The Ball Is in DOL’s Court, and an Age-Old Elephant in the Room

Back in April, a bipartisan group of U.S. senators sent a letter to several government agencies, asking them to investigate apparent abuses of the H-1B work visa program, in which the giant utility Southern California Edison reportedly laid off American IT workers, replacing them by foreign workers, and forcing the Americans to train their foreign replacements. At the time, I expressed doubt that the letter would have any benefit, and in any event, the main agency involved, the Department of Labor, refused to investigate.

But today Senators Durbin and Sessions announced that DOL has had a change of heart. Presumably this is because another case of much higher visibility than SCE has come to light: Disney.

This development is sure to thrill many critics of H-1B. Well, even I like it, but just because it will make for good theater. 🙂 Little or no good will come out of it, and indeed, it will likely make things even worse.

What will DOL say?  They will find, correctly, that SCE and Disney, and their IT outsourcer labor suppliers, did nothing illegal. These firms were almost certainly acting entirely within the law (or the law as it has been interpreted over the years, a point I’ll come back to below).

A reader asked me why I had not devoted a blog to the New York Times piece on the Disney case, linked to above. The reason is that article takes this same point of view that I complain about so much, the perception that the main abusers of H-1B are the IT outsourcing firms; the reporter repeated this in a radio discussion yesterday. Not the reporter’s fault, really, since this view has become Conventional Wisdom, and yes, I do harp on this issue. But as I’ve said, this perception is incorrect and will be used by Congress as reason to actually increase the H-1B cap (while making some mild restrictions on the IT oursourcing firms).

The reader’s point was that at least the Times is now giving H-1B prominent coverage. Actually, they did so in the late 1990s (after one false start in a very one-sided article), but later somehow didn’t pay much attention to the issue. This may be a result of the massive PR campaign by the industry, claiming a STEM labor shortage and portraying the H-1Bs as engineering geniuses.

The original letter from the Senate had requested DOL et al to suggest reforms in the law. It seems doubtful that such a response will be forthcoming from such an arriba immigracion administration (not that I don’t agree with that stance to some degree), but if there is one, it will be some mild proposal to tighten up on the IT outsourcing firms, letting the Intels and Googles go scot free, and indeed, giving Congress the green light to expand H-1B and even add new similar programs, such as for foreign students.

What will certainly NOT be addressed by the DOL is the “elephant in the room” — the AGE issue. Of course, this is the other issue that I harp on, but it is indisputable that age is at the core of H-1B abuse. This is how SCE and Disney save so much on wage costs in hiring — the foreign workers are much younger, thus much cheaper than the Americans they replaced. You might think this is illegal age discrimination, but on the contrary, such discrimination is actually codified in H-1B/green card law: The statute defines four experience levels, and the legal wage floors are defined relative to those levels. (And as I understand it, age discrimination laws in general do not forbid hiring a younger worker because he/she is cheaper.)

For reasons I’ve never understood, none of the major players interested in tightening up on H-1B — activists, researchers, sympathetic people on the Hill — want to touch the age issue. Again: If they won’t touch it, why should DOL?

It would be an easy fix, simply doing away with the experience-based wage levels, and would not have to explicitly cite the age issue. This simple change would go a long way toward reducing the abuse (again, including by the Intels and Googles). But sadly, no one wants to go that route.

There is one wrinkle, though, that I’ve seen brought up a few times recently, which concerns the statutory stipulation that “employment of the H1B worker will not adversely affect the wages and working conditions of similarly employed U.S. workers.” Years ago I said, half jokingly, to a reporter that losing one’s job to an H-1B would be “the ultimate in adverse impacts on working conditions.” 🙂 But that obviously is not how the law has been interpreted. On the contrary, by disallowing the replacement of Americans by H-1Bs in the specific case of the formally defined group of H-1B dependent employers, Congress has implicitly (and as I understand it, legally) given approval of such replacement in all other situations.

I do admire those in the Senate for bringing up. As I said recently, so many of those in Congress who used to speak out against H-1B are now strangely silent (e.g. Stabenow, DeLauro, Pascrell). But my advice to those readers who strongly hope for proper reform of H-1B is, don’t pin your hopes on this investigation.

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14 thoughts on “The Ball Is in DOL’s Court, and an Age-Old Elephant in the Room

  1. Dear Norm: You may wish to examine your post. It appears to have a large block of text that is repeated. This flaw diminishes the clarity of your message! Of course, if you are like me, you are working far to long hours on things that you are passionate about. With my fatigue level, I had a “near miss” regarding an automobile accident two days ago. 😦 Gene

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  2. The ball may not be in DOL’s court with regard to treaty based “Movement of Natural Persons”. It may be completely out of their court, as trade deals remove huge swatches of policy from the control of natinal legislatures.

    Why is that so hard for people to grasp? Look a bit into the future.

    Its like this with a great many GATS-related things already. Politicians are not going to tell people point blank that “we’re sorry, we gave away our right to change this decades ago”. No they will just pretend to be doing something but not actually do anything against the treaty. Thats called “fright to regulate” or “chilling effects”.

