New Borjas Blog

Professor Borjas, whose work I recently cited, has a new blog. It promises to be stimulating and insightful, and should offer previews of his forthcoming book.

In his post introducing his recent research on the Mariel boatlift, he has a great graph, right off the bat. Pictures can be deceiving, of course, but I think that Card, Peri et al would have a hard time disputing the implications of this graph.

The Great Immigration Debate — Now the Great Peri-Borjas Debate

Fun to watch a public spat between two immigration economists, Giovanni Peri and George Borjas, with others chiming in on one side or the other. As Giovanni pointedly told me last year, I am not an economist. But I am a statistician (and, for what little it’s worth, was an econ minor in college), and equally importantly, “I know where some of the bodies are buried,” and I claim to be able to add some value to this debate. By the way, since I know both parties to this debate, it will be more comfortable to me to refer to them by first names.

First, some background: In 1980, Fidel Castro, essentially said to the U.S. president Jimmy Carter defiantly, said “You want Cubans? Well, I’m going to give your Cubans!” (China’s Deng Xiaoping also said to Carter, “You want Chinese immigrants? Excellent. How many millions do you want?”, knowing that Carter did NOT want so many.) So Castro opened the floodgates, including at his jails and mental health facilties, motivated at least in part by a desire to cause political trouble for Carter. It also later caused political trouble for then-Arkansas governor Bill Clinton, whose resulting  defeat in the next election Hillary Clinton is said to keep foremost in her mind today.

One of the main fears, of course, was that the Marielitos would depress wages. (Immigration from Cuba has enriched the already-colorful Spanish language, another example being balseros, Cubans fleeing on balsa rafts.) Economist David Card analyzed the data in Miami, in part based on other cities he considered to be comparable to Miami, He found that there really was no appreciable effect on wages, a finding that made him one of the most famous names in immigration economics, and which played a role in his being selected for the Clark Medal, given to the best economist under age 40. By the way, the linked tribute here is by Richard Freeman, ironically George Borjas’ fellow immigration skeptic.

Giovanni Peri, my UC Davis colleague, is a relative newcomer to the field of immigration economics, and is quite stridently on the pro- side. He has become the go-to man for politicians seeking an academic imprimatur for a stance favoring expansive immigration policies. A notable example is that the Obama White House report on the projected impact of their administrative action on immigration cited Giovanni 38 times, basically citing no one else. It did mention George once — but negatively. George, on the other hand, has been cited often by the “restrictionist” side.

George did a critical analysis of the Card paper last year; Giovanni responded; George rebutted; and yesterday it was Giovanni’s turn (though the latter was not a rebuttal, in that he did not address or even mention George’s latest analysis).

Unlike some economic debates, this one can actually be followed fairly easily by noneconomists, because it basically boils down to a “he said, she said” argument as to exactly which set of workers should be studied. As I’ve said before, I’ve never liked the regional comparison method of analysis, because there are too many uncontrolled variables, leading wild inconsistencies from one study to another; I have cited state-by-state studies on capital punishment, for instance. Yet some things are highly factual and stick out like a sore thumb.

Notable among these is George’s discovery of a major flaw in Giovanni’s analysis: In assessing the impact of the Marielitos on native high school dropouts in Miami, Giovanni treated as “dropouts” those who actually are still in school, i.e. are NOT dropouts. You don’t have to be an economist to see that this is major trouble for Giovanni’s findings.

Giovanni is a serious player in this arena. He uses sophisticated methods, and I found the approach he took in one of his papers to be especially clever (though also flawed). But my criticism of his work has often been that there are decisions he makes in his analysis process that potentially matter a lot but which he does not reveal to the reader in his subsequent writeups. I presume that he consciously chose to include the nondropouts as dropouts as described above; well, fine, but it is required academic protocol that one explain such a thing. In another one of his analyses, a regional approach to the question of whether the H-1B work visa program harms or helps native workers, he omitted from his data the most prominent H-1B using region of all — Silicon Valley! — again without disclosing that omission to the reader. The bibliographies in his papers almost never cite any work that has findings that are unfavorable to the H-1B program, when in fact one is supposed to cite all relevant prior work. These are major academic transgressions.

