To: H-1B/L-1/offshoring e-newsletter 62
Enclosed below is an interesting article from the Electronic Engineering
Times, different from most. I have a few comments.
First and foremost, the author here correctly notes that Stuart
Anderson, a pro-industry writer (more on him later), challenged John
Miano's published study on the LCA data, on the grounds that the "wage
rate" column in the data is not necessarily the wage paid. The author
also correctly quotes me as saying that statistically speaking, the LCA
data is in fact sound.
But the "So there!" tone in the final quote of me is taken a bit out of
context, and does not convey the point I was making, which was that the
percentiles one sees in the LCA data are reasonably close to those for
the BCIS (INS) and census data, both of which are based on actual wages.
The other important point is that the LCAs allow you can see what each
firm considers to be prevailing wage, often quite low. For instance,
one often sees firms in the LCA claiming that a programmer's prevailing
wage is $40,000, in spite of the fact that the average wage for even new
graduates is over $50,000, and much higher for experienced workers.
KEEP IN MIND THAT IN MOST CASES THIS IS PERFECTLY LEGAL, DUE TO THE HUGE
LOOPHOLES IN THE LAW. To me, this is one of the major values of the LCA
data, in that it shows how huge the loopholes are.
That's why the following passage is incorrect:
# LCA "wage rate" and "prevailing wage" data are not actual salaries. But
# the average salaries calculated by EE Times based on that data indicate
# that employers are paying H-1B workers less than Bureau of Labor
# Statistics wage estimates. That's illegal, according to the Department
# of Labor, which administers the H-1B program. The department requires an
The key point is that the definition of prevailing wage in the law and
the regulations is quite different from what's in the BLS data that the
author refers to here, for various reasons.
First, the BLS data referred to here give the median wage for all people
in the given occupation, whereas the prevailing law and regulations
allow the employer to define prevailing wage according to experience
level. Since most H-1Bs have just a few years of experience, the
employer can get a prevailing wage level much lower than the BLS value.
This is one of the major ways in which employers save money by hiring
H-1Bs; recall that I call this Type II savings.
In addition, the employer can use a much finer occupational system than
the BLS uses. This gives rise to odd occupational titles, such as
Associate Software Engineer, which can be exploited by the employer.
There are many other things an employer can do. For example, prevailing
wage is defined in terms of the job, not the worker. So, if the
employer has a job which requires only a Bachelor's degree but hires an
H-1B with a Master's, the employer gets a Master's worker for the price
of a Bachelor's.
The author (or likely his editor) left out an important point in the
following passage:
# Lower salaries undermine employers' contention that they need H-1B
# workers to fill jobs for which Americans can't be found, Matloff
# said. "Otherwise, salaries would be rising."
What I had pointed out was that starting salaries (adjusted for
inflation) for new graduates in the field have been flat since 1999,
counterindicating a shortage.
So, again, the underpayment of the H-1Bs is usually done in full
compliance with the law, as Intel points out:
# Intel Corp. compensates its H-1B workers "under the same structure as
# our domestic employees," a company spokeswoman said. "It's actually
# illegal to pay less than the prevailing wage for any employee sponsored
# under the H-1B visa." Intel employs approximately 3,000 H-1Bs, a
# majority of whom work in VLSI design, device physics or optics, the
# spokeswoman said.
Hopefully you, the reader, immediately detected the deceit in Intel's
technically correct but highly misleading statement here. If not,
please reread what I wrote above.
I made an analysis of Intel's wages in
http://heather.cs.ucdavis.edu/Archive/IntelH1BWages.txt
Basically, Intel was $20-40K below the medians.
# IBM complies with all Department of Labor wage requirements, the
# spokesman added.
Again, hopefully the reader sees the deceit in IBM's statement as well.
# Current limits on H-1B visas essentially promote a nonimmigration policy
# for the United States and endanger the competitiveness of U.S. industry,
# said Stuart Anderson, executive director of the National Foundation for
# American Policy, a think tank that "pursue[s] and promote[s] debate
# consistent with an American entrepreneurial spirit that is welcoming to
Virtually Anderson's entire career has been devoted to promoting H-1B
and offshoring. He wrote pro-H-1B reports for a group called Empower
America and for the ITAA, one of the main industry groups lobbying for
expansion of the H-1B program since 1997. He went to work for
then-Senate Spencer Abraham and was the author of Abraham's H-1B
expansion bill which was enacted in 2000. He then went to work for the
BCIS (INS), and now has again formed his own think tank to promulgate
the industry's views.
# Anderson said employers don't use H-1B visas to lower wages and decried
# the "myth" that each H-1B worker replaces a U.S. worker.
It's hardly a myth when major employers such as the Bank of America and
Siemens admit to doing it.
# Rather than preserving U.S. jobs, H-1B visa caps drive companies to
# expand overseas
Actually, H-1B is used to FACILITATE offshoring. The typical ratio in
an offshored project is one H-1B onshore for every two offshore workers.
