More on SCE and Related Topics

After the SCE debacle, in which the giant utility laid off American IT workers and replaced them with H-1B (and likely L-1) workers, 10 U.S. senators wrote a letter to DOL and other key federal agencies, asking for an investigation and suggestions on how the law should be changed. I was skeptical at the time that the letter would have much effect, and sure enough, DOL declined the Senate request.

Here are some recent developments:

• There is now a ruckus over an SCE-style action by Disney.
• Senators Sessions and Durbin have issued a press release expressing disappointment that the Dept. of Homeland Security has joined DOL in refusing the Senate request.
• A group of the SCE victims have now joined a lawsuit against the recent executive action by the Obama administration to grant work rights to spouses of H-1Bs. The linked article has some interesting details about the SCE layoff. (By the way, the suit cites the action as making U.S. work even more attractive to the H-1Bs, thus further harming American workers. But the suit seems to miss the fact that many of the H-1B spouses are also in the STEM field, and thus will have more direct adverse impacts.)
• Interestingly, Infosys, one of the firms that supplied foreign workers to SCE, is contributing to coding education in the schools, with the message essentially being, “Don’t worry about the programmer shortage, America, we’re going to help K-12 produce more programmers.” When the firm wrote that press release last December, little did they know that its own actions with SCE would dramatize the falsity of the “programmer shortage” myth.

The Obama people seem oblivious to the growing perception that the Democrats are ceding their role as the pro-labor party to Republicans. Odd world we live in.

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The WSJ, Like Congress, Has a Short Memory

There are two reports, requested by Congress, that do a fairly good job in explaining the problems with the H-1B work visa:  One by the NRC in 2001, and another by the GAO in 2003. Yet I believe one could knock on doors all day on Capitol Hill and not find a single staffer who is aware of those highly-relevant studies. Congress, it seems, has no memory.

The Wall Street Journal seems to suffer from amnesia too, as evidenced by an editorial it ran recently, blasting Wisconsin governor Scott Walker for changing his mind on the immigration issue (basically from pro- to con-).  Now remember, folks, I’m a lifelong Democrat, and thus am not out to promote Walker here, but fair is fair — and the WSJ is not being fair at all.  Or consistent, which is my topic here.

The editorial uses as its main source the National Foundation for American Policy (NFAP), “a pro-immigration think tank.” That latter description is right, but the grandiose title of the organization masks the fact that it is little more than a one-man operation consisting of Stuart Anderson.  Much more important, though, is that this same WSJ has roundly criticized Anderson’s past research.

And this was not ordinary research. It was of the “each H-1B creates x new jobs” genre, so popular in the current debate.  To my knowledge, Anderson was the pioneer in this type of research.  And the WSJ gave an excellent analysis of why Anderson was wrong. There were also some major flaws in Anderson’s study that the WSJ missed, but it certainly showed well why vested-interest funded research like that should not be taken at face value.  And yet the recent WSJ editorial does exactly that.

The rest of the editorial cites “the usual suspects,” studies done by researchers who either funded by vested interests or have an ideological motivation to support H-1B. And it yet again gets into the childish debate over which fields do or do not consistute STEM; I’ve repeatedly urged both sides of the H-1B debate to stick to the computer fields, which form the plurality of H-1B jobs.

As to Walker and his dramatic policy shift, I know almost nothing about the man, other than his prominent battle with state workers (on which I don’t know enough to take sides). But a friend of mine mentioned to me the other day that Walker had helped him get smoking banned at the Milwaukee Brewers stadium, Miller Park, in spite of pressure by Phillip Morris, then owner of Miller. Apparently Walker is not afraid to go up against Big Business. Should be interesting to watch.

DOL Refuses Senate Request on SCE Case

There was an uproar after the utility SCE laid off American workers and replaced them with imported ones working under either H-1B or L-1 visas. This was the subject of part of a Senate hearing, and 10 senators wrote an open letter to the Dept. of Labor (and other agencies), asking them to investigate the case.

My blog about the letter had what might now be considered a prophetic title, “Unclear Goal in Senators’ Letter Regarding SCE Case,” as DOL has now refused to conduct an investigation, pointing out, among other things, that SCE’s actions appear to be perfectly legal. I had said the same thing in my blog:

The letter essentially asks whether SCE, and the Indian IT services firms, TCS and Infosys, that provided the workers, dotted all their i’s and crossed all their t’s. The answer is almost certainly Yes — SCE is a huge company with lots of careful lawyers. For instance, the letter asks whether TCS and Infosys are maintaining an employer relationship with the workers sent to SCE, as required by law and regulations. They are almost certainly doing so, assuming the plan, as typical, is to use the onsite foreign workers to serve as liaisons to offshore workers.