Indeed, Giovanni fails to cite his own relevant work. One particularly germane example is his 2012 paper, “Immigration, Labor Markets, and Productivity,” in which he finds (indeed takes it as universally agreed upon) that immigrant labor is cheap, and in fact lauds it as a boon to employers:

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

Presumably the Marielitos especially didn’t want to go back home. Low bargaining power, indeed!

Again, you don’t have to be a rocket economist to see how contradictory this is to Giovanni’s recent research finding that the Marielitos did not adversely impact native wages.

I take issue also with Giovanni’s favorite argument, that immigrants don’t reduce native wages, because immigrants and natives play complementary roles in labor markets; in plain English, the argument is that immigrants and natives do different kinds of jobs, so “no harm, no foul.” But of course, the truth frequently is that the immigrants do different kinds of work because the natives are driven out. As the complementarity claim is an especially common argument with pro-expansive immigration policy researchers, some examples are in order.

A well-known example at the low-skilled level involves the Los Angeles hotel industry, in which employers fired the unionized, largely-black hotel janitors and replaced them with immigrant Latinos. A more recent, but equally egregious instance involved cleanup after Hurricane Katrina, where the African-American workers were told they were being let go, “because the Mexicans are here.”

At the high-skilled end, there is the 1989 NSF report that I often mention, which (a) advocated bringing in lots of foreign graduate students in STEM to hold down wages and (b) correctly forecast that the resulting stagnant wages would drive domestic students away from graduate study. I’ve taken even economists whom I highly admire, Bill Kerr and Jennifer Hunt, to task on this point, as their analyses fail to account for this gradual trend in the makeup of graduate programs. At any rate, you can see from this that the claim made by the industry PR people that foreign and domestic STEM workers play complementary roles (with respect to degree level) is highly misleading.

Another argument commonly made regarding the wage impact issue is “Immigrants are consumers too, thus generating more demand for goods, thus raising native wages and job opportunities.” This too is misleading, in a couple of senses.

First, consider the following “thought experiment.” Suppose immigrants were to live off the land, growing their own food etc. and engage in no consumer activity at all — but they did work for pay. To put things into even sharper focus, say they send all their earnings back home as remittances. Then once again, you don’t need to be an economist to see that they would depress wages. Of course, this is a very artificial example, but it has a real-life implication: If immigrants generate demand below a certain level, there will indeed be a decline in wages. And low-skilled workers, being poor, don’t generate much demand. It’s unclear just where the threshhold is for generating “enough” demand, but it is very clear that claim “Immigrants are consumers, so they raise wages” is a gross oversimplification.

Second, the argument doesn’t account for labor market segmentation, and inelasticities in demand for labor at the high end. The number of software engineers needed by a company, say Walmart, wouldn’t increase much, if at all, if Walmart’s retail sales were to double.

Finally, a note on sample size: Some critics of George’s analysis dismiss it on the grounds that his samples are too small. This ignores the fact that his findings are indeed statistically significant. I am not a fan of significance tests, but let me point on that even very small samples can yield statistical significance. Indeed, getting a statistically significant result with  small sample is an indication of a large effect.

A little more openness to the reader, and to research done by those with contrary opinions, would make Giovanni’s work much more useful, in my humble opinion as a, ahem, noneconomist.

Malkin on Rubio/Microsoft

Another provocative column by Michelle Malkin, describing a textbook case of “follow the money,” very disturbing. The Gates-Rubio connection is especially troubling.

The long arm of Microsoft seems to reach everywhere. I’ve mentioned before, for instance, that the firm and Gates have been huge donors to the Brookings Institution, one of the most pro-H-1B think tanks in the nation.

