AP Reports H-1B/Bailout Connection
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February 03, 2009, 08:39 PM
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Frank Bass and Rita Beamish write for AP:

Banks collecting billions of dollars in federal bailout money sought government permission to bring thousands of foreign workers to the U.S. for high-paying jobs, according to an Associated Press review of visa applications.

The dozen banks receiving the biggest rescue packages, totaling more than $150 billion, requested visas for more than 21,800 foreign workers over the past six years for positions that included senior vice presidents, corporate lawyers, junior investment analysts and human resources specialists. The average annual salary for those jobs was $90,721, nearly twice the median income for all American households.

The figures are significant because they show that the bailed-out banks, being kept afloat with U.S. taxpayer money, actively sought to hire foreign workers instead of American workers.

This won`t be big news to readers—but it is big news that AP is reporting this sort of thing. Part of where these writers went wrong is they think hiring of foreign workers is just a cost savings measure. The real reasons are more complicated. At this point, the management of many "American" companies has a lot more identification with foreign workers than they do American workers. The CEO of Citicorp, for example, is originally from India and maintains close ties there. I`ve seen large software projects that had no real business justification—but did manage to get a lot of visas for "friends and family" of management. Each H-1b visa and green card has considerable monetary value-and that means managers will risk blowing off a career to obtain those visas. The manager simply needs to figure out a story to tell upper management that is credible.

In 2003 a colleague and I showed that high levels of immigration were associated with low state bond ratings. I`ve seen earlier studies that showed similar results for municipalities.

I would suggest investors need to ask is why do we give companies incentives for economic activities that have negative effects when scaled up? Part of the problem is that the SEC does not require companies to report immigration and visa status of publicly traded companies. If we had that data then I think it would become pretty obvious that the hiring of large numbers of H-1b workers is not a symptom of long term economic health on the part of a company.

The companies that have lead the H-1b charge were largely corporate welfare cases like Intel, Microsoft, Cisco and the major accounting firms like Price Waterhouse Coopers that have government-enforced near monopoly status. Those kinds of companies can afford to do stupid things for a long time because they have such deep pockets. When those companies all start following each other like lemmings over a cliff you have a serious problem.

Those kinds of problems aren`t corrected until something really bad happens—like a major economic crisis that takes us beyond business as usual.