In addition, here is a great rejoinder (Searching for Skills, Lorraine
Ash, Gannett News Service, in the Asbury Park Press, August 15, 2005):
% But Eileen Appelbaum, an economist and member of a National Research
% Council committee that studied the impact of H-1Bs on the U.S.
% economy, does not accept the way the H-1B option is typically framed:
% One can have an H-1B worker in an American job, or lose that job to
% exportation.
% "Industry said in 2001, "Let us have the H-1B visas and we'll do the
% work here, or you can say no and we'll just move the work offshore,'
% " she said. "Well, they got all the H-1Bs they wanted, and they
% still moved work offshore. In 2005, that's an argument industry can't
% make with a straight face."
Another industry line:
# Less than 3 percent of Intel's employees hold H-1B visas, and more
# than 50 percent of its 99,000 workers worldwide are in the United
# States.
That 3 percent figure includes all their nontechnical people, i.e. the
clerks, the bookkeepers, the sales and marketing people, etc. If you
look only at engineers, the figure is considerably higher.
# IBM's total of 2,500 H-1Bs pales next to the company's 43,000
# employees in India.
Again, those are not 43,000 engineers in India. The number of engineers
in India is probably comparable to the number of H-1Bs in the U.S.
The author and EE Times are to be commended for doing their own
analysis of the H-1B data.
Norm
H-1B Pay Drags Down All Salaries
By David Roman, EE Times
Jun 19, 2006
http://www.ddj.com/dept/global/189500374
Immigrant engineers with H-1B visas may be earning up to 23 percent less
on average than American engineers with similar jobs, according to
documents filed with the U.S. Department of Labor. Salary data from
Labor Condition Applications (LCAs) lends credence to arguments that
lower compensation paid to H-1B workers suppresses the wages of other
electronics professionals.
The lower LCA-based pay rates, considered unreliable by some, raise
questions about the value of H-1B workers--and of U.S. engineers in
general--to their employers, and add fuel to the debate that has long
swirled around the H-1B program.
LCA "wage rate" and "prevailing wage" data are not actual salaries. But
the average salaries calculated by EE Times based on that data indicate
that employers are paying H-1B workers less than Bureau of Labor
Statistics wage estimates. That's illegal, according to the Department
of Labor, which administers the H-1B program. The department requires an
employer to pay H-1B workers the same as other workers with similar
skills and qualifications, or the prevailing wage, whichever is higher.
"There are plenty of studies, including my own, that show this disparity
in wages," said Norm Matloff, a professor of computer science at the
University of California, Davis, who writes frequently on immigration
employment and H-1B visa issues. Lower salaries undermine employers'
contention that they need H-1B workers to fill jobs for which Americans
can't be found, Matloff said. "Otherwise, salaries would be rising."
The average H-1B salaries calculated by EE Times are based on data from
459 of 65,536 LCA petitions filed by employers seeking permission to
hire immigrant professionals in federal fiscal year 2005. Specifically,
the data comes from LCAs naming one of three positions commonly held by
engineers: electronics engineers, electrical engineers and computer
hardware engineers.
The average salary cited in the LCAs for each of the three positions was
below the mean annual salaries for those jobs in 2004 as determined by
the U.S. Bureau of Labor Statistics' Occupational Employment Statistics
survey of employers.
The average annual wage or salary for electronics engineers was $69,851
in the LCAs, or 9.8 percent less than the $77,450 mean annual-wage
estimate determined by the BLS OES survey. The LCA average for
electrical engineers was $63,268, or 14.7 percent less than the OES
survey's $74,220 mean. And the LCA average for computer hardware
engineers was $64,426, or 23.3 percent less than the $84,010 average
found by the OES survey. (A detailed comparison of LCA-based and OES
salaries can be found in this week's By the Numbers, page 26.)
Underpaid H-1B workers displace American information technology workers
and put undue pressure on salaries, said Kim Berry, a software developer
who serves as president of The Programmers Guild, an activist group for
IT industry professionals. "This is happening under the radar across the
country," he said.
Prevailing wage
Intel Corp. compensates its H-1B workers "under the same structure as
our domestic employees," a company spokeswoman said. "It's actually
illegal to pay less than the prevailing wage for any employee sponsored
under the H-1B visa." Intel employs approximately 3,000 H-1Bs, a
majority of whom work in VLSI design, device physics or optics, the
spokeswoman said.
IBM Corp. takes guidance on salaries for its roughly 2,500 H-1B visa
workers from BLS OES data. "We get our numbers from the OES page," an
IBM spokesman said. "We do that every time." An overwhelming majority of
those workers are engineers, and their benefits package is similar to
what IBMers receive. IBM complies with all Department of Labor wage
requirements, the spokesman added.
H-1B visas allow IBM to "tap into global sources of information," the
spokesman said, echoing industry supporters of the H-1B visa program.
Started in 1990, the program has polarized factions within the
electronics industry. Employers say the visas allow them to hire needed
talent; detractors say it puts U.S. citizens out of work, engenders
fraud and promotes exploitation of immigrants.
