Dr. Norm Matloff On The Brookings Institution H-1B Conference: Most Panelists "Solidly In The Pro-Foreign-Worker Camp"
July 21, 2012, 04:46 PM
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Particularly interesting given that the alleged Aurora shooter was an unemployed STEM graduate, Dr. Norm Matloff writes to his email list

As I mentioned earlier, the Brookings Insitution, a major DC think tank, held a conference on H-1B on July 18. The ostensible topic was the geographic distribution of H-1Bs across the U.S., but it of course turned out to be a wide-ranging discussion of all aspects of H-1B. See here.

The planned theme on geography stemmed from a report by Brookings` Neil Ruiz, Jill Wilson and Shyamali Choudhury. So far, I`ve only read parts of that report, and I have an e-mail query pending to Mr. Ruiz. So I will postpone my analysis of the report, and concentrate instead on the two panel discussions.

It`s unfortunate that there was very little balance in the composition of the panels. As pointed out during the first Q&A period by David North of the Center for Immigration Studies, among 11 panelists, only one, Jared Bernstein, expressed even a semi-critical view of foreign tech worker programs. (Bernstein was negative on H-1B, positive on green cards.) Another panelist was neutral, and the rest were solidly in the pro-foreign-worker camp. I would add that there were no panelists who were working programmers or engineers.

Accordingly, most panelists had a "the employers tell us they can`t find qualified workers, so we can see that H-1Bs are needed" point of view.

Bernstein, the one holdout, is clearly a very thoughtful and insightful analyst who presents his views in a remarkably cogent manner. His patience in dealing with Vivek Wadhwa (see below) was remarkable. Some readers of this e-newsletter know him personally, and respect him, I`m sure quite justifiably so. But...

Unfortunately, Bernstein was handicapped by lack of key knowledge of the workings of the H-1B program. He stated, for instance, that H-1B law requires employers to give hiring preference to Americans (U.S. citizens and permanent residents). This is false, other than for a minuscule part of H-1B law pertaining to "H-1B dependent employers."

More importantly, Bernstein bought into the false notion, common inside the Beltway these days, that use of H-1Bs as cheap labor occurs mainly through violations of the law. Wilson, also on the panel, said that American workers are protected from being undercut by cheap foreign labor by the fact that employers must pay H-1Bs the legally defined prevailing wage. Bernstein agreed, saying most employers are law-abiding. The problem is that the legal prevailing wage is well below market wage. The industry wrote the law to benefit itself, giving the appearance of "protection" when actually giving anything but.

Thus employers can and do pay H-1Bs less than comparable Americans. Such behavior is the rule, not the exception. This loophole has been noted by the GAO, and indeed noted by another panelist, Vivek Wadhwa, who has written in the past that he used the loophole to underpay H-1Bs when he was a tech CEO. Of course, Wadhwa, now more combative and partisan than ever (see below), kept quiet when Wilson made her "protections" remark.

My statistical analysis of employer-sponsored green card data has shown that most mainstream U.S. employers pay at or near the prevailing wage. Since the latter is below market wage, one then sees that most mainstream employers are paying their foreign workers less than they pay comparable Americans. (As I`ve explained before, the word "comparable" is central.) Note carefully that this data essentially excludes the Indian bodyshops, since Prof. Ron Hira`s research has shown they rarely sponsor their workers for green cards. In other words, the problem is much more widespread than Bernstein realizes.

This is a key point. The main controversy on H-1B, after all, is whether H-1Bs are used for cheap labor. Given that the panelists were working on the basis of a fundamentally incorrect assumption to begin with (that paying below-market wages is illegal), that made meaningful discussion of H-1B nearly impossible.

Various panelists denied that H-1B was harming American tech workers. Wilson, for instance, noted that the unemployment rate in STEM is 4%. Bernstein countered that that is double the usual rate of 2%. But this still misses the point, which is that people are forced out of the field. Once they become insurance agents, say, they count in government data as employed insurance agents, not unemployed programmers. There is also the issue of software contractors who find it harder to get work (and get paid less for it). So the 4% figure is highly misleading.

Bernstein did briefly refer to the recent Washington Post article that showed most people in life science research fields eventually get squeezed out of an eventual career. The article did not mention the H-1B connection (the next article will do so, I`m told), but the NIH report certainly did. Data on post docs is poor, but the usual figure cited is that 60% of the post docs are foreign nationals. So if you want an example of a direct, large impact of H-1B on an American profession, there it is. The same is true for programming and engineering, though more complicated.

As most readers of this e-newsletter know, a major point I make is that H-1B is largely about age, meaning people under age 35. Young workers cost less than older workers, both in salary and benefits, so employers save a bundle by hiring the young. When they run out of young Americans to hire, they turn to hiring young H-1Bs. (Many, of course, go directly to the young H-1Bs.)

Wadhwa brought up the age issue, but in a new way for him. He stated that in the past he had been critical of foreign worker programs for precisely the reason I gave in the last paragraph, their effect in forcing Americans out of the field at age 35 or so, but now he has changed his mind. The older programmers are having trouble finding work, he said, not because of the presence of the younger H-1Bs but because the programmers lack up-to-date skills. This is the standard industry lobbyist line, but unfortunately for Vivek, he is on record as saying that even if an older programmer has all the modern tech skills, employers will still hire the young.

