Where I Stand on the H-1B Work Visa

(I’ve been interviewed hundreds of times by journalists over the 20+ years I’ve been writing about the H-1B work visa and employment-based green cards. That means I’ve had my share of misquotes, in rare cases due to overt bias on the part of the journalists but in most cases due to the overwhelming complexity of the issues, as well as the world-class ability of the industry lobbyists to obfuscate the issues and confuse the hapless journalists.  To reduce the possibility that I’m misquoted, I’m writing this blog post, which I will ask all journalists to read before they interview me.  Meanwhile, I think this post will be informative for all you readers out there.)

Information for journalists interested in the issues of the H-1B work visa, employment-based green cards, claims of STEM labor shortages, and so on:

  • I have always strongly supported the notion of bringing “the best and the brightest” talents to the U.S.  For instance, I just recently responded to an employer reference request about a foreign student from China, in which I urged them to hire him.  I emphasized that he is especially creative in developing software, and in response to the employer’s request for advice on how to best use the student’s talents, I wrote “Give him a lot of responsibility, and a free rein creatively,” a very strong statement regarding a new graduate.
  • On the other hand, only a small percentage of foreign students in computer science (CS) are in the “best and brightest” league.  In fact, research done by various academics in the prestigious National Bureau of Economic Research has shown that on average, the foreign students in CS and STEM are actually weaker than their American counterparts, which my own research has confirmed.
  • I have never called for the abolition of the H-1B work visa.  On the contrary, I’ve made specific proposals on how to “mend it, not end it.”
  • I’ve never taken any funding on any topic (not just H-1B and related issues) from the industry or any organization with an interest in H-1B.  This is the FIRST question a responsible journalist should ask those whom he/she interviews — “Do you have any funding from the industry?” It matters — no matter how much a researcher might protest impartiality, one does not “bite the hand that feeds one.”
  • You should be skeptical about studies regarding H-1B and related issues.  Many economists are great number crunchers, but if they don’t understand the numbers they are crunching, their conclusions can be very far off base.  A case in point concerns research into whether H-1Bs tend to be underpaid, relative to the wage their skills and talent would command in the open market. Android programming skills, for example, bring about a 20% wage premium on the open market, so one must ask if the given study takes skill sets into  account.  See my Migration Letters paper for a detailed account of the pitfalls, and also one of my previous posts here regarding claims of “job-creating powers” of H-1Bs.  And most importantly, my stance has always been that the biggest salary savings accrued by hiring H-1Bs is due to age, as noted below, something most wage studies ignore.
  • Indeed, the H-1B program is largely about age.  Employers mostly want new or recent graduates, and rarely hire engineers past age 35. Younger workers cost less, and the H-1Bs are overwhelmingly young. Employers say only young people have modern skill sets, an absurd claim in view of the fact that those new grads were taught those skills by “old” professors.
  • My research findings that the H-1B program is widely abused are thoroughly mainstream, contrary to the “everybody agrees we need more H-1Bs” image spun by the industry lobbyists.  For example, two broad-based congressionally-commissioned employer surveys confirmed that H-1B workers tend to be paid less than comparable Americans (but still legally so, due to loopholes).  One of those studies documented the age discrimination issue, and noted the immobility of the foreign workers.  As mentioned earlier, NBER research has shown that the foreign students at U.S. universities tend to be weaker.  For the record, I happen to be a longtime registered Democrat and minority activist. Click here for my bio.
  • Please do NOT succumb to the industry lobbyists’ tactic of using the term native-born  in place of the word American.  First, it is incorrect — the tech work force, as well as the university student population, consists not just of U.S. natives but also naturalized citizens and green card holders. Second, it’s a “psych,”  meant to evoke the word nativist.  Trust me, this is deliberate, often leading to extremely awkward style in order to force the term several times in the same sentence.
  • Please do not scapegoat the Indian IT services firms.  Abuse of H-1B pervades the entire industry, including in the hiring of foreign students from U.S. universities. The “Intels” are just as culpable as the “Infosyses.”
  • Unemployment rates can be quite misleading.  CS rates may be low relative to auto factory workers, but they are similar to college grads in general.  And when faced with difficulties finding work in their field, CS people often switch fields, and thus do not show up in unemployment data for CS jobs.  One does have to pay the mortgage or the rent, after all.
  • For many employers, especially those in Silicon Valley, the appeal of hiring H-1Bs (with green card sponsorship) is to acquire IMMOBILE workers, who in essence can’t leave them for another employer.  This can be far more valuable than wage savings.
  • The solutions are actually simple:
    • For ALL foreign workers (H-1B, L-1, green card sponsorees, OPT), set a wage floor of the 50th percentile for the given occupation (SOC code) as a whole, NOT broken down by experience levels (so as to deal with the age discrimination issue). Employers must not be exempt from payroll tax requirements and the like for OPT workers. OPT should NOT be extended.
    • Allow all foreign workers full freedom of movement in the labor market.
    • Do NOT create any new foreign-worker programs, such as fast-track green cards for foreign students at U.S. universities.
  • Advocates of the H-1B program often make unguarded statements counter to their carefully constructed public platform.  Click here for some educational quotes.

