IBM in the H-1B Hotseat (Again)

After exposure earlier this year of Southern California Edison and Disney of those firms’ abuse of the H-1B work visa, thus giving a black eye to the visa program, the latest outrage involves IBM. This is interesting because IBM is a tech company — all the tech firms abuse H-1B, but usually that doesn’t make the newspaper — yet it is hardly the first time IBM has been embroiled in controversy over H-1B.  On the contrary, abuses by the firm have emerged ever since the visa program was established in the early 1990s. One 2012 internal memo is particularly damning, in which IBM HR says, “The cost difference is too great for the business not to look for” H-1Bs.

In the last few days, IBM has been accused of reneging on commitments it made to hire in Iowa, with funding from the state and local governments, all the while hiring H-1Bs. But the firm may have chosen the wrong state in which to engage in this kind of thing, as it is the home state of Senator Chuck Grassley, a major critic of H-1B, who asked the company to explain its actions.

IBM has now responded to the senator. The thrust of its argument is that it is hires H-1Bs because the latter have skills for which there is a shortage of qualified American workers, citing among other things cloud and mobile computing, data analytics and security.

As quoted in one of the above links, Professor Ron Hira replied that the median wage IBM has been paying its H-1Bs is $74,753, far below what American professionals with those specialties make. This is a fundamental economic principle; a rare in-demand skill should bring higher wages, not lower ones. Expertise in mobile computing, for instance, commands about a 20% salary premium.

Using the standard argument the industry lobbyists have been making for almost 25 years, IBM says once again that H-1Bs are needed for the short term, but the long-term solution is beefed up efforts at education and retraining in special skills. This has been the greatest red herring in the entire H-1B debate, and I’ve written extensively about it. No need to go into that here; let’s just say that it is certain that IBM rejects many American applicants who are well qualified for those jobs, and that many existing IBM workers could quickly learn new material to perform that work as well.

Note by the way my word “quickly” here, which is important because IBM says it needs to hire H-1Bs in order to fulfill contracts in a “timely” manner. Well, there is more on this. Another standard industry tack has been to portray older American workers as “fat and lazy,” unwilling to learn new things, and last Fall the company accused its workers of exactly that. It informed certain employees — who, not coincidentally were in the firm’s Global Technology Services offshoring group — that their pay would be temporarily cut 10% while the workers underwent training in certain key areas. And the areas the firm cited were — are you ready for this? — cloud, analytics, mobile and social! In other words, the skills the company now says it has an “emergency” need for are the same ones it was training Americans for back in September!

So, where is the disconnect? Are IBM’s American employees really fat and lazy, and unwilling/incapable of learning new things? Did that training program last Fall fail? Or is it just that IBM simply doesn’t want to pay American-level salaries? Given the $74,753 median H-1B salaries, tne answer seems clear: IBM really does believe “The cost difference is too great for the business not to look for” H-1Bs.

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Industrial Espionage Case

A number of people have called my attention to a case of alleged industrial espionage by Chinese nationals working in the U.S. These are former foreign students at USC, and are thus likely current or former H-1Bs.

As I’ve mentioned before, the tech industry has stated that foreign students are the best of the foreign workers, and the industry has supported legislation to grant fast-track green cards to them. If the allegations here are true, though, in this case the foreign workers are takers, rather than contributors.

It is interesting to see the USC connection, since that university has often ranked Number 1 in the nation for total number of foreign students, including large numbers from China.

Those contacting me seem to believe that this recent case will galvanize members of Congress to change their pro-H-1B views. But that’s not going to happen. There have been about two dozen cases in the last few years of alleged theft of industrial secrets by immigrant Chinese engineers and scientists, including several convictions, without any mention by Congress in connection to H-1B that I can recall. In fact, I can’t recall industry leaders mentioning it either. The latter may simple consider it the cost of doing business, with the H-1B program being a net gain for them overall. And people in Congress might think, “If the industry doesn’t care, why should we care?”

Such incidents do call into question the attitude among many in the U.S. government that a benefit of the H-1B program is that “We get to steal China’s engineers.” I’ve said that this attitude is silly to begin with, but it appears that in these cases, some institutions in China are stealing back.

TPP and H-1B

President Obama is encountering a lot of pushback from his own party regarding his Trans-Pacific Partnership (TPP) proposal. In case you haven’t been following this, one of the major points of controversy on this foreign trade measure is that it is secret; members of Congress who want to read the agreement must do so in a secure room, without being even allowed to take notes. Pretty scary stuff. No wonder that we are seeing startlingly strong language from even a Nobel-laureate economist.

