SPEAKERS CONTENTS INSERTS Tables
Page 1 TOP OF DOC
58–001
1999
IMMIGRATION AND AMERICA'S WORKFORCE FOR THE 21ST CENTURY
HEARING
BEFORE THE
SUBCOMMITTEE ON
IMMIGRATION AND CLAIMS
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
APRIL 21, 1998
Serial No. 93
Printed for the use of the Committee on the Judiciary
Page 2 PREV PAGE TOP OF DOC
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB INGLIS, South Carolina
BOB GOODLATTE, Virginia
STEPHEN E. BUYER, Indiana
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
JOHN CONYERS, Jr., Michigan
Page 3 PREV PAGE TOP OF DOC
BARNEY FRANK, Massachusetts
CHARLES E. SCHUMER, New York
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
THOMAS E. MOONEY, Chief of Staff-General Counsel
JULIAN EPSTEIN, Minority Staff Director
Subcommittee on Immigration and Claims
LAMAR S. SMITH, Texas, Chairman
ELTON GALLEGLY, California
WILLIAM L. JENKINS, Tennessee
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
ED BRYANT, Tennessee
Page 4 PREV PAGE TOP OF DOC
JAMES E. ROGAN, California
MELVIN L. WATT, North Carolina
CHARLES E. SCHUMER, New York
HOWARD L. BERMAN, California
ZOE LOFGREN, California
ROBERT WEXLER, Florida
CORDIA A. STROM, Chief Counsel
EDWARD R. GRANT, Counsel
GEORGE FISHMAN, Counsel
MARTINA HONE, Minority Counsel
C O N T E N T S
HEARING DATE
April 21, 1998
OPENING STATEMENT
Smith, Hon. Lamar, a Representative in Congress from the State of Texas, and chairman, Subcommittee on Immigration and Claims
WITNESSES
Borjas, George J., John F. Kennedy School of Government, Harvard University
Page 5 PREV PAGE TOP OF DOC
Fraser, John R., Acting Administrator, Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor
Hatano, Daryl, Vice President for International Trade & Government Affairs, Semiconductor Industry Association
Joyner, Carlotta C., Director, Education and Employment Issues, Health, Education, and Human Services Division, U.S. General Accounting Office
Lariviere, Richard W., Associate Vice President of International Programs, University of Texas at Austin
Matloff, Norman, Department of Computer Science, University of California at Davis
Miller, Harris N., President, Information Technology Association of America
Payson, William S., President, The Senior Staff
Reynolds, Alan, Director of Economic Research, Hudson Institute
Smith, David A., Director of Policy, AFL–CIO
Page 6 PREV PAGE TOP OF DOC
Sullivan, Daniel L., Senior Vice President for Human Resources, QUALCOMM, Incorporated
Vernez, Georges, Director, Center for Research on Immigration Policy, RAND
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Borjas, George J., John F. Kennedy School of Government, Harvard University: Prepared statement
Fraser, John R., Acting Administrator, Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor: Prepared statement
Hatano, Daryl, Vice President for International Trade & Government Affairs, Semiconductor Industry Association: Prepared statement
The Institute of Electrical and Electronics Engineers, United States of America: Prepared statement
Joyner, Carlotta C., Director, Education and Employment Issues, Health, Education, and Human Services Division, U.S. General Accounting Office: Prepared statement
Klink, Hon. Ron, a Representative in Congress from the State of Pennsylvania: Prepared statement
Page 7 PREV PAGE TOP OF DOC
Lariviere, Richard W., Associate Vice President of International Programs, University of Texas at Austin: Prepared statement
Matloff, Norman, Department of Computer Science, University of California at Davis: Prepared statement
Miller, Harris N., President, Information Technology Association of America: Prepared statement
Payson, William S., President, The Senior Staff: Prepared statement
Reynolds, Alan, Director of Economic Research, Hudson Institute: Prepared statement
Rogan, Hon. James, a Representative in Congress from the State of California: Prepared statement
San Francisco Examiner
Smith, David A., Director of Policy, AFL–CIO: Prepared statement
Smith, Hon. Lamar, a Representative in Congress from the State of Texas, and chairman, Subcommittee on Immigration and Claims: Prepared statement
Page 8 PREV PAGE TOP OF DOC
Sullivan, Daniel L., Senior Vice President for Human Resources, QUALCOMM, Incorporated: Prepared statement
Vernez, Georges, Director, Center for Research on Immigration Policy, RAND: Prepared statement
APPENDIXES
Appendix 1.—Prepared statement from American Electronics Association
Appendix 2.—Prepared statement from The American Council on International Personnel, Inc.
Appendix 3.—Prepared statement from American Engineering Association, Inc.
Appendix 4.—Prepared statement from Federation for American Immigration Reform
Appendix 5.—Prepared statement from The National Association of Manufacturers
Appendix 6.—Prepared statement from The American Immigration Lawyers Association
Appendix 7.—Prepared statement from The National Technical Services Association
Page 9 PREV PAGE TOP OF DOC
IMMIGRATION AND AMERICA'S WORKFORCE FOR THE 21ST CENTURY
TUESDAY, APRIL 21, 1998
House of Representatives,
Subcommittee on Immigration
and Claims,
Committee on the Judiciary,
Washington, DC.
The subcommittee met, pursuant to call, at 9:36 a.m., in Room 2237, Rayburn House Office Building, Hon. Lamar S. Smith [chairman of the subcommittee] presiding.
Present: Representatives Lamar S. Smith, Edward A. Pease, James E. Rogan, Melvin L. Watt, and Zoe Lofgren.
Staff Present: George Fishman, Counsel; Judy Knott, Staff Assistant; and Martina Hone, Minority Counsel.
OPENING STATEMENT OF CHAIRMAN SMITH
Mr. SMITH OF TEXAS. The Subcommittee on Immigration and Claims will come to order.
Page 10 PREV PAGE TOP OF DOC
Before we go to opening statements and then hear from our first panel, I do have some housekeeping comments to make that go to a number of areas. We are going to proceed a little bit out of order this morning, not that there was any set order to begin with, but for a number of reasons, we are going to have our third panel first, and then the rest of the panels will be in the original order. Which is to say that after the third panel, we will hear from the administration, and then we will hear from the various groups about H–1Bs, so the third panel will be up first.
Because of the number of witnesses we have today and because of the need of a number of individuals to catch planes and so forth, I am going to have to be strict about enforcing the 5-minute rule, perhaps stricter than I have been before. We will try to finish up by noon today, if at all possible.
Also, in the way of announcements, let me say that we are expecting additional members who are now in transit, to arrive shortly, including our Ranking Member, Mel Watt. Other members besides Mr. Watt are literally taking planes from their districts to try to arrive this morning. I know Ed Pease is coming in from Indiana momentarily, and Elton Gallegly and Zoe Lofgren and others will arrive. But because of the various time commitments that our witnesses have, we are going to go on and get off to an early start.
Let me ask the members of the third panel if they will come forward and take their seats, and then we will have opening statements. The third panel, I think they are all here. Good. I will introduce them shortly. But first I would like to make an opening statement and recognize other members as well.
Page 11 PREV PAGE TOP OF DOC
Today's hearing on immigration and the American work force for the 21st century will be one of the most important this subcommittee will hold in this Congress. Immigration is having an ever-increasing impact on America's work force. Since two-thirds of America's future population growth will be caused by immigration, it will continue to transform our work force, for the better or for the worse, into the new century.
Most people are content to sit back and enjoy the ride of our current economy. But driving carries responsibilities such as keeping the tank full of gas and watching out for hazards.
According to the recent work of a growing number of respected researchers, several of whom are here today, our economy is already hitting some potholes, especially for those who lack a high school education. And our economic engine will sputter without a steady supply of ever more highly educated workers. This research is like a warning light on the dashboard. We have time to get to a service station, but we had better not wait too long.
Ninety percent of all future jobs will require a high school diploma as a minimum qualification. The Hudson Institute in its publication, ''Work Force 2020,'' reports that, ''Unless the education and skill levels of the American work force are upgraded, America's productivity and prosperity will grow less quickly.''
It will be tough going for low-skilled Americans. It will also be tough going for American businesses if sufficient high school workers cannot be found.
Page 12 PREV PAGE TOP OF DOC
A rational immigration policy would not put obstacles in the path of low-skilled Americans and American businesses. A rational immigration policy would not flood the job market with low-skilled immigrants to compete for the comparatively stagnant number of low-skilled jobs while depriving the economy of the skilled immigrants it needs.
Eighty-seven percent of immigrants admitted in 1996 were admitted without regard to skills or education. A disturbing 42 percent of family-sponsored immigrants have less than a high school education.
What is the result of our skewed admission policy? The National Research Council in its report, ''The New Americans,'' finds 44 percent of the decline in the relative wage of high school dropouts between 1980 and 1994 can be attributed to the large influx of low-skilled immigrants during that period. As the Commission on Immigration Reform noted, ''Unskilled foreign workers present the greatest potential for adverse impact because they are competing with some of the most vulnerable of American workers.''
It is not surprising that the Hudson Institute states in ''Work Force 2020,'' that, ''U.S. immigration policy serves primarily to increase the number of U.S. residents who lack even a high school degree. America must stop recruiting workers for jobs that do not exist or exist only at the lowest wages.''
It is not surprising that the RAND Corporation in its recent report, ''Immigration in a Changing Economy: California's Experience,'' states the widening gap between the number of jobs available for noncollege-educated workers and the increasing number of new noncollege-educated immigrants signals growing competition for jobs and, hence, further decline in relative earnings at the low end of the labor market. RAND concludes that, ''There appears to be a growing divergence between current trends in the State's economy and immigration policies that are producing a steady inflow of poorly-educated immigrants. Specifically, we recommend that current policies be modified to place greater emphasis on the educational levels of new immigrants.''
Page 13 PREV PAGE TOP OF DOC
One prime example of the need for a more educated work force is in the information technology industry. The Department of Labor reports that this will be the fastest-growing industry over the next 10 years and that the three fastest-growing occupations will be information technology occupations.
At the same time, the Information Technology Association of America reports that there are already 346,000 vacancies in information technology positions.
Silicon Valley warns us that unless the 65,000 cap on H–1B visas for highly skilled workers is dramatically increased, the American economy will suffer.
A number of witnesses will present us with evidence this morning that there is a growing level of unmet demand for information technology jobs. The question this subcommittee needs to address is to what extent the demand should be met through an increase in the quota for H–1B workers.
Most likely we will need some increase in the cap for at least a few years while we let the law of supply and demand take effect. Presumably, plentiful jobs and increasing salaries will encourage more American college students to study technology. I believe this is already happening. Also, we may need some increase in the quota for at least a few years while America's primary and secondary schools emphasize the teaching of math and science. But the immediate demand can also be alleviated by the retraining of American workers, both information technology workers who need skill upgrades and workers new to the field. And we need to make sure that the information technology industry does not use foreign workers to displace American workers.
Page 14 PREV PAGE TOP OF DOC
By taking advantage of the expertise of today's witnesses, we will be able to decide as a subcommittee how much of the present demand for information technology workers needs to be met through the increased importation of workers on H–1B visas.
That concludes my opening statement. We will go to the gentleman from California, Mr. Rogan, for an opening statement.
[The prepared statement of Mr. Smith follows:]
PREPARED STATEMENT OF HON. LAMAR SMITH, CHAIRMAN
Today's hearing on Immigration and the American Workforce for the 21st Century will be one of the most important this Subcommittee will hold in the 105th Congress. Immigration is having an ever-increasing impact on America's workforce. Since two-thirds of America's future population growth will be caused by immigration, it will continue to transform our workforce—for the better or the worse—into a new century.
Most people are content to sit back and enjoy the ride of our current economy. But driving carries responsibilities such as keeping the tank full of gas and watching out for hazards.
According to the recent work of a growing number of respected researchers, several of whom are here today, our economy is already hitting some potholes, especially for those who lack a high school education. And our economic engine will sputter without a steady supply of every-more-highly educated workers.
Page 15 PREV PAGE TOP OF DOC
This research is like a warning light on the dashboard. We have time to get to a service station. But we had better not wait too long.
By 2006, the Labor Department projects that there will be over 150 million jobs in America, almost 19 million more than there were in 1996. America will indeed be a land of opportunity. But the opportunity won't be for everyone. Ninety-two percent of these jobs will require a high school diploma as a minimum qualification. The Hudson Institute, in its publication Workforce 2020, reports that ''[j]obs that are disappearing require much lower levels of skill than jobs that are being created. Unless the education and skill levels of the American workforce are upgraded, America's productivity and prosperity will grow less quickly. . . . '' It will be tough going for low-skilled Americans. It will also be tough going for American business if sufficient high-skilled workers cannot be found.
A rationale immigration policy would not put obstacles in the path of low-skilled Americans and American businesses. A rationale immigration policy would not flood the job market with low-skilled immigrants to compete for the comparatively stagnant number of low-skilled jobs, while depriving the economy of the skilled immigrants it needs.
Eighty-seven percent immigrants in 1996 were admitted without regard to skill or education. A disturbing 42% of family-sponsored immigrants have less than a high-school education.
What is the result of our skewed admission policy? The National Research Council in its report The New Americans finds that 44% of the decline in the relative wage of high school dropouts between 1980 and 1994 can be attributed to the large influx of low-skilled immigrants during that period.
Page 16 PREV PAGE TOP OF DOC
As the Commission on Immigration Reform noted, ''unskilled foreign workers present the greatest potential for adverse impact because they are competing with some of the most vulnerable of American workers.''
It is not surprising that the Hudson Institute states in Workforce 2020 that ''U.S. firms should press for enlightened immigration policies that give preference to skilled workers. . . . Instead of providing key industries with large numbers of highly educated immigrants, however, U.S. immigration policy serves primarily to increase the number of U.S. residents who lack even a high-school degree. America must stop recruiting workers for jobs that do not exist or exist only at the lowest wages.''
It is not surprising that the RAND Corporation, in its recent report Immigration in a Changing Economy: California's Experience, states that ''th[e] widening gap between the number of jobs available for non-college-educated workers and the increasing number of new non-college-educated immigrants signals growing competition for jobs and, hence, further decline in relative earnings at the low end of the labor market.'' RAND concludes that ''there appears to be a growing divergence between current trends in the state's economy and the immigration policies that are producing a steady inflow of poorly educated immigrants. . . . Specifically, we recommend that current policies be modified . . . to place greater emphasis on the educational levels of new immigrants.''
One prime example of the need for a more educated workforce is in the information technology industry. The Department of Labor reports that this will be the fastest growing industry over the next ten years and that the three fastest growing occupations will be information technology occupations.
Page 17 PREV PAGE TOP OF DOC
At the same time, the Information Technology Association of America reports that there are already 346,000 vacancies in information technology positions. Silicon Valley warns us that unless the 65,000 cap on ''H–1B'' visas for high-skilled workers is dramatically increased, the American economy will suffer.
A number of witnesses will present us with evidence this morning that there is a growing level of unmet demand for information technology jobs. The question this Subcommittee needs to address is to what extent the demand should be met through an increase in the quota for H–1B workers.
Most likely we will need some increase in the quota for at least a few years while we let the law of supply and demand take effect. Presumably, plentiful jobs and increasing salaries will encourage more American college students to study information technology. I believe this is already happening.
Also, we may need some increase in the quota for at least a few years while America's primary and secondary schools emphasize the teaching of math and science.
But the immediate demand may be alleviated by the retraining of American workers—both information technology workers who need skill upgrades and workers new to the field. And we need to make sure that the information technology industry does not use foreign workers to displace American workers.
By taking advantage of the expertise of today's witnesses, we will be able to decide as a Subcommittee how much of the present demand for information technology workers needs to be met through the increased importation of workers on H–1B visas.
Page 18 PREV PAGE TOP OF DOC
Mr. ROGAN. Mr. Chairman, thank you, and thank you for calling this hearing. Because of the number of witnesses we have before us today, rather than present my opening statement at this time, I ask unanimous consent that both my opening statement and a newspaper article written by our colleague from California, Mr. Dreier, be included as part of the record.
Mr. SMITH OF TEXAS. Without objection, both your opening statement and the article will be made a part of the record.
[The information referred to follows:]
PREPARED STATEMENT OF HON. JAMES ROGAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Thank you Mr. Chairman. To begin I would like to thank you for your leadership in authoring this important legislation and calling today's hearing. As the committee knows, H.R. 3736, the ''Workforce Improvement and Protection Act of 1998'' will raise the cap on the number of H–1b employment visas issued to highly skilled foreign professionals hired by American businesses. High technology businesses and research universities vitally need this program to recruit foreign talent, especially where an insufficient number of highly skilled Americans are available to fill current job openings. One recent report states that the computer industry has 340,000 unfilled jobs, while American universities produce only 130,000 computer science graduates a year. In order to compete globally, American businesses and universities need the ability to freely hire foreign talent to fill some of these positions. I understand that the current cap of 65,000 H–1b visas will be reached very soon and when that occurs the INS will no longer issue H–1b visas for the remainder of this year.
Page 19 PREV PAGE TOP OF DOC
Raising the cap on H–1b visas will give American businesses the ability to expand and compete globally. I support raising the present cap from 65,000 to 95,000 for 1998, and to 115,000 by the year 2000.
H.R. 3736 also directs tough enforcement action where it is needed—against those who abuse the program at the expense of American workers. Under the bill, employers who willfully violate the H–1b program face fines that are five times higher than current law. Furthermore, it authorizes additional penalties up to $25,000 on top of those penalties. It also permits the Department of Labor to engage in spot inspections of known violators for a period of up to five years. These important enforcement provisions are necessary and appropriate.
However, I want to bring to the committees attention my serious concerns about other provisions in the bill. What it purports to give with one hand it takes away with the other by imposing a new regulatory structure on businesses that hire H–1b employees. These new requirements may render the program unusable to a large number of American businesses.
H.R. 3736 in its present form increases the Labor Department's authority to initiate investigations on its own. Currently, a complaint surrounding any business is required to commence a Department of Labor investigation. Giving the Labor Department free reign absent any complaint is unwise and potentially unworkable because it would discourage businesses from employing H–1b professionals. Business groups oppose this provision because it would subject those with a higher percentage of H–1b professionals to significantly increased investigations and costs without requiring the Labor Department to implement clearer enforcement guidelines. Further, the Labor Department has a history of not promulgating clear and consistent regulations in this area. In fact, eight years after Congress instituted Labor Department involvement in the B–1b program, there are still no final regulations.
Page 20 PREV PAGE TOP OF DOC
Even more troubling, this bill adds two new regulatory requirements in the form of layoff and recruitment attestation clauses. At first blush, these attestation clauses appear to be reasonable safeguards that provide protection for American workers so they will not lose their jobs to H–1b employees. In reality, these new requirements will add onerous and unnecessary burdens on American businesses. A vast array of employers oppose the layoff attestation because it would place them under the scrutiny of the Department of Labor every time they have to make decisions regarding their personnel. This alone would effectively eliminate the use of H–1bs by many employers.
These attestation provisions require much more than merely ''checking off a box.'' To ensure compliance, the government would be allowed to micro-manage the human resource policies of American businesses. These additional attestations would seriously harm American employers' ability to recruit the best-qualified people and go after the talent necessary to maintain American superiority against foreign competitors, and could force U.S. companies to move jobs overseas where high tech workers are available.
Current law already contains safeguards to protect American workers. Presently all H–1b employers must attest that:
they are paying the foreign professional a wage that is the higher of what is typically paid in the region for that type of work (''prevailing wage''), or what the employer pays its existing employees with similar experience and duties;
the working conditions of its American workers are not adversely affected;
Page 21 PREV PAGE TOP OF DOC
there is no strike/lockout at the worksite, or in the occupation for which the foreign professional is sought;
it has posted notice to current employees that it is seeking to hire an H–1b professional.
H.R. 3736 would properly increase the cap on H–1b professionals. However, the added attestations and Department of Labor-initiated investigation provisions will not benefit American businesses and universities. It will not protect the American workforce; it will hurt the global competitiveness of American employers. I am very concerned that in the end these added regulations may cost American jobs.
Thank you Mr. Chairman.
96
58001d.eps
58001e.eps
Mr. ROGAN. Thank you.
Mr. SMITH OF TEXAS. Let me say before I introduce the first panel, I want to thank the members who are here. Mr. Pease, I mentioned in your absence a moment ago, you had taken a flight earlier than expected, just to be here today from Indiana. We appreciate that. Mr. Rogan had to come early from California, so I guess you get the record for the farthest distance traveled at some inconvenience as well.
Page 22 PREV PAGE TOP OF DOC
Mr. ROGAN. But the weather is nicer here today.
Mr. SMITH OF TEXAS. Good.
Let me introduce our panelists and we will get to their testimony. Dr. George Borjas, JFK School of Government at Harvard University; Dr. Georges Vernez, the RAND Corporation; and Alan Reynolds, the Hudson Institute.
You all know that I have a particular interest in the findings that you have made in various areas. And I appreciate you being here and also the contribution you will be making today to the debate as to what we do about our future work force of America.
And let me say by introducing you all, also, that later on we will be hearing about H–1B high-tech workers. I think we need to emphasize that the H–1Bs are just a tiny sliver of our overall work force numbers. What you all will be talking about is the big picture, which of course includes the tiny sliver, but goes to the more important question of what are the future work force needs of America; what is the match or mismatch between our immigration policy and the needs of the work force.
