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Dr. Norm Matloff On A Brookings Institute/GMU High Tech Immigration Conference
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February 18, 2011, 10:25 PM
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Dr. Norm Matloff writes:
Brookings Institute/GMU high tech immigration conference

To: H-1B/L-1/offshoring e-newsletter

As I`ve discussed before in these pages, in the last few years there has been a push for giving fast-track green cards to foreign students who earn advanced degrees in STEM at U.S. universities. The pitch has been that these are the "good" foreign workers, as opposed to the "bad" H-1Bs imported directly from abroad by the "bodyshops," rent-a-programmer firms. (I will refer to the foreign students here as "H-1Bs," since most of them who work in the U.S. after graduation do so while holding an H-1B visa, typically en route to a green card.)

I`ve consistently opposed such proposals. While I strongly support facilitating the immigration of "the best and the brightest," only a small percentage of the foreign students are in that league. All the proposals would do is exacerbate the oversupply of labor in STEM that we already have.

Lately the push has become more intense, with "innovation" becoming the buzzword of choice. The message is that the U.S., a nation of over 300 million people and the world`s best track record of innovation, somehow has lost its ability to innovate, and needs foreign workers for that purpose.

This theme was even mentioned by Obama in his recent State of the Union address. See my analysis of his speech, at http://heather.cs.ucdavis.edu/Archive/ObamaStateOfUnion.txt

This theme seems to be arising with increasing frequency these days, especially in DC, as exemplified by a a conference held jointly by the Brookings Institution and George Mason University on February 7 titled, "Immigration Policy: Highly Skilled Workers and U.S. Competitiveness and Innovation." As evident in the conference blurb, the conference`s goal was not to debate whether immigration of tech workers is good for the U.S.; instead, it took that as a given, and asked how to facilitate that immigration. The conference blurb:

On February 7, the Center for Technology Innovation at Brookings and the Center for Science and Technology Policy at George Mason University hosted a forum on immigration policies toward the highly skilled and the reforms needed to capture the benefits of a high-skill immigrant workforce. Discussants also shared new research findings on immigration’s role in spurring innovation.

I was not there, but fortunately full transcripts are available here (though unfortunately without the slide presentations). These make it possible for me to write a detailed analysis here.

The conference was largely a "kangaroo court," inviting only speakers perceived to believe that immigration is important for innovation. I say "perceived," because for example I consider at least two of the speakers to be at least neutral on the question (Hunt, Lowell), and a third, Hira, is a major critic of H-1B. But Hunt is perceived to have written positively about immigrants as a source of patents, and Hira supports fast-track green cards. Lowell is skeptical about the latter, but does support the notion that innovation and immigrants are related, and does support giving incentives to foreign students to stay in the U.S. The rest of the speakers were overtly in support of that notion. In short, attendees came away from this conference with the impression that experts across the board think that immigration is increasing our ability to innovate, with essentially no dissenting voices.

Before I get into those details, I need to repeat two points which I`ve made so often, just to make sure we`re all on the same page here:

1. The H-1B program is causing an INTERNAL BRAIN DRAIN in the U.S. The H-1B program causes displacement (direct and indirect) of U.S. citizens and permanent residents—especially those over age 35—from the tech field, and it discourages young people from going into tech in the first place.

2. Our federal government, especially the National Science Foundation, has played an active role in facilitating this internal brain drain. Back in 1989 the NSF was in the vanguard of those pushing Congress to establish the H-1B program, and an internal NSF paper advocated bringing in large numbers of foreign scientists and engineers for the explicit goal of holding down PhD wages. Moreover, the NSF explicitly stated that this would CAUSE an internal brain drain, as the domestic students would be put off by the stagnant wages.

The above two points are of the utmost importance, and the entire conference—two panels, with a total of eight speakers—must be viewed in the context of these two points. In fact, I must ask in advance for forgiveness for my "shouting," by writing INTERNAL BRAIN DRAIN repeatedly in all-caps form below, but I`m doing so in order that readers will keep this absolutely central point in mind. I`ve found over the years that even those who are critical of H-1B tend to forget this point, so again, please forgive me for the repeated all-caps spelling.