Did the senators who authored the letter expect DOL to respond this way, washing its hands of the whole SCE mess? Maybe; there is no naivete in DC, and maybe the intent was to show DOL, and by extension the Obama people, just doesn’t care about H-1B abuses (and that the good senators do care).

Yet I am surprised that DOL simply ignored the request at the end of the Senate letter, which asked DOL and the other agencies to identify any “obstacles in existing law” to preventing abuse such as that in the SCE case. DOL’s lack of a reply on this point is in sharp contrast to DOL’s 1998 House testimony, in which it agreed that there were lots of abuses but the DOL’s hands were tied by the language of the law. In other words, whereas in 1998 the DOL was sympathetic to critics of H-1B, today there is no such feeling. The “obstacle” is now partly DOL itself.

But even those 10 senators, well-intentioned as they may be, are not helping matters either, in their failure to notice the central issue in the SCE case.  As I wrote in my earlier posting, “what really enabled the hiring of H-1Bs to work at SCE was the four-tier system of determining prevailing wage, which makes young foreign workers cheap.” The Senate and the DOL letter have focused on the special H-1B-dependent category in H-1B law, which covers the firms that provided the foreign workers to SCE. Yet the real point is, regardless of whether the rules in that special category are flawed, the foreign workers in the SCE case were still subject to the GENERAL wage requirements for H-1B, and use of young foreign workers for cheap labor is legal under those requirements as well.  In other words: What most needs fixing is GENERAL H-1B wage law.

That law, as I’ve said, makes it legal to hire young foreign workers in lieu of older Americans, as young workers are cheaper. So any legal reform to H-1B that concentrates on the H-1B-dependent class, which I’ve been warning for quite a while is what Congress is headed for, will completely miss the boat.

This includes the proposals to give an unlimited number of visas (temporary and permanent) to newly-graduated foreign students earning STEM graduate degrees at U.S. universities. Even if Congress were to severely clamp down on the H-1B-dependent employers, SCE would have plenty of young foreign workers to hire from.

Remarkable Congressional Briefing on H-1B

A source on Capitol Hill has informed me of an amazing briefing today by a “Who’s Who” of industry lobbying groups (PNAE, CompeteAmerica, American Immigration Lawyers Association, FWD.us etc.), presented to congressional staff. The meeting was closed to the press, which is surprising at first — what lobbyist doesn’t want his/her message to be spread far and wide? — but the reason for excluding the press turns out to be quite startling.

The TITLE of the briefing says it all:  FACTS YOU CAN USE To Prove That High-Skilled Immigration Is Good for the Economy. Prove to whom? Since the “you” is the congressional staff, it’s clear that the briefing is intended to help politicians convince their skeptical constituents that H-1B is good for them. I assume there is nothing illegal in that, but it is incredibly sleazy.

The document itself consists of a rehash of “studies” done by various industry-funded researchers in the last couple of years (even some of the misquotes are rehashed). I’ve refuted those arguments before and thus won’t do a point-by-point rebuttal here. But what is fascinating is the arguments presented verbally at the briefing, ranging from the silly to the bizarre. I’ll discuss a few of them here.

H-1B workers increase native-born worker wages because, while it is true they do push some STEM workers out of their field, those workers counterintuitively go on to higher paying jobs…

The reason only 1 in 4 STEM graduates work in STEM fields is also largely because our economy is so flexible they can instead go into fields like management, healthcare, law, or finance.

This is a standard Giovanni Peri argument, in which he says displacement is fine because the Americans can then become lawyers and the like. (The written briefing document says that they become IT managers and executives, but of course there aren’t enough such jobs to accommodate even a small part of the American workers.)

It’s amazing that the lobbyists actually admit H-1B displaces some Americans out of STEM. In a sense they have to admit it, since this was the major finding of one of Giovanni’s own early papers, and of course incidents like the recent one in which SCE replaced American ITers by foreign workers make the point obvious. But still, quite remarkable that the lobbyists have gotten to the point of admitting this, albeit only verbally and without the press present.

Equally amazing is the apparent concession that H-1B does reduce overall STEM wage levels. Again, they have to admit this, as even the pro-industry Brookings researchers and even the NRC report (with representatives from Intel and Microsoft on the commission) admitted so.