And when I say the needs of the work force, of course, I am also talking about the needs of the economy, because if we are going to continue to have a growing economy, we are going to need to have a work force that I believe is more highly trained and more highly educated than the one we have today. So welcome to you all.
Page 23 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. Dr. Borjas, we will begin with you. We won't say how many times you have been here, but welcome back.
STATEMENT OF GEORGE J. BORJAS, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY
Mr. BORJAS. Thank you very much, Mr. Chairman. And thank you very much to the other members of the committee for having me back and for inviting me to talk a little bit about the latest research and economics, about economic impact and immigration on the United States.
As we all know, the U.S. is now on the verge of yet another historic debate over immigration policy. Up to this point, the debate has focused primarily on illegal immigration and on welfare benefits received by immigrants, and as you all know, the discussions have led Congress to adopt several measures to address those problems.
I believe in the next few years, the immigration debate will likely shift toward a larger, much bigger picture of the character and consequence of legal immigration in the U.S. One question that has historically driven the debate over legal immigration is question of what is economic impact on native workers of more immigrants. That is what I want to talk about today.
Economic theory suggests that the effect of immigration on native workers depends critically on the distribution of skills between immigrants and natives. If the skills of immigrants were similar to those of natives—in other words if, roughly speaking, the number of skilled immigrants was, roughly speaking, equal proportionately to the number of skilled natives and the number of unskilled immigrants was proportionately equal to the number of unskilled natives, then immigration would have little impact on the relative wage of skilled and unskilled workers on the economy.
Page 24 PREV PAGE TOP OF DOC
If, on the other hand, immigrants were more skilled than natives, we would expect the earnings of more skilled natives to fall because there would be an increase in supply of skilled natives and there would be a shift in income distribution toward the unskilled.
If, conversely, like has been the case over the last few years, immigrants were less skilled than natives, then there would be an increasing supply of less skilled workers overall and wages of less skilled workers would be expected to fall and the distribution of income would shift toward the more skilled.
The point is that any analysis of economic impact of immigration on labor market conditions will critically depend on a comparison of the skills of immigrants and the skills of native workers.
In data that is included in my written report, there is evidence that the skilled composition over the last 20 or 30 years of immigrants has been concentrated mostly toward the less skilled. In other words, there has been a dramatic shift toward an increase in less skilled immigration over the last two or three decades and this shift in the distribution of skills is really responsible for what we are talking about later, which is the fact that there has been a pretty sizable impact on the wages of less skilled workers and an adverse impact on the wages of less skilled workers in the United States.
Now, how do economists try to measure that impact? Historically, immigrants have clustered in a very small number of States in the U.S. In fact, in 1960, 60 percent of immigrants lived in 1 of 6 states: California, New York, Texas, Florida, New Jersey, and Illinois. By 1990, the clustering has increased, so that 75 percent of immigrants live in those six States.
Page 25 PREV PAGE TOP OF DOC
This geographic clustering is the way that economists tend to exploit the data to address the question of whether immigrants affect native workers in the labor market. In particular, the hypotheses goes something like this. Suppose that immigrants really cluster in California to a large extent. One would expect the natives in California will be somewhat better off or worse off, depending on the way things work, than natives in States where immigrants don't reside.
It is that cross-sectional or that spatial difference where immigrants cluster that really drives the empirical analysis of what kind of impact immigrants are having on native workers. Practically all the literature searches people conduct, trying to measure the impact of immigration on native earnings, really is a comparison of native conditions.
In particular, cities like San Diego, for example, where there are many immigrants, versus cities like Pittsburgh, where there are very few immigrants. And the assumption being if immigration is really adversely affecting native workers, one would expect the natives in San Diego are somewhat worse off than natives in Pittsburgh, and it is that comparison that motivates practically almost every empirical analysis in economics that looks at this problem.
The typical study in economics tends to find that, in fact, natives in San Diego are slightly worse off than natives in Pittsburgh. But the correlation is so weak as to be almost trivial. From that very weak negative correlation, most economists will tend to jump to the conclusion that because natives in San Diego are only slightly worse off than natives in Pittsburgh, that that must mean that immigration doesn't really have that big of an impact on the labor market.
Page 26 PREV PAGE TOP OF DOC
But I want to argue today that there are two major flaws with that conclusion and that there is a better way of doing things that is sort of the new wave in economic literature. One crucial flaw with that conclusion is the fact immigrants, even though they cluster in six States, do not cluster randomly across the U.S. They don't choose these States just out of pure draw of some random distribution.
Suppose, for example, that conditions in California tend to be quite good compared to the rest of the economy; because immigrants tends to cluster in California, that will tend to build a positive correlation between economics conditions and immigration, and it is just because of the fact immigrants happen to cluster in an unrandom way.
A more serious problem is the fact that immigrants, when they enter a State, are not acting in a vacuum, and by that I mean natives will not sit idly by and watch their opportunities evaporate. Suppose, in particular, immigrants come to a city like San Diego and that they do have an adverse impact on the earnings of natives in San Diego. Natives in San Diego will not just stand by and watch that happen; there will be several responses. Number one, natives who are in San Diego now will now have a bigger incentive to move out of San Diego. By moving out of San Diego, what that means is that whatever supply increase happened in San Diego will now be diffused throughout the whole country, and therefore some of the economic impact of immigration will now also happen in Pittsburgh, where natives will move.
Another way in which natives respond is that natives who are thinking of moving to San Diego will now move someplace else instead, and again that tends to diffuse the economic impact of immigration from San Diego to the rest of the economy.
Page 27 PREV PAGE TOP OF DOC
And last but not least, people who are thinking of investing money and opening up firms will look at opportunities in various cities, and when they see immigrants flooding San Diego and lowering the unskilled wage there, if one is thinking about opening up a factory that uses those workers, then one will the capital flows to compensate also; and again the capital flows will leave Detroit, for example, and move to San Diego, and again equalize economic opportunities across the whole country.
The point is that negative responses will tend to diffuse the impact of immigration away from the city most affected by immigration toward the whole economy. The key point is that because of that, one cannot look at a particular labor market like San Diego, for example, or California, to conclude anything about the economic impact of immigration.
In the written testimony that I provided to the committee, there is some evidence that in fact there are these kinds of flows going on in the economy and perhaps the clearest evidence of a potential relationship between native migration flows within the U.S. and immigration is what has happened to California's population in the last 30, 40, 50 years.
Prior to 1970—let me rephrase that. California has been growing very rapidly in terms of population throughout the whole century. Prior to 1970, the number of natives living in California was growing quite rapidly, and if I just read a couple numbers to you, I hate to flood you with numbers but these numbers are sort of interesting.
Prior to 1970—let me rephrase that again. 6.9 percent of the native population in the U.S. was living in California in 1950. By 1970, almost 10 percent of natives were living in California—of the entire U.S., was living in California. It turns that out even though California's population has grown continuously since then, the fraction of natives living in California has remained steady at about 10 percent since 1970, yet California's population has grown continuously since then.
Page 28 PREV PAGE TOP OF DOC
In 1970, 10.2 percent of the population lived in California. By 1990, 12.4 percent lived in California. One way of interpreting the data is the following. Suppose we go back in time to 1970 and I ask you to predict California's share of the population today. Even though you know nothing about the fact millions of immigrants will be moving to California between 1970 and 1998, you could actually do a very good job of predicting California's population today from pre-1970 trends.
One way of interpreting that is the trend essentially continued but the growth in population was essentially replaced on a one-to-one basis by immigrants moving into California.
Now, there are two ways of interpreting that empirical fact. One is for any immigrant that came into California, one native did not move there that would have moved there given the previous trend.
The other possibility is for reasons we don't understand, California's population growth would have stopped in 1970, and had it not been for immigration, California today would be a much smaller State.
We clearly cannot know which counter fact of history is correct, we only know what actually happened. But preexisting trends in California clearly indicate very rapid population growth, which essentially stopped the minute that the immigrants——
Mr. SMITH OF TEXAS. Dr. Borjas, that has been a very quick 5 minutes, I agree. I would like to hear from you myself for hours.
Page 29 PREV PAGE TOP OF DOC
Mr. BORJAS. Let me conclude.
Mr. SMITH OF TEXAS. Yes, move on. And we will have some questions for you.
Mr. BORJAS. Just 30 more seconds.
What that means is we cannot really look at labor markets to measure the economic impact of immigration. We have to look at the national economy. And recent research that does that shows that because the supply of immigrants tends to disproportionately increase the supply of less skilled workers, immigration has had a very sizable impact on the skilled and unskilled wage. And, in particular, immigration over the 1980 through 1995 period can account for almost half of the decrease in the relative wage of high school dropouts in this country. Thank you.
Mr. SMITH OF TEXAS. Thank you, Dr. Borjas.
[The prepared statement of Mr. Borjas follows:]
PREPARED STATEMENT OF GEORGE J. BORJAS(see footnote 1), John F. Kennedy School of Government, Harvard University
The United States is on the verge of yet another historic debate over immigration policy. Up to this point, the debate has focused primarily on illegal immigration or on welfare benefits received by immigrants—and these discussions have led Congress to tighten restrictions on illegal aliens and to change the eligibility requirements for welfare use by non-citizens.
Page 30 PREV PAGE TOP OF DOC
In the next few years, the debate will likely shift towards the larger and much more important issue of the character and consequences of legal immigration. There have been two major shifts in legal immigration policy in this century. In 1924, the United States began to limit the number of immigrants admitted and established the national-origins quota system, a visa-allocation scheme that awarded entry visas mainly on the basis of national origin and that favored Germany and the United Kingdom. This system was repealed in 1965, and family reunification became the central goal of immigration policy, with entry visas being awarded mainly to applicants who have relatives already residing in the United States.
The social, demographic, and economic changes initiated by the 1965 legislation have been truly historic. Immigration began to surge soon after the enactment of the 1965 Amendments, reversing a long downward trend in the foreign-born share of the U.S. population. As recently as the 1950s, only about 250 thousand immigrants entered the country annually; by the 1990s, the United States was admitting about 1 million legal immigrants annually, and an estimated 300 thousand aliens entered and stayed in the country illegally. In 1970, the foreign-born share of the U.S. population was 4.8 percent. By 1996, the foreign-born share had increased to 9.3 percent.
Moreover, because of the decline in the number of children borne by American women, immigration now accounts for nearly 40 percent of the growth in population, as compared to about 50 percent at the beginning of the 20th Century. At least one of every three new workers who will enter the U.S. labor market during the 1990s will be an immigrant. By this yardstick, immigrants play a crucial role in determining demographic and economic trends in the United States.
Page 31 PREV PAGE TOP OF DOC
The 1965 legislation also led to a momentous shift in the ethnic composition of the population. Although persons of European origin dominated the immigrant flow since the country's founding until the 1950's, only about 10 percent of the persons admitted in the 1980's were of European origin. It is now estimated that non-Hispanic whites may form a minority of the population by the year 2050.
The effect of immigration on native labor depends critically on the distribution of skills between immigrants and natives. If the skill distribution of immigrants matched that of natives, immigration would not affect the relative supply of skills and thus would have little, if any, impact on the wage structure. If immigrants were less skilled than natives, we would expect the earnings of less skilled workers to fall, and immigration would shift the distribution of income toward the more skilled. Finally, if immigrants were more skilled than natives, we would expect the earnings of ore skilled workers to fall, and immigration would shift the distribution of income towards the less skilled.
Any analysis of the economic impact of immigration on native labor market opportunities, therefore, must begin by describing how the skills of immigrants compare to those of natives. Table uses data drawn from the decennial Censuses to summarize the key trends in immigrant skills over the 1970–90 period. The relative educational attainment of successive immigrant waves fell dramatically in recent decades. In 1970, the typical immigrant in the country had 10.7 years of schooling, as compared to 11.5 years for the typical native worker. By 1990, the typical immigrant had 11.6 years of schooling, as compared to 13.2 years for natives. The relative decline in the education of immigrants is partly responsible for a substantial increase in the wage gap between immigrants and natives. In 1970, the typical immigrant earned about 1 percent more than natives; by 1990, the typical immigrant earned 15.2 percent less than natives.
Page 32 PREV PAGE TOP OF DOC
The table also documents that part of the decline in the relative economic performance of immigrants can be explained by a sizable drop in the relative wage of successive immigrant cohorts. The latest immigrant wave enumerated in the 1970 Census (i.e., the 1965–1969 arrivals) earned 16.6 percent less than natives in 1970. By 1980, the latest immigrant wave enumerated in the 1980 Census earned 27.6 percent less than natives; and by 1990, the wage disadvantage between the most recent immigrant wave and natives had grown to 31.7 percent. As long as we are willing to interpret relative wages as a measure of relative skills, the trend in the wage differential between recent immigrants and natives suggests that there was a rapid decline in the relative skills of immigrants during the 1970–90 period.
The available evidence also suggests that the economic gap between immigrants and natives does not narrow substantially during the immigrants' working lives. Figure illustrates the trend in the wage differential between a particular group of immigrants and similarly-aged natives, so that immigrants who arrived when they were between 25 and 34 years old in the late 1960s are compared to natives aged 25–34 in 1970, to natives 35–44 in 1980, and to natives aged 45–54 in 1990. Consider the group of immigrants who arrived between 1965 and 1969 and who were 25–34 years old in 1970. They earned 12.0 percent less than natives in 1970 and 2.5 percent less in 1990. Over a 20-year period, therefore, the relative wage of this immigrant cohort increased by 10 percentage points.
It turns out that practically all immigrants, regardless of when they arrived in the country, experience the same sluggish relative wage growth. This result is significant because it suggests that more recent immigrant cohorts have not had faster wage growth despite their lower starting positions. Immigrants who arrived between 1975 and 1979 and were 25–34 years old at the time of arrival earned 21.3 percent less than natives in 1980 and 15.5 percent less than natives in 1990, an increase of only 5.8 percentage points. This wage growth is similar to that experienced by similarly aged immigrants who arrived between 1965 and 1969.
Page 33 PREV PAGE TOP OF DOC
In short, the process of economic assimilation narrows the wage gap between immigrants and natives by only about 10 percentage points in the first two decades after arrival. If the recent waves experience the same extent of economic assimilation as earlier waves, the wage gap between recent immigrants and natives will remain at about 20 percentage points throughout much of the immigrants' working lives. The implication for the economic impact of immigration is clear: current immigration will have a disproportionately large impact on the number of less skilled workers for the next few decades.
Historically, immigrants have clustered in a small number of geographic areas, and this geographic concentration has increased over time. In 1960, 60 percent of the immigrants lived in one of the six main ''immigrant-receiving'' states—California, New York, Texas, Florida, New Jersey and Illinois. By 1990, 75 percent of immigrants lived in these states, and 33 percent lived in California alone. This geographic clustering occurs because immigrants tend to enter the country through a very small number of gateway cities, and the empirical evidence suggests that many immigrants are unlikely to move to other parts of the country as part of the assimilation process. Figure illustrates the impact of immigration on the percentage of the adult population that is foreign-born in California, in other immigrant-receiving states, and in the rest of the country. Prior to 1970, the foreign-born share was steady or declining in each region. Since 1970, this share almost tripled in California (rising from 10.3 percent in 1970 to 26.8 percent in 1990), roughly doubled in the other immigrant-receiving states (from 8.4 to 14.6 percent), and rose slightly in the rest of the country (from 3.0 to 4.2 percent).
Much of the academic research that attempts to measure the economic impact of immigration on native employment opportunities exploits the geographic clustering of the immigrant population in the United States. The idea can be roughly stated as follows: we know that immigrants flock to California. Why not just compare California's labor market outcomes to the outcomes observed in the rest of the country? This approach is, in fact, the approach used in much of the academic literature that attempts to measure the impact of immigration on native labor market opportunities.
Page 34 PREV PAGE TOP OF DOC
Beginning in the early 1980s, a growing number of econometric studies began to estimate the impact of immigration on native earnings by comparing the earnings of natives who reside in immigrant cities (such as Los Angeles and San Diego) with the earnings of natives who reside in cities where few immigrants live (such as Atlanta and Pittsburgh). These ''spatial correlations'' suggested that the average native wage is only slightly lower in labor markets where immigrants tend to cluster. If one city has 10 percent more immigrants than another, the native wage in the city with more immigrants is only about .2 percent lower. The econometric studies then jumped to the conclusion that the weak spatial correlation must indicate that immigration has little impact on the economic opportunities of native workers.
There are, however, two problems with the spatial correlation approach. Suppose, for example, that immigration into California lowers the earnings of natives in California substantially. Native workers are not likely to stand idly by and watch their economic opportunities evaporate. Many will move out of California into other regions, and persons who were considering moving to California will now move somewhere else instead. As native workers respond to immigration by voting with their feet, the adverse impact of immigration on California's labor market is transmitted to the entire economy. In the end, all native workers are worse off from immigration, not simply those residing in the areas where immigrants cluster.
Moreover, natives might respond not only in terms of labor flows, but also through capital flows. If immigration reduces the wage of less skilled workers in the immigrant-receiving areas, entrepreneurs will take this into account when making their investment decisions and move some of their capital to these areas. Again, these capital flows tend to equalize economic opportunities across areas.
Page 35 PREV PAGE TOP OF DOC
Therefore, native responses to immigration—whether through labor flows or capital flows—tend to diffuse the economic impact of immigration away from the affected areas and towards the national economy. As a result, a weak spatial correlation does not necessarily indicate that immigrants have a numerically inconsequential impact on native workers.
In addition, immigrants do not cluster randomly across the United States. Cities or states where immigrants cluster have done well in some periods and poorly in others, producing a ''spurious'' correlation between immigration and area outcomes. For reasons that are probably unrelated to immigration, California is a high wage state. As a result, it will look as if immigration improves native economic opportunities in a cross-section dominated by California. To avoid this spurious cross-section ''spatial'' correlation, most analysts relate changes in the economic position of natives in an area over time to changes in the number of immigrants. But a state's economy also fluctuates over time for reasons that are independent of immigration, creating the possibility of spurious longitudinal correlations as well. When California's economy booms (or falls into a recession), there will be a positive (negative) correlation between immigration and the economic position of natives.
Recent work by Harvard economists George Borjas, Richard Freeman, and Lawrence Katz provides what is perhaps the clearest evidence of a potential relation between immigration and native migration decisions in the United States.(see footnote 2)
Divide the country into three ''regions'': California, the other five states that receive large numbers of immigrants (New York, Texas, Florida, New Jersey, and Illinois), and the remainder of the country. Table reports the proportion of the total population, of natives, and of immigrants living in these areas from 1950 to 1990. The resurgence of large-scale immigration into the United States began around 1970 and has continued since. It seems natural to contrast pre-1970 changes in the residential location of the native population with post-1970 changes to assess the effects of immigration on native location decisions.
Page 36 PREV PAGE TOP OF DOC
The population counts reveal that the share of natives who lived in the major immigrant receiving state, California, was rising rapidly prior to 1970. Since 1970, however, the share of natives living in California has barely changed. However, California's share of the total population kept rising from 10.2 percent in 1970 to 12.4 percent in 1990. Put differently, an extrapolation of the demographic trends that existed before 1970—before the immigrant supply shock—would have predicted the state's 1990 share of the total population quite well.
Because labor (or capital) flows can diffuse the impact of immigration from the affected local labor markets to the national economy, Borjas, Freeman, and Katz proposed an alternative methodology to estimate the impact. The ''factor proportions approach'' compares a nation's actual supplies of workers in particular skill groups to those it would had had in the absence of immigration, and then uses outside information on how the wages of particular skill groups respond to increases in supply to compute the relative wage consequences of immigration.
The immigrant supply shock that occurred between 1980 and 1995 increased the supply of workers without a high school diploma by 20.7 percent. At the same time, this immigrant supply shock increased the supply of workers with at least a college diploma by only 4.1 percent. It has been estimated that the disproportionate impact of immigration on the supply of less-skilled workers can explain about 44 percent of the 10.9 percentage point decline in the relative wage of high school dropouts observed between 1980 and 1995. This perspective thus implies that the adverse impact of immigration on the well being of workers at the bottom end of the skill distribution has been substantial.
Page 37 PREV PAGE TOP OF DOC
Source: Borjas (1995, Table 1). The statistics are calculated in the subsample of men aged 25–64 who work in the civilian sector, who are not self-employed, and who do not reside in group quarters.
58001a.eps
58001b.eps
Source: Borjas, Freeman, and Katz (1997, Figure 1). The calculations use the 1950–90 U.S. Censuses. The adult-age population contains all persons aged 18–64 who are not living in group quarters.
Source: Borjas, Freeman, and Katz (1997, Table 8). The calculations use the 1950–90 U.S. Censuses. The adult-age population contains all persons aged 18–64 who are not living in group quarters.
Mr. SMITH OF TEXAS. Dr. Vernez.
Page 38 PREV PAGE TOP OF DOC
STATEMENT OF GEORGES VERNEZ, DIRECTOR, CENTER FOR RESEARCH ON IMMIGRATION POLICY, RAND
Mr. VERNEZ. Thank you, Mr. Chairman.
As you know, my colleague Kevin McCarthy and I have just completed a comprehensive analysis of the effect of immigration in the State of California over the past 30 years; in fact, doing what Dr. Borjas said shouldn't be done.