So, how does all this affect the H-1B work visa? Your response may be “But that is not trade!”, but actually it is — officially, trade consists of both goods and services. Moreover, previous trade agreements have had major impacts on H-1B. The 1994 GATS trade treaty explicitly included H-1B, and most significantly, in essence locked us in to a yearly H-1B cap of at least 65,000 visas. In other words, even if somehow Congress wanted to do the right thing about H-1B, it would not have the power to set a cap below 65K.

I’ll have more to say about GATS below, but first let’s turn to the political (and geopolitical) aspects. A number of people have charged that TPP could be used to sidestep Congress in setting immigration policy. TPP proponents dismiss that as an “urban legend,” but none of them has categorically denied the possibility, and guess what! Even if TPP were not to have any power over immigration at all (which is not clear), the pro-TPP pols have a surefire fingers-crossed-behind-the-back way to lie about TPP and H-1B: The latter is officially a nonimmigrant visa.

TPP could easily result in some trade treaty, consisting of thousands of pages, with something on importing foreign labor buried deep inside, and Congress could either miss it (or pretend to do so). At any rate, they would only be able to vote up or down, and there may be enough goodies in there for most people in Congress to vote yes even if they were aware of the foreign labor provision.

The other political issue is China. One of the various goals claimed by TPP proponents has been that TPP is needed as a counterweight to China for influence in Asia. I suspect that inside the White House, this is actually THE goal. I’ve noted before that many in the legislative and executive branches also see H-1B and green cards as a means to thwart China’s growing power. Here is an excerpt from the above link:

Moreover, what is more disturbing is that many in DC see the green card programs as a way to “steal” STEM workers from China. I had heard rumors of this for years, but still was taken aback when they were confirmed at a talk at Georgetown University I gave a few years ago on the quality of the foreign STEM students in the U.S. An attendee came up to me afterward, and turned out to be a young green card case adjudicator at USCIS. He said something close to this: “I don’t see what the fuss is about. My understanding is that our mission is to grab STEM students away from China. The quality doesn’t matter.”

I don’t have the expertise with which to determine whether TPP is indeed a geopolitical necessity with regard to China. But I certainly know about foreign tech worker programs, and I know that the above rationale given by someone from the executive branch is just plain wrong, in numerous ways. I suspect the same is true regarding the China Specter claims for TPP.

Now, here is a fascinating aspect of the GATS treaty: The portion of the document related to H-1B is GATS/SC/90, Section I.4, starting at page 7. There you will see language that is basically identical to our H-1B statute, except for one glaring exception, part (d):

Specialty occupation [i.e. H-1B] aliens and their employers must be in compliance with all labour condition application requirements that are attested to by the established employer. These requirements are: … d) the employer has not laid off or otherwise displaced workers in the subject occupation in the previous six months and will not lay off or displace any US worker during the 90-day period following the filing of an application or the 90-day periods preceding and following the filing of any visa petition supported by the application; e) the employer has taken and is taking timely and significant steps to recruit and retain sufficient US workers in the specialty occupation;…

For those of you who don’t have the statutes memorized, that language in (d) is what is in the law for H-1B dependent employers, not for H-1B employers in general. Yes, the anti-displacement, anti-layoff, American recruitment-required provisions of our H-1B dependent law actually apply to Google, Intel, Microsoft and so on! Thus, since treaties have the force of law, the U.S. has been in violation of the law all these years.

In other words, not only do these trade agreements open all kinds of worrisome doors, but countries can pick and choose which ones they really want to comply with, as long as other signatories to the treaty don’t object, which of course India certainly won’t do in this case.

In other words, there is far more to TPP than the price of instant ramen.

Another PR Gaffe by Fwd.us

I thank a couple of alert readers for calling to my attention to this video of a National Journal LIVE event, which was partly sponsored by Fwd.us, the lobbying organization founded by Mark Zuckerberg to promote expansive policies for H-1B and immigration in general.

Fwd.us arranged for the panel to include Lars Dalgaard, a former entrepreneur and current venture capatilist who is associated with Fwd.us. During the discussion the moderator, the National Journal’s Niharika Acharya, asked about the SCE case, in which American IT workers were replaced by foreign workers, and forced to train those foreign replacements. Apparently having prepared beforehand, Daalgard recognized the substance of the question even as Acharya was in the midst of posing it, and replied,

You know, I’m going to be rather crude about that. Nobody’s going to hold you up and carry you around…If you’re not going to work hard enough to be qualified to get the job…well then, you don’t deserve the job.

Archarya said, “That’s rather harsh,” and turned to the other panelist, P.J. Corbut, who said he agreed with Dalgaard.

