Dr. Norm Matloff On H1-B And Age

Dr. Norm Matloff [1] writes

I am deeply grateful to a reader for calling my attention to a CNN report that aired on February 21. Though it is not about H-1B, it goes to the very heart of the H-1B issue. I'll discuss the CNN clip below, but first, please bear with me while I lay the groundwork.

Ever since 1992, when I started writing about H-1B, I've been stressing that not only is H-1B centrally about cheap tech labor, cheap tech labor is in turn centrally about age. Younger workers are cheaper than older ones, both in wages and health insurance costs. Of course, in addition, the younger H-1Bs are even cheaper than the younger Americans. Result: An employer may hire a 24-year-old H-1B instead of a 24-year-old American, and usually will hire that 24-year-old H-1B instead of a 35-year-old American.

In my article for California Labor & Employment Law Review [PDF [2]] I showed the stark difference in the computer field:

group         25th percentile        median        90th percentile

new grads     $45,000                $50,664       $61,5000

all workers   $65,070                $82,120       $120,410

This is a savings in the 30-50% range, which is larger than the 15-20% difference I found between H-1Bs and Americans of the same age. Getting a young H-1B is of course the best of all from a thrifty (though shortsighted) employer's point of view, but the savings in hiring the H-1B come even more from the age factor than from the exploitation aspect.

Valued readers, please note carefully: By subscribing to this e-newsletter you presumably have serious interest in the H-1B issue. If so, constantly remind yourself of this fact--the H-1B program is fundamentally about age. Employers use the program as a means of avoiding hiring the older (age 35+) Americans. THE H-1B PROGRAM IS FUNDAMENTALLY ABOUT AGE. It is impossible to consider reform, or even academic analysis, of H-1B without having this fundamental issue at the forefront of the discussion.

Which brings me to the CNN video, titled "Students Worry about Economy," filmed at Georgia Tech. (You can view the video at here [3]. I prefer to download streaming videos, rather than watch them in choppy form, so I use DownloadHelper [4]in Firefox. If you do this, I suggest you go to the AOL site instead of CNN, here [5].)

CNN undoubtedly chose Georgia Tech as their interview venue because the campus is only a couple of miles north of CNN headquarters, but it's also a great example for my points below, in that there are many foreign students there. I'll return the latter point later.

In the video, a Chinese-American student, Christine Liu, talks of her engineer dad, an immigrant from China (emphasis added):

Currently the job market with my dad, because he's an engineer, is hard,  really hard, to stay up because we have all these Georgia Tech students  who are up with the new information and stuff like that. THEY'RE COMING  IN AND TAKING THE OLDER PEOPLE'S JOBS, so my dad doesn't have the # opportunity to get a job. He's a really smart guy, so he's considering # going back to China and starting a job there. That should never be an # option!...It makes me angry.

I have several points to make, which I'll number for emphasis:

1. The employers' love of the H-1B program comes, more than anything else, from a desire to avoid hiring the older (again, even 35 is "old") engineers and programmers. The reason employers don't want to hire Ms. Liu's father is not for the reason they are giving him--i.e. it is not because he supposedly doesn't have the latest skills--but rather it's because employers regard him as too expensive. New/recent grads in general, and young H-1Bs even more so, provide the employers with cheap alternatives to Mr. Liu.

2. The "latest skills" issue is a pretext. It's phony. I've gone into this in great detail, e.g. in the CLER link I cited above, and in my University of Michigan article cited in the CLER article.

3. Given that he is an engineer, Mr. Liu is almost certainly a former H-1B who first came to this country as a foreign student. That does add some irony here, but he at least has a green card and is likely a naturalized citizen, thus is--and definitely should be--entitled to reasonable access to the job market. By flooding the market with young foreign workers and young foreign students, the latter a deliberate plan by National Science Foundation to keep engineering salaries low as I've explained before, Congress is maintaining a program that is harming Mr. Liu and many other Americans.

4. Some universities actively recruit foreign students, and Georgia Tech is likely one of them, as its proportion of foreign students is, I believe, substantially higher than average. In other words, Georgia Tech is crowding out Ms. Liu's father, and to add insult to injury, is making him pay more and more for his daughters' education. Ms. Liu states,

My tuition here [at Georgia Tech] is actually, even with the HOPE [Scholarship], more expensive than my sister's was, and she's only four years older than me.

5. These considerations show that recent proposals in Congress to give "fast track" green cards to foreign students in STEM are thoroughly wrongheaded. We certainly don't have a shortage of STEM people, as Ms. Liu notices and is well documented by the Urban Institute study. Worse, the foreign students, like their American counterparts, are YOUNG, so they are exactly the type of worker that is displacing Mr. Liu.

Norm