Certainly California is a unique State as far as immigration is concerned. It has about one-third of all immigrants residing in the United States, and those immigrants, relative to the rest of the nations, are much more likely to come from Mexico, Latin America, and Southeast Asia, and have a much lower level of education. Hence, I think the California experience is very relevant to the topic of this hearing.
We have concluded from our analyses that immigration continues to benefit California's employers in the economy at large. It is doing so at increasing cost to low-educated workers, both natives and foreign borns, and to the public sector. One major reason is a widening gap between the State's economic needs and the skill levels of immigrants.
Let me elaborate briefly on these points: Immigration benefits employers in the economy at large because immigrant labor, particularly low-skilled labor, is less expensive than native-born labor and is equally productive. As a result, immigrants have provided California employers with a comparative advantage within the United States, everything else being equal.
Page 39 PREV PAGE TOP OF DOC
On the down side, however, the employment prospects and wages of less-educated workers have dropped steadily because a greater number of workers, both native born and foreign born, are competing for a fixed number of jobs.
The California economy created 7 million jobs between 1960 and 1990. Eighty-five percent were filled by workers with one or more years of college, and 15 percent were filled by workers with only a high school degree. There has been no job growth in the number of jobs filled by workers with less than 12 years of education during that period of time.
High school dropouts have been most affected by these trends. The employment rate, for instance, among these workers fell from 67 percent in 1970 to 47 percent in 1990.
Now, clearly, the main reasons for this decline are increased worldwide competition, technological advances, and the availability of cheap labor in developing countries.
Immigration to the State has also been a factor, however. We have estimated that immigration has contributed 15 to 25 percent of this decline. Immigration also has had a downward effect on the wages of unskilled workers. Between 1970 and 1990, real wages of native-born high school dropouts declined by 24 percent in California, with about one-tenth of the decline attributable to immigration.
Immigrants themselves have also been affected. The typical image of an immigrant is that he enters the country at a wage that is slightly below a native-born and, over time, within 10 years, catches up and reaches parity with native-borns in terms of wages. That is still true for educated immigrants, particularly college-educated immigrants.
Page 40 PREV PAGE TOP OF DOC
It is no longer true, if it has ever been true, for low-educated immigrants. They enter commanding relatively low wage and they make no economic progress over their lifetimes. In other words, a large portion of those immigrants, which are about 50 percent of all immigrants in California, will live in poverty throughout their lives at very low wages.
These trends which have contributed also to immigration, have a growing effect on the demand for State and local government services and public institutions. Schools have been the hardest hit by immigration. Because immigrants in California are young and have fertility rates that are about 30 to 40 percent higher than native-born residents, their presence in the State has contributed to a 33 percent K–12 enrollment from 1986 to 1996.
The full effect of this increase has not yet been fully felt in high school, community colleges, and the university systems. We have projected a 30 to 40 percent increase in the size of the high school graduating class between 1995 and the year 2005. In less than 10 years, the system will have to grow by about 30 percent if it is to accommodate this growth in the number of students, or otherwise deny a post secondary education to an increasing proportion of California youths.
This educational challenge is all the greater because a large proportion of these children, predominately Hispanic and southeast Asians, are being raised in low-income families in which both parents have less than a high school education.
Research very often is contradictory on many things, but on one thing research has always been consistent; that is, there is a very high correlation between the education of the parents and the resources of the parents and the eventual educational attainment of their children.
Page 41 PREV PAGE TOP OF DOC
Today, for instance, native-born Hispanic youths are 30 percent less likely to go to college after high school and three times less likely to graduate from college than a non-Hispanic-white student. Why is that significant? Because Hispanic students now account for 40 percent of the entry class into school in California and about 15 percent in the Nation and therefore will have a strong bearing on the quality of the future labor force.
Let me conclude with two suggestions. Two of the most important recommendations contained in our report proposes changes in immigration policy and education policy.
One minute?
Mr. SMITH OF TEXAS. Dr. Vernez, maybe I will follow up with my first question to you on that point. Thank you very much.
[The prepared statement of Mr. Vernez follows:]
PREPARED STATEMENT OF GEORGES VERNEZ(see footnote 3), Director, Center for Research on Immigration Policy, RAND
Mr. Chairman and members of the House Subcommittee on Immigration and Claims, thank you for the opportunity to testify on Immigration and America's Workforce for the 21st Century.
Page 42 PREV PAGE TOP OF DOC
My colleague, Kevin McCarthy, and I have just completed an analysis of immigration in the state of California between 1960 and 1990. Our findings, documented in Immigration in a Changing Economy: California's Experience, are particularly relevant to the topic of this hearing.(see footnote 4)
As you probably know, about one-third of all foreign-born people in the nation now reside in California. Along with their children, they account for two-thirds of the state's population growth since 1980. Relative to the rest of the nation, immigrants to California are more likely to come from Mexico, Latin America, and Southeast Asia. Compared to the rest of the nation, they are less likely to have completed high school. In fact, nearly half the immigrants to the state have less than 12 years of schooling.
As these immigrants enter a state economy that is increasingly skill-based, the costs to the public sector are getting steeper. The state must educate an increasing number of children born to immigrants and keep them in the education system long enough to provide them the skills required by most jobs. In short, the widening gap between the needs of the state's economy and the skill levels of incoming immigrants places a heavy burden on the education system. Furthermore, increasing numbers of low-skilled immigrants are competing with native and foreign-born workers for low-skilled jobs, a sector that has not grown in the last 30 years.
Our study concludes that the benefits of immigration to the state continue to outweigh the costs. However, unless immigration policy changes and unless greater investment is made in the education of the children of immigrants who are already residents of the state, the costs of immigration will increase.
Page 43 PREV PAGE TOP OF DOC
The remainder of my testimony elaborates on these points.
On the benefit side, in the past 30 years immigration has helped California's economy grow about 15 percentage points faster than that of the rest of the nation. The main reason for this accelerated growth is that immigrant labor—particularly low-skilled labor—is less expensive than native-born labor and is equally productive. As a result, immigrants have provided California's employers with a comparative advantage over their competitors in other states.
On the cost side, however, the employment prospects and wages of less-educated workers have dropped steadily because a greater number of workers—both native-born and foreign-born—are competing for a fixed number of jobs. Of the 7 million new jobs created in California from 1960 to 1990, 85 percent were filled by workers with one or more years of college and 15 percent were filled by workers with only a high school degree.(see footnote 5) Since there has been no job growth in the unskilled sector, less-educated newcomers are now taking jobs vacated by retirees or by workers moving out of the state.
These immigrants are also taking jobs from native-born high school dropouts. The employment rate among these workers fell from 67 percent in 1970 to 47 percent in 1990. Although the main reasons for this decline are increased world-wide competition, technological advances, and the availability of cheap labor in developing countries, immigration to the state has also been a factor. We estimate that immigration has caused 15 to 25 percent of this decline. Employment among high school graduates has also declined, although not as sharply.
Page 44 PREV PAGE TOP OF DOC
Overall, between 1960 and 1990, we estimate that between 130,000 to 190,000 native-born people were not working as a result of immigration. This figure represents about 3 to 5 percent of all those unemployed or out of the labor force.
Immigration has also had a downward effect on the wages of unskilled workers. Between 1970 and 1990, the real wages of native-born high school dropouts declined by 24 percent in California, with about one-tenth of this decline attributable to immigration. Foreign-born workers have also suffered wage erosion. They receive increasingly lower earnings relative to native-born workers when they arrive, and they actually lose earning power over their lifetime. Unlike immigrants with some college education, who reach earning parity with the average native-born worker in the state within about 10 years, immigrants with less than a high school degree (about half the state's immigrants) fall increasingly behind the average native-born worker during their working lives.
These trends have contributed to immigration's growing effect on the demand for state and local government services. The costs of immigration to the state's public sector have been well documented in a recent report from the National Research Council.(see footnote 6) The report estimates that in 1996 the net annual public costs for state and local services were $3,463 per immigrant household. That amounts to an annual tax burden of $1,170 per native-born California household. The reason for this high cost to the California taxpayer is not that immigrants are greater users of public services than natives with similar income and family composition: It is simply that a greater share of immigrants have low incomes and large families.
Of all public institutions, schools have been the hardest hit by immigration. Because immigrants to California are young and have fertility rates that are 30 to 40 percent higher than native-born residents, their presence in the state has contributed to a 33 percent growth in K–12 enrollment from 1986 to 1996 (from 4.4 million to 5.8 million).
Page 45 PREV PAGE TOP OF DOC
The full effect of this increase has yet to be felt on the state's high schools, community colleges, and universities. We have projected a 30 to 40 percent increase in the size of the high school graduating class between 1995 and 2005. Even a substantial decline in immigration between now and then would have little effect in this growth rate. Most of the students in the senior class of 2005 are already in the state's school system.
This educational challenge is all the greater because a large proportion of these children—predominately Hispanic and Southeast Asian—are being raised in low-income families in which both parents have less than a high school education. Research consistently shows that although the children in such families will be more educated than their parents, they will lag well behind other students, particularly in college attendance.
Today, for instance, native-born Hispanic youths are 30 percent less likely to go on to college after high school and three times less likely to graduate from college than non-Hispanic white students. Considering that by the year 2005, Hispanic youths alone will constitute 40 percent of all high school students in California—and more than 15 percent in the nation—their prospects will have a strong bearing on the quality of the future labor force.
In our report, we make a number of recommendations to address these trends, at both the federal and state levels. Two of the most important recommendations propose changes in immigration policy and education policy.
With regard to federal immigration policy, we do not recommend a radical overhaul. But to address the stagnation of job opportunities by low-skilled labor, we suggest two incremental changes. First, the number of legal immigrants admitted to the United States should be reduced to a more moderate range—which means somewhere between 300,000 per year, the average during the 1970s, and 800,000 per year, the average during the 1990s. Second, we propose that a better balance should be found between the demands of family reunification and the demands for higher-skilled labor in the workplace.
Page 46 PREV PAGE TOP OF DOC
With respect to education policy, it must be recognized that a disproportionate share of the children of immigrants, most of whom are born in the United States, are concentrated in a handful of states. Significant resources in investments for education will have to be made in those states just to keep up with increasing enrollments. But more than that is required: States should support special programs to encourage high school graduation and college attendance, particularly within the Hispanic community, and to enhance the English proficiency of immigrants and their children who already reside in the state.
These recommendations imply that a better balance should be struck between the interests of those who are already here, both native and foreign-born, and those who are seeking to come to the United States.
Mr. SMITH OF TEXAS. Mr. Reynolds.
STATEMENT OF ALAN REYNOLDS, DIRECTOR OF ECONOMIC RESEARCH, HUDSON INSTITUTE
Mr. REYNOLDS. Thank you, Mr. Chairman. Since you were kind enough to set a precedent by quoting from the Hudson Institute study, ''Work Force 2020,'' I am going to begin by doing the same.
In the 1990's, immigration accounted for fully half of the increase in the labor force. Immigration policy remains unchanged. Immigrants will constitute an increasing share of workers in the early 21st century. Thus, the job qualifications of immigrants will have an increasingly important impact on the skill and education levels of the work force.
Page 47 PREV PAGE TOP OF DOC
Unless they acquire more schooling in the U.S. than they did in their native countries, which parenthetically implies a burden on the taxpayer, recent immigrants will account for a rising share of the otherwise dwindling number of Americans who lack a high school education.
Now the reason that immigrants accounted for about half of the growth of the labor force in the early nineties was not that immigration accelerated but, rather, that the labor force has slowed down from about 1.7 percent, a little less in the eighties, to about 1.1 percent in the nineties. And given the slowdown in the labor force and the aging of the labor force, one could make a case for large numbers of immigrants—that there would be some benefits from large numbers of immigrants; but the key question, of course, is even if you were running short of willing and able workers, the key question is ''able,'' and that is where this panel, I think, is in total agreement.
As it comes time to add more workers or to replace retiring workers with young people, immigration becomes extremely important at the margin and this adds up to quite a few numbers as 10 or 20 years pass.
The average skill level of U.S. workers' productivity, average real wages, may well be diluted in the future if too many immigrants come here with below-average skills and are ill-prepared to improve those skills in a rapidly changing economy.
The second point related to that is that an increased supply of unskilled immigrants must depress real wages for unskilled natives unless there was matching increase in capital formation in low-wage industries. I find that extremely unlikely. I don't think capital is going to flow into sweat shops and broom-making and industries of that sort, nor do I think that is desirable. So in that case, an increase in supply of unskilled labor with capital being the same means the capital-labor ratio falls; real wages for productivity fall too, which is simply another way of saying I agree completely with Dr. Borjas.
Page 48 PREV PAGE TOP OF DOC
Up until 1965, from 1924 to 1965, immigration policy was rationed according to country of origin and this was thought to be unfair and irrational. But, in practice, current policy still does that and it does that because the previous wave of immigrants bring in their relatives, so there is the importance of relatives in our immigration priorities. The percentage of immigrants in the family-sponsored category was 63.9 in 1995, 65.1 percent in 1996. And that means de facto immigration quotas are heavily biased in favor of aspiring immigrants from Mexico, the former Soviet Union, the Philippines, Vietnam, Dominican Republic, El Salvador, China, India, and Cuba.
Recent immigrants from these countries bring in their relatives and their relatives then sponsor more relatives, so we end up with a country-based system, inadvertently; which Congress attempted to patch with diversity quotas, but that really isn't working.
With the family sponsorship, the diversity—the 55,000 for diversity and the lottery, refugees and asylees, are using up at least 85 percent of available slots, which doesn't leave much room for any other criteria, such as employment prospects.
The 1990 law permits up to 140,000 employment-based immigrants a year, but actual figures have been much lower, about 85,000 in 1995 and 117,000 in 1996, really trivial numbers.
Moreover, the work-related visas are usually temporary, while the much larger numbers of immigrants admitted for other reasons are permanent.
Page 49 PREV PAGE TOP OF DOC
The dominant criteria for U.S. immigration quotas—which are having a relative here, coming from a really terrible country, or winning a diversity lottery—those criteria are obviously unrelated to any concept of what is good for the U.S. economy or society. No one would sit down and say these are what we would begin with if we were starting fresh. Instead, the prevailing criteria are limited to just two, among many, conceivable interests of the immigrants themselves.
Immigration policy is all about methods and criteria of rationing a relatively small number of spaces among a much larger number of people who would like to live in the United States. It is a rationing question. And there are only four possible rationing methods. One is the queue, waiting in line; first come, first served. Another is the lottery. Another is allocation by political or bureaucratic preference, putting people into categories and having import quotas on categories. The last is the price system. Current policy mainly relies on the queue. Foreigners who are offered a job with less than 2 years of experience are in the employment third preference class and must wait 10 years. Bringing in an unmarried child over the age of 21 has a 6-year wait and so on.
Instead of relying on these arbitrary import quotas and waiting lists, I propose to make somewhat more use of the price system, as Canada does, by requiring a modest immigration fee. Canada's is 975 Canadian dollars. That would tend to reduce the waiting list by weeding out marginal applicants with a weak commitment to this country.
As far as illegal immigration, half of the problem is due to overstaying legal visas. I proposed system fines that would grow geometrically larger, the longer the overstay was overdue. For example, doubled every month. Anyone could leave without paying the fine but they couldn't come back in.
Page 50 PREV PAGE TOP OF DOC
Anyway, the bottom line is we must rely on some criteria for determining an immigrant's eligibility, and I suggest the most sensible and ultimately most humane criteria are those that demonstrate the potential immigrant's ability to support himself or herself and their family. And that would include things like formal education, occupational experience, training or other skills, certainly including English language skills, and accumulated savings.
A constructive and compassionate immigration policy must put primary emphasis on making sure that new entrants have sufficient human capital or financial capital to become, in a reasonable length of time, productive members of the economy and society.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Reynolds follows:]
PREPARED STATEMENT OF ALAN REYNOLDS, DIRECTOR OF ECONOMIC RESEARCH, HUDSON INSTITUTE
Last year, the Hudson Institute published Workforce 2020, the sequel to Workforce 2000. I did the background research on immigration for this project, and contributed some sections of the report. Unlike Workforce 2000 (which was commissioned by the Department of Labor), Workforce 2020 was privately funded. My own research has been entirely privately funded. The views I express here are my own, not those of my employer or associates.
Let me begin by quoting a representative passage from the new Hudson study:
Page 51 PREV PAGE TOP OF DOC
In the 1990s, immigration accounted for fully half of the increase in the labor force; if immigration policy remains unchanged, immigrants will constitute an increasing share of workers in the early twenty-first century. Thus the job qualifications of immigrants will have an increasingly important impact on the skill and education levels of the workforce. Unless they acquire more schooling in the U.S. than they did in their native countries, recent immigrants will account for a rising share of the otherwise dwindling number of Americans who lack a high school education.
Immigration is not inherently good or bad. Given the slowing and aging of the population, a plausible argument could be made that the U.S. might benefit from more rapid increases in the number of working-age immigrants than we have experienced in recent years. There would be more people paying Social Security taxes, for example.
In my view, the most important immigration issue is not whether the numbers of immigrants should be larger or smaller, but whether or not U.S. policy can prudently continue to be indifferent about inviting huge numbers of permanent residents who lack basic education or language skills.
A few preliminary observations:
1. Growth of the U.S. labor force has already slowed dramatically (from more than 1.6% a year in the 1980s to about 1.1% in the 1990s) and is apt to slow further if tax and transfer policies are not redesigned to improve work incentives for older Americans and second earners. We are running short of willing and able workers. This is likely to be a chronic problem for the foreseeable future. Slow growth of the labor force explains why estimates of future economic growth are closer to 2% than to the 3% norm of the postwar era.
Page 52 PREV PAGE TOP OF DOC
2. Immigration accounted for half of all new additions to the labor force in the first half of this decade. At the margin, when it comes time to add more workers, or to replace retiring workers with young people, immigrants will be increasingly important. The average skill level of U.S. workers, productivity and real wages, may be diluted in the future if too many immigrants bring below-average skills to the job, and are ill-prepared to improve those skills to keep up with the economy's rapid changes.
3. Census assumptions that the sum of legal and illegal immigration can forever be held below 900,000 a year seem unrealistic. External pressures on the borders are not getting any lighter. The population of Asia alone is expected to grow by one billion people by the year 2020, and the population of Latin America and the Caribbean by 155 million.
4. An increased supply of unskilled immigrant workers must depress real wages for unskilled natives unless that increased supply of unskilled labor was matched by increased investment in businesses that make use of unskilled workers. Shifting scarce capital toward low-wage industries is quite unlikely to happen, and it would be wasteful if it did.
5. Concerns about a ''shortage'' of high-tech employees are misleading. If certain skills become very scarce relative to demand, then salary offers for those jobs will increase—enticing more people to acquire these skills. A better way of putting the issue is that if immigration policy shifted toward putting greater emphasis on immigrants' skills, then skill-based wage differentials would narrow—unskilled jobs would then pay more, and skilled work a bit less. Under current policy, the opposite outcome is more likely, and more troublesome.
Page 53 PREV PAGE TOP OF DOC
6. Under current law, the schooling or skill of legal immigrants is almost 90% a matter of random luck. Two-thirds of immigrants are admitted solely because they have family members living in the United States, and another 16% are refugees or asylees, and 5–6% win the ''diversity'' lottery. Employment-related criteria have accounted for no more than 13% of immigrants lately, and that figures overstates the true significance of employability due to double counting. Employment-related visas are limited to 140,000, but have been smaller. Work-related visas are often temporary, while the much larger numbers of immigrants admitted regardless of employability are permanent.
CURRENT POLICY
From 1924 to 1965, immigration was rationed according to country of origin. In practice, current policy still does that. This is because the previous wave of immigrants has extremely preferential treatment when it comes to bringing in more relatives from the same countries. The more immigrants who arrived from a certain country in the recent past, the more can be expected from that country in the near future.
From 1990 to 1995, new immigration (aside from legalization under amnesty) averaged about 737,000 a year. Of those, immediate relatives accounted for 238,242 immigrants a year, and family-sponsored relatives accounted for another 220,103. That is, nearly two-thirds (62.2 %) of immigrants were admitted solely because they had family members here. This percentage of immigrants in family-sponsored categories has been rising lately—to 63.9% in 1995 and 65.1% in 1996. Another 16% of immigrants in the first half of the nineties (119,000 a year) were refugees and asylees—mainly from former communist countries: the Soviet Union and Eastern Europe, Vietnam, Laos and Cuba.
Page 54 PREV PAGE TOP OF DOC
We have inadvertently restored the old system of favoring immigrants depending on country of origin. But the new favoritism is no longer for immigrants from democratic countries with high levels of prosperity and skill, but for immigrants from the same countries that accounted for the last group of immigrants. This means de facto immigration quotas are heavily biased in favor of aspiring immigrants from Mexico, the former Soviet Union, the Philippines, Vietnam, the Dominican Republic, El Salvador, China, India and Cuba. Recent immigrants from these countries bring in their relatives. And their newly arrived relatives, in turn, sponsor still more relatives from the same countries.
To patch this problem, Congress added ''diversity'' quotas. The rationing dilemma in this case is so extreme that a lottery is used, with odds not much better than other lotteries. In one 30-day period (ending March 12, 1996), some 6.5 million applications were reportedly received for these 55,000 diversity visas.