Thanks for your attention to this complex but vital topic.

The Unheard Voices

Today everyone in my department received a message from our office manager with the word immigration in the Subject line.  This certainly is not an everyday occurrence, so my interest was definitely piqued.  It turned out that someone on campus had asked the departments to help promote a conference to be held at my university next month.  Nice list of speakers, but all with cushy jobs in academia and think tanks.  None of them appears to be someone who is directly impacted by immigration policy in terms of making a living.  In the enclosure below, I’ll forward a message from a reader that puts a human face on the claimed STEM “shortage.”  Numerous studies, plus a plain common sense look at the lack of rapidly rising wages, counter that claim, yet Congress wants to essentially grant automatic green cards to all the foreign STEM grad students at U.S. universities, exacerbating the STEM surplus.

My reader, a techie consultant who has seen his contract rates fall with the rise of the H-1B program, recounts this incident:

A bit of a sad little story from the world.

You may recall my story of a few years ago of the newly graduated civil engineer who was tending bar, and this is along those lines. I went into a restaurant at the mall on Saturday, the mall was crowded to capacity, but around 3PM I was able to get a seat at the bar to grab a salad and watch a little college football. As we watched and the barkeeper cheered it turned out she was a recent graduate from [prestigious university name deleted]. So exactly why was she tending bar? Well, she was a biology major. Couldn’t find biology work other than $15/hr lab work at the university. The young man sitting next to me suddenly said, “Hey me too!” and it turns out he just graduated recently with a biology degree from [another university], and is currently employed – as a server at another nearby restaurant. The discussion then turned to their student loans. As I was getting up to leave I stopped to talk to the guy, mentioned my brother with his doctorate in molecular biology still struggling with employment in the field, and I worked around to asking if this guy knew anything about “H-1B”. By that name he didn’t. I explained a little and he said, “Oh yeah that”, but nothing more.

Both the barkeep and the guy seemed clear-headed and presentable. Now, this story is a little self-selecting, if a biology major did find biology work she wouldn’t be there tending bar, but as soon as it got a quick second from a random guy, that was confirming evidence I thought worth repeating. Even with the recent “executive action” on immigration that increases the number of foreign students who will now stay and compete for jobs – especially entry level jobs – I wondered if he would mention that either, but no. I hurt for these kids. Back in the day it was mostly true, if you graduated with a STEM degree you’d generally find a job in that field quickly enough (and at much better wages than today, but that’s another discussion). Today, what are we doing?

I replied to him that I had also seen similar cases, and of course the saddest is that of Douglas Prasher, an “almost-Nobel laureate” who was found to be driving a shuttle van for a Toyota dealer when some fellow researchers won the Nobel based on extending Prasher’s research.

I learned today of a TED talk by Jan Ting of the Temple University law school, which I recommend to all.  It’s not that what he says is that novel, but the tone in which he states it, so matter of fact, reminiscent of Pres. Lyndon Johnson’s favorite biblical quote, “Come, let us reason together.”  Ting dares to say the obvious — real people do get hurt when policy is made.  Professor Thomas Sowell says so too, specifically regarding high-skilled immigration, in a more flamboyant manner, It would be nice if others were to emulate them.

Hidden in Plain Sight — Again

You may recall that a few years ago, Microsoft established a software development center in Vancouver, Canada, saying it was forced to do so because of a shortage of H-1B work visas in the U.S.  Well, now Microsoft has gotten the Canadian government to exempt them from a requirement that a firm may hire foreign workers only if it demonstrates insufficient numbers of qualified Canadians are available for the jobs.  (The American H-1B visa does not have this requirement for general employers.)

I reported on the Vancouver center back in May, when I pointed out that there was a glaring contradiction that no one seems to have noticed:  According to the BusinessWeek article, “There, Microsoft will hire and train 400 software developers from around the world to work on mobile and cloud projects.”  Did you catch that?  “…hire and TRAIN”!  Remember, the whole rationale for  hiring the foreign workers — claimed by U.S. employers and codified in Canadian law — is that the employers resort to hiring foreign workers because there are insufficient domestic workers who have the specialized skills for the jobs.  Yet Microsoft is TRAINING the foreign workers in these skills.

Yet no one seemed at the time to notice this “emperor has no clothes” situation back in May, just as no one quoted in the current article seems to fully realize this.

It’s a safe bet that the Vancouver move makes for great lobbying points on the Hill.  There’s nothing politicians fear more in the economics realm than the rallying cry, “Jobs are moving overseas!” (The fact that in this case we’re talking only about a 3-hour drive up I-5 doesn’t reduce the argument’s effectiveness, I’m sure.)  But what if those Hill dwellers (and their counterparts in Ottawa) knew the REAL situation in Vancouver?

