H-1B Reform Proposal — a Great Start or a Cruel Ruse?

For some time now, various people and organizations have been proposing a simple, effective solution to abuse of the H-1B work visa: Dole them out according to offered salary, highest first. When the visa cap is hit, we stop issuing visas. Reportedly it is under serious consideration by the incoming Trump administration. I myself support this idea. It would not be a full solution, but would be a great start if properly implemented, though of almost no value if badly implemented, a point I will come back to below.

The proposal is appealing for a number of reasons. It is a clean, market-based approach, trivial to implement and would seem to directly benefit the U.S. economy and society: Assuming that the higher-paid workers have more value to add, this proposal is very attractive.

And unlike related executive actions by George W. Bush and Barack Obama that usurped Congress’ legislative authority, this proposal is clearly within the rights of the executive branch to write regulations; the H-1B statute says nothing about the order in which visas are issued, so the executive branch can set that order as it pleases.

And lo and behold, the proposal has wide support, ranging from strong critics of foreign worker programs to supporters of such programs, notably Rep. Zoe Lofgren of Silicon Valley and the IEEE-USA engineering organization.

Well, wait a minute. The fact that Lofgren and the IEEE-USA support the highest-salary-first idea ought to raise some suspicion. As I have pointed out before, the claimed benefit of the policy may be illusory if it is implemented in the manner advocated by Lofgren.

H-1B and green card law require employers to pay the foreign worker something called the prevailing wage, which is the average salary for a given occupation in a given geographical region, and at a given level of experience. Concerning the latter, four levels of experience — proxies for age — are defined. There lies the problem — would a highest-salary-first policy rank wages overall, without regard to experience level, or would the ranking be done separately within each level?

Lofgren has already proposed that the ranking be within-level. If that is the policy that is adopted, we are for the most part BACK TO SQUARE ONE.

How so? As I have often stated — yes, yes, often harped on — the core of H-1B is AGE. Younger workers are cheaper than older ones (age 35+). Employers, both Intels and Infosyses, love H-1B because it expands the pool of younger, thus cheaper, workers to choose from. The vast majority of H-1Bs are classified as Level I or II, and they are hired instead of Americans, or to replace Americans, who are at Level III or IV.

In a case given wide publicity, Walt Disney company replaced OLDER American IT personnel by YOUNGER foreign workers. Sorry for the all-caps format here, but the age issue is almost never mentioned in discussions of the Disney scandal, and yet it was the central issue, the main way Disney saved money by hiring the foreigners.

But it is not just Disney; it is basically all of the mainstream U.S. tech world. I’ve shown before, for instance, job ads by firms such as Intel and Facebook that specify new or recent graduates (NCGs and RCGs, in HR parlance). They ignore the older American applicants and then hire H-1Bs, claiming a “shortage” of applicants.

Note especially the invention of rather bizarre job titles, such as HP’s concocting the title Associate Software Engineer. Indeed, it was clear from the rest of that HP job ad that it was targeting cheap foreign nationals.

The point is this: Even salaries that are well above average in Level I would be much lower than what established Americans make. Disney would still replace Americans by cheaper H-1Bs, and HP would still aim its “creative” job titles at hiring foreigners rather than Americans.

So, if the Trump administration caves to the lobbyists and defines its highest-salary-first policy to mean highest within prevailing wage level, it will be fraudulent “reform.” It will look good, but for the most part just continue the current tragic situation, in which employers employ foreign nationals in preference to equally-qualified Americans. To be sure, it would help a little at the margin, but it will be end of H-1B “reform.”

If the motivation for highest-salary-first is truly that a high wage means a high contribution to the American economy, then the ranking should be done overall, not within experience levels.

 

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47 thoughts on “H-1B Reform Proposal — a Great Start or a Cruel Ruse?

      • I’m also 100% in agreement with you about politicians.

        Most of DC does not receive the truth, because the stakes are so high in this particular matter. When I and the others met with Ted Cruz and early fall of 2015, he was absolutely shocked at the facts as presented to him about H-1B. He claimed to have known that there were plenty of problems with it, but not to the extent that we highlighted. And we referred to you plenty of times, so if you look at your web blogs in October in November of 2015, I’m sure you’ll see a spike in visitors from Texas and DC areas.

