-----Original Message-----
From: Norm Matloff <matloff@cs.ucdavis.edu>
To: Norm Matloff <matloff@cs.ucdavis.edu>
Sent: Thu, 8 May 2008 1:50 am
Subject: Heritage Foundation analysis of my CIS article
To: H-1B/L-1/offshoring e-newsletter 117
The Heritage Foundation is a well-known DC think tank, with a
conservative viewpoint. They might be viewed as the mirror image of the
Urban Institute, the well-known liberal think tank in DC that published
the recent study debunking several myths about science and math
education in the U.S. (See my posting on the UI study at
http://heather.cs.ucdavis.edu/Archive/UrbanInst.txt)
Yesterday Heritage released an article responding to my recent study
published by CIS (http://www.cis.org/articles/2008/back508.html, in
its final version, which is slightly expanded from the original). As
you may recall, my study refuted the industry lobbyists' constant claim
that the H-1Bs they hire are "the best and the brightest" from around
the world, and the related claim that the H-1Bs are key to the
industry's ability to innovate.
My analysis took a market-based approach: If the H-1Bs are of
extraordinary talent, as the industry asserts, then they would be paid
well above average for their levels of experience and education within
their profession. Well, they're not. The data show that the vast
majority of H-1Bs are workers of average talent, making average pay for
their occupation and experience.
So, what's a self-respecting conservative institution such as Heritage
to do in such a predicament? They want to support Big Business and thus
present a favorable analysis of H-1B, but on the other hand, my critical
analysis of H-1B is market-based, an approach considered holy by those
on the right of the political spectrum.
Turns out that support for the captains of industry trumps ideology:
The Heritage analysis of my study, enclosed below, basically ignores the
market and says in essence, "OK, so the H-1Bs are just average
engineers, but they're brighter than your average butcher. Most
butchers don't have a master's degree, y'know."
Not only is this a patently silly argument, it is completely at
odds with the claims the industry has made concerning the "best and
brightest" issue. For instance, in his 2003 Senate testimony
supporting the H-1B program, Intel executive Patrick Duffy said
(http://judiciary.senate.gov/testimony.cfm?id=913&wit_id=2610)
# We are an international leader because we have been able to locate,
# hire and retain the world’s best engineering talent.
In other words, he's saying that the H-1B engineers Intel hires are much
more talented than the average engineer--NOT that his H-1B engineers are
more talented than the average butcher.
In his testimony to the House Committee on Science and Technology on March 12
this year (http://blog.seattlepi.nwsource.com/microsoft/archives/134123.asp),
Bill Gates wasn't comparing H-1B engineers to butchers either. He
referred to the H-1Bs as "world class engineers." So of course he was
making a claim about H-1B engineers relative to engineers as a whole,
not comparing H-1B engineers to butchers.
And the data show, as my study found, that the vast majority of H-1Bs,
including those at Intel and Microsoft, are NOT making world-class
salaries. They are making about average for their experience/education
groups within their occupations. If one believes in the marketplace, as
Heritage does, one must conclude that these are not world-class
engineers.
Yes, Intel and Microsoft do hire SOME foreign workers who are
world-class (which I've always supported). For instance, Microsoft
hires some under the O-1 visa, which by statute is for "workers of
extraordinary ability," and the data show that Microsoft pays its O-1s
40% above average, but this is much higher than what it is paying its
other foreign workers.
And note that my recent analysis is merely a confirmation through new
methodology of previous work that also showed that most of the H-1Bs are
not world-class. The study by David North, for example, found that
foreign students in U.S. university tech programs, the source of many
H-1Bs, are mainly concentrated in the less-selective, lower-ranked
schools, again contrary to the industry's "best and brightest" claim.
Once he finishes pointing out that H-1B engineers make more money than
American butchers, the Heritage author, Jame Sherk, then puts forth
another argument that ignores the market economics. He says that U.S.
productivity would fall without H-1Bs, as these jobs would go unfilled
for lack of qualified workers. But if a tech labor shortage did exist
as he says, market economics would mean that wages would be zooming
up--which they're not. On the contrary, salaries have been flat or
falling. For instance, the starting salary for new computer science
grads with bachelor's degrees was $52,473 in 2001 and $53,051 in 2007.
Inflation for this time period has been about 16% but yet the starting
salary for computer science grads only increased by 1%. The same
stagnant trend holds for fresh master's grads.
I never thought I'd see the day when the Heritage Foundation, of all
organizations, would ignore the realities of the marketplace.