But in making these concessions, the lobbyists seem to be working at cross purposes with themselves. On the one hand, they say that tech is vital to U.S. interests and thus they promote getting more Americans into STEM, while on the other hand saying that it’s not a problem that H-1B suppresses STEM wage growth and thus discourages Americans from pursuing STEM careers.

Do the lobbyists think it’s important for Americans to go into STEM, as they’ve said repeatedly, or not?  They can’t have it both ways.

Another statement made by the lobbyists at the briefing:

Wage growth in STEM jobs has been higher than in other fields in recent years. It’s just been slow because the economy has been so weak.

Hal Salzman and others have cited government data showing that STEM wages have been flat, including specifically in IT. I’ve cited NACE data showing that salaries for new Computer Science graduates are DECLINING. The lobbyists are apparently conceding this too, and trying to obfuscate by putting this ridiculous spin on the data. But they cannot get around the salient point:  Lack of wage growth means we do NOT have a labor shortage. Period.

Defining what constitutes a STEM graduate is tricky because things like majoring in Medieval Studies counts as STEM.

Clearly, the speaker didn’t mean this literally, and his/her point was that even if there is no shortage in lots of fields defined as STEM, some areas like Computer Science do have a shortage. But again, I point to the fact that CS salaries are not rising, thus NO SHORTAGE.

Immigrants (over a recent time period I didn’t catch) are responsible for 80 percent of economic growth in the STEM economy, and 40 percent of the growth in the overall economy.

Critics of high levels of immigration interpret such statistics (if true) as saying that immigrants are taking most of the new jobs. As Hal Salzman has shown statistically and I’ve observed anecdotally, it’s certainly true for software engineering jobs.

This is a classical example of a fallacy stemming from lack of a counterfactual. What if we had NO immigration? Would the STEM economy grow 80% less? Do they really believe that?

But again, putting these absurd arguments aside, what is most troubling about this briefing is the message, which seems to boil down to, “We in the industry are paying you in Congress good money, so you had better vote our way. If your constituents don’t like it, here’s how to fool them into seeing things your way.” I must again quote Senator Grassley, “No one should be fooled.”

A Paper on H-1B of Great Importance But Likely to Be Ignored

A couple of people have brought to my attention a new research paper on H-1B by Kirk Doran (Notre Dame), Alexander Gelber (UCB) and Adam Isen (U.S. Treasury). Its findings are certainly provocative, as they directly contradict most (or all) of the recent major work that is positive on H-1B.

Though some might expect me to automatically endorse every paper with findings on H-1B similar to mine, on the contrary, I tend to be rather critical of such work. For example, Georgetown’s Tony Carnevale found that a sizable number of Computer Science graduates are not finding work in their field. This would seem to starkly contradict the industry PR line that there is a dire shortage of CS grads, but I’ve pointed out that (a) a large number of CS grads are simply not sharp enough to do software development and (b) many aren’t suitable for the CS “talking jobs” (say, customer support) either, as they are not the outgoing articulate types that are needed.

In the case of this paper, though, it is one of the most careful, insightful works I’ve seen on either side of the H-1B field. No, not perfect by any means, as I will discuss below, but a fine job at the end of the day.

Contrary to the results — real or misinterpreted — of previous work on whether H-1B increases patenting, the authors here do not find such an effect. Similarly, they find that H-1B does NOT increase employment, and in fact the arrival of new H-1Bs causes some displacement of existing workers, both American and foreign — quite contrary to the obligatory statement in every pro-industry press release, editorial and research paper that “each H-1B creates 2.62 new jobs.”

But mark my words — you won’t be hearing much about this paper. I doubt that it will be highlighted in the press, or even mentioned as counterpoint in articles that bring up the claimed 2.62 figure. The problem is that these authors don’t have the massive PR machine that the pro-H-1B researchers have, in which journalists, editorial boards and above all, offices on Capitol Hill are constantly bombarded with “educational” material featuring H-1B poster boys (rarely girls), tales of woe that “Johnny Can’t Do Math,” and of course the ubiquitous 2.62 figure. I make this point here specifically for the activist programmers and engineers hoping for reduction of H-1B, who often don’t realize that, sadly, facts are not enough in politics.

Well, what does the paper do specifically, and what are its weaknesses as I see them?  First, what are its main findings?

