Dr. Norm Matloff: What May Be Next In Congress Re H-1b?
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March 20, 2013, 04:54 PM
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Dr. Norm Matloff writes to his email list:


My post yesterday, titled "vested interests blame the Indians," archived here, elicited a number of interesting responses.  In this evening`s posting, the main theme here will be to outline the consequences of this "blame the Indians" thinking.  In particular, I will outline what I believe is a likely, or at least a very possible, legislative outcome.

But first I will address one of the responses to yesterday`s posting, an unanticipated criticism from a long time reader whom I very highly respect, as follows.

Recall my "principle agent problem" analysis yesterday, in which I pointed to the various types of vested interests that different entities can have that lead them to support a labor/immigration policy they know to be harmful to American workers and the American economy.  

This particular reader believes I should stay out of the motivation ascribing business, and stick to my usual topics—quantitative and qualitative analyses of H-1B underpayment, lower H-1B average quality, lack of a tech labor shortage, the age issue and so on.  What possible benefit would there be speak of motivations, he asked?

I submit that the topic is of great importance.  Let`s see why.

First, citing motivation is nothing new for me.  I`ve often quoted the remarks of former Senator Bennett and former Rep. Tom Davis, in which they explicitly stated that the H-1B bill of 2000 was enacted "because the industry gives us the money."  

But the vested-interest problem in the "blame the Indians" case is more subtle, and indeed so is the case of foreign tech workers in general, since it may not be obvious that there is a reason for the advocates to have unspoken agendas.  

Yesterday I mentioned the universities, for example.  They`ve toed the industry party line on H-1B, partly because they hire H-1Bs themselves but especially because of the tech industry`s lavish donations, ranging from research support to lab equipment to the construction of entire buildings. The public is generally trusting of universities, and when various university presidents have called upon Congress to expand the foreign worker programs, people aren`t aware of the ulterior motive.

I mentioned in my post yesterday the "Everyone is saying it, so it must be true" mentality, an extremely powerful, thus again an extremely pernicious, phenomenon.  What begins as disinformation—over the years, I`ve pointed to numerous incidents in which spokepersons for mainstream industry firms try to shift the blame on H-1B to the Indian bodyshops— eventually propogates as misinformation.  At the intermediate and later stages of this process, the propogation is more benign, carried out by well-meaning people who maybe haven`t done their due diligence to look into the full consequences, but in the end the effect is there.

I was really shocked a couple of years ago when one researcher I knew to be top-notch told me, "I want the H-1B visas to go to the Googles, not to the Indian bodyshops," again meaning that the Googles don`t abuse the system. For various reasons, he in particular should have known otherwise, but again, the "Everyone is saying it" syndrome is extremely powerful.  If the Conventional Wisdom prevalent in your professional circle is that X is true, then you tend to internalize it.

On top of that, there is the emotional remnant of the outrage felt by many in the 1980s or so when manufacturing—TVs, toys, furniture, etc.—was moved offshore.  So the mere mention of the fact that the Indian bodyshops often send work offshore makes it very hard for people to engage in the due diligence efforts mentioned above—even though, as I pointed out yesterday, whether a job is shipped abroad or filled in the U.S. with an H-1B, American workers lose the job EITHER WAY.

As I often mention, my readership is a diverse group, consisting of programmers and engineers, journalists, researchers, policy makers and so on.  But I feel special responsibility toward the programmers and engineers. They are for the most part apolitical, have no idea how DC works, are not the activist type, and often suffer from the "four blind boys touching the elephant" problem, which makes them easy victims for misinformation.  Hardly a day goes by in which I don`t hear from some programmer or engineer asking what can be done to stop the H-1B madness.  Often they ask me to start an organization, which of course I decline.

I believe that the programmers and engineers are the worst victims of misinformation.  They`re thinking that if only legislation clamps down on the Indian bodyshops, the problem will be solved, or at least greatly ameliorated.  It`s just not true, and I feel the responsibility to explain to them (a) why it`s not true, and (b) why so many different entities are pushing the "blame the Indians" concept.