With family sponsorship, diversity and refugees using up at least 85% of the available spaces, that does not leave much room for any other criteria, such as employment prospects or investment. The 1990 law permits up to 140,000 employment-based immigrants a year, but the actual figures were only 85,336 in 1995 and 117,499 in 1996. Highly restrictive investment-based criteria (called ''employment creation '') have admitted only about 500 people each year.
The dominant criteria for U.S. immigration quotas—having a relative here, coming from a really terrible country, or winning the diversity lottery—are obviously unrelated to any concept of what is good for the U.S. economy or society. Instead, the prevailing criteria are limited to just two (among many) conceivable interests of the immigrants themselves namely, escaping from a politically repressive country, or being able to live closer to other family members. Unless Congress is willing to increase the numbers of legal immigrants, any decision to put greater emphasis on employment qualifications requires putting less emphasis on family ties and/or refugee status. If the numbers are limited, there is no choice but to make choices.
Page 55 PREV PAGE TOP OF DOC
HOW OTHERS DO IT
The percentage of foreign-born residents in Canada is twice as high as it is in the U.S. Yet Canada puts a much higher priority on economic criteria (employability and assets) than the U.S. does, and is also contemplating adding a very strict language requirement. Only half of Canada's immigrants fall into the family reunification category that so dominates U.S. policy, and Canada appears somewhat more strict about refugee qualifications.
Canadian immigrants need 70 out of 100 points. As many as 15 points can be awarded for knowledge of English or French, with another 15 points possible for specific vocational preparation. Education earns up to 12 points. Experience counts for 8 points if the applicant has a job in Canada, which is itself worth another 10–20 points depending on the occupation. Personal suitability and other miscellany make up the balance. An immigration who arrives with a half a million Canadian dollars is rightly considered unlikely to end up dependent on welfare, for example, regardless how those assets are invested. There are also immigration categories for entrepreneurs, the self-employed and investors. Canada also makes limited use of the price system to help balance supply and demand. There is a fee of C$975 for every successful immigrant, with loans available for those unable to pay.
Critics see Canadian policy as harsh, or as a futile exercise in picking winners. But it does at least offer potential immigrants some rules that are not entirely capricious, it does not rely so heavily as the U.S. system on long waiting lists, and it puts a reasonably high priority on the applicant's ability to be financially self-sufficient.
Page 56 PREV PAGE TOP OF DOC
New Zealand actively recruits immigrants, but not without some rules. Applicants must meet ''a minimum standard of English'' (equivalent to an 11 year old native). Their immigration department notes that ''a job offer that is waiting for you is a good way to determine if you are the type of person New Zealand needs.'' Arriving with ''settlement funds'' of more than 100,000 New Zealand dollars helps too. The country's point system favors youth, subtracting points after age 30 and noting frankly that ''a person over the age of 55 on the Skills category and 64 for the Business Category will not be accepted.''
Obviously, the U.S. public might favor quite different standards and priorities than either Canada or New Zealand, if the issue was ever put to them in this way. But so long as immigration depends as heavily as it has on having relatives in the U.S., on being willing to wait a long time, on winning a lottery, or on being granted refugee or asylee status, the U.S. cannot really be said to have any coherent immigration standards at all.
RATIONING METHODS
Immigration policy is about rationing something of great value—the right to live in the United States. The question boils down to methods and criteria of rationing a relatively small number of spaces among a much larger number of people who would like to live in the United States.
There are only four possible rationing methods—the queue, the lottery, allocation by political or bureaucratic preference, or the price system (a fifth option, of course, is to immigrate illegally). Current policy mainly relies on a mixture of political preference categories and the queue, although the lottery is used too.
Page 57 PREV PAGE TOP OF DOC
Foreigners offered a U.S. job requiring less than two years' experience find themselves in ''Employment Third Preference'' class, and must wait 10 years for a visa. Permanent residents sponsoring an unmarried child over age 21 are in a family category 2B, which has a 6 year wait. Brothers and sisters of U.S. citizens are in ''Family Fourth Preference,'' which recently had a waiting list of more than one million. Marrying a U.S. citizen can push you ahead in the line, which has created a booming market in mail order brides. Ordinary citizens have no idea how these quotas on importing various categories of people are established, which makes the process vulnerable to the tug and pull of interest groups and log-rolling.
I propose making somewhat more use of the price system, as Canada does, by requiring a modest immigration fee. This would be far more ''fair'' than relying entirely on arbitrary quotas and multi-year waiting lists. A user fee on immigration services of, say, one or two thousand dollars per accepted immigrant would serve as a means of reducing waiting lists by weeding out marginal applicants with a weak commitment to the U.S. As another another example of the price system, a trial program could begin with an auction of diversity quotas, to replace the current use of gambling.
Even with some use of price system, there will still be quotas and queues. The normal problem of the future will not be job creation but the opposite—finding enough qualified workers, to do the work demanded of a high-tech economy. Still, it might be socially soothing to adjust annual immigration quotas downward in recessions, and upward when jobs are plentiful, by adopting a formula that would link a portion of the coming year's immigration quota to unemployment rates in the preceding third quarter.
Page 58 PREV PAGE TOP OF DOC
Half of the problem of illegal immigration is not due to sneaking across the border, but to overstaying legal visas. I propose a system of fines that grows geometrically larger the longer a visa was overdue (e.g., doubled every month). Anyone would be free to leave without paying the fine, or could be deported, but such a person would never again be readmitted without paying the fine plus penalties for late payment. Illegal acts must carry some sanctions for those who commit them, and financial sanctions seem more appropriate. Imprisoning illegal aliens puts their burden on U.S. taxpayers, and wastes limited court time and prison space that could be better devoted to violent criminals.
Those seeking asylum should ask before arriving, like refugees, not just settle here illegally and hire a lawyer. Out of half a million asylee cases received from 1990–94, only 4.5% were approved. This post-1980 opportunity for illegal aliens to remain in the U.S. by going through the motions of applying for asylee status (and often remaining long after the case is denied), is an unnecessary invitation to abuse.
Regardless how many immigrants are legally admitted, a key question is how best to ration valuable immigration rights. What is needed is not another rousing defense of immigration in general, nor an equally indiscriminate closing of the borders, but a serious, comprehensive reexamination of the criteria and methods by which rights to U.S. residence have been regulated.
We must rely on some criteria for determining an immigrant's eligibility. I suggest that the most sensible (and ultimately the most humane) criteria are those that demonstrate the potential immigrant's ability to support himself and his family formal education, occupational experience, training or other skills (including English language skills), and accumulated savings.
Page 59 PREV PAGE TOP OF DOC
A constructive and compassionate immigration policy must put the primary emphasis on making sure that new entrants have sufficient human and/or financial capital to become productive members of the economy and society.
Mr. SMITH OF TEXAS. Thank you, Mr. Reynolds.
I think it is important to point out it is not just coincidental that all three of you seem to see eye to eye on many issues. I say that that is not coincidental, because you all are aware in the last 18 months there have been a half a dozen studies on our current immigration policy that surprisingly have all reached the same conclusion. And the conclusion, the consensus of these half dozen studies, including your own, is that our current immigration policy, at least in some respects, does not serve the best interest of America. And as I mentioned, we seem to have a mismatch between the needs of the work force, future needs of the work force of America, and our current immigration policy. I think that you all agree that in that respect, our current policy is flawed and that we need to do something—and we will talk about that in just a minute—to give a greater priority to immigrants who have an educational level that will enable them to find a job and work, and to work and to contribute and to produce when they come to America, thereby not only strengthening the economy but supplying the needs of our work force as well.
Dr. Borjas, let me address my first question to you. You mentioned in your opening statement the fact—in fact, this was the last point I think you made—that the large numbers of low-skilled foreign workers are responsible for half the decline in relative wages among those in America who lack a high school education. You also point out at the end of your opening statement, I believe, that the adverse impact of immigration on the well-being of workers at the bottom end of the skilled distribution has been substantial.
Page 60 PREV PAGE TOP OF DOC
What, specifically, do you recommend that Congress do in order to correct that situation?
Mr. BORJAS. Before we can address that issue, we have to address another question, which is what do we want to attain from our immigration policy, what is it the country wants to have by having a particular kind of immigrant? If we, for the sake of argument, say we want to improve the living conditions of native workers and we care about native workers both in terms of their per-capita income as well as distribution of income, then it is pretty clear that a more skilled immigrant flow would tend to provide both the higher per-capita income to native workers, as well as ameliorate the problems of having a more unequal income distribution, which arises when you have less-skilled immigrants coming in, in the kind of changing economy we have been having in the last 20 years.
As all of you know, we have a lot of income growth inequality in the last 20 years, and having a less-skilled immigrant flow coming in only makes our problem worse. So both in terms of solving—not solving, but ameliorating the problem of income inequality and increasing per-capita income for native workers, one would think an immigration policy that not only depended on family preference but also included some other measures of individual immigrants that come in would be preferable.
Mr. SMITH OF TEXAS. Thank you. Dr. Borjas, I appreciate also in your testimony you pointing out the problems of what we call the spatial correlation approach, where you can't just necessarily compare cities, and I think that was an important contribution as well.
Page 61 PREV PAGE TOP OF DOC
Mr. BORJAS. Thank you.
Mr. SMITH OF TEXAS. Dr. Vernez, you mentioned in your testimony that our current immigration policy not only contributes to the unemployment rate among those who haven't finished high school in America but also depresses the wages of those individuals, and that you agree with Dr. Borjas. You also mentioned the problem is not just of this generation but it is of future generations as well, since oftentimes there is a correlation between the educational level of a parent and the employment and productivity of the child.
I thought it might be interesting, and I know we have a couple Californians here, that you conclude that the annual tax burden on a native-born California household is $1,170 due to our immigration policy today; is that correct?
Mr. VERNEZ. That is a conclusion reached by the National Research Council, and we agree with that. That was probably the best estimate to be made in recent years, but that is not our estimate.
Mr. SMITH OF TEXAS. That is the National Research Council's?
Mr. VERNEZ. Right. And the reason for the cost, of course, is not so much that immigrants are using services at a higher rate than natives if they have the same income and family composition, it is mainly because they have lower income and larger family size.
Mr. SMITH OF TEXAS. In your recommendations for policy changes you say, ''We propose that a better balance should be found between the demands of family reunification and the demands for higher-skilled labor in the work force.'' And you say that specifically we recommend that, in the RAND study, ''Specifically we recommend that current policies be modified to place greater emphasis on the educational levels of new immigrants.''
Page 62 PREV PAGE TOP OF DOC
How specifically would you recommend that we do that? I agree with you, obviously, but how can we implement that?
Mr. VERNEZ. There are various ways that can be implemented. Of course, one way, without changing very much the architecture of immigration policy as it is now, would be to increase the number of immigrants who would be allowed to come for employment-related reasons, and of course you could tie to this an education criterion.
The other would be to proceed a little bit like Canada is proceeding, which is a point system that would provide different points for education, for English proficiency, in addition to points for family reunifications. That would require much greater change in the architecture of immigration policy.
Mr. SMITH OF TEXAS. Thank you, Dr. Vernez.
If my colleagues will let me, I am going to sneak in one more question for Mr. Reynolds.
You mentioned in your comments what the Hudson Institute had concluded, which was that unless the education and skill levels of the American work force are upgraded, America's productivity and prosperity will grow less quickly. America must stop recruiting workers for jobs that do not exist or exist only at the lowest levels. And then you say that, in your view, the most important immigration issue is whether or not U.S. policy can imprudently continue to be indifferent about inviting large numbers of permanent residents who lack basic education or language skills.
Page 63 PREV PAGE TOP OF DOC
When you say that the immigration policy today is unrelated to any concept of what is good for the U.S. economy or society, in what ways could we change our policy to better reflect the goals that you stated and the goals that I agree with?
Mr. REYNOLDS. The implication of those remarks is that if you want to increase the emphasis on skills, you have to deemphasize something else or else immigrate more people, and that is just mathematically the problem. So if we put such high emphasis on a family reunification, meaning bringing in more people from the same countries the last batch came from, and if we put such high emphasis on refugee status, then, by definition, there is less room available for the others.
I suspect that something along the lines of the Canada and New Zealand point system is what I am aiming at. I think the system has to be totally crossed out and started over again. That is a little strong, but that is basically what it is. It just sort of evolved. I don't think anyone has really tried to design an immigration policy for the United States.
Mr. SMITH OF TEXAS. Thank you, Mr. Reynolds.
We have just been joined by the Ranking Member, Mr. Watt of North Carolina.
We will first go first to questions from Ms. Lofgren, the gentlewoman California.
Page 64 PREV PAGE TOP OF DOC
Ms. LOFGREN. Thank you, Mr. Chairman.
This is obviously a very interesting and useful hearing for the committee. Many of our later witnesses will talk about the H–1B program, the temporary visa program for skilled immigrants. I think it is worthwhile to take a look at the entire picture to see where we are.
I am mindful that while it is very easy to pick apart some of these issues and to focus on problems, our country is the envy of the world. Everyone wants to come here. When you talk about economic problems, our economy is stronger than any other in the world—it is stronger than Europe, it is stronger than Asia. To some extent, we can't be doing everything wrong because we are having the wonderful benefit of whatever it is we are doing.
I am looking, however, at how we might consider changes. A background of anxiety exists in some parts of the country over diversity, not just immigration itself. Looking at your statement, Mr. Reynolds, I note on page 2, you are talking about a phenomenon that does exist in terms of a category feeding upon itself. I do not disagree with that. I quote, ''The new favoritism is no longer for immigrants from democratic countries with high levels of prosperity and skill, but for immigrants from the same countries that accounted for the last group of immigrants. This means de facto immigration quotas are heavily biased in favor of aspiring immigrants from Mexico, the former Soviet Union, the Philippines, Vietnam, the Dominican Republic, El Salvador, China, India, and Cuba. Recent immigrants from these countries bring in their relatives and their newly-arrived relatives in turn sponsor still more relatives.'' You go on to say that this is a problem that Congress tried to patch with the diversity program.
Page 65 PREV PAGE TOP OF DOC
Are you saying that having people come from Vietnam or from China or India is in itself a problem for America?
Mr. REYNOLDS. No. What I am saying is if you have a limited number of immigrants and that you have biased the system in favor of immigrants, let's say from El Salvador, you are restricting immigrants from Hong Kong and Turkey.
Ms. LOFGREN. I guess the concern I had in reading this is it feeds into some of the hate mail I receive. I am not suggesting, however, that you are doing that.
Mr. REYNOLDS. Let me make it clear. I am pro-immigration, I just don't think we have an immigration policy. I am pro-Mexico, for example. I spent a lot of time down there, I am published down there, they know me down there. I am an ex-Californian. My house is now owned by a Mexican family. So, no; I mean, obviously there are skilled and unskilled people. But you are not doing people a favor by bringing them in here when they are not able to cope.
Ms. LOFGREN. So the point you are trying to make is not where these folks are coming from, but their level of skill, not the country or the color of their skin or their ethnicity or their religion or anything of that nature?
Mr. REYNOLDS. Why should you favor one country over another. You should favor people over another, perhaps for criteria that have to do with the national interest, but not one country over another people.
Page 66 PREV PAGE TOP OF DOC
Ms. LOFGREN. Thank you. That is very helpful.
I would like to go back to Dr. Borjas. I have looked at your charts. It is very difficult, I think, to get facts everyone agrees on because we don't do a very good job of collecting statistics in this country and it is very difficult when you have poor data to extrapolate and make findings.
I see the mean educational attainment and the wage differential and the like. Have you specifically taken a look at the economic impact of, for example, Ph.D. level immigrants or master's degree immigrants and how many jobs are created by each scientist, in industry? Or is that a benefit or burden?
Mr. BORJAS. I have estimated benefits from immigration at the national level, not by education groups so much, but at the national level. And in fact, the National Academy of Sciences report that has been mentioned before cites several of these studies that tried to estimate the benefit from immigration, including my own study. And almost every study that exists right now that estimates benefits at the national level tends to find that, yes, there is a net benefit, but the net benefit tends to be surprisingly small.
Ms. LOFGREN. If I may interrupt, because I know the Chairman is going to, and probably will be stern about our 5-minute limit, I read those reports as well. But, again, it is very difficult to quantify. How do you quantify, the positive economic impact of, for example, Andy Grove of Intel. He was an immigrant. Intel employs a lot of Americans, including my neighbors in Silicon Valley. Or James Gosing over at Sun Microsystems, who invented Java. The economic impact of that invention is huge, but there is no attempt to quantify that in these figures. Have you tried to quantify these factors?
Page 67 PREV PAGE TOP OF DOC
Mr. BORJAS. There are benefits and costs that are impossible to quantify and the ones that cannot be quantified cannot be quantified.
Ms. LOFGREN. Thank you very much. I see my red light is on, Mr. Chairman.
Mr. SMITH OF TEXAS. Thank you, Ms. Lofgren.
The gentleman from Indiana, Mr. Pease, is recognized.
Mr. PEASE. Thank you, Mr. Chairman.
Dr. Borjas, you spoke early in your presentation about the clustering phenomenon and seemed to conclude, or implied, that the clustering was entirely an economic phenomenon. Does your study at all indicate that there may be noneconomic reasons for that clustering as well and, if so, how does that affect what you presented earlier?
Mr. BORJAS. Let me clarify what I meant to say. Clustering happens. There are economic impacts that follow from the clustering. What I was talking about today is the economic impacts that follow from the clustering. When immigrants cluster in a particular place, the locale will be affected the most, and then through flows, that impact is distributed away from that locality. But why that clustering happens can be due to both economic impacts, good jobs, attracting particular kinds of immigrants, but also the networks. I mean, social networks are incredibly important in determining where immigrants end up in the United States. So I certainly do not mean to imply clustering is just an economic matter, but it has economic impacts.
Page 68 PREV PAGE TOP OF DOC
Mr. PEASE. Okay. That is helpful.
Dr. Vernez, you went through your presentation and then got to the point and said, ''I now have two recommendations to make,'' and that was the end. You may have been able to make a couple other points, but I wanted to be sure you were able to share with us your recommendations completely.
Mr. VERNEZ. I appreciate that. We had several recommendations, but the two most important is one concerning immigration policy and one that concerns education policy. I know this is not the domain of this subcommittee, but I think it is important and needs to be done.
With respect to immigration policy, we are certainly suggesting a shift and a better balance between low-educated and better-educated immigrants, as I mentioned earlier. We also suggest that we should somewhat reduce the level of immigration from the current high, of about 900,000 now to somewhere in-between that number and the 300,000 that we had in the 1970's. In other words, looking for a moderate level of immigration, as opposed to what is now a fairly high level of immigration.
Part of it, of course, is to reduce-low educated immigration. The other, of course, is because the economy fluctuates. When you are in a booming economy, certainly you can have a higher level of immigration, but you always also have a slowdown in the economy, as has happened in California when we had a very deep recession for 5 to 6 years. During that time, there was no job growth, while immigration continued at a very high level, and it created a major backlash against immigration, which in the long run is not in the interest of formulating good policy. With these considerations, we feel that immigration policy in this country should be somewhat more flexible.
Page 69 PREV PAGE TOP OF DOC
With respect to education policy, what I mentioned is basically that there will be two impacts on the education system. One occurs in those States where there is a high concentration of immigrants. There the demand for education is increasing very rapidly, and these States have a lot of difficulties in meeting the demand for resources to meet the needs to educate this new population.
The second is a shift in the composition of the student body, particularly, as I mentioned, toward Hispanics. Because their parents have low levels of education and they have low incomes; their children may graduate from high school, but they are not going to go to college in high proportion enough. With that level of education, they are not going to be able to compete in an economy that requires a college education in order to get an adequately-paid job.
Mr. PEASE. Dr. Vernez, thank you. I understand your concern on the educational attainment level of immigrants, and I understand the point that you just made about advocating a smaller number of immigrants. If changes were made in the immigration policy to require higher levels of educational attainment, would you still advocate lower levels of immigration?
Mr. VERNEZ. Probably, yes.
Mr. PEASE. And the reason for that is?
Mr. VERNEZ. For the same reason, is that now we are in a booming economy in high-tech and so on, but it is not necessarily going to last.
Page 70 PREV PAGE TOP OF DOC
At the same level, also, if you have an impact—as long as the economy creates those jobs, the effect on the wages will not be that great. But if you have a large number of high-educated aliens who come in and the demand for the job after a period of time diminishes, it will automatically also have an impact on wages and so on.
So the same economic consideration that happens at the low level of education will eventually happen at the high level of education.
Mr. PEASE. Would you advocate a system that was flexible enough to restrict entry in times of high unemployment or would you just rather say we are not going to introduce any increasing numbers of folks into this system at all?
Mr. VERNEZ. Obviously, here we are moving less on an empirical basis and on a matter of opinions. My opinion is that if around 1990–92 we had slightly decreased the number of immigrants, the quotas for immigration, I don't believe there would be as high an immigration backlash in California than in fact we had to go through, in part because people would have seen that some action had been taken and that their concerns were being taken into consideration.
Mr. PEASE. Thank you.
Mr. Reynolds, there are some things I would like to talk with you about, but my time is out. Maybe I can catch you back at the airport in Indianapolis.
Page 71 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. Mr. Pease, why don't you go ahead and ask one more question of Mr. Reynolds?