    How would the transition into global Mode Four services liberalization occur.

    There is a definitive discussion of this issue at length in “Towards a plurilateral Trade in Services Agreement (TISA): Challenges and prospects” by Pierre Sauvé (2014) here is a random chunk of it.. you should read the whole paper.

    “6. Just How WTO+? The Fate of Sensitive Sectors and Modes of Supply

    Every country has sensitive sectors to contend with at the negotiating table. For the
    United States, the maritime sector has historically proven impervious to services trade
    talks, followed more recently by mode 4 trade (arguably in violation of Article V,
    which states that services PTAs should not exclude any mode of supply on an a priori
    basis). (footnote 17 No PTA concluded by the United States since its bilateral agreement with Australia in 2004 has featured negotiated commitments on the temporary entry of service providers. )

    For the EU and Canada, audio-visual services remain no-go zones in services
    trade talks, as are publicly-funded health and education services in a large number of
    countries taking part in the TISA negotiations. Trade in air transport services offers
    another example of a sector largely immune from the forces of trade negotiating-
    induced liberalization. This is so despite the globally competitive nature of the
    industry, the continued need for airline consolidation and the lower cost of capital that
    a progressive lifting of onerous existing ownership restrictions would entail, as well as
    its central importance as a means of ferrying both goods and people (business people
    and tourists) to market.

    The question naturally arises of those sectors in which TISA could generate the
    value-adding WTO þ and WTO-X commitments extolled by its main proponents. A
    related question is the likelihood that TISA’s political economy, particularly in the
    absence of large developing countries such as Brazil, India, Indonesia, South Africa or
    any number of leading ASEAN Member States, will be conducive to putting on the
    table what has largely stayed off it so far at the WTO and in many PTAs.
    There are generally few signs suggesting a major shift in US attitudes towards
    maritime transport or mode 4 liberalization, nor would much hope appear warranted in
    the sudden ability of the EU or Canada to drop their long-standing reluctance to
    revisiting the case for market opening in audio-visual or other services with notable
    public good characteristics. The above questions are equally germane in regard to the
    probable liberalization harvest of the proposed Transatlantic Trade and Investment
    Partnership (TTIP). Still, the TISA offers a platform for participants to try as best they
    can to push the liberalization envelope in new directions, where the scope for binding
    commitments may have newly opened up as a result of recent autonomous liberal-
    ization, changes in market structures or novel advances in pro-competitive regulation.
    Sectors that come most prominently to mind in this regard include a wide range of
    environmental services, energy-related services as well as postal and courier services.

    One area where TISA could usefully break new ground would be in testing out
    novel formula-based approaches to market opening, devising deeper à la carte liber-
    alization packages using model schedules, collective requests to remove selected
    modal or sector-specific impediments such as foreign equity limitations or economic
    needs tests linked to licensing, as well as multi-sectoral clustering — for instance a
    TISA cluster on trade facilitation services combining transportation, distribution,
    customs brokerage and associated border management consulting services, ware-
    housing, express delivery and logistics services. **Another cluster where forward
    movement should be conceivable would relate to a package of IT-related business
    services (including selected professions with accompanying Mode 4 commitments),
    particularly in regard to Mode 1 trade, which could be packaged as the services
    complement to the WTO’s Information Technology Agreement currently being rene-
    gotiated under the GATT.**

    (Rest truncated)

    (Source: Towards a plurilateral Trade in Services Agreement (TISA): Challenges and prospects
    Pierre Sauvé WTI 2014)

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  3. Article on this at ZH:
    http://www.zerohedge.com/news/2015-06-12/youre-fired-%E2%80%93-now-train-your-much-cheaper-foreign-replacement

    “They told us they could replace one of us with three, four, or five Indian personnel and still save money,” one laid-off Edison worker told me, recounting a group meeting with supervisors last year. “They said, ‘We can get four Indian guys for cheaper than the price of you.’ You could hear a pin drop in the room.”

    (warning: ZH is a very crazy site, some excellent articles and some crazy ones, some excellent comments and some very offensive ones, but is often worth the pain)

    The point here is the wage discrepancy, apparently they are NOT using H-1Bs here but L-1s and who knows what else. FWIW.

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      • I should add, that in general they will probably *need* three, four, or five Indian guys to replace the staff, and even if you stuff them into the same office space that one American used (and I’ve seen this done), the inefficiency of a larger staff turns it into a losing proposition.

        BUT THEY (American management) LIKE IT ANYWAY.

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    • I think that for many jobs, this subcontracting thing won’t last very long. The future of training replacements will involve artificial intelligence and will simply involve software analyzing workers work over some length of time. All of their inputs and their outputs will be sufficient to train a replacement (which is software).

      Thats the real threat to jobs and it will spare no one and no country.

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    • > “They said, ‘We can get four Indian guys for cheaper than the price of you.’ You could hear a pin drop in the room.”

      They must have been talking about salaries in India. In any case, it’s hard to imagine that a supervisor could be so clueless. He might as well have continued: “Of course, my job is safe because only an American can divide an American salary by the Indian salary to calculate that ‘four Indian guys are cheaper’.” Unless he’s the son of the President, his job will be on the block soon enough.

