The Modern Indentured Servants

06/22/2011—The US government currently provides visas for about one million high-skilled foreign workers to work temporarily in the US. These visas, a distinctive sub-category of the wide debate on US immigration policy, raise complex and difficult questions, and from all sides of the debate come strong arguments and answers.

The HTFT (high-tech free-traders) camp contends that the US should maintain or extend its policy of allowing many of the world’s best and brightest to work in the US in occupations where we have shortages of talent (e.g. engineering, nursing, sciences). They give many reasons:

• Our country was founded by creative and independent immigrants seeking a better life; keeping our doors open to these individuals keeps America the most diverse and innovative economy in the world.

• We can’t attract enough bright young US citizens into these fields: in many science and engineering disciplines, more than half of all the PhD students in American universities come from outside the US.

• Without imported talent, our companies, hospitals, and universities would lose competitiveness and fail to produce enough vital good or services.

• These talented immigrants don’t just fill important jobs, they help to create new ones: immigrants were part of the founding teams of roughly one quarter of all the high-tech start-ups in Silicon Valley (Saxenian, 2002) (http://earthops.org/immigration/ppic159alltext.pdf).

• If we don’t allow these workers into the US, then either our competitors (Canada, Australia, the UK) will, and/or

• The jobs and the tax revenue they generate will be offshored to the countries where this talent resides.

Their opponents (for whom there is no snappy acronym) argue for fair trade and the interests of US workers. They counter that the so-called “skill shortages” of domestic talent in these occupations are simply a reflection of the unwillingness of employers to pay enough for the skills that they want, and that the high-skill guest-worker policy proposed by free traders distorts the effective operation of US labor markets by providing a steady stream of workers that keeps US salaries artificially low and thus discourages young people from pursuing these careers.

When was the last time we saw a shortage of investment bankers, lawyers, brain surgeons, or pro athletes? We don’t have such shortages because we’re prepared to pay top dollar in these professions, and our young people are lining up to compete for these positions.

Evidence that the supply of graduates in the US is very responsive to changing wage-levels was presented by Prof. Hal Salzman of Rutgers at the recent 2011 Industry Studies Association Annual Conference in Pittsburgh. Following several decades of limited hiring, the energy industry is facing a major shortfall of petroleum engineers as an aging workforce begins to retire. As a consequence, petroleum engineering ranked first in a recent survey of the earnings of US B.S. graduates, with starting salaries averaging over $86,000, up from $56,000 in 2003. In response, there has been a dramatic increase in the number of domestic undergrads; the number of foreign students enrolling in U.S. undergrad programs in petroleum engineering has stayed relatively constant.

Petroleum Enginering

While we debate these opposing viewpoints, we are left with our current indefensible policy. This allows hundreds of thousands of immigrant workers into the US each year on H1B, B-1, and L1 visas and then treats them like modern indentured servants: they are tied to a particular employer with little bargaining leverage or workplace rights and paid an artificially low wage. The H1B sets the minimum wage for this imported talent at a mere 17% of the prevailing US wage; the L-1 visa, for transfer of employees within companies, has no wage floor, allowing firms to continue to pay home-country wages. This means that some Indian engineers are working in the US for as little as $8,000/year plus expenses.

Recent research by the Government Accounting Office (GAO) finds over half (54%) of all workers brought in through the H1B visa program are being paid at the lowest level. See Table 5 in: http://www.gao.gov/new.items/d1126.pdf.

 Top 10 H-1b Employers

And this is occurring at a time when over 24 million Americans are unemployed or underemployed. A new McKinsey Global Institute report, An Economy that Works: Job Creation and America’s Future, lays out the scale of the challenge that we face in generating good jobs. In the rosiest of their three scenarios, they project that it will be 2020 at the earliest before the US is back to levels of full employment, and that this is unlikely without significant policy changes (http://www.mckinsey.com/mgi/publications/us_jobs/index.asp). While Prof. Salzman’s work and much other research challenges the report’s contention that the US is likely to suffer a shortage of college graduates in the future, its picture of the current job market is very sobering, particularly when one notes that most of the growth in decent jobs in the last decade has come in sectors (public services, education and healthcare) that are now facing significant cuts.  

What Can Be Done?

Is there a way forward that can both protect the interests of US workers and yet avoid protectionism or closing our borders to top talent from around the world? I believe there is a clear middle ground, much of it already proposed in Washington or by pundits like David Brooks, that could achieve these dual objectives:

• Conduct a stricter test to demonstrate that real shortages exist before allowing visas: require companies seeking such visas to first post the positions in the US to see if qualified candidates are available;

• Raise the minimum wage floor for those on visas to match the prevailing US wage for that occupation (as proposed in the Durbin-Grassley Bill in the Senate (S.887)), thus removing any incentive for firms to undercut the salaries of domestic workers;

• Re-authorize and reform the Trade Adjustment Assistance Act and the Workforce Investment Act; use the fees generated by issuing the visas and other federal funding to create a new, more comprehensive public workforce development policy that can help all Americans who have been displaced by foreign trade, offshoring or other disruptions to the labor market to retrain with the skills needed for today’s highly competitive knowledge economy. Professors Matthew Slaughter and Robert Lawrence laid out an interesting proposal along these lines in Saturday’s New York Times:  More Trade and More Aid.

Without such reforms we run the risk of losing public support for globalization and further weakening our already weak job recovery.

For more information on these topics from myself, Professors Salzman and Hira, go to:
Op Ed in Sunday’s Bergen Record: http://www.northjersey.com/news/opinions/jobs_061911.html
http://www.epi.org/publications/entry/bp257/
http://www.epi.org/publications/entry/bp280/

Engineering and Engineering Skills: What’s really needed for global competitiveness” (2010) Paper Presented at: Association for Public Policy Analysis and Management, Annual Meetings November 4, 2010 Boston, MA. Hal Salzman and Leonard Lynn.
 

Salzman, Hal and Lindsay Lowell. (2008). "Making the Grade." Nature. 453, 28-30.
 

The Globalization of Technology Development: Implications for U.S. Skills Policy” (2010) Leonard Lynn and Hal Salzman: in Transforming The U.S. Workforce Development System: Lessons from Research and Practice David Finegold, Mary Gatta, Hal Salzman, Susan Schurman (eds.) Cornell University/ ILR Press.