Mr. PEASE. One, if you could expand for me—you set forth a variety of options on if we were starting from the beginning and writing an immigration policy, the models that seem to provide, or are in use in various forms, and you talked about the queue, the lottery, political or bureaucratic preference, but I didn't catch your last one, and I think that was one where you were starting to explain that Canada is involved with it. But I may have misunderstood that.
Mr. REYNOLDS. The last one is the price system. And that could mean an auction. For example, I think diversity quotas would be better handled by an auction than by the lottery, which is sort of a confession of no priorities. The lottery is as random as its gets.
But I particularly meant just a small fee, $1,000 or $2,000 per entrant. You could provide a loan, as Canada does. For one thing, it would help solve the social question of are immigrants on balance a net cost or a net benefit. They would be paying the cost of the Immigration and Naturalization Service.
Mr. PEASE. Are you familiar with Canada's experience? Is this a recent development for Canada?
Mr. REYNOLDS. Yes. Canada's use of the fee is only a couple years old, and I don't have any feedback on how effective it has been. But it seems to me it would shorten the list. You have a 6- to 10-year waiting list. They might be 5 to 9, is all I am saying, and there are other reasons to do it.
Page 72 PREV PAGE TOP OF DOC
Mr. PEASE. Thank you very much.
Mr. SMITH OF TEXAS. Thank you, Mr. Pease. The gentleman from North Carolina, Mr. Watt, is recognized.
Mr. WATT. Thank you, Mr. Chairman.
I just want to take a moment to apologize to this panel of witnesses for not being here and to my colleagues for not being here at the start of the hearing. I have been trying to get out of North Carolina, and they have been trying to get me out of North Carolina, for those of you who have been following my district configuration woes. So maybe they got, for a little while, what they were striving to achieve.
I don't think I will burden you all with any questions, because I also have not had an opportunity to review your testimony. But I will commit to you that I will.
This is an issue the Chairman has been trying to get me, for quite some time, to focus on. He keeps sending me written materials, and I think he finally gave up on the notion that I might read some of that and decided to hit me between the eyes with a hearing, or at least a panel of a hearing, on this issue which I was able to sidestep, too. But I will read the testimony.
I have heard some provocative comments, just in the short time I have been here, at least from Mr. Reynolds. I heard his comment about there not being an immigration policy. And that is not that much different from some of the comments I have made over at the Brookings Institute when I gave a speech over there. And that has certainly been my observation for the last year or year and a half that I have been the ranking member of this committee and becoming more and more familiar with the law in the area, that it just seems to be more of a hodgepodge than any consistent philosophical or reasoned basis for a number of the policies that we have; and so I will study your testimony very carefully.
Page 73 PREV PAGE TOP OF DOC
With that, Mr. Chairman, I think I will yield the balance of my time to Ms. Lofgren, since she has been here and has some more questions.
Ms. LOFGREN. Thank you, Mr. Watt.
Taking a look again, Mr. Vernez, at your testimony and listening to your comments about the job market, you appear to believe that we have a zero sum game, that we will never have more than the hundred jobs, and that it is just a matter of deciding where of those hundred jobs are going.
In Silicon Valley, we see a much different situation. Silicon Valley is fueled by tremendous growth and an astounding booming economy that is very much related to the diversity we find within that community. For example, last month we had added 10,000 jobs in the county. We added 58,000 in the last 12 months, and most of them are very well-paid jobs.
In getting back to your testimony about the lack of job growth for high school graduates, I am trying to figure out where that testimony comes from and to compare it to the dynamic I am seeing at home. For example, the building trades, which is skilled work but does not require, in most cases, more than a high school diploma, have pulled everyone they can out of the union shops in Southern California.
When I went to Houston last year, I talked to the head of the building trades. They have ripped everyone out of Houston. I know personally you can't get anyone to come build anything because there is a delay in funding these workers.
Page 74 PREV PAGE TOP OF DOC
Three days ago, I visited a cable company. They require a high school diploma in order to be a cable installer. The cable company does the training. The starting wage is $12 an hour and, within 2 years, most, more than half their employees earn $25 an hour. They are losing people to the computer industry. They can't find enough people.
So that is what I am seeing at home, and yet it doesn't square with your testimony. Can you help me out with this?
Mr. VERNEZ. Let me assure you that I don't consider this as a zero sum game, not at all. The economy, quite to the contrary, is very dynamic and what is happening is that, to a very large extent, immigrants have been taking low-skilled jobs that native born have been vacating either through retirement or because, as you probably know, the level of education of the native labor force has increased very rapidly over the past 20 years.
In our estimate, which is perhaps a low-boundary estimate, we have estimated that for every 20 to 30 immigrants there is one native born who is displaced. So this is not a very high level of displacement. Now, I am saying it is probably a lower-boundary estimate because of the comments Dr. Borjas made a little bit before.
But, as you know, as more people come into California from abroad, more native-borns may be moving out of California, or those who might have come in are not coming in. And, indeed, we have seen over the last 30 years a changing pattern in internal migration in and out of California, with low-educated native born leaving California, but California continues to attract very high levels of native born from other States.
Page 75 PREV PAGE TOP OF DOC
So, by all means, this is dynamic. I think I don't want to overestimate the—or give you the impression of overestimating the negative effects. There are definitely positive effects.
You raised with me the question of whether anyone had tried to estimate the effect on the growth. We did try to estimate the effect on the growth of the California economy relative to the rest of the Nation. As you probably know, the California economy has grown, over the 30 years that we looked at, at about 15 percentage points more rapidly than the rest of the Nation. And we estimated that about 10 to 15 percent of that higher growth was due to immigration. So definitely there are benefits.
Ms. LOFGREN. My time is up, but I do want to say that I wish our former colleague, Xavier Becerra, were here in person to refute the idea that the children of uneducated Latino immigrants will not go on to go to Stanford and law school and be elected to Congress.
Mr. VERNEZ. That is a reality, though.
Mr. SMITH OF TEXAS. Thank you, Ms. Lofgren.
Thank you all very much. We appreciate your being here.
Mr. ROGAN. Mr. Chairman.
Page 76 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. Oh, I am sorry. The gentleman from California, Mr. Rogan, is recognized. Jim, I apologize.
Mr. ROGAN. This is the thanks I get for being the first person to show up at the hearing.
Mr. SMITH OF TEXAS. I am in undue haste.
Mr. ROGAN. Mr. Chairman, the oversight is forgiven; and the apology is not necessary. And to show my good sportsmanship, my questioning will be actually very brief for this panel.
Mr. SMITH OF TEXAS. I was about to give you an extra minute for that.
Mr. ROGAN. I promise I won't need it.
I realize we have been essentially dealing with the micro-level on immigration. I want to shift for a moment to the macro-level, where I think some of the other witnesses will be going.
I am sure all you gentlemen know our colleague in the other body has introduced a bill in the Senate that would essentially double the H–1B visa program, and this is in response to a number of high-tech companies, particularly out in California, that are complaining that there is a shortage of skilled labor in these areas. Have any of the witnesses on this panel had the opportunity to review that particular situation or the bill itself and, if so, would you please comment?
Page 77 PREV PAGE TOP OF DOC
Yes, Mr. Reynolds.
Mr. REYNOLDS. I have not, but no knowledge doesn't prevent me from having an opinion.
Mr. ROGAN. That sort of qualifies you as a Member of Congress.
Mr. WATT. That is what I was going to say. You sound like a Member of Congress.
Mr. REYNOLDS. I couldn't stand the cut in pay.
Anyway, my feeling about it is, if it is impossible to reallocate the number of, let's say, admissible immigrants by cutting back on family—by reordering priorities, then it would make sense to expand the skill-based quotas, if you will, and make them permanent by a factor of two. I would say by a factor of five. Let's say 700,000. When I said I was pro immigration, I wasn't kidding. My own personal view, by the way.
Mr. ROGAN. Thank you.
Dr. Vernez.
Mr. VERNEZ. I don't have a particular opinion. I have not studied this. The only perhaps observations I can make is that I would probably favor doing it through permanent immigration rather than through temporary immigration, because the experience has been that temporary immigration turns into permanent immigration anyhow.
Page 78 PREV PAGE TOP OF DOC
Mr. ROGAN. Dr. Borjas, any comment?
Mr. BORJAS. I think the shift toward a more skilled employee is a good thing to have. But I would also worry a little bit about the impact of large numbers of skilled immigrants on very small occupations in the United States.
For example, a flow of mathematicians from foreign countries can have a huge impact on the mathematician occupations in the United States. There are benefits that occupations that are affected are relatively small, and the impact could be much greater. So one has to keep in mind that there is a job effect that could be very diverse.
Mr. ROGAN. Dr. Borjas, have you had a chance to review the pending litigation in the other body?
Mr. BORJAS. Only through what The New York Times says.
Mr. ROGAN. I will resist the temptation to comment further.
Thank you, Mr. Chairman. I yield back the balance of my time.
Mr. SMITH OF TEXAS. Thank you, Mr. Rogan.
And, once again, let me thank the members of the panel for their contributions today.
Page 79 PREV PAGE TOP OF DOC
The subcommittee welcomes our second panel, and the second panel consists of John Fraser, Acting Administrator, Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor; and Carlotta Joyner, Director, Education and Employment Issues, Health, Education, and Human Services Division, U.S. General Accounting Office.
Mr. SMITH OF TEXAS. Mr. Fraser, don't take this personally, but I hope you will pass along a message, and it has to do with the time that we were given your testimony. As I say, I know you are not responsible for that, but we have, quite frankly, put the Department of Justice on notice, and I guess today we are putting the Department of Labor on notice.
As I understand it, your testimony was received last night at 9 p.m. That is not very thoughtful, either of the staff who has to stay late to read it or the members of the subcommittee who would like to be prepared for this hearing that we are in right now. I don't need to say anything more, but I hope you will relay that to the individuals who do make the decision about when we receive the testimony.
And having given you that nice introduction, please proceed.
STATEMENT OF JOHN FRASER, ACTING ADMINISTRATOR, WAGE AND HOUR DIVISION, EMPLOYMENT STANDARDS ADMINISTRATION, U.S. DEPARTMENT OF LABOR
Mr. FRASER. Thank you, Mr. Chairman. I was also there at 9 o'clock last night, so I will convey our mutual concerns back to those who need to hear it.
Page 80 PREV PAGE TOP OF DOC
I will try very hard to stay within 5 minutes this morning. We are going to make the shift, I think, in this panel from the big-picture discussion of immigration in general to a narrower discussion of views on whether this country's important high-technology industry should be afforded increased access to foreign temporary workers to meet its growing demand for highly skilled workers.
Our IT industry is essential to our continuing strong economic growth and wider prosperity in this country.
The administration believes that the issue of whether to increase the industry's access to temporary foreign workers should be evaluated within the framework of three questions:
First, is there a shortage of skilled U.S. workers to fill jobs in the IT industry and meet future workforce needs; secondly, what would be the consequence of increasing the H–1B cap; and, thirdly, does the current H–1B program need to be reformed in order to provide industry appropriate access to foreign temporary workers while protecting the job opportunities, wages and working conditions of U.S. workers?
I will touch on each of these very quickly and leave much of the discussion on the first item to the other panelists that will present today.
With respect to the IT labor market and skill shortage issue, there is no dispute that there is a strong demand and growing demand for workers in the IT industry, although it is much less clear what may be the magnitude of any shortage of skilled U.S. workers or whether our domestic labor market will be able, as it has over the last decade, to satisfy projected job growth.
Page 81 PREV PAGE TOP OF DOC
According to the Bureau of Labor Statistics, employment opportunities for computer systems analysts, engineers and scientists have been growing by 10 percent a year, well above the growth of comparable occupations, and will continue to do so through the next decade. BLS predicts that the U.S. will require more than 1.3 million new workers in IT core occupations through 2006 to fill job openings that are projected to occur due to growth and the need to replace workers who leave the labor force or transfer to other occupations.
The IT skill shortage issue is, of course, more controversial. You will hear much today from other panelists on all sides of that issue. I am only going to suggest this subcommittee consider a couple of factors.
First, while higher than average wage growth can be a reliable indicator of skill shortages, the wage growth record for the IT industry is mixed. BLS wage trends for broad computer categories show only average wage growth between 1988 and 1997 for all categories and only above-average wage growth in the last 2 years in the lower skilled computer programmer occupations.
The subcommittee should also take into consideration other factors that bear on the question of the scope and duration of any IT labor shortage:
The current year 2000 problem, which is now occupying thousands of IT workers, but only in the short-term; the introduction of new technologies that enhance IT productivity; and the fact that the number of computer science enrollments has risen significantly in the last 2 years and that nearly three-quarters of IT workers are trained in other disciplines.
Page 82 PREV PAGE TOP OF DOC
With respect to the consequence of raising the H–1B visa cap, there are two points I would like to make. First, we strongly urge that any decision to raise the cap carefully consider the possible adverse impact of such a move on the normal process by which labor markets adjust to growing demands for workers.
As Ms. Lofgren has pointed out, it is important to remember that tight labor markets are good for U.S. workers. Tight labor markets cause employers to raise wages, improve working conditions, provide increased training to enable currently employed workers to keep pace with technology. An increased demand for trained workers induces educational and job training institutions to teach new skills. With more opportunities for training, workers acquire skills needed to obtain better, higher paying and more secure jobs and create job openings and career ladders for those just entering or reentering the labor market.
Tight labor markets create incentives for employers and workers to react in ways needed to achieve many of the Nation's top priorities: raising wages, providing greater opportunities for lifelong learning, and moving welfare recipients, out-of-school youth, and dislocated workers into good, secure jobs.
At the same time, the labor market can be slow to respond when labor markets get tight. In these circumstances, many argue that temporary foreign workers are needed in the short-term to provide skills while the labor market adjusts. And, further, because the IT sector is so critical to our global competitive edge, the U.S. economy could suffer disproportionate harm if skills shortages do become acute.
Page 83 PREV PAGE TOP OF DOC
We must also be cognizant that raising the H–1B cap may subvert the protection of U.S. workers, which is one of the key principles underlying the administration's strong support of legal immigration. Raising the H–1B cap will almost certainly increase employment-based legal immigration and, perhaps, illegal immigration. Nearly half of those who become permanent employment-based immigrants convert from H-visa nonimmigrant status.
The administration believes that our first response to meeting the workforce needs of the IT industry should be to provide the needed skills to U.S. workers to qualify them for IT jobs. The administration has already taken a number of steps in the training and education arena, and those are laid out in my testimony. And I will just get to the final point, which has to do with the need for reforms in the H–1B program.
Temporary visa programs like H–1B are intended to allow employers who are faced with domestic skill shortages to have access to temporary foreign workers with the requisite skills while the domestic labor market makes appropriate adjustments. However, as the subcommittee knows, having heard from us about this over the years, there exist serious structural flaws in the current H–1B program.
The Department's Inspector General found that, despite the legislative intent, the H–1B program often serves as a probationary try-out employment program for illegal aliens, foreign students and foreign visitors to determine if they will be sponsored for permanent status. The IG also found that some H–1B employers use alien labor to reduce payroll costs, either by paying less than the prevailing wage to their own alien employees or treating these employees as independent contractors, avoiding related payroll and administrative costs. And, as the subcommittee knows, other H–1B employers are job contractors, whose business is to provide alien contract labor to other employees.
Page 84 PREV PAGE TOP OF DOC
It is important to note that the IG concluded that the H–1B program does little to protect the jobs or wages of U.S. workers, and it recommended eliminating the current program and establishing a new one which would better fulfill Congress' intent.
The current H–1B program does not require employers who use it to test the U.S. labor market to try to recruit U.S. workers for the jobs that they are trying to fill. It does not require U.S. employers who want access to foreign temporary workers to promise not to lay off or displace U.S. workers to fill those jobs with temporary foreign workers. That is why, since 1993, the administration has urged the Congress to include those reforms in this program, and I renew that call to the subcommittee this morning.
Our amendments, first proposed in 1993, were carefully designed to ensure continued business access to needed high-skilled workers in the international labor market while decreasing the H–1B program's susceptibility to misuse to the detriment of U.S. workers and the businesses that employ them.
Mr. Chairman, I will conclude by saying that the administration's view is that our first public policy response to skill shortages should be to train and develop U.S. workers to fill those jobs, U.S. workers, including new immigrants to this country. Solving skill shortage problems, especially perceived skill shortage problems, with increased immigration should be our last, not our first, public policy response to that kind of situation.
With that, Mr. Chairman, I will conclude and let Ms. Joyner make her presentation.
Page 85 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. Thank you, Mr. Fraser.
[The prepared statement of Mr. Fraser follows:]
PREPARED STATEMENT OF JOHN R. FRASER, ACTING ADMINISTRATOR, WAGE AND HOUR DIVISION, EMPLOYMENT STANDARDS ADMINISTRATION, U.S. DEPARTMENT OF LABOR
Mr. Chairman and Members of the Subcommittee:
We appreciate this opportunity to share the views of the Administration on whether this country's important high-technology industry should be afforded increased access to temporary foreign workers to meet its growing demand for highly skilled workers. In doing so, I want to again call your attention to the need to train U.S. workers first in order to provide them with the opportunity to acquire the skills needed to compete in our rapidly changing economy, and to the pressing need for reform of the H–1B nonimmigrant visa program.
Our information technology (IT) industry is essential to our continuing strong economic growth and wider prosperity. Our interest in the industry's strength is evidenced by our participation in a recent convocation in Berkeley that assessed IT work force needs. Further, as you know from Administration proposals advanced since 1993, we believe that the H–1B program needs fundamental reform. I would like to commend the Subcommittee for its interest in these issues.
We believe the issue of whether to increase the IT industry's access to temporary foreign workers should be evaluated within the framework of the following three questions:
Page 86 PREV PAGE TOP OF DOC
(1) Is there a shortage of skilled U.S. workers to fill jobs in the IT industry and meet future workforce needs?
(2) What would be the consequences of raising the annual H–1B cap?
(3) Does the current H–1B program need to be reformed in order to provide industry appropriate access to temporary foreign workers while protecting the job opportunities, wages and working conditions of U.S. workers?
I will address each of these in turn.
TIGHT LABOR MARKETS AND IT SKILLS SHORTAGES
Proponents of increasing the annual cap on H–1B visas argue that this increase is necessary for the IT industry to be able to overcome an acute shortage of skilled U.S. workers. While there is no dispute that there is strong growth in demand for workers in the IT industry, it is much less clear what may be the magnitude of any shortage of skilled U.S. workers to meet this demand, or whether the domestic labor market will be able—as it has over the last decade—to satisfy projected job growth.
U.S. employment has been growing rapidly, labor markets are increasingly tight, and they are likely to remain so. Though this is true for the nation as a whole, IT labor markets appear to be particularly affected. Employment opportunities for computer systems analysts, engineers, and scientists have been growing by 10 percent a year—well above the growth of comparable occupations—and are expected to continue growing at a comparable rate through 2006. The Bureau of Labor Statistics (BLS) predicts that the U.S. will require more than 1.3 million new workers in IT core occupations between 1996 and 2006 to fill job openings projected to occur due to growth and the need to replace workers who leave the labor force or transfer to other occupations.
Page 87 PREV PAGE TOP OF DOC
The IT skills shortage issue is somewhat controversial. Some industry advocates assert that there exist more than three hundred thousand unfilled jobs within the IT industry, and that these vacancies are raising business costs and hurting U.S. competitiveness. Industry points to a number of other factors to substantiate their assertion of an IT skills shortage—large numbers of want ads, hiring bonuses, aggressive recruiting, and high turnover of IT specialists within the industry.
On the other hand, critics argue that the IT industry: (1) overstates the problem by producing inflated job vacancy data and equating it to skills shortages; (2) continues to lay off tens of thousands of workers (e.g., Intel, Netscape, Cypress Semiconductor and Silicon Graphics recently announced large lay-offs); and (3) fails to tap reservoirs of available talent by insisting on unnecessarily specific job requirements and not providing more training to develop incumbent workers' skills.
One point of contention is the confusion between equating job vacancies and actual skills shortages. While an industry association-sponsored survey indicates that there may be as many as 350,000 job vacancies in the IT industry, as you will hear, the General Accounting Office (GAO) has concluded that this does not necessarily signal an acute shortage of skilled workers. In fact, most industries and firms (particularly those with rapid employment growth and high worker turnover) will have large numbers of job openings that may not indicate skills shortages.
While higher than average wage growth can be a reliable indicator of skill shortages, the wage growth record for the IT industry is mixed. Though BLS wage trends for broad computer-related categories show only average wage growth between 1988 and 1997 for all categories, it only shows above-average wage growth in 1996 and 1997 and only in the lower-skill computer-related categories, such as programmers. At the same time, a variety of industry wage surveys show larger wage increases in 1996 and 1997 in specialized, high-skill occupations.
Page 88 PREV PAGE TOP OF DOC
The Subcommittee should also take into consideration other factors that bear on the question of the scope and duration of any labor shortage in the IT industry:
The current ''Year 2000'' problem is now occupying thousands of IT workers but only for the short-term;
New technologies are being introduced that are creating more efficient ways to produce software, store and retrieve data, speed up computations, and generally improve the productivity of the IT work force;
The number of computer science enrollments has risen significantly in the last two years (and nearly three-quarters of all IT workers got their education in other disciplines).