"I work with those H-1Bs, and as far as I know they are getting half of
what we get," said Shahid Sheikh, a senior software developer with TAC
Worldwide in Jacksonville, Fla. "I get a normal salary. I get $80,000 a
year. They get a maximum $40,000 a year." Sheikh, who worked under an
H-1B visa when he emigrated from Bangladesh 12 years ago, said the
program is "filled with fraud and cheating." He was naturalized about
two years ago.
President Bush weighed in on H-1B visas in February, when he called the
current annual limit of 65,000 visas a "problem" and urged Congress to
"raise that cap." The U.S. Senate voted in March to increase the annual
limit to 115,000 for fiscal 2007. The House hasn't taken up the issue.
Employer applications for H-1Bs reached the fiscal 2006 cap of 65,000
last August, two months before the current fiscal year began on Oct. 1.
Applications for fiscal 2007 have already maxed out the 65,000-visa
allotment.
Current limits on H-1B visas essentially promote a nonimmigration policy
for the United States and endanger the competitiveness of U.S. industry,
said Stuart Anderson, executive director of the National Foundation for
American Policy, a think tank that "pursue[s] and promote[s] debate
consistent with an American entrepreneurial spirit that is welcoming to
new people, ideas and innovation," according to the group's Web site.
"Except for a short window of time, no one can hire a new H-1B because
the cap keeps getting hit before the experiment's even started,"
Anderson said.
Anderson said employers don't use H-1B visas to lower wages and decried
the "myth" that each H-1B worker replaces a U.S. worker. Immigrants help
create jobs and innovation, he said. Rather than preserving U.S. jobs,
H-1B visa caps drive companies to expand overseas to preserve
flexibility, in Anderson's view. "The more we continue current policy,
the more this will happen," he said.
H-1B visas account for a fraction of the work forces of multinational
employers like Intel and IBM. Less than 3 percent of Intel's employees
hold H-1B visas, and more than 50 percent of its 99,000 workers
worldwide are in the United States. IBM's total of 2,500 H-1Bs pales
next to the company's 43,000 employees in India.
The number of H-1B visas issued for high-tech occupations is too few to
affect the salaries of the larger U.S. labor force, according to Jeremy
Leonard, chief economist at American Sentinel University. By 2004, a
total of 139,000 H-1B visas were issued for information technology
professionals, a broad classification that includes computer occupations
and engineers. "In comparison, the U.S. IT labor force, using a
relatively narrow definition, numbers about 3 million," Leonard said. In
2003, 12 percent of H-1B holders were in engineering occupations and 28
percent were in computer jobs, Leonard said.
While U.S. electronics industry employment levels and pay increases both
trail boom-year levels (see "Jobs data spurs debate" in By the Numbers,
June 12, page 30), H-1B visas are not to blame, Leonard said. BLS data
shows a 23.3 percent increase in hardware engineering jobs from 2000 to
2005, and a 5.1 percent increase in electronics engineering jobs over
that span. "So employment in these occupations certainly hasn't declined
due to H-1B visas," he said.
Nigel Brent, president of Nigel B. Design Inc., an amplifier
manufacturer based in California, said he's fed up with engineers
complaining about immigrants taking American jobs. "This is so bogus,"
he said. "The truth is that people are lured to come here from many
different countries with the promise of higher salaries, better
lifestyle and standard of living than their home countries can provide."
The United States has grown strong with the constant influx of
immigrants, said Brent, who emigrated from Britain almost 30 years ago
and became a U.S. citizen in the 1980s. "The upside with the present
H-1B system is that jobs stay in America. Every H-1B who comes here
supports the economy with the food they buy, the cars they buy, the
house they buy. I could go on with the many benefits that the trickle
effects of being here bring to the economy."
Writing in the June 12 issue of the Financial Times, IBM chairman and
chief executive officer Sam Palmisano said that a modern company must
resist anti-globalization fervor and become a "globally integrated
enterprise." The alternative is grim, he wrote. "Left unaddressed, the
issues surrounding globalization will only grow. People may ultimately
choose to elect governments that impose strict regulations on trade or
labor, perhaps of a highly protectionist sort," said Palmisano.
NFAP's Anderson criticized what he called basic flaws in using LCA wage
data as a stand-in for H-1B salaries. "One is that you're comparing the
prevailing wage, basically the minimum an employer would have to pay
others similarly employed at the firm," he said. Second, LCA minimums
wouldn't approach average salaries of all U.S. professionals, some with
decades of job experience, he said.
The tactic of presenting LCA wages as salaries was used in "The Bottom
of the Pay Scale," a report on the salaries of computer programmers
published last December by the Center for Immigration Studies, a
nonprofit research organization "animated by a . . . vision which seeks
fewer immigrants but a warmer welcome for those admitted," according to
the CIS Web site.
Professor Matloff rebuffed Anderson's criticism and raised questions
about his objectivity. "He's a lobbyist," Matloff said.
Using LCA data to reflect salaries is sound methodology, Matloff said,
because the data "tracks very well" with H-1B compensation data in an
annual report published by U.S. Citizenship and Immigration Services, a
bureau of the U.S. Department of Homeland Security. "I have confidence
the LCA data is reliable," Matloff said. "And I'm a former statistics
professor."