        I will never publicly admit this, but a first step of starting minimum pay of $100,000 and eliminating the offshoring companies, is a heck of a lot further than where we’re at today.

        Craw, walk, run can be acceptable if there isn’t five to ten years in between each stage.

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        • That change does not keep up (my opinion) or equals inflation (economic dry labing opinion)! It is not an increase and highlights previous losses over 28+ years. Over that time the increase suggested is about 2.75%. Counting alluded to chickens before they are received.

          The Indian press (and the legislator’s site I think) is reporting $132,000. Now why would the US press discount? Meow. Meow!

          I have been abroad for a few years and have returned to fantastically high prices in a techy city. Not to mention asset prices like stocks. So, when I saw that 132K number I thought hey that is large. And did not connect it to inflation until I did a calculation to figure out the annual rate of increase to compare to purchasing power depreciation of currency.

          P2017=P1987(1+f)^n where n=2017-1987 , it Might be 1989 but 2 years will not effect the result much

          f=(p2017/p1987)^(1/n)-1 = (132,000/60,000)^(1/30)-1=.027 2.7%
          If it started in 1989 then it is 2.8%.

          I remember the days of the $60k rule was put into effect and remember that a single person living small near that pay with out a house renting in an expensive area hardly saved any money per year.

          Aside: {(Now, I wonder if US is in a situation Japan used to be with really large prices and their people looking like they were really rich because they had high amounts of cash compared to the places they visited. Then when it went bust Japanese tourism plummeted.) A possible explanation is more money floating around because of the debt taken on by the private sector. Credit money created by debt and destroyed by paying debt increases the money supply. The money supply is credit money and currency.}

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        • "You could buy and sell Congressmen in those days—you can still buy and sell Congressmen, but in those days they were a lot cheaper. "--Jim Rogers says:

          “New H-1B reform bill proposing twofold hike in minimum wage introduced in House of Representatives ”
          https://www.americanbazaaronline.com/2017/01/31/new-h-1b-reform-bill-proposing-twofold-hike-in-minimum-wage-introduced-in-house-of-representatives422045/

          “No, Zoe Lofgren’s Proposed Legislation Does Not Call For a New Mandatory Minimum H-1B Salary of $132,000 ”
          https://ashwinsharma.com/2017/01/31/no-zoe-lofgrens-proposed-legislation-does-not-call-for-a-new-mandatory-minimum-h-1b-salary-of-132000/

          How to calculate the annual increase, f, of pay over a period of, n, years.

          P1=p0(1+f)^(1/n)

          f=(p1/P0)^(1/n)-1

          if:
          p1=$132000
          p0=$60000
          n=29 years

          then f~=0.0275.

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      • How do we as employees get the truth to him? The only ones who seem to have a path to the leadership are the CEOs and guest worker lobbyists (Immigration Voice). We have the government statistics to prove that there is displacement of American workers in favor of cheap labor.

        I have other issues:

        1. Quality of foreign education sources – all institutions need to be accredited by an internationally recognized agency; engineering and IT programs should be recognized y the Washington Accord or Seoul Accord and similarly as appropriate for other professional degrees

        2. Profession with a licensing or testing agency – individuals should possess appropriate license (doctors and nurses already do) ; engineers as PE or Engineering Intern; accountants as CPA, …

        3. All currently unused time should be voided; people can no longer “bank” a visa for future use

        3. Use it or lose it; guest worker must appear for work on date indicated in application. They must work continuously for the authorized period; any absence outside the US greater than the permitted employer vacation time should void the visa requiring the guest worker to go through the process again

        4. Change of status should void the active approval (no changing of H-1B to H4 or F1 or B1/B2 and then back)

        5. Employer should post a “bond” equal to one year of FICA payments to make sure that the employment offer is legitimate

        6. E-verify required

        7. FICA employer payments for payroll of OPT and CPT workers to eliminate the benefit of hiring foreign students and recent graduates; better still the elimination of the programs as US citizens do not require additional “training” to go to work for the same employers as OPT students

        More to come

        Liked by 1 person

        • >> How do we as employees get the truth to him? The only ones who seem to have a path to the leadership are the CEOs and guest worker lobbyists (Immigration Voice)

          The groups that got our back too have ‘hotline’ access to him through Stephen Miller, the one referenced in the reuters article above. Miller is THE ‘brain behind Sen. Sessions’ and ‘our man’ in the president-elect’s administration. Him supporting Issa’s bill along with IEEE-USA should be an early wake up call to all of us of what’s coming our way. Does that mean our groups are unable to push the envelope or is there something else?

