Dr. Norman Matloff


H-1B Bills and Shamless Big Buck Politics


Enclosed is a WSJ article on the H-1B bills currently pending in Congress. I will add some comments. My information from a number of sources, some private and some public, is that even many of those who were critical of the H-1B program last year are leaning toward supporting the Lofgren bill. These (former) critics mistakenly think that bill is "reasonable," which is very sad.

I've discussed the "Trojan horse" problems with the Lofgren bill here before. The $60,000 compensation level is highly misleading, etc.; see Section 9.7 of my "Debunking the Myth of a Desperate Software Labor Shortage" paper for details. (I've included that section below in this message, right after the WSJ article.)

But quite apart from problems with that $60K figure I wish to repeat here that SALARY EXPLOITATION OF THE H-1BS IS NOT THE CENTRAL ISSUE. There is indeed salary exploitation in many cases, but it still is not the central issue.

THE CENTRAL ISSUE IS AGE DISCRIMINATION. EVEN IF EMPLOYERS WERE TO GIVE FULL SALARY PARITY TO H-1BS, THEY STILL WOULD PREFER TO HIRE YOUNG H-1BS OVER OLDER U.S. CITIZENS AND PERMANENT RESIDENTS. Employers would still prefer hiring a 25-year-old H-1B to a 45-year-old American, even if they pay the 25-year-old H-1B the same as 25-year-old Americans.

Here is a passage from the newest version of my "Debunking the Myth of a Desperate Software Labor Shortage" paper:

     The fact that the employers are turning to young foreign workers when they run out of young American    workers is reflected in the age-distribution data presented in Foreign-Origin Persons in the U.S. Information Technology Workforce (IT Workforce Project, March 1999), from the 1998 Current Population Survey. They found that 75% of the foreign-born software developers were under age 40, compared to only 58% for the native ones. If data were restricted to H-1Bs, the disparity between the two figures would be even greater.

In other words, ANY INCREASE IN THE NUMBER OF FOREIGN-NATIONAL WORK VISAS WILL SIMPLY EXACERBATE THE AGE DISCRIMINATION PROBLEMS. Even if the sneaky provisions in the Lofgren bill were to be fixed (which they won't be), the bill would still MAKE THINGS WORSE FOR U.S. PROGRAMMERS.

Remember, we don't need any more programmers and engineers in the first place. We are not making use of the people we already have. Recall that the NSCG data show that only 19% of CS grads are still working as programmers 20 years after graduation, a sharp drop from the 60% figure which holds 5 years after graduation. The IT Workforce Data Project found another interesting way of viewing this; here is another passage from my "Debunking the Myth of a Desperate Software Labor Shortage" paper:

     This same point was found in a study by the United Engineering Foundation (UEF), as reported in IT Professional, May/June 1999: "Most credentialed IT workers do enter a core [IT] profession, but then leave as they age. THIS HAPPENS IN OTHER TECHNICAL PROFESSIONS, BUT IT HAPPENS A DECADE EARLIER IN THE IT INDUSTRY."

As far as I know, none of the organizations active in opposing the H-1B bill last year has been nearly as active this year. (My information on this may not be up to date; if any of the representatives of these organizations who are on this e-mail list have updates, please let me know and I will pass on the information to the list.)

Perhaps the organizations are being lulled by the public statements by pro-H-1B congresspeople that "Oh, we may not have enough time left in this session to pass a bill." But that is what they said last year, and yet a bill was passed anyway; it was clear that that industry was bound and determined to get a bill, which they did. And as I said, my sources indicate that there is much acceptance of the Lofgren bill already in place.

In other news, I heard an unconfirmed report today that the Justice Dept. has decided the employer attestations mandated in last year's H-1B bill for "H-1 dependent" employers are unenforceable. No details as of yet.

By the way, though the enclosed article greatly understimates industry contributions to politicians, since it doesn't count personal contributions from industry executives.

In any case, this and many other articles have shown that Congress and the White House are extremely anxious to please the computer industry. Thus it is very tempting for them to say, "The Lofgren bill is good, because it will not allow salary exploitation." Again, that is (a) incorrect, and (b) irrelevant to the main issue, which is that the Lofgren bill would exacerbate age discrimination in the field, not solve it.

Dr. Norman Matloff

Silicon Valley's Political Gifts May Help Push for More Visas

By Marjorie Valbrun

The Wall Street Journal, September 15, 1999

WASHINGTON -- An issue dear to Silicon Valley has gained new currency in Congress. In recent weeks two bills have been introduced that would again raise the limit on the number of visas for computer engineers and other foreign specialty workers.

Doug Comer, director of legal affairs for Intel Corp.'s Washington office, says the renewed interest reflects the fact that the high-tech industry's continuing shortage of skilled engineers is too serious to be ignored. 

But also hard to ignore is Silicon Valley's increasingly visible role in the 2000 presidential and congressional elections. Presidential front-runners Vice President Al Gore and Texas GOP Gov. George W. Bush have both been aggressively courting industry executives. Mr. Bush has called for raising the visa cap while Mr. Gore has voiced support for the visa program in general.

