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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25 thoughts on “IBM in the H-1B Hotseat (Again)

  1. Hi Norm,

    This is a very good article, which touches close to home, since I work in the area of wireless, a field that overlaps with mobile computing.

    It’s widely acknowledged in the wireless industry that IBM is no longer an employer of choice for engineers. I’d say that’s been the case for about the lase 15 years.

    To some, a salary of $74,753 might seem very attractive, but that has to be considered in light of the fact that this mobile computing job probably requires

    1. a master’s degree,
    2. probably does not come with much of a pension
    3. probably requires that the candidate have good, if not top, marks
    4. very likely requires that the candidate have several years of work experience in the exact sub-specialty that IBM is looking for

    What is the opportunity cost to gain such skills?

    Bright engineering students and recent new grads look around, see the opportunities at startups, in the financial industry where their skills are also in demand, and quickly realize that there are better paying, more secure opportunities than working at IBM for $74,753 a year.

    In today’s economy, there is no way that you could pay off student loans, purchase a home, raise a family, pay for college for your children or hope to retire with dignity on a salary (with no or little pension) on $74,753 a year.

    Yet, you’re right, there are probably many older engineers at IBM who would be happy to go back to school for six months to pick up whatever skills that IBM desires.

    Yes, IBM doesn’t bother with this, because they:

    1. They secretly want to get rid of their “older” (read 35+) better paid, higher benefit cost, engineers.
    2. Every penny must be squeezed out of the engineer, quarter by quarter. There’s little room for long term vision, so the idea of training someone for a few months is beyond consideration.
    3. H-1bs are cheap, can’t complain, and are readily available.
    4. H-1bs facilitate outsourcing of some work, making them an attractive option for IBM, who has a sizeable portion of its workforce offshore.

    I’ve reached the point that I don’t care that this is going on. I just wish the National Science Foundation, political leaders and CEOs would stop telling us that there is a “shortage” of science and engineering grads (usually required to have an advanced degree) willing to work for in a job that requires long hours, inadequate benefits, and relatively low pay.

    It’s disingenuous and clearly, very self serving.

    As an engineer, I’m tired of being a “STEM” football. Let’s just tell it like it is. The leader ship at IBM, and most tech companies, don’t really care about the long term viability of there organizations. They care about short term profit, and squeezing their workforce, including their technical workforce, as hard as they can to maximize short term revenue.

    Liked by 1 person

    • As I’ve said so often, it’s not a matter of going back to school. The mobile app software development that they mention can be learned on the job, without formal instruction, by any good software engineer.

      Liked by 1 person

    • How might I go about getting a job at one of those “startups in the financial industry where their skills are also in demand”?

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  2. The cost to import an H-1B worker should be greater than that to hire an American worker to allow for the specialized training of the American workforce in skills that are supposedly lacking.

    In addition, there should be the up-front and ongoing payments into an escrow account of the annual state and federal taxes and health care premiums so that when the H-1B employees are benched with lower or no pay, the US taxpayer still receives the benefits of and does not have to support to the workers supposed exceptional skills..

    I also believe that the tax advantages of hiring a student on OPT or CPT should be negated by requiring payment of employer FICA taxes on the basis of payroll independent of the visa status or citizenship of the workers. The student would not pay or earn SS credits, but the employer would be required to pay the employer contribution. In fact, it would not be unreasonable for the missing employee match be assessed as a tax to fund educational opportunities for American students in the area of study of the OPT student. In addition, all OPT and CPT students should have to be paid as W-2 workers and not in cash or on 1099s.

    When our system is rigged and corporate America supports a system so detrimental to the populace that there is a financial incentive to deny jobs to Americans, it is clear that major, punitive changes are necessary. If there are truly no qualified US based workers, a company should have no problem paying the premium to hire internationally,

    I realize that our elected officials are concerned more about their campaign donors than their constituents and do not expect changes. I do not know how to make our voices heard.

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  3. Being on the other side if the fence (hiring) there is no doubt I am able to find cheaper developers through the H-1b body shops. They have an onshore and offshore presence, and their rates are extremely cheap either way. Their quality and speed leaves much to be desired, but their sticker price is taking away opportunities from American professionals.

    $12/hr offshore and $35-$55/hr onshore is the end rate to the body shops in our area. American consulting firms all bill out at much higher rates, but the offshore developers that come here puts downward pressure on all of us.

    Rates to independent consultants has remained stagnant for years. This is most likely high. The government has allowed companies to game the system and tamper with the supply side.