Another Futile Call to Remedy the Post-Doc Problem

Our various national academies have published yet another report on the outrageous state of post-docs (post-doctoral researchers, typically in STEM), a perfect example of the principle that powerful interests won’t solve problems that even they admit are severe, if it would mean compromising the financial well-being of those interests.  In this case, those powerful interests are universities and research institutes, hiring cheap labor, both domestic and foreign.  And yes, the latter typically hold H-1B work visas, and according to one figure, about 60% of the post docs are foreign.  The salary and working conditions tend toward the Dickensian, clearly showing a huge surplus of labor — and yet Congress wants to give all foreign STEM students earning U.S. degrees automatic green cards.

As the article at the above link points out, this is hardly news.  Many national science organizations have noted it for years — see my Migration Letters paper for some references, for instance — and anyway, isn’t the problem obvious?  These scientists work for years at low wages, which are years of painful limbo, as they have no idea whether a career awaits them at the end of that time.  Imagine being age 35 and still working as a temp.  Most people have families, homes and so on by that age, and you’re still a low-paid temp with a highly uncertain future.

Of course, the spin placed on this by the universities is that national science research is underfunded, hence the labor surplus. Look at the way the article puts it (emphasis added):

All that [the good old days, when being a post doc was so pleasant]  changed, of course, since the 1970s, when Petsko was a postdoc, he said, “and not in a good way.” The plight of postdocs worsened in the last decade in particular, he said, due in part to the failure of federal science agencies to have budgets large enough to keep up with demand. Recent Ph.D.s also face a much tougher tenure-track academic job market, even in the STEM fields.

Interesting word, demand.  Let’s put that word in perspective:  Universities want research dollars.  To maximize the dollars, they maximize the number of researchers.  Producing more research brings in more dollars, which in turn requires more researchers to spend the money on, etc.  And cheap researchers are best, to “get more bang for the buck.”  That’s why the National Science Foundation has been so supportive of the H-1B program; even though the foreign workers are paid the same as the Americans, swelling the labor market reduces wages, in fact so much that not many Americans are interested in pursuing science research.  What I wrote in the 1990s holds even truer today:

Indeed, Massy and Goldman point out [in a Stanford-RAND Corp. study] that production of Ph.D.’s in science and engineering is geared not to labor market needs, but rather to the “needs'” of university faculty to produce Ph.D.’s! A faculty member’s rise in the ranks will depend to a great degree on how much federal and private grant funds he/she is able to attract, and how many Ph.D. students he/she produces (the funds are used to provide financial support to the students). Massy and Goldman quote a chair of a major Computer Science Department as saying that he sets the enrollment level for his department’s graduate program by simply multiplying a per-faculty quota for Ph.D.’s by the number of faculty in the department; this is standard practice.

There is an interesting postscript concerning that Massy-Goldman report.  In 1995 some academic computer scientists found an apparent error there, due to a change in NSF definitions of CS, and announced that Massy agreed.  But in that announcement, CTO Forest Baskett of the then-high flying firm SGI said, “A trend I do find disturbing and counterproductive is the trend toward postdoctoral fellows in computer science…We’ve had a fabulous 30 year history of great relations between our computer science departments and a vibrant industry without postdoctoral fellows gumming up the works…This is a good model. Let’s not break it.”  Well, since that time the number of post docs in CS has grown tremendously; see my Migration Letters paper for references.  (Baskett also said that his firm didn’t need PhDs but said they are smart people.)  Again this illustrates academia’s addiction to cheap labor, and the surplus of PhDs.

Ah, but doesn’t our economy and society benefit from all that research, you ask?  I would be the first one to say that society should indeed invest in research.  But the huge emphasis on money has major perverse effects that actually reduce the societal/economic value of the research work that that money supports; see a related essay I was asked to write on “machine learning” and the like.  Here is a concrete example:

I once attended a talk by a very famous computer science professor whom I’ll call X.  He was presenting the results of his main research project at the time, a very complex and powerful computational system.  During the talk, in response to a question from the audience, it became clear that he really didn’t know his own project very well, not too surprising as he was at the top of a pyramid:  He had some Associate Professors run things, and they in turn supervised the post docs, who in turn supervised the doctoral students and so on.  In other words, the prodigious talent of Professor X was not being put to good use; his “job” was just to bring in the bucks.  The reader comment at the first link above says it well:  “I bet you dollars to donuts that the average quality of research would improve dramatically if (1) it wasn’t being carried out mostly/entirely by people who were still in the midst of their ‘apprenticeships’…”

And, most important, what became of that highly funded project of Prof. X’s, at one of the top five universities in the country?  The answer, as far as I know, is “basically nothing.”  Today, 20 years later, I am not aware of any major findings from the project that have been incorporated into practical systems today.  Indeed, a quick check in Google Scholar shows that even in the research world, X’s work on that project has rarely been cited after 2000.  Even accounting for the likely fact that some papers today might contain references to a chain of papers going back to X’s in the mid-1990s, it’s pretty clear that X’s project just hasn’t had much impact.