Norm
http://www.heritage.org/Research/Labor/wm1916.cfm
May 6, 2008
H-1B Workers: Highly Skilled, Highly Needed
by James Sherk
WebMemo #1916
H-1B visas enable businesses to temporarily hire highly skilled immigrants
to fill vital positions. Immigration opponents argue that workers on H-1B
visas are not especially talented, but have average skill levels. These
arguments are based upon a misleading metric of talent. The education and
wage levels of H-1B recipients demonstrate that they are much needed, highly
skilled workers. Congress should raise the cap on H-1B visas.
H-1B Program for Skilled Workers
Congress created temporary H-1B visas for non-immigrant workers to prevent a
shortage of skilled workers from hurting the economy. H-1B visas allow
foreigners with advanced skills to work in the United States for three
years, and may be renewed for another three years. After that, these workers
must leave the country.
Congress permits U.S. Citizenship and Immigration Services (USCIS), an
agency within the U.S. Department of Homeland Security, to issue 65,000 H-1B
visas per year to workers with at least a bachelor's degree, and an
additional 20,000 to workers with at least a master's degree.[1] This
represents far fewer people than American high-tech employers need. USCIS
received 163,000 employer applications for these limited visas within a week
of accepting applications for FY 2009,[2] and reached the cap within hours
of accepting applications for FY 2008.[3] Employers are currently urging
Congress to raise the visa cap.
Opponents Claim H-1B Workers Not Highly Skilled
Opponents of expanded legal immigration have claimed that H-1B workers are
not, in fact, highly skilled workers. The Center for Immigration Studies
(CIS) recently issued a report claiming that most H-1B workers are not the
"best and the brightest," but of merely average talent.[4]
The CIS came to this conclusion by examining data on H-1B workers whose
employers sponsored them for permanent residency. The government requires
companies to pay H-1B workers at least the prevailing market wage for
workers in their occupation with their experience level. Companies
sponsoring a worker for a green card must report both the prevailing wage
and the actual wage they pay the employee. The CIS found that most H-1B
employers pay workers market wages. H-1B workers do not earn substantially
more than other workers in their occupations. On this basis the CIS
concluded that H-1B workers are not of extraordinary ability, but are of
average skill levels.
Flawed Analysis
This claim relies on a highly misleading measure of ability. Most employees
with H-1B visas work in occupations that require advanced skills, such as
computer and mathematics. The fact that H-1B workers earn wages comparable
to those of their highly skilled co-workers does not mean that they are
average workers or lack advanced skills. Looking at the objective skill
levels of H-1B workers, instead of their skills relative to their highly
skilled colleagues, provides an accurate assessment of their talent.
Highly Educated
H-1B workers have much more education than the typical American worker. With
only a few exceptions, an employee must have the equivalent of a bachelor's
degree to qualify for an H-1B visa. Many have much more education. Chart 1
shows the education levels of H-1B visa workers compared with U.S.
workers.[5] Virtually no H-1B employees have less than a bachelor's degree;
and 31 percent have a master's degree, compared with just 6 percent of
American workers. Twelve percent of H-1B workers have a doctorate, compared
with 1 percent of American workers.
chart 1
Highly Compensated
H-1B workers also earn high wages because of their high skills. The Heritage
Foundation examined the wages of H-1B workers using the same data that CIS
used.[6] Table 2 shows the distribution of wages for full-time
private-sector workers in the economy, and for H-1B workers using these
data.
Table 1
The median H-1B employee earns $74,250 a year—90 percent more than the
median private sector salary of $39,100.[7] The average H-1B salary of
$78,600 is 50 percent above that of the average U.S. worker's of $50,300.
Some critics contend that major corporations do not face a talent shortage,
and want the H-1B cap lifted so they can employ inexpensive foreign labor
that undercuts the wages of American employees. This is false. The law
requires employers to pay at least what equivalently skilled U.S. workers
would earn. Table 2 shows that major U.S. corporations pay H-1B employees
substantially above-average wages. Typical salaries for H-1B workers at
these companies range from $80,000 to $110,000 a year. At these wages,
employers are not seeking cheap foreign labor. They are seeking highly
skilled workers with the talents they need to expand and compete in the
global marketplace.
Table 2
Good for the Economy
The advanced skills of H-1B workers enable companies to grow. When a company
cannot hire a highly skilled worker, it is not only that worker who does not
get a job. Other employees whom the business would have hired as part of
that expansion also lose out.
