Correcting the Corrector

Prominent libertarian writer Stephen Moore recently wrote an op-ed lavishing praise on the H-1B work visa program, “…arguably the most successful [immigration program] for the U.S. economy has been the H-1B program.” A strong statement even for a libertarian, reminiscent of physicist Michio Kaku’s calling H-1B “our secret weapon” for US world economic leadership. Now  LA Times writer Mike Hiltzik is taking Moore to task for “parading his ignorance” on H-1B, a program Hiltzik calls “a cynical sham.” No voices of moderation among Messrs. Moore, Kaku and Hiltzik!

Sadly, though, Hiltzik too has his facts wrong. His statement,

…visa holders can work in the U.S. for three years, with the goal of obtaining permanent residency and, ultimately, citizenship.

is way, way off base, not even on the ball field. H-1B is a temporary work visa, good for three years and renewable for another three. It is separate from the employer-sponsored green card program. It is common for a sponsor of an H-1B to also sponsor the worker for a green card, but they are separate programs, and sponsorship for one does not imply sponsorship for the other. And, note that even if there is an application for a green card, this comes from the employer, not the worker.

This is not splitting hairs. In the green card case, the worker is in essence tied to the employer, whereas if the worker is just an H-1B, she has much more mobility and thus less chance to be abused.

Moore said, “There is little evidence that these foreign workers displace Americans from their jobs,” to which Hiltzik retorts that on the contrary, there have been some celebrated cases (Disney, SCE etc.). Yes, but Moore’s general statement is correct; in fact there is widespread displacement (direct and indirect), but hard evidence is limited.

Hiltzik says the NFAP study finding a big jobs multiplier effect from hiring H-1Bs was invalid because it wrongly attributed cause-and-effect, when actually  “tech companies were adding jobs at the same time they were hiring H-1B workers,” i.e. both stemmed from a boom tech economy. Fine, but Madeleine Zavodny’s study showing each H-1B hire produces 2.62 jobs used more sophisticated statistical methods, which she claimed did show cause-and-effect. Her study had tons of other problems, but still Hiltzik has not done his homework. (He’s written a number of articles on H-1B over the years.)

Of course, regular readers of this blog will immediately spot my biggest objection to his column, the “Intels Good, Infosyses Bad” syndrome, a view under which the Indian outsourcing firms are the main abusers of H-1B, an incorrect and dangerous view. Granted, he doesn’t let the Intels off the hook completely, but mostly so (“The H-1B program continues to be an outsourcer’s dream”). To me, that error tops any of Moore’s.

The Old (Age 35) American Software Developer

A friend called my attention to an article, “The Plight of the Graying Tech Worker,” by Prof. Bill Kerr of HSB. Most economists writing on a controversial topic will be rather (or very) strongly on one side or the other. On H-1B, Bill is pro-, as evidenced by a string of published papers, as well as his recent book, The Gift of Global Talent: How Migration Shapes Business, Economy & Society (Stanford University Press, 2018).

I first “met” Bill in 2009, when he and I were virtual guests on Lou Dobbs’ TV show, following the publication of Bill’s first paper on H-1B. I disagreed with its finding (which in any case has been widely misinterpreted to mean that the H-1B program increases US innovation), but was rather harsh in saying so. This I regretted later when I met him in person, as I found him to be a warm, friendly guy of high intellect and a genuine desire to get at the truth. I’ve continued to appreciate these qualities ever since.

Yet I tend to find fault with some his analyses, as in this 2013 post to my old e-newsletter. (Be sure to see Bill’s rejoinder.) One point I made in particular is worth including here (“KKL” refers to the three authors — Bill, his wife, and a collaborator, Bill Lincoln; by the way, this 2013 working paper appears to be Reference 8 in the current article):

Congress and the press will take KKL’s research to have implications specific to the hiring of engineers on temporary work visas–even though KKL’s work does NOT do this. People in Congress and the press are not going to read the disclaimers in the paper.

Even more importantly, KKL omit what should be an obvious analysis. They spend 46 pages measuring what they claim to be the effect of hiring immigrants is on a firm’s subsequent hiring. The obvious question is then what the effect of hiring NATIVES is, compared to hiring immigrants. If, for example, the native impact on hiring is greater than the immigrant one, then policymakers should be reluctant to expand foreign skilled immigration in any long-term sense; indeed, in such a scenario, H-1B would bring net harm to the economy.