With all that in mind, following are the highlights of the speakers` remarks.

PRESENTATIONS, PANEL 1:

Robert Hamilton, Wyle Information Systems (federal contractor):

He said that 100,000 got their PhDs in STEM at U.S. universities in the last 12 years, and then repeatedly used the term "best and brightest," implying that all 100,000 were in this category. Actually, as I`ve discussed before, they are generally of average abilities, e.g. David North`s data showed that they tend to be disproportionately concentrated in the lower-ranked PhD programs.

Hamilton did let the cat out of the bag a bit by remarking, "foreign doctoral students also appear to benefit universities in a situation similar to on-the-job training where these foreign students are employed as relatively low-wage, highly skilled research assistants while they pursue their doctoral degrees." Note that the NSF goal of holding down wages in industry also led to the same effect on graduate student stipends.

Patrick Gaule, post doc at MIT:

Gaule`s is one of the more technical presentations, thus of special interest to me, but it turned out to be profoundly disappointing. He has chosen an interesting topic and interesting ways to approach it. However, I`m sorry to say this, but Gaule lacks the necessary depth on the subject matter, he lacks impartiality, and above all he uses startlingly incorrect quantitative analysis whose flaws should be clear even to the average person.

He made some interesting remarks about students from China, based on his paper at http://sites.google.com/site/patrickgaule/completed-research I`ll report on that paper later in a separate posting after I read it, but I`ll make a couple of comments here, as I believe Gaule`s paper will become highly cited in DC circles.

First, Gaule uses number of publications as his criterion, and finds that graduate students from China tend to publish a lot. This is similar to what Jennifer Hunt found (for immigrant scientists in general, not specific to China), and as I said in my review of her work,  it sounds plausible to me. In my years in academia, I`ve definitely found that the immigrant faculty publish more. The point, though, is that this is NOT a valid criterion for measuring quality. Writing a lot of mundane papers with the goal of maximizing the length of one`s CV is NOT equal to having publications that are smaller in number but much more significant in their impact on their fields.

But even more importantly, the one section of Gaule`s paper that I did read was alarmingly off the mark. He writes:

Indeed Chinese graduate students overwhelmingly come from a set of extremely selective Chinese universities. Around 10 million high school finishers take the national college entrance exam but only three thousand are admitted into the two most prestigious schools, Peking University and Tsinghua University. Peking University and Tsinghua University are thus more selective than the most exclusive US institutions- the majority of MIT undergraduates would not have had standardized test scores high enough to be admitted into the undergraduate programs of Peking University and Tsinghua University (10). (Footnote 10: The median maths SAT score of MIT undergraduates is 770 which is lower than the top centile cutoff. Only 3% of Chinese entrance test takers scoring in the top centile are admitted into Peking University and Tsinghua University.)
First of all, Gaule apparently doesn`t know that admissions policies at Chinese universities give heavy priority to applicants` from the universities` own provinces. An applicant to Peking (Beijing) University from Beijing has a far higher chance of admission than an equally-qualified applicant from another region. The main reason for this is probably the fact that the Chinese government still regulates residence; one has a residence permit for one`s home province, and that is very difficult to change. But in any case, whatever the motivation behind the Chinese admissions policy, the point is that Gaule`s numerator of 3000 and his denominator of 10 million are completely incomparable.

Since China`s system is so different, Gaule`s ignorance is forgivable (though dangerous, because as mentioned, Gaule`s paper will undoubtedly be widely circulated in the corridors of power in the U.S.), But that footnote of his is outrageous innumeracy.

At selective universities like MIT the SAT plays a minor role. Most MIT applicants have SAT Math scores at or near 800, so it basically becomes a nonfactor, in stark contrast to Chinese university admission, which depends entirely on the exam, the ??. But that point pales in comparison to the gross error in Gaule`s footnote, in which that 50% ("median") figure is a totally different animal from his 3%. The 3% number is admittees divided by applicants, whereas the 50% is admittees divided by admittees. The data Gaule cites says nothing about what percentage of MIT applicants in the top SAT decile get admitted to MIT.