That`s why I explained (b) yesterday.  Permit me to quickly address (a) briefly before I go on to the main part of this posting, my speculation on where Congress is headed on the foreign tech labor issue.  First, as I have shown statistically and otherwise, abuse of H-1B is widespread in the industry, including in the mainstream U.S. firms; it is NOT mainly an Indian bodyshop problem.  Second, employers WANT cheap foreign labor, and they will GET it, as long as there is a legal avenue of some kind to do so.  Congress could outright ban the Indian bodyshops tomorrow, and the employers would still get that cheap foreign labor, by hiring more H-1Bs directly.  It might not be quite as cheap as before, but it would still be cheaper than hiring Americans.

So, assuming that, as I`ve argued, the powers that be within Congress want to enact legislation with the theme "the Intels are the Good Guys, the Infosyses are the Bad Guys," what would they do?  I believe that one possibility is that they would use Rep. Lofgren`s IDEA Act, introduced in the last Congress, as a model.  

The key features of that bill were:

1.  The bill not only would have let the mainstream U.S. firms get off scot free, no attempt at reducing abuse at all, but also would have set new rules making it EVEN EASIER THAN BEFORE for them to hire foreign workers. Moreover, it would make the H-1B cap INFINITE for the STEM foreign grad students at U.S. schools.

2.  The bill would have set cosmetic "reforms" that for the most part would have enabled "business as usual" for the Indian bodyshops.  (They have clout too, even if not commensurate with that of the big boys. Recall then-Senator Hillary Clinton referring to herself as "the senator from Pubjab" when addressing an ethnic Indian group that had been pushing for more H-1Bs.)

Had Lofgren`s "reform" bill been enacted—making things EVEN WORSE than they already were—Congress would have declared victory over H-1B abuse ("We put many Indian bodyshops out of business!"), and dropped the matter, having done no real reform and actually worsened things.

You can read my old analysis of the IDEA Act here.  As it says there, some of my calculations are rough, but I think they are accurate enough to make the point.  It seems clear to me that Lofgren`s proposal regarding prevailing wage levels would, as I said above, mean business as usual.

For those who are concerned about the adverse impact of H-1B etc. on American tech workers, and for people like me who are even more concerned about the negative effects of the foreign tech worker programs on the American economy (internal brain drain, replacing higher quality with lower quality), the bottom line concerning any legislative proposal has to be: Would it result in increased employment for American workers?  Shifting external H-1B hires (i.e. via bodyshops) to internal H-1B hires, or forcing the bodyshops to pay their workers a bit more but still rent them out more cheaply than American rates, fails that criterion.

So, are there any good bills out there?  Yesterday, what used to be known in previous Congresses as the Grassley/Durbin bill was reintroduced, and I continue to strongly support it.  

Grassley introduces H-1B visa reform bill amid immigration reform discussions, By Jennifer Martinez, March 18 , 2013

On the other hand, he did not cosponsor Grassley`s bill a couple of years ago (with Sanders) that forbade recipients of TARP funds (bank bailout) from hiring H-1Bs.  Durbin also organized last week`s "blame the Indians" briefing.  So I really am not sure what to make of it all.

I`m told the Grassley bill will be cosponsored by Sherrod Brown.  As before, the absolutely central provision is that it would reset the legal definition of prevailing wage, WITHOUT breaking it down into experience levels.  It would set the wage at the 50th percentile, rather than the more effective 75th percentile as in the DPE/AFL-CIO proposal, but it still would go a long way to solving the abuse problems.  Other provisions, of limited effectiveness but still very much worthwhile, would require H-1B employers to give hiring priority to qualified Americans (and at least let them know there is a job open that the employer wants to fill with an H-1B).  The bill, as before, also has certain enforcement provisions, which I consider of very little value, as most of the abuse is LEGAL.

I continue to like one provision in the Moran bill, which would take the green card sponsorship out of the hands of employers entirely, thus removing the employers` ability to "handcuff" their foreign workers. Unfortunately, this would ADD a new type of green card, not replace the existing one, but still a significant step.

Finally, a clarification on a point I made yesterday:  My phrasing regarding the AFL-CIO may have been misinterpreted as meaning that I believe the AFL-CIO sets its H-1B stance according to that of the Democratic Party. This is not what I meant, and I`ve clarified the prhasing in the archived version of my posting; see the above URL.