I have nothing against the firm (and applaud their current trend of embracing open-source software), but their track record on issues that I care about has been quite poor. For example, take the age issue. I’ve often emphasized that H-1B is used as a vehicle to avoid hiring older Americans, with young H-1Bs being hired in lieu of older U.S. workers. Remarkably, Microsoft actually admitted that they hire very few oldsters. And when you couple that with their strident push for expansion of the H-1B program, well, it doesn’t look pretty.

Be sure to follow Malkin’s link to journalist Maria Bartiromo’s putting Rubio on the hot seat, with Rubio blatantly ignoring her questions. I’ve always liked Bartiromo, even more so now.

Major Breitbart Analysis of H-1B and Related Issues

Press coverage of H-1B and other foreign tech worker issues has generally been scant for the last 10 years or so. By contrast, H-1B was on every major TV network news show in 1998-2000, along with fairly good coverage by the New York Times and Washington Post. The SCE and Disney scandals did result in some lengthy articles in the Times during the last year, but even those were biased in favor of the mainstream tech industry, a point I’ll come back to below.

Computerworld has been giving excellent coverage to this topic since at least as far back as 1997, and the Science Careers online site has also been first rate. By the way, the latter has a new review of the Malkin-Miano book Sold Out that is well worth reading.

For general news sources, Breitbart has stood out, and just published one of the most in-depth articles on H-1 I’ve ever seen, a must-read. In this post I’ll amplify on some of the comments made by the reporter, Neil Munro, and will also take him to task a bit.

Munro’s main complaint seems to be that the vast majority of journalists who write articles on H-1B refer to the 85,000 yearly limit for new visas, without mentioning that there are categories exempt from the cap, chiefly involving universities (and their industrial partners), that add tens of thousands more foreign STEM workers into the U.S. labor force.

To me, it isn’t such a big deal. I don’t think the universities should have exemptions from the cap (and they did not always have this privilege), but I don’t think the reporting on this issue has been severely distorted by the omission. Nevertheless, Munro raises a good question, asking how this omission has occurred.

He says it is because the reporters “have been kept in the dark” by the industry and other entities with vested interests in the H-1B program. But that really says that the press is lazy; even a cursory look into information on the visa would quickly show that there are exempt categories.

But Munro also suggests that part of the press’ blindness on this issue is that they tend to be ideologically quite pro-immigration, even to the point of describing immigration as a “civil rights issue.” He quotes Mark Krikorian and me on this, but is also speaking from his own experience as a member of the journalistic community.

Munro cites Julia Preston of the New York Times as a case in point, and it is fascinating:

The New York Times’s Julia Preston is a leading example. In 2013, at a semi-public event in Washington D.C., she described the push by business groups and progressives to win amnesty for the roughly 12 million migrants living in the United States as “a very substantial civil rights movement.”

Preston admitted that she empathized with the migrants. When covering a meeting of young advocates for illegal immigration, “seven hundred kids got out of their chairs and kind of came forward and… embraced [some of their] parents… and I’m just sitting there going, ‘How come I can’t get this kind of game from my daughter?’” she said. Her support for migrants is also driven by her employers’ ideology, she admitted. “There is a strong understanding on the editorial desk and at the masthead of the New York Times, that this issue is about the heart and soul of the United States, and who we are going to be as a nation going forward,” she said.

This is strong stuff, “the heart and soul of the United States”! I feel compelled to disclose, then, that Preston is the “mystery journalist” I‘ve mentioned before:

Many of my readers think the MSM [mainstream media] is horribly biased on H-1B issues. I’ve generally defended the MSM, saying they are merely ignorant, victims of the tech industry’s relentless PR campaigns to implant in the American consciousness the ideas that we have a STEM labor shortage, that the foreign STEM students are all geniuses, etc. But I must say that even I was taken aback by something a reporter from a top MSM outlet recently said to me in an e-mail exchange. I had corrected her terming H-1B visa holders as “immigrants” (many hope to immigrate, but H-1B is simply a temporary work visa), she replied,

I am aware that the term of law for foreign workers on temporary visas is “non-immigrant.” But it is legal jargon that we avoid [at this MSM outlet], in no small part because its tone is insulting to the foreigners. (From non-immigrant to non-person is not a long way.)