CONSEQUENCES OF RAISING THE H–1B VISA CAP
We strongly urge that any decision to raise the H–1B visa cap carefully consider the possible adverse impact of such a move on the normal process by which labor markets adjust to a growing demand for workers. The labor market should be permitted to adjust to this increased demand without introducing unnecessary factors which could delay, if not prevent, these normal market adjustments. Indeed, the IT labor market has already begun to respond to the signals of increased demand. A survey of U.S. Ph.D. departments of computer science and computer engineering showed bachelor-level enrollments were up 46 percent in 1996, and another 39 percent in 1997—nearly doubling over the two year period.
Page 89 PREV PAGE TOP OF DOC
It is also important to remember that tight labor markets are good for U.S. workers. A tight labor market causes employers to raise wages, improve working conditions, and provide increased training to enable currently employed workers to keep pace with technology. An increased demand for trained workers induces educational and job training institutions to teach new skills. With more opportunities for training, workers acquire skills needed to obtain better, higher-paying and more secure jobs, thereby creating open jobs and career ladders for those just entering or reentering the labor market (e.g., young people, minorities, displaced workers, welfare recipients and other disadvantaged groups). Therefore, tight labor markets create incentives for employers and workers to react in ways needed to achieve many of the Nation's top priorities: raising wages; providing greater opportunities for lifelong learning; and moving welfare recipients, out-of-school youth, and dislocated workers into jobs.
However, while tight labor markets are good for U.S. workers, labor markets can sometimes be slow to respond to skills shortages. In these circumstances, it is often argued that temporary foreign workers are needed in the short-term to provide necessary skills while the labor market adjusts to provide U.S. workers with the requisite training. Without needed foreign temporary workers, industries experiencing skill shortages may adjust in ways that do not serve the short-term or long-term priorities of the country, either by reducing job creation or by moving jobs overseas. Further, because the IT sector is so critical to our global competitive edge, the U.S. economy could suffer disproportionate harm if skill shortages do become acute.
Because the expanded use of foreign temporary workers may interfere with labor market adjustments and may make achieving our other priorities more difficult, we must make sure that any increase in the annual number of foreign temporary workers is done with care to ensure that the use of these foreign temporary workers does not interfere with healthy adjustments in the labor market.
Page 90 PREV PAGE TOP OF DOC
We must also be cognizant that raising the H–1B cap may subvert the protection of U.S. workers that is one of the key principles underlying this Administration's strong support of legal immigration. Raising the H–1B cap will almost certainly increase permanent employment-based legal immigration and, perhaps, illegal immigration. Nearly half of those who become permanent employment-based immigrants convert from H-visa nonimmigrant status. Rather than filling a temporary labor shortage, conversion fills permanent jobs that will then not be available to U.S. workers and students who we want to be able and prepared to fill high-tech jobs in our economy.
The Department of Labor has heard from many concerned individuals and groups on the issue of the adverse impact on U.S. workers of raising the annual cap on H–1B visas. I would like to request that copies of the many letters we have received from these people be included in the record of today's hearing.
The Administration believes that our first response to meeting the workforce needs of the IT industry should be to provide the needed skills to U.S. workers to qualify them for IT jobs. The Administration already has taken significant steps to increase our capacity to enhance workforce skills. The President continues to pursue comprehensive reform of the Nation's employment and training system by working with Congress to enact the principles embodied in his GI Bill proposal. Moreover, in the historic balanced budget agreement of last summer, the President insisted on and achieved the largest increase in 30 years in the Federal investment to expand the skills of American workers, including:
the largest Pell Grant increase in two decades;
Page 91 PREV PAGE TOP OF DOC
Hope Scholarships to make the first two years of post-secondary education universally available;
the Lifelong Learning Tax Credit for the last 2 years of college and continuing adult education and training to upgrade worker skills;
a major increase in employment and training resources, including increases for dislocated workers and disadvantaged adults and youth; and
a $3 billion program to help long-term welfare recipients secure lasting, unsubsidized employment.
Further, the Administration announced several new initiatives at the recent Berkeley Convocation to help address the growing demand for IT workers:
A Labor Department Technology Demonstration project to test innovative ways of establishing partnerships between local workforce development systems, employers, training providers and others to train dislocated workers in needed high tech skills;
The expansion and integration of America's Job Bank and America's Talent Bank to allow employers and workers to list and access job openings and worker resumes in one integrated system; and
The convening of four town hall meetings by the Commerce Department to discuss IT workforce needs, identify innovative practices, and showcase successful models.
Page 92 PREV PAGE TOP OF DOC
In addition, last week President Clinton and Secretary Herman announced that grants totaling $1.6 million are being provided to projects in four states to continue highly successful programs to train dislocated workers for high paying jobs in information technology.
Finally, with the Technology Literacy Challenge and related educational programs, the Administration has put strong emphasis on effective use of educational technology to strengthen our nation's schools and school-to-work transition. Linking elementary/secondary schools, institutions of higher education, and business can produce the knowledge, know-how, and skills our nation's businesses and young people need in IT. This creates opportunities for business and America's students alike.
We believe that there is more that can be done to move U.S. workers into high technology jobs, and we welcome the discussions that may be sparked by this hearing. We are committed to continuing a dialogue with the major stakeholders on this critical workforce issue—government, industry, workers, and education and training institutions—to better define the workforce needs of the IT industry and develop appropriate solutions to meet these needs domestically through commitments from each of the stakeholders.
In sum, Mr. Chairman, our assessment of the likely effects of raising the H–1B cap reconfirms our strong conviction that our primary public policy response to skills mismatches due to changing technologies and economic restructuring must be to prepare the U.S. workforce to meet new demands. Yet we recognize that short-term demands for skills may require that we develop a balanced, short-term response to meet urgent needs while we actively adjust to rapidly changing circumstances. However, increased numbers of temporary foreign workers should be the last—not the first—public policy response to skills shortages.
Page 93 PREV PAGE TOP OF DOC
Given this broader context, let me now turn to the third of the issues I listed—the pressing need for reform of the H–1B nonimmigrant program.
H–1B NONIMMIGRANT PROGRAM MUST BE REFORMED
The H–1B visa program allows the admission of up to 65,000 workers each year (to stay for as long as six years), to meet short-term, high-skills employment needs in the domestic labor market. Temporary visa programs, like H–1B, are intended to allow employers who are faced with a domestic skills shortage to have access to temporary foreign workers with the requisite skills while the domestic labor market makes appropriate adjustments.
However, there exist serious structural flaws in the current H–1B program. These flaws are documented in a May 1996 report by the Department's Inspector General (IG). I would ask the Subcommittee to accept the IG's full report in the record of today's hearing.
The IG found that, despite the legislative intent:
'' . . . the [H–1B] program does not always meet urgent, short-term demand for highly-skilled, unique individuals who are not available in the domestic work force. Instead, it serves as a probationary try-out employment program for illegal aliens, foreign students, and foreign visitors to determine if they will be sponsored for permanent status.''
Page 94 PREV PAGE TOP OF DOC
The IG also found that ''some [H–1B] employers use alien labor to reduce payroll costs either by paying less than the prevailing wage to their own alien employees or treating these aliens as independent contractors, thereby avoiding related payroll and administrative costs.'' It found, in addition, that ''other [H–1B] employers are 'job shops' whose business is to provide H–1B alien contract labor to other employers.'' The IG concluded that the H–1B program does little to protect the jobs or wages of U.S. workers and it recommended eliminating the current program and establishing a new program to fulfill Congress' intent.
Employers obtain H–1B workers by simply filing a labor condition application (LCA) with the Department affirming that they have complied with four requirements:
that the higher of the local prevailing rate or the wage paid to the employer's similarly-employed workers will be paid to the foreign workers;
that no strike or lockout exists involving the occupation;
that notification has been provided to U.S. workers or their union; and
that the employment of H–1B nonimmigrants will not adversely affect the working conditions of U.S. workers similarly employed.
By law, the Labor Department can do no more than review these attestations for completeness and obvious inaccuracies—to determine whether an employer checked all of the boxes, made no flagrant errors, and signed the attestation—and must do so within 7 days of receipt.
Page 95 PREV PAGE TOP OF DOC
Because current law does not require any test for the availability of qualified U.S. workers in the domestic labor market, many of the visas under the current cap of 65,000 can be used by employers to hire foreign workers for purposes other than meeting a skills shortage. In addition, current law does not require a U.S. employer to promise not to lay off U.S. workers and replace them with H–1B workers as a condition for gaining access to these foreign temporary workers, and it allows employers to retain H–1B workers for up to 6 years to fill a ''temporary'' need. We simply do not believe this is right.
In 1993 the Administration asked the Congress to amend the H–1B nonimmigrant program to address these structural problems. Unfortunately for many U.S. businesses and workers, these amendments have not been enacted. The amendments requested in 1993 were carefully designed to ensure continued business access to needed high-skill workers in the international labor market while decreasing the H–1B program's susceptibility to misuse to the detriment of U.S. workers and the businesses that employ them. Briefly stated, the amendments would require employers which seek access to temporary foreign ''professional'' workers to also attest that:
they have taken timely and significant steps to recruit and retain U.S. workers in these occupations; and
they have not laid off or otherwise displaced U.S. workers in the occupations for which they seek nonimmigrant workers in the periods immediately preceding and following their seeking such workers.
Page 96 PREV PAGE TOP OF DOC
Enactment of these reforms will help employers actually facing skills shortages, including those in the IT industry, obtain needed workers through the H–1B program. Under existing law, employers facing skills shortages must compete for available visas (up to the cap of 65,000) on a first-come, first-served basis with other employers that do not face such shortages. Thus, enactment of the proposed amendments would reduce pressure on the visa cap by screening out employers that are not faced with skills shortages and have no interest in recruiting U.S. workers.
If the Administration's reforms are not implemented, as the Inspector General has pointed out, the Labor Department will not be able to ensure that the intended purposes of the program are actually served. The H–1B program exists to ensure that U.S. employers can meet short-term labor needs by limited access to the international labor market. Under current law, the government cannot ensure that employers use the H–1B program for its intended purpose, and that purpose only.
CONCLUSION
Mr. Chairman, let me conclude by restating that the growing workforce needs of the IT industry can only be met—and the strength and growth of the industry secured in the long run—if we take the steps needed to fully develop and utilize the skills of U.S. workers. Increased reliance on temporary foreign workers should, at most, only be a small part of the solution and must be viewed as a minor complement to the development of the U.S. workforce. Further, let me repeat that reform of the H–1B program is essential to eliminating abuses under the program and providing appropriate protections for U.S. workers. Enactment of these reforms would effectively allocate a greater share of H–1B visas to employers facing actual skills shortages.
Page 97 PREV PAGE TOP OF DOC
I appreciate the interest shown by the Subcommittee and staff in our views, and your thoughtful consideration of them. The Department looks forward to continuing to work closely and cooperatively with you and your staff on these issues.
Mr. Chairman, that concludes my prepared statement. I would be happy to respond to any questions.
Mr. SMITH OF TEXAS. Ms. Joyner.
STATEMENT OF CARLOTTA C. JOYNER, DIRECTOR, EDUCATION AND EMPLOYMENT ISSUES, HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION, U.S. GENERAL ACCOUNTING OFFICE
Ms. JOYNER. Thank you, Mr. Chairman, members of the subcommittee.
I would like to begin by introducing Sigurd Nilsen, to my right, who is a labor economist and assistant director, who is with our group and will be joining me later to answer any questions that you might have.
We are pleased to be here today to discuss our assessment of the Department of Commerce's report on the demand and supply of information technology workers.
As you know, many industry reports and other newspaper or magazine articles have predicted that there will be severe shortages of information technology, or IT, workers and that this would have a very damaging effect on the industry and on the economy as a whole.
Page 98 PREV PAGE TOP OF DOC
In conjunction with cosponsoring a convocation on the supply of IT workers, the U.S. Department of Commerce prepared a report intended to bring attention to the issue. That report, issued in September 1997, was titled, America's New Deficit, The Shortage of Information Technology Workers.
Today, I would like to discuss our recent review of that analysis of the demand and supply and its conclusion that a shortage of IT workers exists in the United States.
In conducting our work, we reviewed the report and we talked with officials at the Departments of Commerce and Labor and also looked at other available data from sources such as the Bureau of Labor Statistics. We did not perform any independent analysis to determine whether a shortage of IT workers exists. As requested, we limited our work to analyzing the methodology used by the Commerce Department in reaching its conclusion.
In summary, we found Commerce's report has serious analytical and methodological weaknesses that undermine the credibility of its conclusion that a shortage of IT workers exists. The report does not adequately describe the likely supply of IT workers, and the other evidence it presents is also insufficient to reach its conclusion.
However, it is important to note that the lack of support presented in this one report does not lead to a conclusion that there is no shortage. Instead, as the Commerce report states, we believe additional information and data are needed to more accurately characterize the IT labor market now and in the future.
Page 99 PREV PAGE TOP OF DOC
Regarding the demand for IT workers, the report appears to appropriately establish that the demand is expected to grow.
Although there is no single, universally accepted definition of IT workers, Commerce used the definition used by BLS and focused on occupations of systems analyst, computer scientists and engineers and computer programmers. In doing so, the report that we reviewed projected over an 11-year period 1 million additional IT workers.
A subsequent update has projected even stronger growth over a 10-year period of 1996 to 2006 that there would be 1.3 million projected openings. The overall growth rate is expected to be 60 percent in these occupations, compared with 14 percent for all occupations, with the greatest growth being for systems analyst of 92 percent and a lower growth of only 12 percent for computer programmers.
Commerce did not, however, adequately describe the supply of IT workers. When it quantified the supply to compare with the demand, it only considered those with bachelor's degrees in computer and information sciences. Thus, they compared the 24,553 recent graduates with the estimate of 95,000 additional IT workers needed each year.
The report also noted that there were many other people who could serve as labor supply, such as people with associate degrees, and also mentioned there were over 15,000 people with those degrees but did not include them in their quantitative analysis.
They also did not, in their analysis, consider workers with degrees in other areas. And, as has been previously noted, the National Science Foundation found that only 25 percent of those currently working in computer and information science jobs actually had degrees in those particular fields. Many people who work in these fields have degrees in other areas and have taken additional training to expand their skills and their qualifications for this work.
Page 100 PREV PAGE TOP OF DOC
In drawing its conclusion that an inadequate supply is emerging or that there is a shortage, Commerce cited, in addition to the analysis I just described—and the criticism that I have already levied against that certainly applies—three other areas. They cited the rising salaries of IT workers, the estimates of unfilled vacancies for IT workers nationwide based on a trade association survey, and offshore sourcing and recruiting.
But the body of evidence from all four of these sources we believe did not adequately support their conclusion, first, that although some data show rising salaries for other IT workers, other data indicate these increases are commensurate with those for other specialty occupations over time, rather than being unique to this particular set of occupations.
Regarding the unfilled vacancies, the 14 percent response rate for the trade association survey makes it inadequate as a basis for a nationwide estimate of unfilled IT jobs. In addition, the estimate of the number of unfilled vacancies was simply that. It did not say anything about how long these positions had been vacant; and there is always turnover, as you know, in industries. It was also too little information provided about offshore sourcing and recruiting to be able to know how to consider that in drawing their conclusion.
Their conclusion actually was variously presented. As I said, the title described a shortage. The quantitative analysis in the first part of the report described a shortage and concluded there was one. Later in the report, however, there was acknowledgment that there was too little information. Statistical frameworks and methodologies for measuring labor supply are not adequate to give a precise identification, and the Department concluded more information was needed. On that point we entirely agree with them, that more information and data are needed about the current and future IT labor market.
Page 101 PREV PAGE TOP OF DOC
That concludes my statement.
Mr. SMITH OF TEXAS. Thank you, Ms. Joyner.
[The prepared statement of Ms. Joyner follows:]
PREPARED STATEMENT OF CARLOTTA C. JOYNER, DIRECTOR, EDUCATION AND EMPLOYMENT ISSUES, HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION, U.S. GENERAL ACCOUNTING OFFICE
Mr. Chairman and Members of the Subcommittee:
We are pleased to be here today to discuss our assessment of the Department of Commerce's report on the demand and supply of information technology workers.
Industry reports and various newspaper and magazine articles predict that severe shortages of information technology (IT) workers could have a crippling effect on the growth of the economy. In conjunction with cosponsoring a convocation on the supply of IT workers, the U.S. Department of Commerce prepared a report intended to bring attention to the issue and to encourage stakeholders to examine the potential for shortages and to take the necessary steps to ensure an adequate supply of IT workers. That report, issued September 29, 1997, is titled America's New Deficit: The Shortage of Information Technology Workers.(see footnote 7)
Today, I would like to discuss our recent report on the Commerce Department's analysis of the demand and supply of IT workers and its conclusion that a shortage of IT workers exists in the United States.(see footnote 8) In conducting our work, we reviewed Commerce's report and interviewed officials at the Departments of Commerce and Labor. To assess Commerce's analysis of IT worker supply and demand and to evaluate the basis for its conclusion that there is a shortage of IT workers, we compared the data presented in the report with other available data from sources such as the Bureau of Labor Statistics (BLS), the National Science Foundation, and the Information Technology Association of America (ITAA). We did not perform any independent analysis to determine whether a shortage of IT workers exists in the United States. Rather, we limited our work to analyzing the methodology used by the Department of Commerce in reaching its conclusion.
Page 102 PREV PAGE TOP OF DOC
In summary, we found that Commerce's report has serious analytical and methodological weaknesses that undermine the credibility of its conclusion that a shortage of IT workers exists. However, the lack of support presented in this one report should not necessarily lead to a conclusion that there is no shortage. Instead, as the Commerce report states, additional information and data are needed to more accurately characterize the IT labor market now and in the future.
The report appears to appropriately establish that the demand for IT workers is expected to grow, but it does not adequately describe the likely supply of IT workers. Although Commerce reported that only 24,553 U.S. students earned bachelor's degrees in computer and information sciences in 1994, Commerce also stated that BLS projects increasing job growth—an annual average of 95,000 new computer programmers, systems analysts and computer scientists and engineers will be required to satisfy the increasing demand for IT workers between 1994 and 2005. Pointing to the disparity between these two numbers and referring to evidence from other sources, Commerce concludes in the report's title and introduction that there is a shortage of IT workers. Commerce did not, however, consider other likely sources of workers, such as college graduates with degrees in other areas. As a result, rather than supporting its conclusion that a shortage of IT workers exists, the data and analysis support the report's observation that more needs to be known about the supply and demand for IT workers.
BACKGROUND
ITAA, a trade association, issued a report entitled Help Wanted: The IT Workforce Gap at the Dawn of a New Century in February 1997 that focused on issues relating to the IT labor market.(see footnote 9) Responding to this report, the National Economic Council and the Departments of Commerce, Education, and Labor began to discuss the workforce requirements of the IT sector; subsequently, federal officials agreed to cosponsor a convocation on the IT worker issue. The convocation, cosponsored by the Departments of Commerce and Education, the University of California at Berkeley, and ITAA, was designed to bring together leaders from industry, academia, and government to develop new educational strategies and forge partnerships that would increase the quantity and quality of the American IT workforce. Federal officials noted that the convocation would support the administration's goals for lifelong learning.
Page 103 PREV PAGE TOP OF DOC
Commerce's Office of Technology Policy was assigned the lead federal role in working with ITAA on the IT worker issue. The Office of Technology Policy's mission is to work with the private sector to develop and advocate national policies that maximize technology's contribution to U.S. economic growth, the creation of high-wage jobs, and improvements in Americans' quality of life. In preparation for the January 12–13, 1998, convocation, the Department of Commerce issued its report, America's New Deficit: The Shortage of Information Technology Workers, examining the potential for shortages of IT workers.
DEMAND FOR IT WORKERS
In its report, Commerce presented BLS projections that between 1994 and 2005 the United States would require slightly over 1 million additional IT workers. BLS projections, based on surveys conducted for the Occupational Employment Statistics program and on the Current Population Survey, estimate future occupational needs resulting from expected national growth and separations from employment over time. Although there is no single, universally accepted definition of the occupations that should be designated as IT occupations, Commerce based its analysis of demand on job growth projections for the three IT occupations used by BLS—computer programmers, systems analysts, and computer scientists and engineers. BLS descriptions of these occupations are as follows: (1) computer programmers write and maintain the detailed instructions, called ''programs'' or ''software,'' that list in logical order the steps that computers must execute to perform their functions; (2) systems analysts use their knowledge and skills in a problem solving capacity, implementing the means for computer technology to meet the individual needs of an organization; (3) computer scientists generally design computers and conduct research to improve their design or use, and develop and adapt principles for applying computers to new uses; and (4) computer engineers work with the hardware and software aspects of systems design and development.
Page 104 PREV PAGE TOP OF DOC
BLS projections for new IT workers over the 11 years from 1994 to 2005 include IT workers to fill newly created jobs (820,000) in the three occupational categories and to replace workers (227,000) who are leaving these fields as a result of retirement, change of profession, or other reasons. The report noted that, according to BLS, of the three IT occupations, the greatest job growth is predicted for systems analysts (92 percent). (See table 1.) The number of computer engineers and scientists is expected to grow by 90 percent, while the number of computer programmer positions is expected to grow at a much slower rate (12 percent). The projected job growth for all occupations between 1994 and 2005 is 14 percent. Since the report was issued, Commerce has issued an update with revised BLS projections showing even stronger growth. Between 1996 and 2006, there will be over 1.3 million projected job openings as a result of growth and net replacements; about 1.1 million of these job openings will be due to growth alone.
