish Immersion Programs, but instead to the then-practice of keeping Spanish-speaking kids in classes that were close to Spanish-only for many years. This measure did pass, but in the process Unz went from a hero to a goat among Latino community activists.

In promoting his language initiative, Unz emphasized that he was still highly pro-immigration. And regarding H-1B, he was strongly in favor of it (he is a Silicon Valley entrepreneur). In fact, I was one of Unz’s debate opponents in a panel discussion on H-1B at that Stanford conference.  I don’t know what his present stance on the issue is.

Currently Unz is running in the California primary election to replace retiring senator Barbara Boxer. He says his primary motivation is to preserve Prop. 227, which the legislature has been trying to overturn.

But his stance on immigration has changed radically. He is now in favor of tightening immigration, both legal and illegal. Interestingly, this morning’s California Report, in reporting on a debate between the major Senate candidates in San Diego, noted that Unz advocated  reducing immigration as an alternative to raising the minimum wage. Citing supply-and-demand principles, he said that reducing immigration would reduce labor supply at the low end, thus raising wages without legislating a wage floor directly.

It would be interesting to know whether this change is yet another example of how Trump, for better or worse, is changing the conversation on immigration.

By the way, those who advocate both maintaining/increasing yearly immigration levels AND raising the minimum wage are missing the economics of things, as far as I can see. Something’s got to give in such a scenario. Presumably the results would be higher unemployment, fewer benefits, more abuse from employers and so on.

Apparent vs. Real Winners and Losers in Trade

In his latest blog post, Alan Tonelson remarks on a study that puts trade issues in a new light. The study “contends that, since 1970, crooked politicians have stolen just over $12 trillion from the third world countries they’ve ruled.” Moreover, almost 2/3 of this theft has involved just a few countries, notably major American trading partners China and Mexico.

Though the scale of this corruption is stunning, Alan makes a somewhat different point, as follows. An argument made by the Establishment class in the U.S. is that although trade harms the American middle class (something they are now just starting to admit, thanks to Sanders and Trump), it is lifting millions of people in the Third World out of poverty. But Alan ties in the corruption issue by pointing out that if all this stolen wealth had been invested in infrastructure, education and so on, the salutatory effect on the Third World poor would have been far greater than whatever benefit they derive from trade. The “lifting them out of poverty” issue is thus a red herring.

Sounds plausible, but it got me to wondering just who benefits from trade with poor countries, which will be my topic in this post.

I’ll start by noting that Alan and I move in quite different circles. In a post a few days ago, he mentioned that a standard argument in favor of liberal trade policies for the U.S. is that it reduces the chances of war. Yes, I have occasionally heard this argument, as well as the one about reducing world poverty, but really, I think one hears this much more often in Alan’s circles than in the mainstream press — or from Hillary Clinton. The canonical arguments for free trade in most Americans’ minds has been claimed benefits to them, in terms of lower consumer prices and creation of American jobs.

In the last 15 years or so, I’ve begun to understand that claims along the latter lines are often fallacious.  A Wall Street Journal analysis, for instance, showed that only a small part of the price of an iPhone is connected to Chinese labor. My colleague Phil Martin found that use of unauthorized immigrant labor saves consumers of lettuce only about a nickel per head. Due to small profit margins, the use of foreign labor does increase the vendor’s profits proportionally, but the much-vaunted savings to consumers is not there in most cases.

These things have been startling revelations to me, as they clash not only with what we are told in the press, but also with the extensive education in economics that I pursued as an undergraduate and in continuing informal study afterwards. I feel a little sheepish about being so naive, but as Alan points out, plenty of economists are saying the same thing today. Caveat emptor, even in — especially in — university studies.

Thus my first reaction to Alan’s post was to wonder whether the claim that trade helps alleviate Third World poverty is just as subject to misinformation as assertions of benefits to Americans. I haven’t read studies on this, but I know the situation in China fairly well, and I must say it’s not so clear that rural Chinese, the putative group most helped by trade with the U.S., has benefited to the degree implicit in the slogans about “lifting millions out of poverty.” Though it’s certainly true that individual factory workers from rural China have found the income from their work to be worth the quite onerous hardships (leaving their children back home, enduring harsh, dangerous and tedious working conditions etc.), I believe few of them would agree that they have been lifted out of poverty. Instead, it is the well-off in China (or more commonly, in Taiwan, the source of much of the investment) who have reaped the main benefits.

In other words, the main winners on both ends of trade seem to be the upper class, quite contrary to the image most people have of middle-class beneficiaries in the U.S. and lower-class ones in the Third World.

One of the particularly disturbing points Alan makes in his post is that prominent, presumably Democratic, economists such as Harvard’s Kenneth Rogoff are in essence saying that Bernie fans should be ashamed of themselves for supporting Sanders’ call for tighter trade policies. Does Rogoff really believe that? He’s about my age, and thus grew up on a diet of Samuelson-style support for trade, and maybe he has just never taken the trouble to take a serious look at just who the winners and losers are here. Is he yet another member of the Chattering Class, whom I noted recently have no idea what it’s like to be laid off, face eviction or mortgage default and so on? It’s so easy to view things simplistically while sipping a $6 latte’ in Harvard Square.

 

 

 

A Congressional Candidate for Real Reform

Ryan Detert, a programmer, is running for Congress, in California’s third congressional district primary election. His opponent, John Garamendi, is one of the most well-known, insider, powerful pols in the state. One of Ryan’s main issues is the H-1B work visa, which he believes badly needs scaling back.