I had written here before on the manipulation of language by the industry PR people, but “insulting”? “Non-person”? Really? The above statements by a journalist at a major newspaper are really laughable — and pathetic. It is this sense of things spinning out of control in the country that are making the “outsiders” so attractive to many voters these days.

Munro adds,

…since 2012, Preston has written several powerful articles about the H-1B’s impact on middle-aged American tech-experts at Disney, Southern California Edison and Toys ‘R’ Us. But [she] has not mentioned the university exemption.

Again, I don’t think Preston’s failure to mention the exemption is so terrible, but I have been highly critical of her articles on SCE etc., because they give the impression that abuse of H-1B occurs mainly among the “Infosyses,” the rent-a-programmer firms, and not the “Intels,” the mainstream companies. I’ve written on this point often, and won’t repeat myself here, but my point is that Munro has missed the boat here, as Preston’s “powerful” articles on SCE etc. should be seen as her defending “the System,” actually affirming that H-1B is used responsibly by the Intels. Indeed, she ignored the information I gave her showing the contrary.

The System includes OPT, heavily used by the Intels, and Liz Robbins, a Times reporter who later wrote another piece on H-1B, also defended this.  I wrote,

There is also a related article in today’s New York Times.

There isn’t much in the Times article. On the contrary, though balanced in terms of space, the reporter (newly transferred to the immigration beat from the sports desk) seems to buy into the DHS claim that we “must” retain the foreign students — and indeed, attract them here in the first place — come hell or high water. Given my research and that of others regarding the overall lower quality of the foreign students, why the mad rush to grab them? Or better, why is there no push to give H-1B and green card priority to the top foreign students, as befits our national interest?

By the way, Munro describes me as someone “who often speaks to reporters,” implying that I contact them rather than their seeking me. Actually, the latter is almost always the case. I did in fact contact Preston, but with Robbins, it was the way things usually work — she contacted me and asked for an interview. I spent an hour talking to her outside on a very hot summer day (she called earlier than our agreed-upon time, when I was driving, so I parked the car and talked to her on the street). And she got it; she understood what I said quite well, and asked good questions. Yet none of that appeared in the article, and other than a brief quote of John Miano, the entire article was pro-OPT. Indeed, another academic who had spent a lot of time with her when she contacted him also was omitted from her article.

It’s worth mentioning at this point, as I occasionally do, that I have no personal stake in the H-1B issue. Lots of reporters contact me but with my quotes not making the cut, and that is absolutely fine. But Robbins’ article was so biased, and appeared in our nation’s leading newspaper to boot. Munro’s material on the Times above makes all the pieces fit together. Preston’s words about those who opposed the 2013 Comprehensive Immigration Reform bill, “It gets really ugly out there,” seem to describe the Times pretty well too.

Munro, unfortunately, dropped the ball in his analysis of university hiring of H-1Bs, as professors, researchers and so on. WHY do they do this? The main answer is that so many STEM PhDs at U.S. universities are awarded to international students, and THAT IN TURN is due to the flooding of the market by those students, in a vicious cycle. As I’ve often pointed out, a 1989 government memo actually forecast this (and supported it) — foreign students would swell the PhD labor market, causing stagnant wages, resulting in domestic students avoiding doctoral study, so that universities would admit even more foreign students, and so on. This too is almost never mentioned in press accounts by the Prestons and Robbinses (and the latter did know about it), and it’s far more important than failing to point out the cap exemptions.

H-1B, OPT, green cards and so on are complex issues, no doubt about it, but our journalists are failing the nation. Freedom of the press includes the right to print uninformed or downright biased material, but this is a sad state of affairs we’re in.