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    • I agree on the quality issue, but the employers seem to treat programmers as commodities, one as good as another, so price becomes the main issue. Of course, this means they’re shooting themselves in the foot.

      Liked by 1 person

      • Amen, I’ve fought since March 2003 to get back into the industry full time and even though I’m being forced to take a Food Service Worker position in civil service, I no longer feel that it is worth the effort or banging my head up against a wall so that I can get back into an industry that wants to treat me as a disposable commodity.

        So, even though I will make about 85,000 less than I made in 2002, at least I will have a steady job, and a steady paycheck with benefits that will take the pressure off of me so that I can focus on developing a way to replace the lost income.

        Or I might just come home in the evenings and listen to blues while bbq’ing and sipping on a cool one or two while reflecting on all of the knowledge and wisdom that corporate America has thrown away, not just from me, but from the million or possibly millions that have been cast aside.

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      • This of course is the real issue, that importing a ton of low-grade, cheap labor treats the whole field as if commodity skills could get the job done. Generally, they can’t. They get the job halfway done, and then they call in the high-skilled guys, typically American, to fix and complete it. Think the Obamacare site. Or think this employer I’m talking to now about a gig. They outsourced the development to India, and when they turned it on in production it didn’t work. They US crew has now been working 60-hour weeks for a year, testing and patching and yelling at the outsource company, who of course respond in realtime at 3AM. They asked me how I felt about joining a project that would continue working 60-hour weeks for the foreseeable future. In spite of the wonderful money involved in billing that many hours, I wasn’t much for it.

        This is too, too common: commodity developers cost MUCH MORE in the end than increasing salaries, hiring high skills, and hitting the target earlier. If IBM or anyone really saved money importing cheap labor I could understand it – but they DON’T. Not even near-term, it takes 2x more commodities to do what even 80th percentile developers could do. Maybe 5x, when you figure in all the extra overhead and corruption. American business PREFERS IT THIS WAY, they’d rather spend 2x the budget just so they don’t have to pay mere engineers high salaries. That’s where we are today, folks.

        Liked by 1 person

  4. This may come as a surprise to some people but replacing American workers with foreign, cheaper workers has been going on for 25 years. Of course in the earlier years it didn’t affect the engineers or various other professional people. Now it’s beginning to spread out to them and they to see their jobs go to foreign, H1B employees. Now it’s a major issue. While I completely agree with them and find it despicable that U.S. corporations are engaged in this practice I can’t help but see a certain irony in the whole thing.

    I live in the Great Lakes area, Ohio to be specific and while outsourcing never effected me personally as I was professionally employed I did witness hundreds of factories in my area close down and the work shipped off to China, Mexico, Vietnam, Bangladesh or any place else where workers could found for 50 cents or a dollar an hour. Thousands and thousands of jobs were lost. Since 2000 I believe the number is somewhere around seven million nationwide. For some perspective, there are currently almost exactly the same number of American factory workers employed today as there were in 1942!

    Whats ironic is that many of the vary same people losing their jobs today found it perfectly acceptable and rational when the blue collar employees were off-shored for cheaper labor. I can remember many referring to factory workers as “fat and lazy” and of course “overpaid”. I once recall having a heated discussion with an engineer who flat out didn’t want those factory jobs ever returning to America because his “iPhone would cost $200 dollars more”. Well I suppose that with the current trend some of my apps will be cheaper now.

    I guess you could say the moral of the story is ‘what goes around comes around’. Lets just hope they put a stop to this soon.

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    • Similarly, a lot of young American tech workers think there is no problem with H-1B, as they perceive it doesn’t affect them. They don’t realize it will affect them later (and probably does even now).

      Concerning the retail price of an iPhone, it has been well-documented that consumers save almost nothing by the work being done in China.

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    • > I guess you could say the moral of the story is ‘what goes around comes around’. Lets just hope they put a stop to this soon.

      The trouble is that when it “comes around”, it affects those who argued against the policy as well as those who argued for it. Like it sounds you did, I argued against the broad, positive arguments about NAFTA when it was being debated. I considered myself far from being an expert on the matter but I could not understand what would counteract the “giant sucking sound” that Perot described. Likewise, I don’t understand how you can hire a mid-level H-1B for a job that a native worker is available to do and have it create 1.83 jobs. That strikes me as voodoo economics. I am more than willing to see an honest debate on the matter. But as I describe at http://econdataus.com/amerjobs.htm , the 1.83 and 2.62 jobs-created numbers being quoted by the other side are numbers from a single working paper that depends on carefully cherry-picked time spans. Pick another time span and they both turn into job LOSSES.