Outrageous?  Sure. To my knowledge, neither SCE nor anyone else has claimed that the laid-off Americans at SCE weren’t working hard. What we do know is that the foreign workers were a lot cheaper than the Americans they replaced. Hard to believe Dalgaard would deny the obvious.

This isn’t the first time someone from Fwd.us has made statements along these lines. Joe Green, while serving as the organization’s first president, bragged that the tech industry could buy its way in Congress and the media, and also implied on C-SPAN that tech firms were laying off Americans and replacing them with better-quality Americans. One of the interviewers asked Green, “Are you saying that all of the [Americans] who are laid off are not talented and all the people from these other countries are valued employees?” Green, realizing how unreasonable his remark sounded (and was), didn’t really answer. Green resigned, apparently having been fired, not long afterward.

My guess is that Fwd.us won’t be sending Dalgaard to more panels anytime soon either. But his attitude typifies what I’ve observed among tech CEOs: an arrogance, a sense of entitlement, even a Messiah Complex. Not to mention a completely uncaring attitude. I’ve mentioned before an incident some years ago when I was chatting with Netflix founder and CEO Reed Hastings. When I mentioned that H-1B has caused major harm to older American tech workers, not just financial but also emotional, with divorces and even some suicides, he sarcastically replied, “Maybe they beat their wives too.” Bill Gates looks good in comparison.

But there is more. We should all be concerned that Fwd.us was a sponsor of this National Journal forum. The latter is a private enterprise, of course, but one that has enjoyed respect. That this forum was one-sided is obviously an indication that Fwd.us’ dollars have influence (just as Green said they would), and that should worry any reader of the magazine. Indeed, even Archaya had apologetically prefaced her question to Dalgaard by saying she was playing the “devil’s advocate.” Something similar occurred a few years ago with the Washington Monthly.

So the whole thing is even scarier than just Dalgaard’s callous remark.

A Pleasant Clash of Two Papers on H-1B

Recently I reported on a new working paper by Kirk Doran (Notre Dame), Alexander Gelber (UCB) and Adam Isen (U.S. Treasury), that appears to counter work by my UCD colleague Giovanni Peri and his coauthors, as well as by Madeleine Zavodny, a former Fed researcher now at Agnes Scott College. The Peri/Zavodny line of research finds that the hiring of H-1Bs creates lots of new jobs, with the much-cited 2.62 figure being Zavodny’s.

To review, the new work by Doran, Gelber and Isen (DGI) finds that

  • “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.”

It would be hard to imagine a paper as diametrically opposed to Peri/Zavodny as this one. And certainly quite timely, as the Peri and Zavodny work has been intensely shopped around to Congress and the press by the industry lobbyists seeking expansion of H-1B.

Yesterday Isen gave a talk in a workshop hosted by Giovanni on our UCD campus, with Isen’s two coauthors present as well. Giovanni presented his work following Isen’s talk. Each side had an hour’s time allotted to them, including questions and comments by the rest of the attendees, which enabled a good thorough exploration of both papers. I had not been aware of the workshop until a couple of days before the event, but fortunately heard of it through the grapevine, and did attend both talks. There were about two dozen people in attendance.

Given the stark challenge that DGI is to Giovanni’s work, he deserves a lot of credit for inviting the authors to speak, and he was a very gracious host. Eventually, though, things did get a little heated, though remaining friendly enough that there were smiles all around by those enjoying watching the clash. I particularly enjoyed the following exchange (as verbatim as my memory allows):

Giovanni, to DGI: Your paper consists of nothing by 0s [i.e. findings that the effect size is 0, e.g. 0 gain in employment]! That can’t be true!

DGI: We did find some nonzero results! We found a triple-star effect [i.e. very highly significant in statistical language] of reduced payroll! [An indication that the H-1Bs may be hired as cheap labor.]

Giovanni: But only in some of the cases!

Interestingly, one of Giovanni’s criticisms of DGI was their data source. DGI looked at H-1Bs hired by lottery late in the season. If I understood Giovanni’s point correctly (he speaks very rapidly, with a heavy Italian accent), it was that each “winning” firm got only about 2 H-1B workers in the process, thus making it hard to judge their impact on the firm. (Some of you may recognize that Josh Stern posted a similar comment to my blog post.) DGI, on the other hand, believe that collectively, across the totality of 3,000+ firms, there should have been an impact, if indeed H-1B has the salutatory effect that Giovanni claims. I may be biased, but I would say that given the 8-year time window DGI used to measure results, their defense seems reasonable.