This reasoning is so far off the mark that it makes me wonder about the validity of the rest of the paper. But in addition, the paper lacks impartiality. Gaule`s presentation, especially his overtly admiring language, comes across as indicating that he has a fascination for the Chinese. Well so do I, and granted, in the world of immigration research, people are generally viewed as favoring one side of the issue or the other (Lowell and Hunt below are exceptions). But I found one of the remarks Gaule made in his presentation to be quite telling:

One point I need to emphasize is that it does not necessarily follow from the fact whether Chinese students or — have a strong publication performance and it does not follow from that fact that immigration of these students is good thing for America and there are a number of possible counterarguments. The main one is that Chinese and other immigrations may reduce incentives for Americans to engage in scientific careers, for instance by reducing wages for postdocs. One thought at this point is there are tools besides immigration policy that could be used to address that concern; in particular the amount of NSF graduate fellowships could be increased to make scientific careers more attractive for talented Americans without toying with immigration policy.
This of course relates to the NSF comment I noted above, that the NSF projected back in 1989 that H-1B would have the effect of driving American students out of PhD programs. It`s good that Gaule is bringing that up here, but that last sentence of his is very telling: He`s saying, Immigration must be protected at all costs; we must find ways to solve this problem without reducing immigration.

In other words, he is presuming that immigration is the end rather than the means, that immigration must be preserved above all. The ostensible aim of the conference was to promote immigration as a means to an end, the latter being enhancing the innovative capacity of the U.S. But Gaule apparently regards the replacement of the foreign students by domestic students in U.S. graduate programs to be inherently a bad thing. (Gaule himself is apparently a Swiss national.)

At any rate, Gaule`s "solution," to have the NSF expand the number of prestigious fellowships it awards to grad students, would of course be pretty much useless. As the NSF projected, the domestic students are discouraged from STEM doctoral study because of the low wages. In addition, in the lab sciences, they are put off by the absurd post doc system, in which one can reach age 40, say, and still not know whether one will have a career in the field. Both of these disincentives come from the swelling of the labor market by the foreign influx, which I must stress again was NSF`s explicit goal. Offering more fellowships woouldn`t do anything to solve those basic barriers.

Lindsay Lowell, Georgetown University:

He said, that contrary to what we see in the newspapers, only a small minority of foreign faculty return to India and China. Presumably he was challenging the claim that without a fast-track green card program as an incentive to say, the H-1Bs will return home. He also mentioned that Chinese students are coming to the U.S. in record numbers, though I would mention that that is misleading, as these days they`re coming to do undergraduate work, not pursue PhDs, and they are studying business rather than tech, and their intent is to go home after graduation.

Lowell notes:

What does it mean to have shortages in STEM? If you look at this box down here, and you can`t like I warned you read all this stuff in any great detail, wage change in IT and even natural sciences lagged other professions. The person who looks at this, Mr. Lemieu says it`s difficult to understand an industry with a high level of demand generates so few wage gains, so where is the evidence of shortages?
I of course have made the same comments, for more detailed categories of workers (new CS and EE graduates).

He argues that the quality of foreign students is decreasing, not increasing, simply because as we take more and more of them, we become less and less selective, and cites some data to support that claim.

Darrell West, Brookings Institution:

Pure industry lobbyist talking points here, I`m sorry to say. He brings up examples of immigrants who made good in tech, without mentioning that none of the people he cites came here as a foreign student or as an H-1B. He implies that Andy Grove was the sole founder of Intel when in fact he was not a founder at all. Etc.

He said

I found it very interesting in Robert [Hamilton]`s paper that he found that 38 percent of doctoral students today are coming from abroad, but yet very few of these people actually have an opportunity to stay here.
Hamilton said no such thing, and the PhDs can and do easily stay here, as their green card process is already fast-track.

In general, I found West`s presentation to be quite shallow. He`s been speaking out about this topic for the last few months, but he doesn`t have the depth of the other speakers. He hasn`t done his homework.

Q&A, PANEL 1:

Lowell noted that for 30 years, about 1/3 of college students plan to major in STEM, so interest has NOT been declining. High school math scores are up, even if not relative to other nations. Anyway, average scores don`t mean much; STEM draws from people at the top. Only 1/3 of those with STEM degrees are working in STEM.