          In the absence of Issa’s bill seeing the light of the day, our folks will halt any other ‘reform’ bill coming (a good thing), a status quo being maintained (bad thing).

          I so love our Despicable Congress.

          Liked by 1 person

          • How many engineers who comment on line actually write their congresspeople? But I think when you write them it is Honourable so and so.

            I was told the engineering organizations are pro company over engineer with the assertion that their leadership was made up of corporate managers.

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          • "You could buy and sell Congressmen in those days—you can still buy and sell Congressmen, but in those days they were a lot cheaper. "--Jim Rogers says:

            Is it pay to play? Has it been corrupt? If it has been corrupt is it still?

            If lobbing has a return on investment more than 10 to 1 upwards of a 100 or 1,000 to one, starting a lobby might be the way. It sounds like a fantastic deal! And, on top of that, the incremental returns could be decades to come! First is defensive. But, when the returns come in they can be pyramided.

            If the companies only have profits to draw on for lobbying and if engineers pay is much more than that who has more to lobby with? Who really has more lobbying power?

            Even if salaries were less than corporate profits, and if the ROI is 10 to 1, it would be a good deal.

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          • "You could buy and sell Congressmen in those days—you can still buy and sell Congressmen, but in those days they were a lot cheaper. "--Jim Rogers says:

            Good Idea.

            No resister pants. No one will get it.

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    • you can’t be negative on Trump – he is the ONLY ONLY ONLY (got it?) person who even talked about helping the working class.

      IF IF IF… Trump does NOT help us, then we vote in the next guy who says he will help us.

      That is how we fight back.

      Please get on board with this idea. Its all we have.

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  1. Either way, whether it is done overall or within each experience level, the narrative will be “now that we’ve fixed the issues with H1B, we need to allow more visas.”

    I’m not sure if there is any data on what the lowest salary would be if the past visas were awarded based on salary offered, but I think ultimately the engineer profession will still be getting undercut by younger foreign labor since those $30k manicurist and landscaper visas will now become $55k associate software engineer visas.

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  2. Therein lies the problem, the lobbyists write their own bills and have their pet representative introduce it. Invariably, these bills strike, or overwrite, certain portions of the law. As a group, we should fully back one solution, perfect a sample legal document, and present to a lawmaker that can be trusted.

    As I’ve stated before, the straight competitive-bid solution has a fatal flaw, all of the H-1B visas would be awarded to the highest paid occupations. The selection process should be designed to distribute visas across all eligible occupations, i.e., where a programmer’s salary is bid only against other programmers. A round-robin sports style draft selection, with each eligible occupation representing a “team,” would be awarded one visa per round.

    If we were forced to continue with the prevailing wage farce (and worse by area of intended employment), the round-robin selection would also defeat that loophole. Levels I, II and III have upper limits, those applications would invariably result in ties and a random selection among several applicants. Using the “STEM Designated Degree Program List” for OPT extension, there are 224 occupations on the list and this is not inclusive for all eligible occupations. Distributed across four prevailing wage levels, that total would be 896 (capped) occupational designations. With full participation, the result would be 95 visas available, per occupational designation, nationwide.

    Eliminating the lottery with the competitive bid scheme would have another side effect, all of the applications would be opened, evaluated and their checks cashed — un-selected applications are currently returned unopened. NASSCOM companies are currently applying for almost 10,000 visas per year, but are only financially for the applications that are opened. In a competitive bid scenario, those $4000.00 checks would be cashed, it would cost a NASSCOM firm $40 million to continue to game the system by flooding the system with applications. (The applications vs. available visas propaganda would die eliminated and a true metric established.)