      Sadly, the policies might not stop until they start affecting some people with real clout. Unfortunately, I don’t think that Congress is in danger of losing their jobs to H-1Bs or outsourcing. But if it starts to affect our corporate elite and those close to them, there will likely be a loud cry for us to “pull together as Americans”!

      Liked by 1 person

    • It was never OK with me to offshore manufacturing for cheaper goods. I am particularly concerned that the US cannot supply its own essential needs anymore. In the event other countries decide not to sell to the US – as would be the case during a war, we are doomed. We no longer have critical manufacturing capabilities – think pharmaceuticals, textiles, garment manufacturing, metals, to name just a few.

      Just as it is foolish to concentrate industries and services in few locations – like financials in NYC and petroleum and chemicals along the Gulf Coast, it is foolish not to maintain the minimum required manufacturing capabilities to sustain the populace and mount a defense against another country in the even of a war. As the population grows, this level of production needs to be increased. Only non-essential and “luxury” – in the case of quality or quantity – could be imported from elsewhere but the minimum required should be made at home with tariffs equalizing the prices.

      Being able to afford 5 pairs of tennis shoes rather than 2 is not a good reason to place the country in the position of being able to obtain none at any price if the tennis shoe manufacturers are prohibited from selling to us. I am too cheap to buy an Iphone so I cannot comment on that price.

      Add to this the inability to guarantee the quality of the goods we are importing. Check the recall of children’s items on the CPSC website; with few exceptions they are “Made in China”; Poorly made and outright hazardous items are killing and injuring us. (Think toothpaste and methanol several years ago, and the pet treat problems that are ongoing and baby cribs whose parts fail trapping infants). That does not even address the national security issues of purchasing parts for critical military gear from potentially hostile countries. There are some countries – generally our NATO partners from whom high quality products are still available.

      I am so tired of poorly made goods from XYZ that I am doing without. I have items I received as wedding gifts over 45 years ago (and some from my parents estate that are over 65 years old) that are still in use while similar items given to DD 14 years ago have long since gone to the dumpster. I have lots of recent purchases that did not make it even that long. It is particularly noticeable in textiles.

      The offshoring and outsourcing is potentially disastrous to even more than our jobs. Will greed be the end of all?

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    • Actually we were shipping steel production offshore as early as the 1960s, not to mention car manufacture to Japan. Foreign trade is supposed to work, to find such efficiencies. It’s “comparative advantage” from Ricardo, circa 1817. However when you push this towards the limits it gets very unpleasant, and we need some updated theory. We did pass moderate protectionist legislation in cars, and a bit in steel, and the “domestic content” laws for autos worked quite well, actually. We OBVIOUSLY need more of this, and anyone who barks about “Smoot-Hawley” causing a protectionist disaster is also quoting a single, underanalyzed example from a bygone era.

      And I don’t know any economic laws that cover bringing in cheap labor, except maybe Gresham’s Law.

      And as for the quality of the labor brought in, there’s Sturgeon’s Law.

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      • Way, way back, when I was in college, a took a full-year introductory class, which of course used Paul Samuelson’s famous textbook. There I “learned” that international trade benefits both sides. At that time, I was too naive and trusting enough to think about who those parties really are, but hey, so was Samuelson. I eventually went on to take a total of 8 economics courses, the start of a lifelong interest in the subject, yet it wasn’t until I got into the H-1B issue that I began to see the contradictions between the simplistic, unquestioned-assumptions theory and the practical reality.

        To his credit, Samuelson started questioning trade theory near the end of his life. But his papers along those lines are very narrow in scope. Too little, too late.

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        • In Washington DC and on the masthead at WSJ they are still full Ricardo. The lack of intelligence, the isolation from the real world, is just unbelievable. People believe what they were taught in school 30 years ago, though in truth it was already obsolete even then – but those professors were teaching what *they* were taught 40 years earlier, when the US was ascendant and a little Ricardo made sense.

          Mathematical functions often makes sense within a limited range, they are convergent or well-behaved within a narrow range – and break down entirely outside of that range. This seems to be the case for comparative advantage. You have to define your acceptable ranges. Otherwise economics turns out, as they say, to be nothing but, “In the long term we’re all dead.”

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  5. Hedrick Smith’s book ‘Who Stole the American Dream?’ , 2012, has a good chapter on H1-B. Rick is a dinosaur – an old-fashioned honest reporter, unlike the new ones who would never tarnish their ‘personal brand’ [and career prospects] by criticizing H-1B.