A questioner asked whether giving easy green cards was wise, with say 250,000 people entering the labor pool and holding down wages etc. West answered that we need a lot in order to get a Sergey Brin. (See my comment above.) Lowell then said that a similar policy in Australia had lots of perverse effects. He did call for a longer OPT period for STEM.

Another questioner pointed out that Brin and Intel`s Andy Grove did NOT come to the U.S. as foreign students.

Lowell mentioned that STEM unemployment is low but wages aren`t growing, whereas lawyers` wages are going up fast. He said he doesn`t know why. But the answer of course is H-1B. Even the NRC report, generally favoring the industry point of view, noted that the sheer size of the H-1B population (current and also those now holding green cards or citizenship) holds down wages. As I mentioned above, the NSF advocated bringing in foreign scientists and engineers for this very purpose, and Alan Greenspan has made similar remarks.

Another questioner asked why the speakers are advocating immigration as a solution to the need for innovative. The questioner asked, Wait a minute, who says we lack innovation? No one really answered.

PRESENTATIONS, PANEL 2:

Jeanne Batalova, Migration Policy Institute:

MPI is a think tank known as promoting high levels of immigration, the mirror image of the Center for Immigration Studies. Batalova`s theme was on something she called "brain waste," in which highly-educated immigrants wind up in occupations "beneath" their background in the U.S.

Her attitude would probably make many American anti-H-1B activists` blood boil, because THEY are underemployed and believe that the influx of foreign workers is a major factor causing that. I`m sure they would consider it outrageous that Batalova is sympathizing with the immigrants, when (a different set of) immigrants are causing the Americans` underemployment.

Batalova may be surprised by this phenomenon, but it certainly isn`t surprising to people who live in immigrant communities. For example, I knew a man some years ago who was a physician in China but just a medical assistant here, and our neighbor, also a physician in China, is a nurse here. A waiter at a local Chinese restaurant we frequent was an engineer in China. We recently met a woman who was a pharmacist in China but works as a butcher here.

But what Batalova is missing is number of highly-educated Americans who were displaced by immigrants and ended up in occupations beneath their backgrounds. Again, H-1B and the like are causing an INTERNAL BRAIN DRAIN in the U.S.

Unfortunately, Batalova is also unaware of the biggest cause of that "brain waste"—age discrimination. She sees a correlation of underemployment with having only foreign university degrees, but that is a conflation; the real issue is age. And it`s not really language either; Silicon Valley is full of immigrants with poor grammar and limited vocabulary, but they do just fine.

Of course, Batalova`s solution is training programs for the educated immigrants. These would be just as useless as the ones for the Americans, e.g. the ones funded by H-1B user fees, as I`ve detailed before.

Jennifer Hunt, McGill University:

I`ve stated before that Prof. Hunt has conducted the most detailed, most statistically valid study ever done on tech immigrants. You can read my analysis of that study at the URL I gave above.

Though I like Hunt`s study very much, I did have one major criticism of it at the time, which is that she did not take into account the displacement effect. As I`ve mentioned above, H-1B is causing an INTERNAL BRAIN DRAIN in the U.S. She touched on that point in her talk in this conference, but only touched.

First she said, more or less hypothetically,

The more people [tech] you have, the more ideas are likely to pop up, and the richer per capita a country you will be.
Again, I strongly disagree, because if many of those tech people are not working in tech, displaced from the field, then the ideas will NOT pop up..

Indeed, later in the presentation she said,

Now, on the other hand, immigrants might actually contribute less than you would think by looking at their own productivity because perhaps — as has been mentioned a few times — they`re discouraging the native-born from going into innovative fields. And here, I`m going to actually present you some evidence of which is true.
But actually, she never did get back to that point. She may have been referring to the effects on native patenting, which once again I think is flawed by not considering the INTERNAL BRAIN DRAIN.

Later she said:

And I do that by comparing similar natives and immigrants. And by "similar," what I really mean is here I`m comparing immigrants and natives with the same level of education, and the same field of study.

And when you do that, you find that compared to similar natives, the immigrants actually earn 8 percent less. This is a rather well known result that I won`t linger on, that seems to be closely related to how old you are when you arrive in the U.S., and language ability. But what`s very interesting is that the results are different for the other more technology-related outcomes.