Again, I love doing research.  But today’s “business model” (an apt term) is just wrong, in myriad senses, including the sad plight of post docs.  And since so many of our government policy makers are so obsessed with competing with China, let me ask this simple question:  Why doesn’t China have a post doc system?

Proof by Internship Data

Following a BusinessWeek article quoting researchers who claim the tech labor shortage is a myth, tech entrepreneur Yuri Sagalov has responded with a blog post, “Immigration is about talent, not costs.”  The shortage is real and H-1Bs really are hired purely on the basis of talent rather than wage savings, insists Sagalov.  As “proof,” he cites the generous salaries some Silicon Valley companies are paying some of their interns.  I did use the qualifier some here twice, but let me assure you, if you are, say, an MIT student interning at Google, the firm is going to pay you quite handsomely.  But of course, Sagalov has set up a straw man here, a variation of the old “programmers make more than bus drivers argument.”

As I’ve often pointed out, the attraction of the H-1B program, at least in Silicon Valley, stems mainly from two factors:

  • The program supplies them with a YOUNG labor pool, and since younger is generally cheaper, H-1Bs are cheap relative to older (over age 35) U.S. citizens and permanent residents. Yes, young H-1Bs do also come somewhat cheaper than Americans of comparable quality (verified by, among others, two congressionally-commissioned employer surveys), but the real wage savings comes from the young nature of the H-1Bs.
  • Green card sponsorship provides employers with IMMOBILE labor, which is extremely valuable to the firms.  In fact, this is pitched by immigration attorneys as a major virtue of hiring foreign workers.

So, hiring H-1Bs is indeed more than an issue of simply obtaining talent.  I’d add, as I sometimes do, that another factor is convenience; firms like Sagalov’s like just recruiting foreign students from a local university, rather than having to spend genuine effort finding Americans to hire.

Worse, Sagalov’s firm, and his comments, follow the pattern so familiar by now in the industry:  His company defines a Senior Software Engineer title as corresponding to only 4 years of experience, so you can see that 35 is way past “senior.”  Sagalov says (if it was indeed he who wrote this, rather than a lobbyist supplying this boilerplate prose) that the law requires that H-1Bs be paid the prevailing wage, but he doesn’t tell you that the legally defined prevailing wage is a lowball figure, typically well below the real market value of the worker, given his/her talents, skill sets and so on. He cites $8,000 in legal fees as “evidence” that employers are not hiring H-1Bs to save money, but do the math: If the employer is saving, say, $25,000 per year over the 6 or more years it takes to get a green card, a one-time cost of $8,000 is nothing.

As my favorite quote of Sen. Grassley goes, “Nobody should be fooled.”

Greg Clark Seems to Miss the Boat on the Great Immigration Debate

When I referenced my UC Davis colleague, economist Giovanni Peri, last week, I didn’t realize I’d be discussing another one this week, Gregory Clark.  I don’t know Professor Clark, but I’ve certainly admired him for the highly successful, semi-technical/semi-popular, books he’s written.  See a self-synopsis of one of them in this New York Times op-ed.  He is definitely an out-of-the-box thinker.

But now Clark has (seemingly, though not actually) brought race into his writings, in a recent Foreign Affairs article, titled “The American Dream Is an Illusion:  Immigration and Inequality.”   I say “seemingly” here, because what he is really writing about is socioecnomic class, not race per se.  He presents data showing that descendents of Latino immigrants are NOT upwardly mobile in education, in contrast to other immigrant groups.   Many other groups have arrived in the U.S. poor, he says, but have had the ambition, the educational values and so on to do well, if not in the first generation then surely the second.  In the words of a stuck-up rich British character one often sees in movies, Clark is saying that we’re bringing in “the wrong kind” of people.  He seems to be hinting that the nation should think more carefully on the topic of unauthorized immigration.

I don’t like Clark’s message.  It’s not that I am denying the validity of Clark’s numbers.  On the contrary, a few years ago, a prominent liberal writer who has worked professionally in the Latino community startled me by telling me of a similar statistical analysis he’d done.

But what Clark is missing, I believe, is that Latino upward mobility could be greatly improved if the schools devoted resources to it.  The irony is that that is not going to happen, precisely because of the larger-than-manageable level of immigration that we have, both legal and unauthorized.  As many studies have shown, the first victims of too large an influx are the most vulnerable people in our society, many of them earlier immigrants.  It’s a shame that Emma Lazarus poem on our Statue of Liberty says famously, “Give me your tired, your poor/Your huddled masses,” but sadly it doesn’t promise to give those huddled masses a fighting chance after they get here.