    Conversely, legitimate employers are interested in Level IV personnel because they are critical to their project. even if the candidate is has Level I experience, the legitimate employer can choose to apply at level IV, make the highest bid and ensure that they win the visa for their chosen candidate.

    Finally, I agree that ageism is a problem, but once the wage delta is increased, age will become a far less important factor in hiring decisions. The NASSCOM firms, under pressure to perform on their contracts will experience a foreign labor shortage for the administrative positions that they specialize in and be forced to consider even Americans over 35.

    Liked by 1 person

  3. The H-1B can not be fixed it needs to end. The law is a masterpiece of deception. One section promises protection only to be undermined by another. Looks to me like the people who wrote it knew they were doing something voters would disapprove of and therefore gave politicians plenty of “plausible deniability.”

    Liked by 1 person

  4. A number of conditions are need to make an “auction” system work. First, the pool of visas must be kept low enough to sustain the visa’s price premium. If we have 235,000 petitions and 215,000 visas, then we’ve gained nothing.

    Similarly, different occupations can’t be used to broaden the pool. If the auction runs simultaneously in 5 or 6 occupations, the power of the auction may be diluted.

    I assume there will be carve-outs and exceptions. These are invitations to erode the power of the auction.

    Of course, we always have the risk of saying the auction system suddenly “fixes” the H-1B program, and we lose the initiative to get non-displacement language, market mobility for H-1B workers, and other provisions from Durbin-Grassley.

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    • I know it really changed the mind of one friend who had the “Intels good, Infosyses bad” mentality.

      I often use that scandal to illustrate my point that, for many Silicon Valley employers, the attraction of hiring a foreign worker is not so much a matter of cheap labor as immobile labor. So it was not really a wage-fixing case, but conspiracy to keep workers trapped in their jobs.

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      • "You could buy and sell Congressmen in those days—you can still buy and sell Congressmen, but in those days they were a lot cheaper. "--Jim Rogers says:

        Its a human rights case.

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        • "You could buy and sell Congressmen in those days—you can still buy and sell Congressmen, but in those days they were a lot cheaper. "--Jim Rogers says:

          H1-B laws and practices are already illegal. They break many human rights laws.

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          • "You could buy and sell Congressmen in those days—you can still buy and sell Congressmen, but in those days they were a lot cheaper. "--Jim Rogers says:

            When or if it is overturned it would be good form to not cheat those subject to it or let the beneficiaries cheat them further due to the overturning.

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  5. From the reuters article,
    >> The idea advanced by Miller in the tech meeting has also been pushed by the IEEE-USA.

    If this has “Brain-behind-Sessions” Stephen Miller’s blessings, it is a looong ride for american workers!

    and ,

    >> Microsoft (MSFT.O) CEO Satya Nadella said technology companies need to be able to recruit talent from abroad when necessary.

    wow! this guy has the audacity to want to bring in ‘as many’ and ‘whenever’. At this point, this is not about the cartel wanting to loosen the current system, but folks like him wanting more of H1s after himself gone through the same process and having first hand knowledge of how flawed EB immigration system is!

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  6. Will the bidding for workers be secret or will one know what others have bid prior to placing/revising a bid?

    There will have to be a hefty fee ($10,000?) for each bid in order to prevent companies from reneging on a winning bid. If not, a company can summit dozens of bids, one for each different worker, and choose the lowest winning bid and renege on all the other higher winning bids.

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  7. “Lofgren has already proposed that the ranking be within-level.” If this is the case, then this will benefit native workers. Lofgren’s proposal would, I guess, require the visas to be allocate to each of the four levels of experience prior to bidding. If 25% of the visas are allocated to each of the four levels of experience, then there will be fewer available visas for the younger and cheaper workers since currently “the vast majority of H-1Bs are classified as Level I or II”.

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  8. I agree with Norm that the award of H1-b & L-1 Visas based upon Highest wage first and 4 “Tiers” of foreign worker experience is misleading and likely unfair to all job applicants. These 4 Tiers will not be implemented because of Trump opposition to increasing government regulation, the job title Tiers are too difficult to classify and regulate, and implementation of the job title 4 Tiers will greatly slow down the hiring process for IT workers as companies try to ensure compliance with increased government regulations.