There were various comments from others in attendance. For instance, Giovanni’s PhD student and coauthor, Kevin Shih, suggested that the reason the DGI analysis didn’t find a positive effect of H-1B on patenting may be because the innovative firms tend to file for H-1Bs earlier in the season. But DGI had found that the later filers actually were more prone to patenting.

I posed a question to Giovanni on a point I’ve brought up here in the blog before: If one accepts the research showing that (a) there is no STEM labor shortage, including in CS, and (b) the quality of the H-1Bs is on average somewhat lower than that of their American peers, how can the H-1Bs have a positive effect on employment numbers, relative to what the hiring of Americans would produce? What magic potion do the H-1Bs possess? He replied that he thinks that it’s good to have as many STEM people in the nation as possible, and that, say, an overqualified Indian PhD H-1B doing ordinary work is good. (He didn’t mention whether it’s good for that Indian PhD H-1B to get the job in lieu of an overqualified American PhD.)

In my earlier blog post on DGI, I had suggested that they might do separate analyses for the ordinary 65,000-visa H-1B category, and the ADE category, which allots 20,000 visas for foreign students earning advanced degrees at U.S. universities. Since that latter type of H-1B is a favorite of the industry, supposedly producing so much innovation, it would be useful for DGI to run separate analyses for ADE.

Actually, they responded to this suggestion. But the results were, borrowing from Giovanni’s phrasing, “More 0s.” In other words, the ADE workers did not increase patenting or employment, etc.

By the Giovanni mentioned, good naturedly but I’m sure correctly, that he gets a lot of hate mail. Someone then asked, “Do you respond?”, to which Giovanni replied, again in a lighthearted tone but probably correctly, “I put them all in a big box.” Some of you may recall that Vivek Wadhwa also complains of getting hate mail. For the record, I should add that sometimes I do too, from H-1Bs. Goes with the territory, I guess.

Bottom line, the two talks were both enlightening, and the exchange quite enjoyable.

Mass. H-1B Works in “One of the Lowest-Paying Jobs in Years”

Yes, H-1Bs tend to be underpaid.  But a Massachusetts state government program has given new meaning to the term “cheap labor.”  And maybe even new meaning to the notion of “sneaking through a hole in the fence.”

The MA program is simple.  H-1Bs working for universities aren’t subject to the yearly visa cap. So, the state hires the foreign worker to spend a few token hours per week at some university, and voila! — they get their visa and full work rights in the U.S.  See this blog post by a prominent immigration lawyer for the legal details.

So it’s a bizarre new twist on the H-1Bs-as-cheap-labor idea.  The article notes about one of the lucky foreign workers,

It’s one of the lowest paying jobs O’Connell says he’s had in years, but he doesn’t mind — he gets a visa and the chance to launch his company in the U.S., which he’s now doing.

The MA program, GEIR, recognizes that it operates as a blatant ruse:

Through the GEIR, universities will partner with the Commonwealth to provide valuable, relevant part-time work opportunities which will initiate a cap-exempt H-1B visa application process. Participating universities will act as the “sponsor” for filing cap-exempt H-1B petitions for graduates with advanced degrees who want to grow their companies but cannot due to a lack of available H-1B visa slots. This part-time employment authorization will enable the entrepreneur’s start-up company to apply for the entrepreneur’s work authorization, also in a cap-exempt visa category, and ultimately will allow the company, and new high-skill jobs, to grow here in Massachusetts.

Note that even GEIR encloses their word sponsor in quotation marks.  Wink, wink, nod, nod. Former governor Deval Patrick is actually quite proud of the MA ruse, which he had originally developed.

Those who love the H-1B visa will say, in almost religious tones, “Ah, but O’Connell is starting a business!” Fine, but his business sounds iffy, and the vast majority of startups with much better promise than his end up in failure.  In any case, the beneficiary apparently need not be the actual employer, just a worker who is helping to “grow the business.”

Granted, this program is currently small, and since funding is limited, presumably only the very best students would be accepted into it; they may not meet my personal “best and brightest” standard, but the standard would be reasonably high.

But how can anyone stand for this government-sanctioned gross fraud? Where are those who single out the Indian IT services firms as abusing H-1B because “the visa was never intended to be used” in a rent-a-programmer context? I’ve always said this is a fallacious argument, because if there is a labor shortage it doesn’t matter if it is remedied via a broker; this doesn’t violate legislative intent at all. But clearly Congress never meant the cap exemption for universities to be used in the role of fake employers. Really, is this all that different from attaining a green card through a fake marriage to an American? I wonder what the Morrisons and Donnellys have to say about this.