Egregiously One-Sided White House Report on Obama Executive Action

When I first started reading the White House report on the projected economic impact of President Obama’s executive action on immigration, I was pleased to see it cite my UC Davis colleague, economics professor Giovanni Peri.  While I tend to disagree with Professor Peri, it was nice to see someone from UCD involved in White House policymaking. However, that institutional pride quickly faded when I saw that Giovanni and his coauthors were basically the ONLY ones cited. The report does make one token reference to Harvard’s George Borjas, who is generally on the other side of the immigration issue, but the report quickly dismisses that work.  The few remaining non-Peri citations are all of the pro-immigration genre, such as Berkeley professor David Card’s famous work on the Mariel boatlift. (Card found that the 1980 influx of Cuban refugees to Miami had no adverse impact on, for instance, jobs for low-skilled blacks.)

It turns out that Cardiff Garcia at the prestigious British business newspaper Financial Times had a similar reaction:

…the CEA report does cherry pick from within the existing literature on immigration economics. For instance there are thirty-three mentions of Giovanni Peri, all of them favourable. Peri is the pro-immigration economist’s pro-immigration economist. (Disclosure: FT Alphaville very much likes Peri’s work and we have been happy to feature it.) The report only mentions George Borjas, who is well known for his scepticism about the employment and wage effects of immigration, three times — and does so to contradict his findings.

Whether you like Obama’s executive action or not, such obvious bias in selling the policy to the American people is unconscionable.  This is especially true in light of the fact that the report says it is based partly on the earlier CBO report — which acknowledged feedback from both Giovanni and George.  (Harvard’s Lawrence Katz and pro-H-1B professor Gordon Hansen of UCSD were thanked as well.)

Most researchers on immigration issues are known to be either pro or con on the topic.  Giovanni is pro, George is con, and so on.  In the H-1B issue, I’m of course known to be critical of the program.  Some are more impartial than others, but in the end, almost everyone has a clear point of view.

Giovanni absolutely has a lot to contribute, and Obama’s Council of Economic Advisers (CEA) did well to make use of his work.  But it’s outrageous that CEA basically looked ONLY at his work.  This is particular true in light of the fact that some of his work has been sponsored by business interests.  Consider for instance his report for the lobbying group PNAE, which by the way shows the same lack of balance — it has essentially no citations to research critical of H-1B, and the companion working paper uses overly strong language such as claiming to have found “causal” effects.

In discussing the substance of the CEA report, I will of course focus my comments here on what the report has to say about high-skilled immigration, i.e. H-1B and related issues.   In that area, CEA relies on a single Peri paper, ignoring a mountain of negative research.  Two items of particular significance that CEA ignored were congressionally-commissioned reports, one by the NRC and the other from the GAO.  Both found that underpayment of H-1Bs is commonplace, and the NRC report warned that the sheer size of the H-1B IT workforce forces wages down.  And given all the research showing lack of a STEM labor shortage, that latter finding is especially significant.

An aspect of H-1B that especially concerns me is quality.  I’ve mentioned occasionally that I’ve always driven Japanese cars, as I believe they are made better, and I’ve always strongly supported bringing in “the best and the brightest” engineers from around the world.  However, the overall average quality of the H-1Bs is lower than that of their American peers.  My EPI report, for instance shows this in the case of workers who first came to the U.S. as foreign students studying computer science.  Among other things, my work confirmed an NBER report that found that foreign students in the sciences tend to study at less-selective universities; and work by Jennifer Hunt of Rutgers that found that the foreign students have a lower patenting rate than comparable Americans.  (See a qualifier in my EPI article.  Also, CEA cited earlier work by Hunt, but  that research did not make this comparison; in essence, it found that immigrant STEM workers file more patents than American non-STEM people, not surprising.)  When combined with the displacement issue (to be discussed below), this means a net loss for the U.S. economy, something that should alarm the CEA.

The paper by Giovanni that CEA relied upon for its projections regarding high-skilled immigration takes a city-by-city comparison approach.  As I explained recently, regional-comparison analyses are notorious for producing conflicting results, often due to lack of data on key covariates, and there are numerous other problems with this paper, in my opinion.  One issue in particular is that the paper does not take into account displacement of U.S. citizen/permanent resident workers.

Ironically, Giovanni concedes that U.S. STEM workers are displaced by immigration:

…we assess whether native-born workers with graduate degrees
respond to an increased presence of highly-educated foreign-born
workers by choosing new occupations with different skill content.

…we add to evidence from past studies by showing that [U.S.]
native occupational adjustment in response to immigration occurs
among highly-educated workers and occurs for those already employed.

As the foreign-born share of highly-educated employment rises,
native-born employees respond by moving to jobs with less
quantitative and more interactive content.