"Both parties are almost tripping over each other to court the computer industry for campaign contributions," says Paul Hendrie, spokesman for the Center for Responsive Politics, a nonpartisan Washington research group. "It's almost like the industry has both parties eating out of its hands."

Hefty Contributions

Already computer-industry executives, employees and political-action committees have given nearly $843,000 to presidential hopefuls, including almost $178,000 to Vice President Gore and more than $380,000 to Gov. Bush, according to the center. Additionally, congressional candidates received close to $6 million from the industry in the 1997-1998 election cycle.

Because the industry is relatively new and still growing, it doesn't have strong allegiances to either party, Mr. Hendrie says. "So both parties feel like it's up for grabs, and are competing aggressively for its support and are inclined to give it what it wants."

One of the few presidential candidates who hasn't jumped on board is Patrick Buchanan, a Republican who is edging close to running as a third-party candidate on an economic nationalist platform. He derides the courting of the industry as "an unseemly competition to see who can do more to pander to the super rich by selling out the American worker."

"I think that's absurd," counters Intel's Mr. Comer. "I haven't seen anyone trying to kowtow to the industry, it's a mischaracterization of what is happening. You have policy makers who have constituents who are the high-tech industry and are saying we have a problem. Any good member of Congress who represents his district well is going to listen to his constituents and try to help them find solutions."

Acute Shortage

The high-tech industry is facing an acute shortage of skilled workers and is greatly reliant on what is known as H-1B visas. These allow companies to hire highly skilled computer engineers and scientists and other workers from abroad. Industry analysts estimate a shortage of 400,000 workers for computer technology jobs over the next five years.

Last June the program reached capacity in record time -- less than seven months after Congress raised the annual limit to 115,000 from 65,000. At that time, the consensus among lawmakers from both parties was that there was little likelihood the cap would be raised again soon. Lawmakers were hard pressed to even discuss the possibility of an increase, much less attempt to draft new proposals that would bring the much-debated issue back to the congressional floor.

Yet just three months later, not only have two bills been introduced to raise the cap once more, another measure was proposed to create a separate employment-visa category for foreign students who are recent graduates of U.S. universities with degrees in engineering or science: the "T" or Tech Visa.

Some skeptics say the new push is, in the words of a trade-association representative, "a contest for the hearts and minds and pocketbooks of the high-tech industry." The bills' sponsors insist otherwise.

Talk With IBM Chairman

Rep. David Dreier, chairman of the House Rules Committee, says a conversation with International Business Machines Corp. Chairman Louis Gerstner Jr. convinced him that he and his colleagues had to do something.

"He personally raised this issue with me," the California Republican says. "The CEOs of these companies have talked about the future success of their companies hinging in large part to their having the qualified, available people with the expertise to do the work. The fact that we have already gotten to the point where we've exceeded the cap makes it very apparent to me that we need to do this."

Mr. Dreier introduced his "New Workers for Economic Growth Act," early last month. His proposal and a companion bill in the Senate, co-sponsored by Texas GOP Sen. Phil Gramm, would raise the annual limit to 200,000 workers for fiscal years 2000 through 2002.

Some people question if any of the bills will even be adopted this late in the session, considering the heated, bipartisan debate on the issue during the last go-around and strong opposition from labor.

"It's going to be tough" Rep. Dreier concedes. "We have few days remaining in this Congress, coupled with the fact that we did something on this last year. I'm just going to talk to my colleagues to build support for this.And as chairman of the House Rules Committee, I think I'm in a position to help move this along."

Long-Term Solutions

Some in the industry worry that the proposals don't go far enough. Sandy Boyd, assistant vice president of the National Association of Manufacturers, says her organization is pleased that people in Congress are talking about the visa issue again. "But we also think we should be focused on long-term solutions," she adds.

Ms. Boyd says simply increasing the cap won't address a host of bureaucratic problems in employment-based visa programs in general and the H-1B visa program in particular. These problems contribute to lengthy delays in the application process and backlogs that cause the cap to be reached sooner than anticipated, she says.

"The numbers weren't based on any projected usage or on any scientific data on how many the industry needed," she says of the cap. "They were politically expedient numbers."

Tom Dunlap, vice president and general counsel for Intel, says while there seems to be agreement on Capitol Hill that a longer-term solution is needed, it may take longer for lawmakers to reach one. "I'm disappointed we don't have a bipartisan bill," he says. But he remains optimistic that lawmakers will eventually agree on one approach.

"Sooner or later we will have one" bill, he says. "They're close enough."

High Tech Political Help

Presidential Hopefuls Computer industry contributions to presidential candidates:

George W. Bush  $380,200
Al Gore  177,950
Bill Bradley  166,975
John McCain  56,715
Gary Bauer  28,918
Elizabeth Dole  15,500
Dan Quayle  6,000

Source: Center for Responsive Politics

Congressional Races

Top political action committee and soft money computer company campaign contributors to federal candidates and parties 1997-98 election cycle: 

    Company       Democrat       Republican         Total     
Microsoft  $476,903  $872,868  $1,353,271
Gateway   153,000   362,454      515,454
EDS   158,118   223,028      382,146
Oracle   234,663    79,000      313,663
IDX Systems   180,250    21,000      202,250


From "Debunking the Myth of a Desperate Software Labor Shortage,"

9.7 Highly Deceptive Proposals Involving a Master's Degree or a $60,000 Wage Floor

In 1999 Senator Phil Gramm and Representative Zoe Lofgren introduced bills which would allow an unlimited number of foreign high-tech workers to be brought to the U.S. Though they differ in some details, after negotiations the likely conditions set for this new category would be that the worker have a Master's degree or equivalent, or be offered compensation of $60,000 or more.