    The Trump Administration mantra to cut Federal Government rules and regulations that supposedly prevent job creation within the USA does not seem to agree with the increased government intervention needed to monitor and regulate this proposed 4-Tier wage structure ranked by wages. How are Job Tier assignments and wages to be quickly assessed, assigned, and ranked, when the supply and demand of available IT jobs and the cost of living varies so much across geographic locations in the USA ?

    As briefly mentioned in earlier posts, is Government or Business supposed to decide which of the 4 Tiers of Jobs should a specific job opening be assigned? IMHO, Companies in the USA and overseas cannot be trusted to self-monitor on the “honor system” to fairly classify these open jobs into Tiers. Most Companies are solely interested in basic legal compliance, while minimizing contract/hiring costs in any way possible. Contract companies have no incentive to raise wages because they claim only their Customer decides the job tier assignment and contract companies are responding to specifications set by the Customer. Unethical Company Managers in all industries will probably try to create new, revised, or vague job names, titles, or descriptions and assign these specific jobs to lower wage job tiers for lower costs.

    Most job assignments to a specific tier are likely to be appealed by multiple companies until a revised Tier list is reviewed, negotiated, approved by multiple partners/participants, and implemented much later after management reviews and legal appeals. It would take many years and multiple legal battles to implement a 4-tier job ranking based on wages.

    It seems to me that further restricting the quantity of H1-b and L-1 visas that are available through a Visa Lottery is the most simple, effective, and expedient way to reduce the age discrimination and wage discrimination that is far too common in the IT Industry.

    Liked by 1 person

  9. Considering you have so much experience and interest in this field, why don’t you directly reach out or have people like Sessions include you in the committee professor? I think that would be very helpful

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    • There are in fact some key people here and there who read this blog. Some of them have in fact contacted me occasionally. However, the industry lobbyists would veto any formal participation on my part.

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  10. But if its all about age discrimination, why do employers need H1Bs for this? Why dont they just hire younger americans to replace the older americans?

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    • They do! As I have said many times, the market for new graduates, domestic or foreign is strong.

      There are some nuances to that, though. First, new foreign graduates are even cheaper than new American ones. Second, if the foreign worker is being sponsored for a green card, he is essentially immobile, enormously attractive to employers. Third, the American students, with their good English etc., are often shunted into the “talking” jobs, with the foreigners assigned the technical work.

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    • >> But if its all about age discrimination, why do employers need H1Bs for this

      As @matloff puts it, its the lack of job mobility.

      Every employer loves the current system of legally blessed/congress approved indentured labor being served on a silver platter to them — the labor that will be with them for the rest of their lives due to greencard backlogs,

      for a simple reason – Intels do not mind paying, say 200k for Level I (even if we assume for a moment that’s the floor set by Issa’s bill) since they very well know that this person will be with them since (s)he joins (at a very young age) and (s)he will ultimately die in that very position since (s)he is in a backlog and *any* material change (promition/salary hikes/transfers etc) will necessitate a new petition and there is a huge risk in doing so which the employer nor the indentured employee will be willing to undertake. The wealth of talent that the indentured labor gains will be ‘retained’ with the company for a life time – Now, which employer would not want that?

      If reuter’s article posted above is any true, Stephen Miller supporting Issa bill is most appalling.

      Whatever happened to ‘we will stop *all* alphabet visas’ as a starting point on negotiating table and work from there … Maybe its very difficult even for the likes of creme-a-la-creme in ‘have our back’ groups/congressional folks and they too need to settle for the proverbial ‘collateral damage’. One is one too many, but who cares?

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  11. I thought increasing prevailing wage would solve the issue with H1B because the companies which are hiring cheap foreign labor would have to think twice to see if it is worth bringing someone over than using existing American talent. If the prevailing of an H1B is same as that of for an American then there is no point in bringing over people on H1B. Thoughts?