The wage consequences of immigration were not estimated in this
paper…If the evidence from the labor market for less-educated
workers is an indication, the occupational skill response among
highly-educated natives is likely to mitigate their potential wage
loss from highly-educated immigration.

Giovanni also agrees that immigrant (from context, he seems to mean legal) labor is cheap, and indeeds lauds it as a boon to employers:

One common empirical finding in the literature is that immigrants
are paid less than natives with similar characteristics and skills.
This is in part due to the fact that many immigrants, because of
less attractive outside options (such as having to go back to
their home country), have lower bargaining power with the firm. In
this case firms pay immigrants less than their marginal productivity,
increasing the firms’ profits.

Interesting that a Democratic CEA would rely on such a Republican-sounding researcher, celebrating cheap labor.  Of course, the “lower bargaining power with the firm” is something I’ve emphasized repeatedly in my writings.

Once again, I have no problem with CEA using Giovanni’s work.  He’s a major figure in the field, and also a great guy, who by the way graciously agreed to give a guest lecture in the freshman seminar I taught on immigration a few years ago.  And as seen above, he and I do agree on the issues of displacement and cheap labor. 🙂  But the CEA one-sided report to the American people is an outrage.

CWA Suit Against OPT Extension Advances

In my last post, I discussed the foreign tech worker provisions in President Obama’s recently announced plan for executive action, part of which involve the Optional Practical Training (OPT) part of the F-1 student visa.  OPT may turn out to be a key feature in terms of the ultimate impact of Obama’s actions.  I explain this here, and report some news on the lawsuit brought by CWA.

OPT was designed (back in 1947, apparently) to supplement a foreign student’s book learning with practical work experience.  For years, the policy was to allow the student 12 months of such training before returning home.  During the George W. Bush administration, that period was extended to 29 months for STEM students, and Obama is planning to extend it again, possibly to 48 months.  (I erroneously stated in my last post that the statutory period is 12 months, but it turns out that that was simply a regulation, as was the OPT program itself, according to an immigration law expert who contacted me.  In other words, OPT was originally created by the executive branch in the first place, out of whole cloth.)

The original intent of OPT was to strengthen the foreign student’s ability to help his home country, typically in the Third World.  I’ve known about OPT since the late 1980s, when I served as faculty adviser to graduate students in my department.  When students graduated and applied for OPT, I was actually required to write a paragraph in their application form, explaining how OPT would help the student contribute to his home country.

In recent years, though, OPT has been used to circumvent the H-1B work visa cap, as openly stated by the government.  This is the motivation for the time extensions.  There was a lawsuit filed in 2008 against the first extension, which was rejected on grounds of standing.  The current lawsuit, however, recently had standing established for most of the counts in the suit.  Among other things, the judge pointed out that the government itself said that the extension to 29 months added tens of thousands of IT workers to the labor pool, presumably with an adverse impact on American workers.  I must add, as always, that the impact is especially heavy on older American workers, i.e. those over age 35, since the OPT workers are overwhelmingly young.

In my view, there has been much written in the last few days about OPT that is misleading or dangerously irrelevant, such as in this Washington Post article.  Though it is correct that OPT does not require the employer to pay prevailing wage, the fact that OPT workers are fully mobile limits abuse in that sense.  And the notion that prevailing wage affords protection for American workers is a joke anyway, as I’ve explained before; that wage value is typically well below the actual market value of workers similar to the given foreign worker.

I also strongly disagree with the emphasis in the article on the loose oversight of the OPT program, at least in economic terms.  Foreign workers with degrees from fly-by-night schools are not competitive with American graduates of real colleges and universities.  I view focus on the “less real” schools as a dangerous distraction away from the core issues, just like the unwarranted emphasis on the Indian bodyshops regarding H-1B.  As I’ve explained before, these distractions are going to come back to bite the activist critics of foreign tech worker programs.

Note carefully another point I’ve made before:  Even though computer industry employers are concentrating on hiring the new college graduates (both domestic and foreign), in order to get a good job the student must generally have gotten internship experience during her college years.  Well, guess what?  OPT covers that too; a foreign student can use part of the OPT time for working as an intern during school, thus competing with American students for hard-to-get internshis.  So there you see further harm to Americans.

Hopefully the press will give good coverage now to the CWA suit.  Now that the Obama people can’t argue so much on procedural grounds anymore, they’ll have to actually address the core issue of the case itself — the negative impact of OPT on U.S. citizens and residents.  It will be interesting to see what arguments the administration can come up with.  Judging from the White House report on the projected economic impact of Obama’s executive action, the administration may cite the work of my UC Davis colleague, economics professor Giovanni Peri.

And that report will be the subject of my next post.  The report is one of the most blatantly biased government documents I’ve ever read, dramatically raising the bar for the definition of chutzpah.  Stay tuned.