(Gramm's bill actually stipulates that both the degree condition AND the salary condition must hold. However, during negotiations on these bills, employers in low cost-of-living regions will likely demand that the provision ``Master's degree AND $60,000'' be changed to ``Master's degree OR $60,000.'' They would argue such a change is needed because the $60,000 cutoff is unreasonably high relative to salaries in their regions. They would also point out a precedent, in that the condition ``Master's degree OR $60,000'' appears in the definition of ``H-1B dependency'' in the 1998 law.)

Though the authors of these bills try to justify the establishment of this special category by claiming that workers who satisfy these conditions are of outstanding talent---Lofgren calls them ``geniuses''---the fact is that the conditions are essentially meaningless.

Here is why these conditions seeming to guarantee high quality are actually a sham:

* The $60,000 level is nowhere near genius-level salaries for this profession, which approach and often exceed $100,000. On the contrary, the proposed $60,000 threshhold actually matches the median salary nationwide in 1998 for professional staff in information technology (IT), according to the annual Datamasters survey. And this median includes all education levels; the figure for those with a Master's degree would be significantly higher.

* As pointed out earlier, in terms of specific technological skills acquired, a postgraduate degree is not needed in order to do work in the computer industry. Though research experience gained at a top university has some ``cultural'' value, for most students at most schools a Master's degree does add much value to a worker's productivity. Microsoft founder Bill Gates does not even have a Bachelor's degree, let alone a Master's. The same is true for Oracle founder Larry Ellison, Apple/Pixar founder Steve Jobs, and countless others. (I was a software developer in industry, and later became a computer science professor conducting research and teaching in the field, and yet have no formal training in computer science at all.)

* One certainly need not be a ``genius'' to earn a Master's degree. On the contrary, most holders of Bachelor's degrees in computer science would qualify for hundreds of Master's programs nationwide, if they were interested in advanced study. Therefore, a Master's degree does not signify special talent. * Salaries in the high-tech professions have been rising at a rate of nearly 10% per year. Yet these legislators have not included any provision in their bills to adjust the $60,000 threshhold as nationwide salaries rise. The $60,000 level would be the equivalent of less than $50,000 within two years, and would continue to erode after that.

* Employers in regions with high costs of living would have especially high potential to exploit the foreign workers. Assuming that Lofgren's bill is indeed changed to conform to Gramm's, the proposed legislation would be of huge benefit to employers in Lofgren's Silicon Valley district, which has an astronomical cost of living. It is so expensive to live there that a four-person family there actually qualifies as low-income for the purposes of federal housing assistance if its income is as much as $53,100

footnote: San Jose Mercury News, August 15, 1999 ---not far below the $60,000 threshhold Lofgren describes as ``genius'' pay. Lofgren herself has stated that the mean high-tech salary in Silicon Valley is in the mid-$80,000 range, and her own press secretary blurted out that $60,000 is considered just ``peanuts'' wages in that region.

footnote: Red Herring magazine online, August 9, 1999.

* Gramm and Lofgren define their $60,000 level not just in terms of salary, but also including ``cash bonuses and similar compensation,'' and Lofgren's includes ``stock options, bonuses and other similar compensation.'' Capers Jones, a well-known analyst of software development economics, estimates that nonsalary compensation is on the order of 30% of base salary.

footnote: Software Workers for the New Millennium, National Software Alliance, Arlington, VA, January 1998. Thus the $60,000 level corresponds to a salary of only about $46,000. And how is total compensation for a foreign worker to be calculated under these bills? The values of bonuses and stock options are unpredictable. Bonuses may or may not materialize, and stock options could end up worthless. Thus employers would have to be allowed to merely estimate the values of such compensation. Given the industry's abysmal track record---an audit by the Department of Labor found that a fifth of H-1B employers were not even paying the salaries they had promised in their applications for the visa

footnote: The Department of Labor's Foreign Labor Certification

Programs: The System is Broken and Needs to be Fixed, Final Report No. 06-96-002-03-321, Joseph Fisch, Assistant Inspector General for

Audit. ---we can be sure that many employers would make greatly exaggerated ``estimates'' for such nonsalary compensation, in order to meet the magic number of $60,000. 

* The language in Gramm's legislation is actually ``Master's degree or its equivalent,'' not just ``Master's degree.'' (Again, such language has a precedent in the H-1B dependency section of the 1998 law.) An employer could state that two years of work experience are equivalent to a Master's.

So, quite contrary to the legislators' claim that the special, unlimited-numbers categories they propose will apply only to those workers who are of especially high quality, the practical effect could be merely that the worker have at least two years of experience.