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    • There is nothing in the plan that directly raises the legal wage floor. It would merely give some preference to those who offer higher wages (with the definition of “some” depending on the details).

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    • Even if the true prevailing wage is paid it is still cheap labor. First, the wage is set by the job not the person. If a job is described as needing a BS degree and one year experience the company can hire someone with a PhD and 10 years experience and be in full compliance with the law. Second, if, as is often claimed, the skill set is in short supply then in a free market that skill set should command a premium above the average or prevailing wage. Yet the employer pays the average wage not the higher market wage. Even when an honest prevailing wage is paid it is advantageous to hire foreigners.

      I am pessimistic about any fix to the bill. The H-1B law is a masterpiece of deception with one section giving protection to American only to be taken away in another section. Most fixes are going to be cosmetic. A year after they are implemented we are going to discover that it got worse not better. The H-1B needs to end.

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      • Martin,

        The real motivator is the prospect of much cheaper unregulated guest workers, under a separate set of rules, those of the WTO General Agreement on Trade in Services. Thats the 1995 agreement the US and a great many other countries signed that pledged to progressively open borders to services (defined as “everything you cannot drop on your foot”) under four so called Modes of Supply.

        “Mode Four” or Movement of Natural Persons – such as temporary service workers, across borders to provide services, is also covered in the new Trade in Services Agreement, portions of which have been leaked. the primary goal of such agreements is enabling lower costs/higher profits for multinational corporations, and providing a means for the corporations of poorer countries, particularly officially recognized Least Developed Countries- to get into service business provision in developed countries, (economic integration) and make healthy profits acting as a broker of low wage initially high skill workers..

        Ive read several times that nowhere in the GATS does it say anything about wage parity, although this could possibly change it would have had to be by means of international agreement in an area where the poor countries have repeatedly insisted that their workers not be paid a national minimum wage if one exists. Because they feel it would poil their chances of getting the work.

        Does this mean that even when state or national laws require payment of a prevailing wage (say on a government contract) they would not have to? I think they would simply bring the subfederal entity before the WTO or similar body and have them rule that the national or subnational entity had to eliminate the requirement or be subject to sanctions. So in anticipation of the change its likely the national or subfederal entities will eliminate any requirements which could be seen to be waving a red flag in front of the WTO like prevailing wage requirements.

        We have to remember that the main goal of the GATS is stimulating international trade, part of which is turning gradients in costs from one country to another into profits.

        Therefore, not doing so would eliminate the profit – so then what would be the whole point?

        You may be confusing Mode 4 with H1-B, the subject of this site.
        So to recap the main point, the guest worker programs enabled by trade agreements largely do not embrace the concept of wage parity because to do so would be seen as depriving poor countries to make use of their main “competitive advantage” (as opposed to comparative advantage) low wages.

        This is because the trade agreements main goal is increasing trade in services internationally. Its understood that there are winners and losers in this global game.

        Were their professionals required to be paid the wages prevalent in rich countries by their service employers it would deprive the LDCs of the long delayed, much anticipated pay back for 20 years of globalization, and also eliminate a good chunk of the profit to be gained from said globalization. So don’t expect that to happen..

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  12. Elsewhere, in a not-so-distant world in DHS, the entrepreneur ‘parole’ rule is implemented (cap-free, yay!).

    But wait.. after the initial ‘5’ year parole, if they have to apply for greencard, they have to get into the ‘backlog’ since this rule is created essentially to get more Indians here by the Venture capitalists (Khoslas of the world). Too many things to handle, too much little time. Oh well!

    More here:

    http://www.geekwire.com/2017/obamas-edict-help-immigrant-entrepreneurs-start-companies-u-s-takes-effect/

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  13. "You could buy and sell Congressmen in those days—you can still buy and sell Congressmen, but in those days they were a lot cheaper. "--Jim Rogers says:

    What if we formed a +500,000 person block or at least 25% of engineers with the accountants, an other talented group, and other business professionals. I hear there are a lot of out of work MBAs. If things are not made right in 30 days we would break off from the current group corporations and form, own corporations, and co-ops and be capitalists!

    Not a strike, but an abandonment. The others could be hired.

    Like

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