I asked Bill about this omission back in May. He replied, “The main rationale for pursuing the immigrant hiring calculation [but not] the native hiring is that the former is more proximate to a policy action and its consequences than the latter is. Given that the ‘creates 4 jobs’ statements are at the center of the policy debate, they will tend to get the most attention from economists.”

Proximate, schmoximate, I strongly disagree. The policy debate focuses in large part on the industry lobbyists’ claim that the foreign workers are especially innovative, “the best and the brightest,” and thus have special job-creating powers. It would thus be natural, indeed imperative, to compare the job-creating powers of the immigrants to the job-creating powers of the natives. Arguably, KKL’s failure to do so suggests an unconscious bias on their part.

The friend who brought this new article of Bill’s to my attention presented it as a “man bites dog” piece, quite out of character. Yet its theme, the adverse impact of the H-1B program on older US techies, is not new to Bill at all. Indeed, his 2013 paper cited above found such an impact.

I highly appreciate that previous work, and the current article, as I have over the years maintained that age is a, arguably THE, core issue in H-1B. Older workers cost more than younger ones, not only in wages but also in health care and other benefits. Since most H-1Bs (and almost all H-1Bs in the tech field) are young, basic economic principles apply — employers will prefer the young H-1B to the older (read 35+) US citizen or permanent resident.

So, good for Bill for addressing the issue, one that most critics of H-1B (writers, think tank people, researchers) studiously avoid.

Nice. But sorry, I don’t like Bill’s current article. First, he states that he is focusing on the adverse impact of H-1B on older Americans because young ones are not affected much. In fact, employers have strong incentives to prefer young H-1Bs over young Americans. One major benefit of hiring an H-1B is that she is a de facto indentured servant, trapped with her employer, who then need not worry that she might jump ship for another firm, a huge advantage. And Bill’s assurance that wage underpayment is not an issue, due to the H-1B statute’s prevailing wage requirement, is not correct; the legally-defined prevailing wage is typically well below the wage the H-1B would command on the open market.

Second, I am disappointed by Bill’s two main recommendations: (a) the government should dole out the H-1B visas in order of offered salary, and (b) the harm to older US workers should be ameliorated by retraining programs funded by H-1B user fees.

To be sure, I myself support (a). However, the subtext of Bill’s support seems to be the “Intels Good, Infosyses Bad” idea that I have criticized so much — the thinking that the Indian outsourcing firms are the main abusers of the program, while the US mainstream firms use it responsibly. Bill is missing the boat here, and I believe it colors his other analyses.

Bill’s advocacy of (b) is puzzling. Doesn’t he know that this has been tried before (in the 1998 H-1B bill) resulting in failure? Even more importantly, it was pointed out — beforehand by me and in retrospect by Sun Microsystems — that such a program CANNOT work. An older programmer, say, who had been passed over by employers because he was too expensive will STILL be too expensive (and even older) after retraining. Actually, most software developers do have modern skill sets; they tend to be the types who love tinkering and learning new technologies. But employers won’t touch them, due to their perceived salary requirements, not to mention their health care costs and so on.

Again, all this is old news. See for example my comments in another post to my old e-newsletter, in which I said regarding Microsoft,

More subtle, but equally important, is what the article says MS will do in expanded MS operations in Vancouver: “This month [MS] announced plans to more than double its roughly 300-employee office in Vancouver, where video games have been the focus. There, Microsoft will hire and train 400 software developers from around the world to work on mobile and cloud projects.” What? “Hire AND TRAIN”? Bear with me while I explain.

The training issue–a phony one, for reasons I’ll discuss shortly–has been central to the H-1B debate ever since the industry’s first push to expand H-1B in 1998. The legislation that was enacted included an H-1B user fee, so that employers would fund training that would allow Americans to do these jobs in the future. I stated at the time that this would never work, because (1) good programmers can learn new skills on the job, very quickly, without formal training, and (2) employers wouldn’t hire them even with their newly acquired skills, as the employers wanted cheap foreign workers.

As Bill’s book title makes clear, he does indeed view the “Intels” as good economic citizens, and views America’s world tech dominance as due in substantial part to H-1Bs hired as foreign students from US universities. But no, sadly the “Intels” tend NOT to be  good economic citizens. I’ve written, for instance, that Google openly told a group of us researchers that it prefers to hire foreign workers due to their “trapped” nature, and need I mention the name “Facebook”? And though I’ve always strongly supported hiring “the best and the brightest” from around the world, the vast majority of foreign-student H-1Bs hired by the Intels are ordinary people doing ordinary work. Without understanding these key points, it’s impossible to formulate good solutions to the age problem, even if it were politically feasible to do so.