As I mentioned recently, I don’t endorse candidates for office in this blog. I will say, though, that Garamendi refused to meet with me when he represented my district. I usually don’t contact officeholders, but I did feel a responsibility to discuss H-1B with my own congressperson. Sadly, this didn’t happen, nor did it with Ellen Tauscher, who preceded Garamendi; her husband was a tech executive. I did meet with my current congressman, Mark DeSaulnier, who showed a good grasp of the issues (if not a willingness to vote against expansion of the program).

Rare Sighting of Bias in the Press

No, wait, wait! Don’t jump to the conclusion that my posting title above is sarcastic. On the contrary, as I’ve said a number of times in the past, I believe that most journalists do try to be fair. There are other obstacles to accurate reporting — lack of depth, susceptibility to PR fallacies, a self-confessed innumeracy and so on — but they generally do try.

Sadly, a report by the Bay Area NBC station on Trump and the H-1B work visa is a clear exception. Its message is that Trump’s criticism of H-1B is NOT shared by the very people he claims to be protecting, American tech workers.

“Techies disagree with Trump [on H-1B],” the reporter tells us — and then offers as “proof” a techie CEO. Yes, CEOs do like to hire H-1Bs for cheap, immobile labor; we all know that. But this news report doesn’t have any comments at all from actual techies, i.e. engineers or programmers.

Instead, the report includes an interview with Melinda Jackson, a poli sci professor at San Jose State University, in which she “explains” that Trump’s criticism of H-1B is pure nativism, rather than there being genuine problems with the visa. The mere fact that the reporter sought Jackson’s opinion reflects the reporter’s preconceived views of the issue, I believe.

And what about that CEO who was interviewed? He claims that his company just can’t hire in this “hot” job market. Well, his firm, Vectra, lists a couple of open positions, one for a Platform Engineer and the other in Quality Assurance. The latter is quite generic, certainly not needing an H-1B, and while the latter is more specialized, I know of people who would qualify.

As many of you know, I have had my own problems with Trump regarding H-1B (along quite different lines), but this news report is a travesty.

More on the Chattering Class and Trump

I’ve received a number of e-mail messages praising my post of last night. Nice, but hardly surprising, as I’ve said similar things here before, on several occasions. I would suggest in particular my posts “More Disturbing News about Sec. Clinton” and “Where I Don’t Stand.”

The latter post, by the way, makes it clear that I am not endorsing anyone. I state,

A reporter contacted me today, having read a blog post of mine, and she said she hoped to interview me as a “Trump voter.” I told her she should have read some of my other posts.

I try not to endorse any politician in this forum. It should be clear to regular readers that I admire both Sanders and Trump, but I’ve also criticized both of them. I will say this, though: In my mind, they are the ONLY two candidates in either party in whom I have any confidence that they would “do the right thing.”

(And I go on to say that “the right thing” involves far more than H-1B and green cards, such as overturning Citizens United.)

Thus my post last night was intended to be just what its title indicated, an expression of my disdain for the ignorant and uncaring Chattering Classes, rather than an endorsement of Trump. The fact is that even if I were willing to divulge such information, I myself don’t know what I will do in November. And I have often declined to vote in the general elections for president (though I always vote for the other offices). But it ought to be clear who I’m voting for in the California Democratic primary on June 7, and who I absolutely will NOT vote for in November.

The Chattering Class Still Doesn’t Get It about Trump

Now that Donald Trump basically has the Republican nomination sewed up, we are seeing yet another round of statements from the press and Democratic officials along the lines of Trump’s ascendancy being some kind of bizarre, unbelievable accident. We are being told once again — in spite of numerous exit polls to the contrary — that his constituency is only disaffected white men without a college education. And speculation by some that many Bernie supporters will vote for Trump instead of Hillary is met by hoots of laughter, interspersed with objections like “Come on, Trump and Sanders have nothing in common.”

Well, if Bernie doesn’t get the nomination, a lot of his supporters will be loathe to vote for Hillary, and I believe some non-negligible number will indeed choose Trump. And contrary to assumptions by the Chattering Class, a number of minorities will vote for Trump too. Many African-Americans, for instance, are NOT in favor of high levels of immigration, which they believe (backed up by statistics) hurts low-skilled blacks, drains needed money for education of the underclass and so on.

But as I’ve often said, the biggest problem with the Chatterers is their inability to empathize with people who are struggling economically. Many of the Chatterers aren’t making anything near “1 percent” wages, but on the other hand, they haven’t ever felt the terror of facing eviction or being long-term unemployed or underemployed. Just like the old line, “A conservative is a former liberal who has been mugged,” many Trump supporters may be former Democrats who are victims of the financial crash that Democrats like Bill Clinton, Larry Summers and Robert Rubin contributed to. How on Earth could such a person support Hillary Clinton and her lavish speaking fees paid by Wall Street? Think of it. If you think that such people will consider Clinton the lesser of two evils, I believe you are dead wrong.

The Chatterers are oblivious to the finding of the recent Fed study that 47% of Americans could not come up with $400 cash for an emergency, without borrowing the money or selling some possession.  “A measly $400,” the Chatterers might say in (temporary) awe, before going back to their mantra, “Trump has offended all groups, so no one will vote for him,” etc.  They just don’t get it.

People feel betrayed. And I don’t mean just people who are Caucasian, male and blue collar. When will the Chatterers wake up?