A journalist in the audience indirectly brought up the age issue as well. She noted the revolving-door aspect of the industry lobbyists` claims to need H-1Bs because the technology evolves rapidly, so that only the young qualify for jobs. She pointed out that this is a self-sustaining process, guaranteeing that we will ALWAYS "need" more H-1Bs. Unfortunately, the panel did not really understand her question, but she was right on point. I`ve written extensively on the skills issue before, so will just insert my sound-bite comment here: If only new graduates know new programming languages and the like, how can it be that they learned those languages from old guys like me? The journalist also correctly pointed out that today`s H-1B becomes tomorrow`s victim in this process.

Much has been made in the last few days about the fireworks between Wadhwa and Bernstein at Brookings. I`m sure the audience was entertained, but Vivek`s behavior once again was far beyond what is acceptable in an academic/research setting. Sure, banter is fine, but Vivek once again chose to trash Professor Ron Hira, calling Ron (his fellow Indian-American, by the way) "an academic nut case" and so on. Vivek repeatedly characterized all critics of H-1B as "anti-immigrant," "xenophobic" and "fringe." Bernstein objected, as did that same journalist in the audience.

But Bernstein said that "everyone," except for the people in the affected professions, supports promoting the immigration of more tech workers. Unfortunately, as a recent White House economist, his definition of "everyone" means "everyone inside the Beltway." My own experience, e.g. when I`m interviewed on radio talk shows, is that most Americans are solidly opposed to importing tech workers on a large scale. That was borne out by a 1998 Harris Poll (though I`ve heard the industry recently commissioned a poll with the opposite results).

See http://heather.cs.ucdavis.edu/Archive/ChangingFaceOfAm.txt for an account of my own run-in with Vivek, which in turn has links to cases in which he bullied Ron on two different national TV shows. I have also praised Vivek for some of the research he`s done, and wish he would stick to the facts, rather than ranting and raving. One such outburst might be excusable, but with Vivek it is pattern and practice, and I cannot understand why he keeps getting invited to serious forums such as this one.

Rude as Vivek`s behavior was, I must say that Microsoft`s Bill Kamela was a lot worse. He repeated the claim Bill Gates has made that the software developer jobs at Microsoft "start at $104,000 per year." Actually, the green card data show that only 6% of Microsoft`s software engineers being sponsored are making over $100K.

Kamela then made the bizarre claim that "Microsoft knows every computer science professor in the country," and recruits through them. Needless to say, this is nowhere near true. Moreover, that claim was a nonresponse to the question asked of Kamela by congressional staffer in the audience. The latter, pointing out the difficulty many Americans have of moving across the country when saddled with a high-interest mortgage, asked Kamela whether Microsoft might help refinance. This was clearly aimed at older workers, not new graduates, but Kamela ignored that and gave a spiel on recruiting new grads.

In 2008 Vivek quoted David Vaskevitch, then the chief technology officer at Microsoft, saying Vaskevitch “acknowledged that the vast majority of new Microsoft employees are young, but said that this is so because older workers tend to go into more senior jobs and there are fewer of those positions to begin with.”

I`ve often written that most people don`t realize the "indentured servitude" attraction that foreign work programs have for employers. Losing a worker to another firm in the midst of an urgent project can be a big blow. Green card sponsorship in effect locks the foreign worker in, something even more valuable to many employers than wage savings. Wadha briefly mentioned this too.

Along those lines, North asked Kamela if Microsoft would support a law that grants the foreign worker a green card WITHOUT employer sponsorship, thus eliminating the "indentured" status. Kamela said Microsoft supports portability, but that it also insists that the employer sponsor the worker. Kind of contradictory, but I think Kamela`s comments do make it clear Microsoft wants the "indentured" status, at least for a few years. As I`ve said, look for more bills coming that make it appear that foreign STEM students are getting "instant" green cards but that actually ensure that the process is strung out over several years.

I was quite impressed by the moderator of the first panel, Edward Schumacher-Matos. He clearly had done his homework. He knew, for example, that the training funds that come from the H-1B employer fees go to training technicians, jobs that H-1Bs don`t take. Thus the whole rationale for the user fees, to end dependence on the H-1B program, is wrong from the git go. Indeed, Sun Microsystems, in its heyday, said the same thing, as did the Dept. of Commerce. Again, go back to Vivek`s comment I cited above—employers don`t want the older worker even if she has all the right skills.

I won`t comment here on Vivek`s claims about immigrant entrepreneurship in the tech industry, as I`ve explained in detail before why those claims are misleading. Ditto for his claim, and Kamela`s, that most H-1Bs are "the best and the brightest." (I think Bernstein did counter that one briefly.)

Wilson brought up the issue of "diversion," in which STEM grads choose non-STEM careers, such as finance and the law, which are much more lucrative. She seemed mystified by this, but it`s not mysterious at all. H-1B and similar programs have flooded the STEM job market, suppressing wage growth and thus making STEM careers unattractive. As I`ve mentioned many times, an 1989 NSF analysis predicted that this would occur as a result of the foreign influx, even predicting that the "diversion" would be in the direction of finance and the law.

To me, one of the most interesting statements was Bernstein`s recounting his experience at the Dept. of Labor in the 1990s, when the industry was ramping up its campaign to expand the H-1B program. He said the industry was telling Labor, "Wages in our industry are going up, so the government has got to help us!" So there it is quite explicitly—the industry admitting that H-1Bs is about saving labor costs. Some of you may recall that a memo unearthed coincidentally during the Justice Kagan confirmation hearings showed that the Clinton administration had real suspicions about the industry regarding H-1B.

The Brookings conference consisted of lots of heat but not much light, as the saying goes.

Norm