The Obama Plan for Executive Action on Foreign Tech Workers

Though the main attention on Obama’s speech on immigration last night will be on his plans for the unauthorized immigrants, he definitely included provisions regarding foreign tech workers, specifically regarding H-1B, employer-sponsored green cards and the F-1 foreign student visa.  His proposals have something for the employers, something for the foreign workers, but nothing to help American workers. In this post, I’ll explain the proposed changes and their likely impact, and also discuss what executive action a labor-friendly president could have taken.

From my point of view, the President’s plan has three major elements:

  • Granting work rights to spouses of H-1Bs.
  • Further extending the Optional Practical Training (OPT) part of F-1.  OPT gives foreign students the right to work for a period after graduation.  For years, the period was 12 months, but George W. Bush used executive action to change that to 29 months, and there are reports that Obama may change this to 48.
  • Allowing green card sponsors to switch employers much earlier in the green card process.

There are obvious adverse impacts here to American workers, by swelling the labor market, thus reducing job opportunities and wages for Americans.  This is especially true in that the foreign workers are overwhelmingly young, thus exacerbating the rampant age discrimination that we already have in the tech world.

Some readers may be surprised to hear that I strongly support one of those proposals, but they shouldn’t be surprised at all.  I’ve been stating for years (e.g. in my 2003 article in the University of Michigan Journal of Law Reform) that, for many tech employers the appeal of hiring foreign workers is to have not just cheap workers but even more important, immobile ones.  As a result, employers often hire a foreign worker over an equally-qualified U.S. citizen or permanent resident.  The third point in Obama’s proposal above would actually be beneficial to American workers, as it would make the foreign workers’ period of de facto indentured servitude much shorter, thus rendering the foreign workers less attractive to hire in the first place.

However, the key word in the last sentence is would.  For the reasons I’ve given, employers will NOT like that provision, which by the way, the foreign tech worker organization Immigrant Voice is taking credit for.  So, the employers may work behind the scenes to quash it.  In doing so, they would have to speak carefully, as they don’t want to admit that they prefer hiring foreign workers for their indenturability.  But the lobbyists are very good at spin, and they will likely say something like “Why would any employer pay $10,000 in legal fees for green card sponsorship if the worker can jump ship to another employer?”  One mitigating factor is that the employers do want the potential foreign workers to find work in the U.S. attractive, and freedom of movement would help in that regard, but again, it’s vital to keep in mind that indentured servitude is hugely valuable to many employers.  I don’t think they’ll go quietly on this one.

Now, what actions could Obama have taken to help the American worker?  In a more positive tone, what could he still do now?

  • He could roll back the OPT period to the original 12 months,  instead of extending it.
  • He could enforce the section of green card law (note:  NOT H-1B law) that states that the Secretary of Labor must ascertain that employer-sponsored immigration does not adversely impact American workers.  This could be applied to the definition of prevailing wage, the defining of jobs by employers to be entry-level (negatively affecting Americans over age 35), and so on.
  • He could apply federal age discrimination laws to the foreign tech worker issue.  I mentioned one example in the previous bullet, and here is another.  While most H-1B employers are not required to give priority to American workers, those employers are still subject to age discrimination laws like anyone else.  Since a large part of the wage savings accrued by hiring H-1Bs comes from their youth, enforcement of age discrimination laws could really reduce H-1B usage; they wouldn’t want to hire older foreign workers in most cases.  Of course, those laws are complex and subtle, but much could be done with this.
  • He could direct federal agencies to give contracting preference to those vendors who hire large percentages of American engineers and programmers (no, NOT American secretaries,  janitors, accountants and marketers).

But all indications are that the Obama administration simply doesn’t care about American workers, so the above is just blue-skying.

The Trouble with State-by-State Analyses of H-1B

A number of researchers on H-1B and related issues rely on state-by-state, or city-by-city, comparisons.  Notable in the genre are my UCD colleague Giovanni Peri, HBS’ Bill Kerr (and his coauthors) and Madeline Zavodny.  The latter, who wrote on H-1B as a member of the Dallas and Atlanta Feds, is currently a professor at Agnes Scott College.

A couple of weeks ago, R. Davis, a Silicon Valley software developer, contacted me regarding Prof. Zavodny’s  2011 research, sponsored by industry groups.   She found:

The data comparing employment among the fifty states and the District of Columbia show that from 2000 to 2007, an additional 100 foreign-born workers in STEM fields with advanced degrees from US universities is associated with an additional 262 jobs among US natives.

Skeptical of those findings, Davis asked my opinion of the study, and exactly how Zavodny had done the analysis.  I’d been critical of the research in the past, but suggested that Davis write to Zavodny and interact with her.  He did so, and she replied instantly, sending him her data and Stata code.   This showed real class on her part, as most researchers would not send their code and data, unless required by law.

Davis set to work.  Stata is an expensive commercial product, but I steered him to the R language, which is both free and very high-quality.  R is the lingua franca of the statistics community, and I’m quite active in the R world.  Davis has now posted his analysis of the Zavodny research, replicating her numbers but also uncovering a fascinating story underlying the data, which I’ll explain shortly.

