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Professor Hammers Study That Claims More H1-B Visas Means More American Jobs

A University of California, Davis professor is scoffing at a new report from the libertarian Niskanen Center that claims the importation of high-skilled immigration helps job creation in the U.S.

“The tech industry may claim a shortage of STEM workers, but they seem to have no shortage of researchers in pro-industry think tanks who can write reports promoting the H-1B work visa program. The new kid on the block in this speciality is David Bier,” Norman Matloff, a computer science professor, wrote Thursday at his blogUpon Closer Inspection.”

Earlier this week the The Niskanen Center’s Bier argues Congress should liberalize the H1-B visas system because it serves as a job creator, and not — as many have argued — a factor in the lack of tech jobs for and lay offs of American workers.

“Opponents of the H-1B high-skilled work visa argue that businesses use it primarily to replace American workers with cheaper foreign substitutes, taking jobs from native-born workers and undercutting their wages. But the data show that over the last decade, as businesses have requested more H-1Bs, they also expanded jobs for Americans,” Bier’s executive summary reads.

Matloff speculates that the study is tied to “industry money,” saying that while the study largely amounts to a “rehashing of old arguments” he does take a new angle on the matter that ironically, Matloff writes, goes against Bier’s theory.

Here Bier tries to correlate unemployment rate in computer-related occupations with the months until the H-1B cap is filled (Chart 1). Since in recent years the cap has been filled right away, that second variable is a bit difficult to interpret, and as I’ve said before, unemployment rates in this field aren’t very useful, since tech workers find it necessary to bail from the field after encountering major obstacles in finding work; the former engineer now working as a sales clerk at Radio Shack counts as employed, even though he/she is UNDERemployed.

But putting that all aside, what Bier’s numbers suggest is that as the filling of the H-1B cap approachrd (sic), unemployment in the computer fields goes down. Yet, contrary to Bier’s contention that American tech workers aren’t harmed by H-1B, Bier’s numbers could naturally be interpretable as indicating that as visas become hard to get, employers finally break down and hire some Americans. 

Matloff points out that in his report, Bier himself acknowledges that one could see his research in that matter but shrugs it off by writing “But if companies were hiring H-1Bs to save money rather than increase production, we would expect to witness, in the aggregate, more H-1B requests at exactly the time that companies are seeking to cut back on labor costs through layoffs when unemployment is rising. The fact that we see the opposite is strong evidence that companies are not basing their decision to hire H-1Bs on a desire to lower the cost of labor.”  To which the professor responds that businesses “ALWAYS are keen on hiring H-1Bs” to achieve less expensive labor.

He continued to highlight Bier’s take on the recent Southern California Edison layoffs.

Speaking of age, I must give Bier credit for noticing that the primary way that SCE recently saved money by replacing Americans with foreign workers is that the latter are young. Again, younger is cheaper. Interestingly, Bier says that this was a matter of “penny wise, pound foolish” for SCE, as the foreign workers didn’t do too well at first, which he attributes to their lack of experience. Of course, this echoes the frequent observations by Americans that many foreign IT workers are not terribly competent. But what Bier doesn’t realize is that this won’t change SCE’s plan at all (indeed, they probably anticipated it); there will be a rough period at first, but it will work out to SCE’s satisfaction after a while.

Matloff further broke down Bier’s arguments point by point.

Bier at least showed some novelty in his Chart 1, but Chart 2, unfortunately, shows no sophistication at all. He finds that tech employment rises and falls with the number of H-1Bs. He makes no attempt to bring in other variables, especially the overall state of the economy. So, his chart doesn’t seem to say anything more than, when the economy is good, there are more job openings, and thus more H-1Bs hired. To claim that the H-1B hiring “caused” the number of overall openings to rise, merely on the basis of this chart, is unwarranted.

Bier’s recurrent theme is that the H-1B program doesn’t harm U.S. citizen/permanent resident tech workers. At one point, he goes so far as to say, “…there is no evidence that foreign-born high-skilled workers are harming wages for American workers.” Bier just hasn’t done his homework. The congressionally-commissioned NRC report, written by a commission that included both labor economists and representatives from firms like Intel and Microsoft, did indeed conclude that H-1B was suppressing wage growth for American IT workers. Even the highly pro-H-1B Brookings report made such a statement.

And even though Bier stridently maintains that H-1Bs are not underpaid, he himself says that mobility issues with H-1B and especially employer-sponsored green cards impede the foreign worker’s ability to get the salary they are worth. You can’t have it both ways, Mr. Bier!

One of the arguments Bier rehashes is that wages in the computer field are not going down. He cites figures showing a 5% rise in the computer field (accounting for inflation) since 2003, compared to a 2% fall in the broader economy. It’s unclear why Bier thinks that tech occupations, and others requiring a college degree (lawyers’ wages went up much more than 5%, in spite of the glut), should be compared to wages of those who work at McDonald’s. But 5% is 0.4% a year, clearly contrary to the industry’s claim of a tech labor shortage.

He concludes the report is “All in all, one of the industry’s weakest offerings to the H-1B debate.”

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