• “Winning additional H-1B visas has an insignificant effect on patenting within eight years…”
• “H-1Bs substantially crowd out employment of other workers.”
• “We find some evidence that additional H-1Bs lead to lower average employee wages while raising firm profits….and rules out the scenario in which H-1Bs replace natives one-for-one.”

One disappointment I have with the paper is that it doesn’t sufficiently treat the question of the variability of the quality of the H-1Bs, and of corresponding variability of the firms that hire them. The authors do perform some separate analyses in which they omit the large IT services firms, but they do so only because such firms don’t do much patenting. That is true, but it ignores the point that the quality of the H-1Bs hired by those firms is low. Why didn’t the authors do separate analyses in which they kept only the mainstream firms that are most vocal in pushing Congress to expand H-1B, such as Google, Facebook, Intel, IBM, Oracle, Cisco and Texas Instruments? Conceivably they might find a salutatory effect of H-1B on patenting in those firms. For that matter, assuming the authors’ data separated visa counts for the main 65,000 cap and the 20,000 supplementary cap for foreign MS/PhD grads of U.S. universities, they should have done separate analyses here too. This is the industry lobbyists’ favorite group, so it would have been useful to see if H-1B had a postive effect on patenting in those firms.

There is also no recognition in the paper about the role of the OPT extension to the F-1 student visa, which serves as a buffer to a “shortage” of H-1B visas. If there were a positive effect of H-1B/foreign workers on patenting, it might be missed if the OPTs are being granted a lot of patents. The time period for OPTs was extended during the George W. Bush administration, and now the Obama people want to lengthen it even further. So, this is a very important factor policywise.

Mind you, my own position is that the H-1Bs who were formerly foreign students are actually WEAKER than their American peers, thus causing a net LOSS in patenting for the nation, due to the displacement effects (the latter of which, I hope you recall, even Giovanni’s research has shown). This was the subject of my EPI paper, and of work by John Bound, who ironically is prominently acknowledged by the authors as being helpful to them. So, I believe H-1B should be curtailed, not expanded, and I feel the same about OPT. But though confirming this with the data of the present paper may have been difficult, if they had at least found that H-1Bs don’t increase patenting even at firms like Google, this would have been very significant.

I was also disappointed at the authors’ weak understanding of H-1B wage law and the manner in which H-1B displacement of Americans works. The authors remark that the wage laws “may not be effective,” but they seem to have no inkling of the central role of age in the use of H-1Bs as cheap labor, in which young H-1Bs are hired in lieu of older (35+) Americans, in full compliance with the law. And while the authors seem surprised that new H-1Bs often displace earlier-hired ones, it is probably due to the same problem; those earlier H-1Bs may have gotten enough raises in the last couple of years to make them likely targets for dismissal too.

The phrase “hired in lieu of” above is quite different from the “replace Americans by H-1Bs one-for-one” model the authors seem to have in mind. This model of course likely stems from the huge publicity given to cases like SCE, in which that phenomenon does indeed occur, but the much more common use of the H-1B program is at the hiring stage. This is something the authors should have pursued, though again it’s not clear that their data would have been sufficient for this kind of analysis.

The authors use the word causal, something I’ve taken my colleague Giovanni Peri to task for. The authors seem to believe that this is justified by the “random treatment assignment” nature of the data, in which visas were awarded by USCIS by random lottery, but I still consider use of the word to be reckless.

Consider for instance a point I’ve made before on Giovanni’s “lottery” analysis. (By the way, the authors of the present paper don’t consider his paper to be truly based on randomization.) He found that the cities that “won” the H-1B lottery saw the wages of Americans in IT rise. But consider a scenario in which a firm fires most of its American IT workers except for the managers, and hires a number of H-1Bs to replace them. (Again, it does occur sometimes, as we’ve seen.) Then, since the managers tend to make more money than the programmers, the wages of Americans at that firm — those Americans who REMAIN — does rise, even though none of the retained Americans got a nickel in raises. In such a scenario, the claim that the H-1Bs “caused” the American salaries to rise might be technically correct, but certainly not in the sense people assume upon hearing the claim.

Bottom line, though, this paper is generally done extremely carefully and its results are highly remarkable. It flatly contradicts the work by Peri and Zavodny (“2.62”!), and for that matter, contradicts the inaccurate interpretation by the industry of Bill Kerr’s paper on patenting. Too bad no one will notice.

Attention, Walmart Shoppers!