Consider a hardware company that cannot hire key engineers to design a new
product because of the H-1B shortage. Those workers do not get a job; nor do
the workers who would have manufactured the product; nor do those who would
sell it. Each H-1B employee at a high tech company supports the jobs of four
American workers.[8] By keeping the H-1B cap artificially low, Congress
costs hundreds thousands of workers their jobs at a time when the economy is
weakening.
Raising the H-1B cap would also raise tens of billions of dollars in new
revenue for the government without a harmful tax increase. Because H-1B
workers are highly compensated, they pay high taxes. Heritage Foundation
calculations show that raising the H-1B cap to 195,000 visas would raise $69
billion in new tax revenue over eight years.[9] This is a much better source
of revenue for PAYGO offsets than raising taxes, which cause economic losses
and are especially inappropriate in a time of economic stress.
Conclusions
Contrary to the claims of immigration opponents, H-1B workers are highly
skilled workers with vitally needed skills. H-1B workers are highly
educated. Almost half have an advanced degree. The median H-1B worker earns
90 percent more than the median U.S. worker. They are in no way average
workers.
James Sherk is Bradley Fellow in Labor Policy in the Center for Data
Analysis at The Heritage Foundation.
_________________________________________________________________
[1] Employees of universities are also exempt from the annual cap; H-1B visa
renewal does not count against the cap.
[2] U.S. Citizenship and Immigration Services, "USCIS Releases Preliminary
Number of FY 2009 H-1B Cap Filings," press release, April 10, 2008, at
http://www.uscis.gov/files/article/USCIS%20
Update_H1B_Preliminary%20Count1_10Apr08.pdf.
[3] U.S. Citizenship and Immigration Services, "USCIS Reaches FY 2008 H-1B
Cap," USCIS Update, April 3, 2007, at
www.immigration.com/newsletter/H-1B%202007%20Quota.pdf.
[4] Norman Matloff, "H-1Bs: Still Not the Best and Brightest," Center for
Immigration Studies, Backgrounder, May 2008, at
http://www.cis.org/articles/2008/back508.html.
[5] Data on the education of H-1B workers come from U.S. Department of
Homeland Security, Office of Immigration Statistics, "Characteristics of
Specialty Occupation Workers (H-1B): Fiscal Year 2003," November 2004, Table
10, at http://www.uscis.gov/files/article/FY03H1BFnlCharRprt.pdf. This is
the most recent report examining the education of H-1B workers. Data on all
U.S. workers come from the March 2004 Current Population Survey, conducted
by the Bureau of Labor Statistics. U.S. workers are U.S. citizens between
the ages of 25 and 65 who work at least 35 hours a week in the private
sector and are not self-employed.
[6] Department of Labor, Office of Foreign Labor Certification, Foreign
Labor Certification Data Center Online Wage Library, Permanent Program Data,
at http://www.flcdatacenter.com/ CasePerm.aspx. Data are for 2007. Workers
were considered H-1B employees if their current visa is an H-1B visa and
their application for permanent residence was not denied or withdrawn. Note
that these data differ from wage information provided in Labor Condition
Agreements for two reasons. First, the data included the actual wages that
employers pay their workers, not the minimum prevailing wage level they are
required to. Second, the data only includes the wages of H-1B workers whose
employers sponsor them for a permanent residence, which may be higher than
the wages of all H-1B employees.
[7] Data on the wages of U.S. workers come from the Department of Labor,
Bureau of Labor Statistics, March 2007 Current Population Survey. U.S.
workers are U.S. citizens between the ages of 25 and 65 who work at least 35
hours a week in the private sector and are not self-employed. Since the
March CPS reports wages and salary income for the previous year, these data
come from 2006 and are inflation adjusted to 2007 levels using the CPI-U-RS.
[8] National Foundation for American Policy, "H-1B Visas and Job Creation,"
Policy Brief, March 2008, p. 8, at http://www.nfap.com/pdf/080311h1b.pdf.
[9] James Sherk and Guinevere Nell, "More H-1B Visas, More Jobs, A Better
Economy," Heritage Foundation Center for Data Analysis Report No. 08–01,
April 30, 2008, at http://www.heritage.org/Research/Labor/cda08-01.cfm.
Recent Heritage Studies
H-1B Workers: Highly Skilled, Highly Needed by James Sherk
May 06, 2008
More H-1B Visas, More American Jobs, A Better Economy by James Sherk and
Guinevere Nell
April 30, 2008
Increasing the Cap for H-1B Visas Would Help the Economy by James Sherk and
Diem Nguyen
March 31, 2008