Monday, December 19, 2011

Interesting Discussion of the H-1B Visa Problem

Professor Norman Matloff at UC Davis has a nice summary of the problems with the use of H-1B visas to drive down wages of software engineers and, more importantly, force American software engineers to leave the field.  An excerpt:

Though the tech industry lobbyists portray H-1B as a remedy for labor shortages and as a means of hiring "the best and the brightest" from around the world (which I strongly support), the vast majority are ordinary people doing ordinary work. Instead of being about talent, H-1B is about cheap labor.
  • Employers accrue Type I wage savings by paying H-1Bs less than comparable Americans (U.S. citizens and permanent residents).
  • Employers accrue Type II wage savings by hiring younger, thus cheaper, H-1Bs in lieu of older, thus more expensive (age 35+) Americans.
  • Both types of wage savings are fully LEGAL, due to loopholes in the law and regulations. The problem is NOT one of lack of enforcement.
  • Use of H-1B for cheap labor extends across the industry including the large U.S. mainstream firms., facilitated by the nation's top immigration law firms. It does NOT occur primarily in the Indian " body shops," and it DOES occur in the hiring of international students from U.S. university campuses.
The underpayment of H-1Bs is well-established fact, not rumor, anecdote or ideology. It has been confirmed by two congressionally-commissioned reports, and a number of academic studies, in both statistical and qualitative analyses.
Even former software industry entrepreneur CEO Vivek Wadhwa, now a defender of foreign worker programs who is quoted often in the press, has confessed,
"I know from my experience as a tech CEO that H-1Bs are cheaper than domestic hires. Technically, these workers are supposed to be paid a 'prevailing wage,' but this mechanism is riddled with loopholes."
Wadhwa has also stated
"I was one of the first [CEOs] to use H-1B visas to bring workers to the U.S.A. Why did I do that? Because it was cheaper." 
Even Rep. Zoe Lofgren, the most strident advocate of the H-1B program Congress has ever had, now realizes that H-1B is used for cheap labor, in full compliance with the law. She says the program is undercutting American workers:
Lofgren said that the average wage for computer systems analysts in her district is $92,000, but the U.S. government prevailing wage rate for H-1B workers in the same job currently stands at $52,000, or $40,000 less.
"Small wonder there's a problem here," said Lofgren. "We can't have people coming in and undercutting the American educated workforce."


Unknown said...

I know they are paid less for a fact. How? Because one of the Wipro engineers in the MFP lab left some pay/bank account info on a MFP and it was in the $40K a year range.

I saw it by accident while retrieving my print job. In retrospect I should have made a copy so I would have proof, but somehow it seemed like an invasion of privacy so I did not...

This was probably in 2007.

hga said...

Unknown: If they're actually hired by the company as of 2001 it is required to post their salary. That's how I learned that my younger, but a much better match for the job peer, a brilliant H-1B from Jamacia, was making $45K to my $80K at Lucent ... which was also very possibly purging more expensive citizen/permenant resident workers at the same time (granted, they were in something much worst than a tailspin at the time, they had 106,000 employees when I joined and were headed to a target of 35,000 when I was purged at the end of the year).

As for the page Clayton links to: that's a very nice update by Professor Matloff. His viewpoint is particularly interesting because he's trying to get jobs for his students at a low tier CS school (i.e. not Stanford, UC Berkeley, CMU or MIT) and his wife is Chinese, so he has a good window into how that group of foreigners is exploited by the abuses of the H-1B program (he has some good material on that side of things).

I also really like this line, because it highlights what I understand to be the start of this policy of STEM wage suppression:

Moreover, an internal report in the National Science Foundation, a key government agency, actually advocated the use of the H-1B program as a means of holding down PhD salaries, by flooding the job market with foreign students.

In the '80s the NSF apparently decided it was paying too much for scientific labor and got the ball rolling in this area. As a result the scientific labor market, which was pretty bad for biologists but otherwise not horrible became very bad for all fields I'm familiar with. At least for citizens/permanent residents; what's a horrible field for them is a great opportunity for many smart (enough) 3rd World citizens.

All in all, science and engineering, a terrible betrayal of citizens and permanent residents (Green Card holders). And with lots of ... side effects, from the obvious of our effectively eating our seed corn to e.g. MIT EECS graduates who are strong in math tend to become quants at in finance, it pays much better than the highest industry offers (which come from Oracle, at least for programming). Or students target law school as their terminal degree and take the easiest Whatever Studies courses possible because incoming GPA is a very important part of USNWR's ranking of law schools (and if you don't get into one of the top ones you're going to have a hard time after graduation).

As the Instapundit keep noting, we have a remarkably bad ruling class now....

Unknown said...

Where are they required to post the salary?

The workers were working for Wipro. Does that apply to such workers as well--i.e. working for a contractor?

Thanks for the info. I fear the impact to the US economic, technical and military status caused by this scientific outsourcing will lead to our collapse (even more than I fear the personal pain of financial ruin because of lack of employment or insufficient wages to pay off mortgages or build up retirement I'm experiencing).

Clayton said...

Where I worked at HP, the Labor Department certifications were on the wall just after you entered the cafeteria. I do not think Wipro positions were posted there.

Joseph said...

If immigration is the violation of a social contract, the social contract in question is one in restraint of trade.

Clayton said...

If we lived in a completely free trade society, I would see your point. But we do not. A liberal welfare state provides substantial funding to public education, mandated emergency room care, Medicaid, and the criminal justice system. In a free market, the costs of illegal immigration would be born by either illegal immigrants, or their employers, who would have to pay them high enough wages to pay those costs, or provide employment benefits sufficient to hire them.

Unlimited immigration produces enormous social costs because the government provides those services at no cost to either illegal immigrants or their employers. Thus, all legal residents are required to subsidize services for people who are driving down our wages, while driving up our taxes. This is absurd.

The libertarian solution is to smash the welfare state. It is not going to happen. Americans believe in the welfare state, and the courts only grudgingly limit the assistance that the welfare state provides to illegal aliens. Libertarian ideas are really wonderful, but have nothing to do with real societies, because most people are neither intelligent enough, nor consistent enough, nor long-term enough, to support libertarianism.