Source: BLS.
SUPPLY OF IT WORKERS
Commerce identifies the supply of potential IT workers as the number of students graduating with bachelor's degrees in computer and information sciences. The report presents data from the Department of Education showing that 24,553 students earned bachelor's degrees in computer and information sciences in 1994, a decline of more than 40 percent from 1986. While the Commerce report highlights the supply of IT workers as those with bachelor's degrees in computer and information sciences, Commerce does note that IT workers may also acquire needed skills through other training paths—master's degrees, associate degrees, or special certification programs. Commerce's report also includes information from BLS that indicates, in the case of computer professionals, there is no universally accepted way to prepare for such a career but that employers almost always seek college graduates.
Page 105 PREV PAGE TOP OF DOC
Commerce's analysis of the supply of IT workers, however, did not consider (1) the numerical data for degrees and certifications in computer and information sciences other than at the bachelor's level when they quantify the total available supply; (2) college graduates with degrees in other areas; and (3) workers who have been, or will be, retrained for these occupations. Regarding these other sources of workers, the report sometimes acknowledges their relevance to a definition of supply but does not include estimates of workers from those sources in its overall estimate of supply. For example, Commerce reported that in 1994, 15,187 degrees and awards were earned in computer and information science programs below the bachelor's level, but this number was not included in the supply number for IT workers when Commerce compared the IT worker demand with the available supply.
Commerce also noted that, although employers almost always seek college graduates for computer professional positions, there is no universally accepted way to prepare for a career as a computer professional. According to the BLS Occupational Outlook Handbook, which defines qualifications for jobs and careers in terms of education and experience of IT workers with a bachelor's degree, some workers have a degree in computer science, mathematics, or information systems, while others have taken special courses in computer programming to supplement their study in other fields such as accounting or other business areas. According to the National Science Foundation, only about 25 percent of those employed in computer and information science jobs in 1993 actually had degrees in computer and information science.(see footnote 10) Other workers in these fields had degrees in such areas as business, social sciences, mathematics, engineering, psychology, economics, and education. The Commerce report did not take this information into account in any way in estimating the future supply of IT workers. The report also stated that IT workers acquire needed skills through various training paths, but it provided no analysis of the extent to which companies are training and retraining workers.
Page 106 PREV PAGE TOP OF DOC
COMMERCE'S CONCLUSION REGARDING SHORTAGE OF IT WORKERS
The Commerce report cited four pieces of evidence that an inadequate supply of IT workers is emerging—rising salaries for IT workers, reports of unfilled vacancies for IT workers, offshore sourcing and recruiting, and the fact that the estimated supply of IT workers (based on students graduating with bachelor's degrees in computer and information sciences) is less than its estimate of the demand. However, the report fails to provide clear, complete, and compelling evidence for a shortage or a potential shortage of IT workers with the four sources of evidence presented. First, although some data show rising salaries for IT workers, other data indicate that those increases in earnings have been commensurate with the rising earnings of all professional specialty occupations. Second, the ITAA study gives some indication of a shortage of IT workers by providing information on unfilled IT jobs. However, in our view, ITAA's survey response rate of 14 percent is inadequate to form a basis for a nationwide estimate of unfilled IT jobs. Third, although the report cites instances of companies drawing upon talent pools outside the United States to meet their demands for workers, not enough information is provided about the magnitude of this phenomenon. Finally, while the report discusses various sources of potential supply of IT workers, it used only the number of students earning bachelor's degrees in computer and information sciences when it compared the potential supply of workers with the magnitude of IT worker demand.
Salaries for IT Workers
Commerce stated that upward movement in salaries is evidence of a short supply of IT workers and cited several surveys and newspaper articles illustrating salary increases. For example, the report cited a survey conducted by the Deloitte & Touche Consulting Group showing that salaries for computer network professionals rose an average of 7.4 percent from 1996 to 1997. The report also cited an annual survey by Computerworld, a weekly newspaper covering the computer industry and targeting IT workers and managers, showing that in 11 of 26 positions tracked, average salaries increased by more than 10 percent from 1996 to 1997. Increases in starting salaries were also reported in the Wall Street Journal and the Washington Post.
Page 107 PREV PAGE TOP OF DOC
These wage increases, however, may not be conclusive evidence of a long-term limited supply of IT workers, but may be an indication of a current tightening of labor market conditions for IT workers. According to BLS data, increases have been less substantial when viewed over a longer period of time. For example, the percentage changes in weekly earnings for workers in computer occupations over the 1983 through 1997 period were comparable to or slightly lower, in the case of computer systems analysts and scientists, than the percentage changes for all professional specialty occupations. Thus, salary increases for these occupations have been consistent with the salary increases for other skilled occupational categories over time. What is uncertain is whether the recent trend toward higher rates of increase will continue.
Reports of Unfilled Vacancies
Regarding unfilled jobs, Commerce cited the ITAA report,(see footnote 11) which concluded that about 190,000 U.S. IT jobs were unfilled in 1996 because of a shortage of qualified workers, and that these shortages were likely to worsen. According to the ITAA survey, 82 percent of the IT companies responding expected to increase their IT staffing in the coming year, while more than half of the non-IT companies planned IT staff increases.
The Commerce report should have cautioned readers, however, that the ITAA survey has a major methodological weakness. While the ITAA study provides useful information on unfilled jobs among the firms responding to its survey, the findings cannot be generalized to the national level. ITAA surveyed a random sample of 2,000 large and midsize IT and non-IT companies about their IT labor needs and received a total of 271 responses—a response rate of about 14 percent. We consider a 14-percent response rate to be unacceptably low as a basis for any generalizations about the population being surveyed. In order to make sound generalizations, the effective response rate should usually be at least 75 percent(see footnote 12) for each variable measured—a goal used by many practitioners.(see footnote 13) Furthermore, ITAA's estimate of the number of unfilled IT jobs is based on reported vacancies, and adequate information about those vacancies is not provided, such as how long positions have been vacant, whether wages offered are sufficient to attract qualified applicants, and whether companies consider jobs filled by contractors as vacancies. These weaknesses tend to undermine the reliability of ITAA's survey findings.(see footnote 14)
Page 108 PREV PAGE TOP OF DOC
Offshore Sourcing and Recruiting
Commerce cited support for an emerging shortage in its observation that some companies are drawing upon talent pools outside the United States to meet their demands for IT workers. For example, the Commerce report stated that India has more than 200,000 programmers and, in conjunction with predominantly U.S. partners, has developed into one of the world's largest exporters of software; in 1996 and 1997, outsourced software development accounted for 41 percent of India's software exports. Commerce also cited a Business Week article, ''Forget the Huddled Masses: Send Nerds,'' to illustrate that companies are searching for IT workers in foreign labor markets such as Russia, Eastern Europe, East Asia, and South Africa.
However, the Commerce report stated that some professional engineering societies believe information regarding a short supply of IT workers in the United States is exaggerated and that it is not necessary to recruit foreign workers to fill IT jobs. Additional systematic information about the magnitude of the phenomenon of companies meeting their demands for IT workers outside of the United States would be useful.
Estimated Supply Compared with Estimated Demand
The report identified the decline in the number of computer science graduates as a factor contributing to an inadequate supply of IT workers. The introduction to the report stated that evidence suggests that job growth in information technology fields now exceeds the production of talent. Commerce reported that between 1994 and 2005, an annual average of 95,000 new systems analysts, computer scientists and engineers, and computer programmers will be required to satisfy the increasing demand for IT workers and that only 24,553 students earned bachelor's degrees in computer and information sciences in 1994. Because there is a disparity between these two numbers, Commerce concluded that it will be difficult to meet the demand for IT workers.
Page 109 PREV PAGE TOP OF DOC
Commerce did not adequately explain why the decline in conferred bachelor's degrees in computer science would reflect a short supply of IT workers. As stated in the section on supply, IT workers come from a variety of educational backgrounds and have a variety of educational credentials such as master's degrees, associate degrees, or special certifications. In addition, Commerce reported on the decline from 1986, although that year represents a peak in the number of computer science degrees conferred, which had risen steadily from the 1970s but has remained relatively stable in the 1990s.
Commerce's Conclusions in the Report
Commerce's conclusions about the IT workforce are inconsistently reported in separate segments of its report. First, the title of the report states that America's new deficit is a shortage of information technology workers. The introduction also states that there is substantial evidence that the United States is having trouble keeping up with the demand for new information technology workers. However, the report notes that current statistical frameworks and mechanisms for measuring labor supply do not allow for precise identification of IT worker shortages and, in its summary chapter, Commerce concludes that more information is needed to fully characterize the IT labor market. We agree with Commerce's conclusion that more information and data are needed about the current and future IT labor market.
Mr. Chairman, this concludes my prepared statement. I will be happy to answer any questions that you or Members of the Subcommittee may have.
Page 110 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. Mr. Fraser, let me make sure I understand your testimony. Is the Department of Labor in favor of raising the H–1B cap or not?
Mr. FRASER. Mr. Chairman, the administration has been looking at this question and talking with members. The administration's view is that our first step in increasing the availability of skilled workers must be training and preparing U.S. workers.
Mr. SMITH OF TEXAS. I heard the first priority and last priority. I guess I am getting to, are there any circumstances where we could increase the H–1B cap that the administration would support?
Mr. FRASER. The administration would be willing to work out a package that includes reforms to the program, include significant increases in investment in training and development to meet this goal of looking first to the U.S. workforce, developing U.S. workers, training people to fill these jobs. We would be willing to work out a package that possibly——
Mr. SMITH OF TEXAS. You would support an increase if there were certain conditions, certain attestations, certain safeguards.
Mr. FRASER. And training. A commitment to increase training investment and efforts. I believe that is correct, Mr. Smith.
Mr. SMITH OF TEXAS. You mentioned attestations. Any particular attestations that are significant to you?
Page 111 PREV PAGE TOP OF DOC
Mr. FRASER. Yes, sir. The administration, as I said, since 1993 has been urging the Congress to add two attestations to the program, one that the employer has taken timely and significant steps to recruit U.S. workers for the jobs for which they are seeking nonimmigrants.
It seems entirely feasible that if we are going to give employers access to foreign temporary workers, that they should at least first try to find a U.S. worker to fill the job. Secondly, that the employer will not lay off, fire, displace U.S. workers in order to replace them with foreign temporary workers.
To us, these are common-sense, reasonable, straightforward requirements. From what we hear from the information technology industry, they should not be burdened by those attestations.
Mr. SMITH OF TEXAS. Would you have an attestation of no layoff apply just to particular location or have it apply across the board to anywhere within the business?
Mr. FRASER. We would apply it to the occupational category. It would apply to individuals who are similarly qualified. So the pool——
Mr. SMITH OF TEXAS. Regardless of where they may be located?
Mr. FRASER. Yes, sir. If an employer is going to go to India or to China or to Thailand to find a worker, they ought to be able to look within their own operations in California or Indiana or in Texas.
Page 112 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. Mr. Fraser, you alluded to abuses in the H–1B program. But if that is the case, why have there been so few investigations by the Department of Labor of any abuses?
Mr. FRASER. In large part, Mr. Smith, our investigative authority is constrained to respond to complaints alleging violations. Of course, nonimmigrants, who are legally bound to their employer, can't work and reside legally in the United States without maintaining their job, are dependent on the employer eventually to sponsor them for permanent immigration, and thus have many incentives not to lodge complaints.
We have had about 300 complaints in the 8 years of this program. Of those that have presented reasonable cause, nearly 90 percent have involved wage violations. And the small number we don't think in any way indicates the potential extent of violations in the program.
Just to give you an example, in the IG's report, when the IG looked at a random sample of employers using the H–1B program, they found one in five pays less than the wage they promised to pay on their application.
Mr. SMITH OF TEXAS. Who conducted that?
Mr. FRASER. The Office of Inspector General of the Department of Labor in an independent audit found that 19 percent of employers——
Page 113 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. This is 19 percent?
Mr. FRASER. Yes, sir.
Mr. SMITH OF TEXAS. Okay. Thank you, Mr. Fraser.
Ms. Joyner, let me ask you the obvious question, which is that if the GAO would argue that we don't have definitive evidence to know whether there is a shortage or not, how are we going to find out or know whether there is a shortage if, in fact, it doesn't exist?
Ms. JOYNER. Well, I think one answer to that might lie in the reverse side of some of the criticisms that we levied toward the Commerce Department report. Our concern was largely of a failure to do a thorough enough analysis to document the likely supply, so that there were sources that could be quantified that hadn't been quantified in this.
I mentioned, for example, the people who get degrees, other than associate's degrees, that it would be possible perhaps to get a better understanding of how much training and retraining is currently being done, which would give some sense of the potential to bring people into the field from other areas and to look more broadly and to some extent, as the Labor Department has focused, on increasing the supply by enhancing the training for people. So I think taking that into consideration would give one a better sense of how these balance out.
Mr. SMITH OF TEXAS. Okay, thank you, Ms. Joyner.
I don't have any other questions.
Page 114 PREV PAGE TOP OF DOC
The gentleman from North Carolina, Mr. Watt, is recognized.
Mr. WATT. Thank you, Mr. Chairman.
Let me maybe ask a question that the Chairman asked in a slightly different way to be sure I understand where the administration is.
Sometimes we hear from the Department of Labor, then we hear something else from the Department of Commerce and somebody else in the Administration. Do I understand that the administration's position on this is that they will oppose increases in the H–1B category unless there are substantial reforms to the H–1B program? Is that the administration's view?
Mr. FRASER. That is the administration's view, Mr. Watt.
The administration, for example, has strongly opposed Senator Abraham's bill, S. 1723 in the Senate, on the grounds that it did not provide the needed reforms in this program and did not provide for substantial increases in investment and training and education to prepare U.S. workers for these high-tech jobs, for these good jobs we want U.S. workers to have.
Mr. WATT. And the entities that got together in the administration and talked about this—I assume there was some entities. Who were they?
Mr. FRASER. The same entities that kept us up until 9 o'clock last night finalizing the testimony.
Page 115 PREV PAGE TOP OF DOC
This is an effort that has been coordinated by the National Economic Council and Domestic Policy Council, involving Department of Justice, Department of Commerce, Department of Labor, Department of State, all of the affected agencies, the Department of Treasury, all have been involved in the deliberations around this topic.
Mr. WATT. So I can assume that those agencies would recommend to the President he veto a bill unless it had substantial safeguards and reforms in it such as you have described?
Mr. FRASER. Mr. Watt, I don't know that that particular bridge has been crossed at this point, but certainly with respect to the markup of the Senate bill, Secretary Herman, Secretary Daley, and the Attorney General, all joined together to write a letter to the Judiciary Committee in the Senate to say that we would strongly oppose this bill for the reasons that I have cited.
Mr. WATT. Okay. Let me go to another issue.
Increasing the H–1B numbers, I have heard, would be in response to what would be perceived as a temporary shortage. What is the maximum amount of time that the administration would support an increase if we could get the reforms done and is there some maximum period of time that you would be talking about?
Mr. FRASER. Well, the labor market, as I indicated in my testimony, has already shown signs of making adjustments to meet increased demand. We have seen college-level, bachelor-level enrollments in computer science and engineering almost double in the last 2 years; and a relatively small fraction of those are foreign students.
Page 116 PREV PAGE TOP OF DOC
The administration, I am sure, would find any temporary increase in the cap, assuming there are the reforms to the program and substantial means of helping the labor market make a more rapid adjustment through training and education, look at 3 to 4 years as the outside limit on such an adjustment.
Mr. WATT. What impact, if any, does the stuff I have been reading about, potential layoffs in the high-tech industry, have on this issue?
Mr. FRASER. Well, there have been several recent announcements. Intel, AT&T, Cyprus Semiconductor, and several other companies have announced large layoffs recently.
Mr. WATT. Are those layoffs, as you understand it, in the high-tech category of workers that H–1B is designed to cover?
Mr. FRASER. Yes, sir, that is our understanding. Of course, we have only seen the news accounts of these. But that is our understanding, that these occupations for which H–1B workers are brought into the country are involved in these layoffs.
Our reform proposal would help assure that companies that are displacing, laying off U.S. workers will not then be able to turn around and fill those jobs with foreign temporary workers and that they will look first in the U.S. labor market and in their own labor force to try to fill job vacancies as they occur.
Page 117 PREV PAGE TOP OF DOC
Mr. WATT. Now, one of the concerns I have heard expressed about putting new reforms, requirements, certifications, so forth into the process is that it will substantially delay a process of getting workers that needs to be time sensitive. How do you respond to that? And is there anything in this administration's proposals that would directly address that?
Mr. FRASER. Yes, Mr. Watt. In the administration's proposal there would be no source of new delay in the application process. Right now in the law, an employer seeking a foreign temporary worker has to submit, as the first step, a one-page form to the Department of Labor on which four boxes are checked. The administration's proposal is to add, as I indicated to the Chairman, two more boxes to that form, one saying that the employer had taken steps to recruit U.S. workers, and the other having the employer promise not to lay off U.S. workers in those occupations.
That form, under the law, must be processed by the Department of Labor within 7 days of receipt. Nothing about that requirement in the law would change. The law, as currently written, says that the Department of Labor cannot reject that application unless it is incomplete or contains obvious inaccuracies. Nothing about that law would change with the administration's reform proposals.
The net effect, in terms of delaying access, would be that employers would have to make two more check marks on this form. And from what the IT industry has been telling us for 8 years, they make exhaustive efforts to recruit U.S. workers. The tight labor market doesn't allow them to ignore qualified, available U.S. workers. So we don't see how checking those two boxes can either add any delay to the process or form a burden on the IT industry.
Page 118 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. Would the gentleman yield just for a minute?
Mr. WATT. I don't have any time left, but if the Chairman gives me some more time, I will yield it to him.
Mr. SMITH OF TEXAS. Mr. Fraser, you mentioned it is just a matter of checking two boxes. But don't those two check marks entail, perhaps, a great deal of time-consuming effort?
Mr. FRASER. That is often asserted, Mr. Chairman, but, in fact, the IT industry has been telling us, and I have been talking to the industry for the 8 years we have been administering this program, we meet quarterly with many of the industry associations—and in every conversation they tell us over and over again about the extent of their efforts to recruit U.S. workers through a variety of means, about how they don't have the luxury in the search for qualified workers to fill their jobs to displace or lay off U.S. workers in order to fill them with temporary foreign workers.
So the boxes do represent an attestation of certain behavior by the employer, but those are behaviors that the IT industry in particular has told us, and I think will tell you today, that it routinely pursues. So we don't perceive that it imposes any new burden on the industry.
Mr. SMITH OF TEXAS. Thank you, Mr. Fraser.
Page 119 PREV PAGE TOP OF DOC
The gentleman from Indiana, Mr. Pease, is recognized; and then the gentlewoman from California, Ms. Lofgren.
And let me say I have to step out for a minute, but if you all will continue.
Mr. PEASE. Thank you, Mr. Chairman.
Mr. Fraser, your presentation has been very helpful, and I appreciate your initially putting it in a framework for us to consider with sort of a checklist that you had gone through. That is very helpful to me as well.
Much of my interest in this comes from colleagues and former colleagues in higher education from throughout my district, and they tell me information that is mostly secondhand about the concern in the IT workforce, although there is some industry concern in my territory as well.
I wanted you to share a little bit more information on your analysis of the potential skill shortage of skilled workers based on analysis of relative growth in the wage rate as perhaps a better indicator of whether there really is a problem here or how serious the problem might be.
Mr. FRASER. Mr. Pease, I don't know if this will help you at all, but I brought with me a chart here that compares the wage trends over the last 10 years for all workers with 4 years of college and workers in the three major categories of——
Page 120 PREV PAGE TOP OF DOC
Ms. LOFGREN. Would it be possible to share that with the whole panel?
Mr. FRASER. I would be happy to. I just pulled it out of the book, Ms. Lofgren, but I would be happy to share this with you all.
[The information follows:]
58001c.eps
Source: U.S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings, Household data. Annual averages (published in January after each year).
It compares the wage trends from the BLS data with the three major IT occupational categories that BLS tracks: computer programmers, operations systems research analysts, computer system analysts and scientists. As you can see, just from the chart of the curve, while some of the higher skilled computer jobs do pay higher on average than for all professional occupations, the trends in wage growth have been basically the same over the last 10 years.
Now, in 1996–1997, you can see there was a jump in the computer programmer category. I know you will hear more from other witnesses today that have information from industry surveys that have different cuts at this information. But the general point is that a usually good reliable indicator of emerging skill shortages is significant increases in wages as the market adjusts. The data that we have from BLS, admittedly for fairly broad occupational categories, doesn't indicate that at this point. And that is a fact we thought was worth calling to the attention of the subcommittee, and we would be happy to provide this data to all the members.
Page 121 PREV PAGE TOP OF DOC
Mr. PEASE. I would appreciate it, and I think it would be helpful to us.
You made a comment in your presentation that increasing legal immigration leads to increasing illegal immigration. Can you expand on what you meant by that?
Mr. FRASER. I said, Mr. Pease, that we need to be cognizant of the fact that if we are going to increase the H–1B cap, we should expect that we will, in the short term, be increasing both legal employment-based immigration and perhaps illegal immigration.
Mr. PEASE. What is your basis for that?