But first, I wish to emphasize quite strongly that I’ve never thought highly of the “H-1B creates x jobs” kind of analysis, as it suffers from a huge issue of causality.  Zavodny is careful to use the phrase “is associated with,” which is a lot better than Peri’s repeated claims of finding a “causal” relation in his April 2014 report, but let’s be real, folks:  The industry paid for Zavodny’s work, and are surely representing it as causal as they spread it around Capitol Hill.

Association is NOT causality.  Any decent undergraduate who’s worked with data knows that.  In Zavodny’s case, for instance, what would happen if employers were to hire 100 additional U.S. citizens and permanent residents instead of H-1Bs?  (See qualifier coming up.)  Would they not “cause” 262 jobs to be created?  Indeed, given the poorer average quality of the H-1Bs, wouldn’t hiring 100 more Americans produce MORE than 262 new jobs?  (The industry lobbyists, of course, claim there aren’t 100 more Americans available, but research by Salzman, Lowell, Kuehn, Costa,Teitelbaum and so on has pretty much laid those claims to rest, as even some pro-industry economists seem to concede.)   Actually, this was one of my major criticisms of a paper by the Kerrs and Wm. Lincoln.

Worse, region-by-region analyses are notorious for being unreliable and misleading.  For example, there have been numerous studies on capital punishment, both pro and con, based on comparing states that do and do not have capital punishment., in terms of murder rates and so on.  They can’t all be correct.

The other point I wish to make before turning to the Davis analysis is her use of the terms foreign-born and native-born.  In addition to objecting before to the industry lobbyists’ calculated, labored use of the term foreign-born instead of foreign, such an analysis is highly misleading.  There are many STEM students who are foreign-born but are either naturalized U.S. citizens or permanent residents.  So a lot of STEM workers in her “foreign-born” category are actually Americans, and were never H-1Bs or foreign university students.  Zavodny does not make this clear (and likely is unaware of it), and while she has a separate number for H-1Bs (183 instead of 262), again we all know that on the Hill and in the press, people will take “foreign-born” to mean “H-1B.”  Indeed, this is basically the thrust of Zavodny’s Recommendation 3:

Recommendation 1: Prioritize immigration by workers in STEM fields who hold advanced degrees from US institutions.

Well, then, what about the Davis analysis?  I was floored by his figure titled, “Foreign STEM Workers, 2000-2007.”  Look at the states with big H-1B usage, such as California, New York and New Jersey.  The data are basically flat!  Within states, an increase in the number of foreign-born STEM workers with advanced degrees is NOT associated with a trend of increasing STEM employment for natives.  On the contrary, Davis finds that the foreign-born are replacing the natives, something that even Giovanni has written (which may come as a surprise to those who cite his work).

So, basically we have a situation in which, within groups, the graph of mean Y vs. X is flat, yet after aggregation it appears that increases in X are associated with increases in mean Y — Simpson’s Paradox.   In other words, Davis has uncovered a fundamental flaw in Zavodny’s work, which may well apply upon closer inspection to other region-by-region research on H-1B and related issues.

One more point:  While she was in the immigration neighborhood, Zavodny threw in an analysis of the famous “They pay more in taxes than they take in services” claim so popular among advocates of expansive immigration policies:

Highly educated immigrants pay far more in taxes than they receive in benefits. In 2009, the average foreign-born adult with an advanced degree paid over $22,500 in federal, state, and Federal Insurance Contributions Act (FICA, or Social Security and Medicare) taxes, while their families received benefits one-tenth that size through government transfer programs like cash welfare, unemployment benefits, and Medicaid.

To begin with, the whole “net fiscal gain/loss” issue is a can of worms.  There are so many effects, effects of effects and so on, that it really is an impossible question to answer.  I wish Zavodny had not tried to do so.

But now that she has, let’s take a closer look.  First, the obvious problem — she hasn’t factored in the LOST tax revenue resulting from H-1B and related programs.  Cheaper workers pay less in taxes (some actually pay NO income taxes, due to U.S. tax treaties with their home countries); a glut of workers brings down overall wages, again reducing tax revenue; and the displaced American STEM workers are generally making less (after being forced to change fields) than they used to before displacement, and thus making smaller tax contributions as well.

But less obvious is that a large number of immigrant STEM workers consider one of the major benefits of naturalizing the ability to sponsor their elderly parents for immigration, and later put them on welfare — cash payments, Medicaid, subsizied senior housing and so on.  In Silicon Valley, this is absolutely standard among Chinese and Indian immigrants.  I and others have quantified this, such as in my 1996 Senate testimony.

But that’s a side issue.  I recommend that everyone read Davis’ analysis.  In the future, every time you hear about a state-by-state or city-by-city analysis of the wondrous benefits of H-1B, keep that Davis figure in mind.