DHS Strikes Again — But with Less Than Meets the Eye

There is yet another proposal by DHS to please employers, foreign workers and foreign students. See the Breitbart account, DHS’ “summary” and the actual proposal.

The proposal is yet another outrageous attempt of the Obama people (and before them, the Bush people) to take the law into their own hands, bypassing Congress and thus the Constitution. Though, contrary to the Breibart headline, the actual impact on American tech workers would be small (details later below), it’s quite amazing that the White House has the gall to make this proposal, in light of recent scandals.

I have one scandal in particular in mind, the one discovered by the local press at Wright State University. I discussed this in blog posts here, here and here, but a summary is as follows.

Basically, private industry is setting up shop near/on university campuses as an end-run around the H-1B cap. University workers are exempt from the cap, so the strategy is for the private company to contract out work to the university, who hires the H-1Bs, yet still with the private company playing the main role in supervising the work. As a bonus, the prevailing wage for the job is figured on academic levels, so the company attains salary savings too. The work is called “research,” and though there may indeed be university researchers who publish some papers on the work, it’s a mainly a great way for industry to save on labor costs.

Wright State was engaged in such activities, and though for the most part both Wright State and the private firm were likely in technical compliance with the law, it certainly made for bad press for the university, especially when it was found that some of the university administrators seemed to have overstepped their bounds. Two were fired.

This setup is surprisingly common. I mentioned in a previous post that for instance, that Intel has several such centers. And needless to say, this approach is highly popular with universities, as they get fat commissions (known as overhead) for the companies sponsoring the research. Just today a reader called my attention to this one at the University of Illinois. There the details are given for one of the arrangements for hiring students:

Indirect hire at an hourly rate through Research Park Internship Program: Under this program, the intern is a student that is regarded as an employee of the University and performs work or services for the company as an independent contractor without any employment relationship between the company and the student.  The University of Illinois is responsible for all human resources services and the student is on the University’s payroll.  The company pays an hourly wage to the student plus an overhead charge on all student wages to the University for administrative services.  The company retains ownership of the work product. Contact Megan Puzey in the UI Office of Corporate Relations at mpuzey@illinois.edu.

Did you catch that part about the company having ownership of the work product? And of course, UIUC here points out that the companies can definitely hire international students. Also, though this document was about hiring students, in the Wright State case full-time workers were being hired, and this is probably common.

Plug “university research park” into Google, and you’ll find lots of other examples of such cooperative entities.

The DHS proposal would simply tweak policy on these setups. Indeed, DHS said that they are merely codifying policy that they had been using informally. But it is BAD policy to begin with.

This is only one of many aspects of the new proposal, most of which clarify current DHS practice. One of the provisions having the most consequence to foreign workers would allow many who are currently waiting for a green card to “jump the gun” and enter the labor market essentially as a free agent, rather than waiting the years until their visa comes up. They only will get an Employment Authorization Document (EAD), and must still wait for the green card itself (and its role as a first step toward chain migration of others), but they are free to leave the employer who sponsored them for the green card.

The impact on Americans would be quite small, because these foreign workers are ALREADY working in the U.S. — for the employers who sponsored them. So, for those who view these workers as taking jobs that Americans could have filled, they are ALREADY doing so, and thus there would be no real net loss to the Americans. On the contrary, I’ve repeatedly emphasized that one big reason tech employers like hiring foreign workers is that the workers become immobile during the years the green card is pending. The DHS change would slightly reduce this attraction to employers (though again, only slightly).

All in all, the impact on American workers of the new DHS proposal would be minor. It pales in comparison with what DHS has been doing with OPT, which has been quite harmful. In fact, Satya Ganti, the foreign worker profiled in the press accounts of the Wright scandal, had already been working the U.S. for 29 months, under exactly the DHS OPT policy which was recently vacated by a court, pending fixes to be made by DHS. That case, currently hanging in the balance, will have far greater impact, one way or the other.