No, it is NOT language ability. As I explained above, there are lots of immigrants with poor English in Silicon Valley who do great. No one cares, really.

Instead, one must look at the more obvious explanations. First of all, the H-1Bs ARE paid less than comparable natives. This has been shown statistically and also in employer surveys (NRC, GAO), where employers admitted it. It also is quite clear qualitatively, just by noting that if an H-1B is being sponsored for a green card, she is effectively immobile, and thus cannot roam the job market to get the best wage offer like U.S. citizens and permanent residents can.

After getting the green card, the worker does become a free agent, but HR departments are reluctant to give too big a raise to someone relative to their last salary, so there is a "momentum" effect at work here for a few years.

The other obvious explanation is that maybe on average the immigrants are simply of lesser quality. Hunt`s criteria of publishing and patenting are questionable, for the reasons I cited above, and by other measures that I`ve used before, the immigrants do come out as having less quality.

Hunt`s main claim is that immigrants cause natives to be more productive. But again, that analysis (which comes from the paper she wrote before the one I reviewed) ignores the problem of the INTERNAL BRAIN DRAIN.

Another one of Hunt`s productivity criteria was entrepreneurship. As I mentioned in my above-cited analysis of her paper, though, this is a difficult quantity to get a handle on. Many of the immigrant-founded tech businesses are basically offshoring shops, something we really ought not count as "productivity." I`ve also pointed out that a Saxenian paper found that "36% of the Chinese-owned firms are in the business of Computer Wholesaling," meaning that they are simply assemblers of commodity PCs, with no engineering or programming work being done, again something we shouldn`t count as "productivity."

Since the topic of the conference is the foreign students in the U.S. who go on to get H-1B visas and green cards, I am surprised that Hunt did not cite what I consider one of the most important findings of her previous work: She found that the H-1Bs who come to the U.S. as foreign students are LESS prone to patenting than the natives, and have an even greater wage differential than the 8% she cited in her talk (13.2%).

Ron Hira, Rochester Institute of Technology:

He made a big point of the fact that in the discussion of foreign workers, the H-1B (temporary work visa) and green card (permanent immigrant visa) are typically confused. He`s right. And my observation has been that industry lobbyists often deliberately confuse the two, by the way.

He stated:

One big myth is that there`s a labor market test. In fact, there is no labor market test for H-1B or L1 visas. Employers do not have to look for American workers before hiring H-1Bs or Ls. And, in fact, they can replace American workers with H-1B and L1 visas. And this isn`t just a theoretical thing. It`s been reported in various press accounts that major companies like Pfizer, Wachovia, when it was taking TARP money, IBM and Siemens have actually had, and forced their American workers to train foreign replacements on H-1B and L1 visas.
This is a good example. Rob Sanchez used to have on his Web page a collection of letters from senators and representatives to their constituents, saying that employers of H-1Bs must give hiring priority to Americans. It`s not true.

Much of his talk was about the use of H-1Bs and L-1s to facilitate offshoring. He`s written extensively about this, of course, but here he brought into some interesting profitability data.

He talked a fair amount about the loopholes, my favorite H-1B topic, though unfortunately he didn`t explain how loopholes make the official prevailing wage lower than the true market wage.

David Hart, GMU:

He did a study on immigrant entrepreneurship, which you can download here. As it is basically the study I reviewed previously here in the e-newsletter,  If you haven`t read that review yet, or have forgotten it, I urge you to take a look, especially regarding countries of origin.

I`ll only make one comment on Hart`s presentation here:

I have to give Hart credit, as I did with Hunt above, for considering "crowding out" effects, in which the influx of immigrants is reducing in this case native entrepreneurship. However, he appears to be unaware of the internal brain drain problem that I`ve identified as key here, that the NSF actually planned that fewer Americans would pursue careers in science and engineering, as the foreign workers would be cheaper. Work that is not informed of this key fact simply cannot address the crowding-out problem, in my opinion; mere number crunching is not enough. Hart did state that he doesn`t know the answer to the question, though he thinks the answer is no.

There is a Computerworld article on the conference here.

Norm