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  4. More Disney[1] damage control: Stanford’s Dan Siciliano[2] delivers, in a mere 7 minutes[3], most of the H-1B Big Lies on this week’s (12 Jun 2015) edition of “Marketplace Weekend”[4]. Unfortunately MW provides no transcript, so here are my excerpts from the audio download:

    1. Host (David Lazarus) regarding Disney: “is this unusual that a big company would ask their domestic workers to train their foreign replacement?” Siciliano: “I think it is pretty unusual in the bigger picture of the use of temporary visas…. Even with the Disney story, it’s pretty hard to sort out what the underlying real facts are.” (So don’t even try 🙂
    2. “The folks that [Disney] brought in appear to be somewhat more technical [than the citizens they replaced.] Disney’s trying to enhance their innovation” (Training is, of course, not an option.)
    3. “[H-1B] is meant to be used only for 3 years and it’s got a max of 3 more years, so it is temporary” (No mention of linkage to permanent status.)
    4. “[Big picture,] total labor turnover in the US right now[:] there’s [~5.3 million] open positions, so this 65k visas is actually a pretty small number.” (No mention about accumulation, or of numbers relative to the STEM labor market.)
    5. “The type of skills [H-1Bs] bring to the US are *really* important.” (How did we ever survive without importing STEM labor?)
    6. Host: “I’m always hearing from Silicon Valley that we would love to be hiring American workers, but they lack the skills, they lack the education, they’re just not qualified. Is that true?” Siciliano: “It *is* true, but it’s complicated.”
    7. “For US-born workers with [STEM] skills at the bachelors-plus level, or the masters, there aren’t enough. In fact, if you look at unemployment rates [before and after the recession], the numbers are *really* low[:] 3%, 2%, in some categories 0.1% unemployment rate for these types of employees. So it is true: we don’t have enough.” (There you have it: we *need* more STEM unemployment.)
    8. “Certainly the story in Silicon Valley: I teach the venture capital classes [at Stanford] and a lot of the time I’m looking at these teams and I say, [you need to find] a technical team member. Go find [an] engineer: that’s always the missing component of these teams. So these H-1B visa recipients tend to be very complimentary. They *enable* the economy, because the teams that can’t find someone who’s technically-oriented, they never launch. The teams that do, they launch and they grow, and you end up with these companies that create hundreds if not thousands of jobs.” (So Stanford can’t connect their business/law students with their engineering students?)
    9. Host regarding the “STEM shortage”: “is there an effort underway to try to fill that hole and thus ease our need for those overseas workers?” Siciliano: “Yes, [but] when it comes to training people, it takes a generation[….] One of the outcomes of the H-1B program [is, H-1B employers] pay an extra fee that goes into a technology training fund that is used to augment US training of US-born workers in these fields. That’s been around for awhile but it’s really only now starting to show up.” (So the H-1B program is self-limiting, which is why “we need” to raise the cap: to make it even more self-limiting.)
    10. “We *need* the H-1Bs. Without them, jobs and companies go outside the US. That shortfall is a disaster for our economy.” (No mention about how H-1Bs are used to *enable* offshoring.)
    11. “It’s *costly* for the companies to [import H-1Bs]!”
    12. “I haven’t found a company yet who would *prefer* an H-1B over a qualified US-born worker, despite all this kinda news; everyone would rather hire someone from here who they know is gonna stay here and has all these roots here. It just makes it a lot easier to grow talent.” (And “growing talent” is what corporate America is all about 🙂

    [1]: http://www.nytimes.com/2015/06/04/us/last-task-after-layoff-at-disney-train-foreign-replacements.html
    [2]: http://www.law.stanford.edu/profile/f-daniel-siciliano
    [3]: audio @ http://download.publicradio.org/podcast/marketplace/segments/2015/06/12/mp_20150612_seg_31_64.mp3
    [4]: “Marketplace”[5] is an American Public Media vehicle that seems (much like NPR’s “Planet Money”) intended to politically passivate the public-radio demographic. Realizing that “the 99%” are increasingly concerned about their decreasing prospects, the editorial line from this branch of US corporate-funded media is that, while our economy has problems (sad face), it’s complicated (puzzled face), but (happy face) the US has the best *feasible* economy, and (stern face) There Is No Alternative.
    [5]: http://www.marketplace.org/

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    • Siciliano is introduced as an “immigration policy expert.” Unfortunately, the interviewer was probably unaware of the huge vested interest Siciliano has in H-1B. Here is what I wrote in 2009:

      Siciliano was previously an immigration lawyer with Bacon and Dear, one of the most prominent immigration law firms in the nation (www.sinoedu.com/stanford-cg05.htm); Sun Microsystems retained Roxanne Bacon when Sun engineer Guy Santiglia sued Sun after they laid him off while keeping H-1Bs. Siciliano also is CEO of LawLogix, a firm that develops software systems for immigration lawyers. To top it off, Siciliano is on the Board of Trustees of, and is a research fellow at, the American Immigration Law Foundation, the research arm of the American Immigration Lawyers Association.

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