    IBM was a pioneering offshorer beginning in the 90s, mostly to India. They began to sell their offshoring expertise to other companies as consultants.

    http://www.amazon.com/Stole-American-Dream-Hedrick-Smith/dp/0812982053

    ‘In September 2007, IBM applied for another patent on what it evidently thought was an even smarter blueprint, promising clients a computerized “Workforce Sourcing Optimizer” to assess the pros and cons of moving out of one country (unnamed) to other countries such as India, China and Hungary (named). IBM’s application boasted that its program could help clients achieve “50% of resources in China by 2010.”

    When the U.S. Patent and Trademark office made IBM’s patent application public in March 2009, it was a bombshell. Congressman John Hall of Dover Plains, New York, a Democrat to whom IBM had made campaign contributions, denounced IBM as “downright unpatriotic and un-American.”…

    Within twenty-four hours, IBM pulled its patent application.’

    Liked by 1 person

  6. Folks, posting comments here is not going to make much of a difference. Pick up the phone, get on Twitter and Facebook and LET YOUR ELECTED OFFICIALS KNOW that ANY politician who supports the H-1B Visa program will be VOTED OUT in the next election. If enough people do this, they will listen.

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  7. I’m retired so I no longer have a horse in this race but if the younger tech workers think this won’t effect them I think they’ll eventually will be in for a very big surprise. As more and more people loose employment to cheaper foreign labor these people still have to work somewhere. Those who loose their jobs don’t just disappear. Put very simply this whole outsourcing trend has the end effect of increasing competition for the remaining available jobs and in the process reducing the wages they will be able to command. I believe it’s the biggest problem the remaining middle class faces and IMO far to many appear to be oblivious to it.

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    • amen – 30 years in technology and I can’t buy an interview anymore.
      Problem is, I’m considered way overqualified for any of the lower paying positions.
      And now at 57 I’m too old I guess.
      I went 5 years without a job.
      Begged the attorney general of texas and the two local police depts that needed a dispatcher as I’m a amateur radio operator and I was a radioman in the navy which is what a dispatcher does and they wouldn’t even talk to me.

      The big firms like USAA that are built for vets and make headlines saying they hire vets?
      Right, they are predominantly h-1b shops and could care less about unemployed programmers who are veterans.

      As you say, they are in for a rude awakening.

      How bad does it get?

      My website keep america at work is down again as of today because I can’t afford $20 dollars to turn it back on.

      It’s memorial day weekend and I can’t even afford money to go drink a beer with fellow vets at the local pub.

      But that is ok because i can continue to research the subject and when I find a way to get kaaw back on, I can come out swinging again…

      Like

  8. China has generally been cracking down on foreign corporations, and particularly computer & communications companies. The NSA spying revealed by Edward Snowden has given them some excuse for this. They have demanded that these companies open themselves up to China – turn over their source code, security keys, etc. – though they did recently back off a deadline for doing this.

    Most Western companies have been resisting these demands, but the one that seems to be complying is IBM. The situation is complex however, and IBM says that it is a project that they already have in place with other countries and companies.

    http://www.nytimes.com/2015/04/20/business/ibm-project-in-china-raises-us-concerns.html

    ‘In the past 16 months, IBM has agreed — and received permission under United States export laws — to provide the Beijing company, Teamsun, with a partial blueprint of its higher-end servers and the software that runs on them, according to IBM announcements and filings from Teamsun. As the chief scientist overseeing the IBM project on behalf of the Chinese government, Mr. Shen is helping Teamsun, and in turn China, develop a full supply chain of computers and software atop IBM’s technology.

    The goal is to create a domestic tech industry that in the long run will no longer need to buy American products, thus avoiding security concerns.’

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    • Even Obama has said that all nations spy on each other. But he was referring to the military. Seems hard to believe that the U.S. would engage in industrial spying on China, and I don’t recall Snowden saying such a thing.

      Like

  9. I used to be a liberal/progressive. I am one no longer. The liberal/progressive side of things is terminally stupid about both ends of illegals. They think that Mexican illegals, here to steal jobs in construction, restaurant work, and hotel service, are just a bunch of hard-working people who want to help their families. This ignores the fact that these people displace American workers with families. Every wetback (note: this is the term Cesar Chavez used for illegals) displaces an American worker, mostly blacks on the bottom end. If all the people in Ferguson, Baltimore, and Staten Island had jobs, there would be far fewer throwing rocks. On the top end, they talk about having a lot of immigrants (ignoring in their stupidity the fact that the H-1B is not an immigration vehicle) brings in better and more diverse restaurants. Most are young and really stupid. Any mention of the economic issues gets the mentioner tarred as a racist.

    Like

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