For those who might not get the allusion in my title above, it’s the phrase used on a PA system in the store to announce special sale items and so on. It’s often used as a prop in comedy routines. But it may take on a new meaning in light of an April 11 CIO Story blog item, which says in part,

“Walmart and its IT contractors are driving down standards in the tech industry in the U.S. by using H-1Bs visas excessively to keep costs low. Walmart is among the companies seeking an increase in the H-1B cap,” commented Greg Penner, the vice chairman of the Walmart board of directors

Is this a case of a rogue director, an egregious misquote, or what?

To me, what is more interesting is the paragraph that follows the one above:

Efforts are being initiated by Congress to raise the H-1B visa cap and also restricting its use by offshore outsourcing firms.

This of course is exactly what I’ve been warning about: The unwarranted focus on the IT service firms, oblivious to the industrywide nature of the abuse, will be used as an excuse to INCREASE the H-1B cap (and to create additional H-1B workaround visa programs, such as automatic green cards for foreign students, extension of the OPT period and so on).

Unclear Goal in Senators’ Letter Regarding SCE Case

Sometimes I receive so much mail about a certain topic that I feel compelled to write about it, even though I had not been planning to do so. Such is the case with a letter sent by 10 senators to Attorney General Eric Holder and other top officials, raising questions about the legality of Southern California Edison’s recent replacement of American IT workers by foreign workers.

The letter essentially asks whether SCE, and the Indian IT services firms, TCS and Infosys, that provided the workers, dotted all their i’s and crossed all their t’s. The answer is almost certainly Yes — SCE is a huge company with lots of careful lawyers. For instance, the letter asks whether TCS and Infosys are maintaining an employer relationship with the workers sent to SCE, as required by law and regulations. They are almost certainly doing so, assuming the plan, as typical, is to use the onsite foreign workers to serve as liaisons to offshore workers.

So, one must ask what the point of the letter is. I don’t see any point, which is why I originally had not planned to write about it. Perhaps the point lies in the closing sentence of the letter, which asks the recipients to notify the senders as to any “obstacles in existing law” to preventing abuse such as that in the SCE case. But does the Senate really need “permission” from the Executive Branch to fix the problems with current law?

To me, the only interesting aspect of the letter is who did NOT sign it. As pointed out in a Computerworld article, neither California senator was a signatore. A few years ago, a top aide to Senator Barbara Boxer told me that Boxer would never support any legislation that tightened up any aspect of immigration policy whatsoever, but I am somewhat surprised to see that Senator Feinstein didn’t participate in this very innocuous letter. Even more interesting is that the two most strident senators in expanding H-1B, Hatch and Schumer, didn’t agree to sign what, again, is what we in CS call a “no-op” (a placeholder machine instruction that does nothing).

As I have been warning for so long, there is far too much attention paid to the IT services firms, who provide H-1B and L-1 workers to mainstream firms. Why is it that people think it’s fine for an employer to hire a foreign worker directly but terrible for the same employer to hire a foreign worker through an agent?

And for that matter, why is overtly REPLACING Americans by foreign workers any worse than hiring foreign workers INSTEAD OF Americans? For example, does anyone really think that none of the 18,000 Americans laid off by Microsoft could have done the Microsoft jobs being filled by H-1Bs (and OPTs, etc.)?

Senators, please step up to the plate! Trying to tweak the H-1B program around the edges will only result in some kind of Rube Goldberg-style mechanisms that don’t work. As I explained in a recent post, what really enabled the hiring of H-1Bs to work at SCE was the four-tier system of determining prevailing wage, which makes young workers cheap. The ability to hire cheap young H-1Bs in lieu of older Americans is CENTRAL to the attractiveness of the program to employers, and to their ability to abuse it. Changing prevailing wage to a single number, an overall mean wage rather than four wage levels tied to experience, would have prevented the SCE fiasco in a very simple, direct manner.

And senators, if you do want to stop the abuse (a big “if”), such reforms need to be applied across the board, to ALL hiring of foreign workers. Don’t enact legislation that targets only the IT services firms, and don’t create H-1B workaround programs such as fast-track green cards for foreign students. Don’t create an “out of the frying pan and into the fire” situation for American STEM workers.

All this presumes that those senators have a genuine desire to protect American workers, which is questionable. Senator Sessions, in announcing the letter, noted that “There is no ‘shortage’ of talented Americans, only a shortage of officials willing to protect them.” Senators Sessions and Grassley are the only ones I can see with such a will, sad to say.