Mr. FRASER. I will explain that to you. About half of the individuals who adjust to permanent employment-based immigrant status do so from the H–1 Visa category. So about half of the folks who become permanent employment-based immigrants transition out of the H–1 status.
As you heard in earlier testimony, the employment-based visa, permanent immigrant visa numbers are underutilized. So if half of the H–1B workers are going to ultimately transition into employment-based immigration status, then we can expect those numbers to increase and perhaps put some pressure on the cap on the permanent immigrant side.
On the illegal side, INS estimates that about 40 percent of the resident illegal population in the United States are visa overstayers. Many of those folks are foreign visitors and folks in nonimmigrant status for employment and other reasons. If you increase the pool of nonimmigrants by raising the cap, you can expect that there will be some increase in the number of visa overstayers as a result. It is hard to predict the dimensions of that.
Page 122 PREV PAGE TOP OF DOC
Ms. LOFGREN. Would the gentleman yield on that point?
Do you have any data to support that that trend applies with H–1Bs?
Mr. FRASER. Just what I cited, Ms. Lofgren.
Ms. LOFGREN. Your bald extrapolation without any data?
Mr. FRASER. No, based on the studies that INS has done over the last couple of years to try to scope the demographics and the composition of the——
Ms. LOFGREN. I thank the gentleman. I would very much like to get the report that you are referring to that documents overstays in the H–1B program.
Mr. PEASE. And related to that, you also made a statement, or words to this effect, that the H–1B program is a tool for hiring illegals. Can you explain a little more what you meant by that?
Mr. FRASER. I was quoting there, Mr. Pease, from the Office of Inspector General report. I brought a copy of that, if you would like to have that for the record of the hearing.
What they found was that, while often the H–1B program is used for the purposes that it is intended, to give employers access to needed skills in international labor markets, it is not uncommon for the program to be used for other purposes, and that is really as a probationary employment program.
Page 123 PREV PAGE TOP OF DOC
We have seen the trend of employers first making connections with foreign nonimmigrants when they are students in the United States, then hiring those folks for a period of a practicum, after they are students, then hiring them as H–1Bs, and, ultimately, after 5 or 6 years in that status, sponsoring them for permanent residency.
That is what the IG found, that quite often the program is used as a probationary employment program; that people who are employed under it in many cases are unauthorized to be employed in the United States; they are foreign visitors or foreign students who were first brought into the H–1B program. So we do have their report if that would benefit this committee.
Mr. PEASE. I think it would, but are you then suggesting that if we better enforced existing law we wouldn't need to increase the number of H–1B visas?
Mr. FRASER. We are suggesting that if the reforms that the administration has been calling for were incorporated, then it would really give—right now, the program operates so that employers are competing with each other on a first-come, first-serve basis. Whoever's application gets in first gets access to foreign workers.
With the reforms we have been advocating, it is our view that U.S. employers, like in the IT industry, who are actively recruiting and looking for U.S. workers to fill their jobs, will be advantaged because they will be competing less with employers in the United States, including job contractors, who aren't really interested in finding U.S. workers for those jobs, so that there will be more room within the cap for those employers who really are facing skill shortages.
Page 124 PREV PAGE TOP OF DOC
Mr. PEASE. I don't want to be accused of taking advantage of the Chairman's absence, so I will acknowledge my time is concluded and yield to Ms. Lofgren.
Ms. LOFGREN. Thank you. And I think I actually caused you to be over, so I will not be critical.
As I look and read through this testimony, it occurs to me that there are many themes at work here. The H–1B program was originally not devised as a labor shortage answer. It was devised so that talent could be chased by American firms. That is why there is no job search requirement—so you can go after the best minds in the world. If you are lucky, you'll be able to keep them in America, create innovation, wealth and prosperity.
I thought the list of the top 100 H–1B users was actually very interesting. I was glad to have the list because I think it reflects the dichotomy of what is going on. If you look at the Intel Corporation, and I use Intel as an example because it was the first name I actually recognized, it is quite a ways down the list. Intel had 144 applicants, which is not a very large number for a company that has 63,700 employees. Given the number of applicants, the huge number of actual employees, and the amount of money Intel is making, I assume that they are chasing the talent that was originally intended under the program.
But then I saw some companies that I have never heard of. I don't want to be insulting to any of them, but I was born and raised in Silicon Valley. I have lived there my whole life. Number five on the list is a company called Wipro. They have six, or seven times more applications than Intel. And I have never heard of them.
Page 125 PREV PAGE TOP OF DOC
My father is 79, and I visit him often. Sunday morning I went to see him in Palo Alto. On the way I thought I would stop and take a look at Wipro. The address is right off Central Express, right near Lawrence. When I looked on Cobalt Way, Suite 107, I found a mail drop. There were a dozen firms listed. Wipro was not one of them.
So I thought I'd see if they are on Tautau. Well, there is no Tautau Street in Cupertino. There is a Tantau. That is where Tandem is. And it is right off Lawrence Expressway. So I zoomed up Lawrence Expressway, and I found the building, and it was Suite 201 in this building. There is no way you could fit 600 people in that building. And I thought to myself what is going on here?
So this is the question . . . Is your problem or the concern about the main line employers that we know are on this list, the Oracles or the Intels, who are chasing talent, or is it the temporary agencies that really use huge numbers of these visas? If it is the temporary agencies, then I am struggling to understand why, given the tools you currently have, you cannot address the issue.
For example, let's look at the attestation. You need to attest. But how can you possibly attest if you have a mail drop and you are applying for 500 visas? The mailman could tell you there is fraud involved.
Mr. FRASER. Well, Ms. Lofgren, that is an excellent question, and what you pointed to is a very serious problem with the way this program operates, not just in the IT field, but in the health care field as well. And that is that there are an awful lot of employers who are in the body business, they are in the people business, using this program to bring in a large number of foreign temporary workers to lease out, contract out, to other employers.
Page 126 PREV PAGE TOP OF DOC
Whether the companies' names that you recognize, to what extent the companies who you recognize on that list, unlike the Mastechs and the Syntels and the Tata Consultancies and so on, which are job contractors, they are body shops. To what extent the Intels and Microsofts and Sun Micro Systems of the world use the services of those contractors, none of us can tell. But in fact——
Ms. LOFGREN. I can't either. But since I do have limited time, let me follow up with a question I thought I had asked.
Given the current rules of the H–1B program, as outlined by Congress and administered by your agency and the Immigration Service, how could a consultancy firm hire 80 percent of their employees as H–1 visas, and actually perform no other service other than that of a temporary hiring agency? How would that comply with our current rules?
Mr. FRASER. Because the fundamental problem and the fundamental reason the administration has been urging reform is that there is nothing in current law that prevents that. There is nothing in current law that prevents an employer from saying, I want an entirely nonimmigrant work force and some have entirely nonimmigrant work forces.
Ms. LOFGREN. But they are not doing any work. The whole idea is to say that you have posted. But how can you post in these particular cases. The posting would have to be in the companies that have utilized the temporary service. I am sure there is a shortage. We now have an unemployment rate of 1.6 percent among computer programmers, and it's even less than 1 percent in some of these fields. So, it is very interesting to hear all this testimony about whether there is a shortage, but when full employment is defined as 4 percent, overall unemployment in Santa Clara County is 2.8 percent, and you have less than 1 percent unemployment in some of these tech fields, and under .05 in some of them, obviously there is a shortage in some of these fields.
Page 127 PREV PAGE TOP OF DOC
But going back, wouldn't the posting on the H–1Bs have to be at the various companies? Are you saying we need to tighten up the posting and the attestation for the temporary agencies, and if so, why is there nothing in your testimony about that?
Mr. FRASER. Well, I think our proposal is to, under the current cap, advantage employers who have a legitimate need for highly skilled, highly talented people in the international labor market, as opposed to those who have no interest, or little interest, in finding U.S. workers, and our two reforms are intended to get directly at that question.
Ms. LOFGREN. If I may, Mr. Chairman, I don't think that is accurate. You are going to attest that you are not going to layoff any American workers.
Mr. FRASER. First——
Ms. LOFGREN. But you don't have any American workers, you posted at your mail drop.
Mr. FRASER. First, you have to attest that you are making bona fide efforts to find U.S. workers, that your first recourse is not to the international labor market. That is the first reform. You are making bona fide efforts to find U.S. workers.
Ms. LOFGREN. If I may, I think that is pretty easy to do when in some of these fields you have .05 percent unemployment. But going back, the issue that you talked about is who is being laid off in which large company. I would add that no one does a press release about the hiring. I think to look only at the cutbacks gives a very misleading picture about what is happening economically. Our concern is that should Cyprus Semi have five H–1Bs if they are going to cut back a thousand people. If the five H–1Bs are coming from the temporary agency, I just don't see how the reforms you have outlined address that situation.
Page 128 PREV PAGE TOP OF DOC
Mr. FRASER. The reforms that we have outlined—.
Ms. LOFGREN. Or so-called reforms.
Mr. FRASER. If Cyprus Semiconductor were to, as it has announced it will do, lay off a number of workers, the reforms would require that before the company came back with its next application for a foreign——
Ms. LOFGREN. But they are not the applicant in this case. They are just hiring Tata.
Mr. FRASER. Well, the administration's reform gets to layoff and displacement of U.S. workers, so if they were seeking to replace the laid off U.S. worker through contracting out with a firm that supplies temporary foreign workers, that would also be covered by the attestation that the administration advocates.
Ms. LOFGREN. The red light is on. If I may, I do agree with many of Ms. Joyner's reports. You are right. It is not just a computer science degree that leads to a high skill job. I thought your comments were thoughtful.
I would, however, like to ask if there has been any analysis of the nature of the student bodies in some of these terms. For example, when I go to Stanford or San Jose State, and by the way, the dean of engineering there very much supports an extension, I mean, what I am hearing from the deans in engineering and other physical sciences is more than half their student body are foreign students, especially in the graduate schools. And so to look at people who are in graduate studies in computer science in American universities and say they are going to come, if we don't look and see that maybe two-thirds of them are actually foreign students and would only come here through the H–1B, might lead us to an erroneous conclusion as well.
Page 129 PREV PAGE TOP OF DOC
Thank you, Mr. Chairman, for your indulgence.
Mr. SMITH OF TEXAS. Thank you. We thank the panelists as well and appreciate you being here.
We now move to our third and final panel: Harris Miller, President, Information Technology Association of America; Dr. Norman Matloff, Department of Computer Science, University of California at Davis; Daniel Sullivan, Senior Vice President for Human Resources, QUALCOMM; William Payson, the Senior Staff; Daryl Hatano, Vice President for International Trade and Government Affairs, Semiconductor Industry Association; David Smith, Director of Policy, AFL–CIO; and Dr. Richard Lariviere, Vice President of International Programs, from the well-known, well-respected institution the University of Texas at Austin.
Before we begin, let me say to you all that we are going to try to finish this panel as expeditiously as possible because there are a number of individuals who have to leave to catch flights or for other reasons. Among them is David Smith, from the AFL–CIO, so we are going to proceed a little bit out of order and begin with Mr. Smith, so that we make sure we hear his testimony, and then we will go back to the order in which the witnesses are listed according to the agenda.
Mr. Smith, if you will begin. Thank you.
STATEMENT OF DAVID A. SMITH, DIRECTOR OF POLICY, AFL–CIO
Page 130 PREV PAGE TOP OF DOC
Mr. SMITH. Mr. Chairman, thank you for your indulgence. Unfortunately, Continental Airlines wasn't as willing to accommodate my schedule as you are. I will try to be brief. I submitted a statement for the record, which I hope you will include, but let me try to summarize.
I am struck, Mr. Chairman, by the definition of the subject of today's hearing as a crisis, as a problem, as something that bodes ill for the American economy and for American workers.
Frankly, that strikes me as backwards. What we have here is a fast growing industry, one that has doubled in size in the last decade, and it seems likely to again double in size in the next decade. It is an industry that provides skilled jobs for working men and women. It is an industry which has taken advantage of the international marketplace and is often held up as an exemplar of American know-how and of the resurgence of America's preeminence in the global economy. This strikes us as an enormous opportunity, not as a crisis. It is an opportunity for American workers to learn new skills, to get new jobs, to move into an industry which will substantially define the economy of the 21st century.
What is striking, and some of the colloquy between my friend, John Fraser, and Congresswoman Lofgren, at the end of the last panel, underscores my point, is that there is a chunk of this industry, primarily the job shops and the contractors, who don't want this opportunity to be seized by American workers, who would prefer to undercut the labor market, in fact they prefer to distort the labor market.
Page 131 PREV PAGE TOP OF DOC
It is ironic, that while much of the conversation about this industry and about its opportunity invokes the advantages of an unfettered marketplace, a marketplace which, free from undue interference and undue regulation, will prosper.
In fact, what folks who want to increase the H–1B cap or who resist some of the procedural reforms that the administration has talked about, want to do is rig this marketplace. They want to rig the marketplace so that it doesn't work for American workers, that it doesn't provide the training, that it doesn't provide the opportunities to upgrade their skills. In fact, they want to distort the marketplace in exactly the way that they often rail against in quarrel. And I think that irony is compounded by another one. I would urge all of you, however painful it might be, to think back to the Fast Track debate. Those who supported Fast Track argued that our ability to compete in the international economy, our ability to have leading sectors and particularly sectors which were marked by our technological prowess grow, would be good for American workers. Today's discussion, and the discussion about raising the cap, about substituting temporary foreign workers for American workers, belies many of those claims. And if it is true that this brave new global economy marked by the information services industry, marked by high technology, is going to be good for American workers, then we need to make sure that American workers are those who are employed in this industry and reap its benefits.
I can't resist, and I won't belabor it, but the third irony, of course, here is at the same time that the industry in general is arguing for an increase in the cap and claiming shortage, many of the industries brightest stars, Xerox, Cyprus, Intel and Apple, are laying off precisely the workers that they claim are in demand.
John shared with you some wage data. It is interesting to compare that, and I will provide it to the committee, with another chart that shows changes in employment in those same three sectors of the information technology industry. Employment is rising, wages are not. Now that tells us something. Marketplaces do work. If this marketplace were as tight as Congresswoman Lofgren suggested it is, wages would be rising. We haven't yet repealed the fundamental laws of supply and demand in the labor market or any other market. We are not seeing what every economist in this room and most economists around the country would tell you we would see if we were facing anything like a crisis.
Page 132 PREV PAGE TOP OF DOC
Let me try to briefly outline, and it is detailed in my written testimony, let me briefly suggest what we think the right prescription is here.
The H–1B program can provide an important safety valve for an industry facing a real shortage, but at the moment it doesn't oblige a potential user to prove that there is a real shortage or to prove they, in a diligent and serious way, attempted to recruit American workers. We ought to reform the system so that both attestations are a necessary condition of receiving an H–1B allocation.
And, second, we ought to make sure that this does not become a system where job shops hiring low wage computer professionals from foreign countries drive down and distort the labor market in the country. And the way to do that, and I think the administration is on target here, the way to do that is to, in addition to insisting upon bona fide efforts to recruit, to insist that no layoffs can proceed with a subsequent request for H–1B status.
Let me end, very briefly, Mr. Chairman, by suggesting that another important part of seizing this opportunity is putting in place the kind of education and training programs, and the kind of skill upgrading programs for incumbent workers that ensure that these opportunities can be seized by American workers, so that American firms will continue to prosper well into the next century.
We don't think there is much evidence of a crisis, we do think there is a lot of evidence of a great opportunity for our country and for this vibrant sector of the country's economy. The task of this subcommittee, it seems to me, is to help us seize it.
Page 133 PREV PAGE TOP OF DOC
Thank you very much.
[The prepared statement of Mr. Smith follows:]
PREPARED STATEMENT OF DAVID A. SMITH, DIRECTOR OF POLICY, AFL–CIO
Mr. Chairman and Members of the Committee:
On behalf of the AFL–CIO I would like to thank Chairman Smith and Ranking Minority member Representative Watt for the invitation to testify at this hearing on an issue of great importance to organized labor. The real issue before you today is not whether or not the cap on H–1B immigration should be raised, but whether or not the American employers and the American government consider American workers valuable enough to afford them the opportunity to train for and get well-paying, secure jobs. You have an opportunity to see to it that that opportunity is seized and to take steps to halt the abuse of this country's immigration laws by those who would deny Americans job opportunities and drive wages down.
The appropriate long-term approach to current and future labor shortages lies in the development of effective, efficient training and education programs that help American workers to gain new skills. Any temporary guestworker program should be limited to those rare instances where there truly is a demonstrated, urgent, short-term labor shortage that cannot be immediately addressed. We must not overreact to the unproven claim of the IT industry that such a shortage exists today and that we, therefore, must expand a seriously flawed program.
Page 134 PREV PAGE TOP OF DOC
The IT industry has not made a sufficient case to warrant an increase in the H–1B cap
Recent media reports of massive layoffs belie the IT industry's claims of a shortage of workers. The Wall Street Journal, hardly an enemy of the IT industry, reported on April 13 that ''the past couple of weeks have seen a steady drumbeat of layoff announcements in industry sectors that until recently have complained about personnel shortages.'' Xerox and Intel announced plans to layoff a total of 12,000 employees, and smaller firms in Silicon Valley, including Netscape Communications and Apple Computer, have also announced layoffs. This development is not surprising in light of the March 20 report of the General Accounting Office that the Information Technology Association of America (ITAA) and Department of Commerce studies frequently cited as establishing proof of massive IT labor shortages were so fundamentally flawed that it could not verify any shortage or workers, much less one of the magnitude claimed by the IT industry. An increase in the H–1B cap should not even be considered until there is clear substantiation that a labor shortage actually exists, and that vacancy rates cannot be remedied by improved pay and working conditions. In fact, the current H–1B program should be reassessed periodically to determine if a shortage of U.S. workers actually exists in those fields for which H–1B workers are employed. Without such review, a large general increase of foreign workers such as that proposed by Sen. Abraham in S.1723 will exacerbate unemployment problems in fields such as occupational and physical therapists and engineers, which already face labor surpluses.
The H–1B program must be reformed
Under current law, an employer does not have to demonstrate a labor shortage, undertake recruitment efforts, or improve training programs as a condition of receiving approval for an H–1B visa application. All of these steps would improve our labor market. Under current law, the employer only needs to check off boxes on a form stating they will pay the worker the local prevailing rate, that no strike or lock-out exists, notice has been provided to workers and the union, and that working conditions of U.S. workers will not be adversely affected by the hiring of the H–1B worker. An understaffed DOL has only 7 days to review the application for completeness and technical inaccuracies. Current law does not require a market test for the availability of qualified U.S. workers or prohibit the layoff of U.S. workers in order to hire H–1B workers. Because the H–1B status can last up to six years, employers can and do game the system. They use the category to hire entry-level foreign workers, see how they work out as employees and then sponsor the foreign worker for permanent residency if they like them. Current law provides no remedy for a U.S. worker who is laid off and replaced with a foreign worker, and no remedy for a U.S. worker whose resume or applications is never considered by an employer reserving a position for an H–1B worker. Reforms of the H–1B program that give protection to American workers and ensure DOL the authority and resources to enforce the law are necessary. At a minimum:
Page 135 PREV PAGE TOP OF DOC
1. Employers must attest that they have taken timely and significant steps to recruit and retain U.S. workers.
2. Employers also must attest that they have not laid-off or otherwise displaced U.S. workers in the occupations for which they seek H–1B workers in the periods preceding and following their seeking such workers.
3. DOL must be given the tools necessary to enforce the laws governing the H–1B program. DOL must have the authority to initiate investigations on ''reasonable cause'' of employer abuse of the system, instead of being forced to wait until a complaint is filed as current law requires. It is essential that DOL receive the funding necessary to fulfill its enforcement responsibilities. Congress must also provide for increased penalties for employers who break the law.
4. Limit the duration of H–1B status to three years. The H–1B guestworker program was intended to serve as a temporary program to provide workers in time of urgent, short-term local labor shortages. It was never meant to serve as a probationary period during which an employer could ''try-out'' the guestworker to decide to sponsor him or her for permanent immigration. The result of a six year stay is that many employers, knowing they can keep the H–1B worker for a long period of time, never make any effort to recruit or train domestic workers. Reducing the duration of an H–1B visa to three years ensures the temporary nature of the program, and provides employers incentive to hire or train qualified and qualifiable American workers for those jobs.
Page 136 PREV PAGE TOP OF DOC
5. Limit the percentage of H–1B workers in an employer's workforce. According to the Immigration and Naturalization Service, the employers whose workforce have the highest percentage of H–1B workers are not the large IT companies, or even the small ones. They are ''job shops'', contractors whose workforce is composed almost entirely of H–1B workers, who are leased to other U.S. companies where they are often used to replace laid off U.S. workers. Perhaps no other abuse of the H–1B program has proved as damaging to American workers. Those employers who use the H–1B program in good faith during short term labor shortages would not face the shortage of visas of which they currently complain.
According to the Immigration and Naturalization Service (INS) over half of all approved H–1B visas were granted last year to information technology firms. In fact 7 out of the top 10 H–1B employers are not just IT firms, they are IT temporary contractors. These contractors continue to reap millions off of cheap foreign labor while American workers miss opportunities. This is a situation where the labor market should be allowed to work. Employers can and will train and pay the women and men that they need. A guestworker program that removes the normal incentives to do so has the effect of reversing the normal operations of the market and consequently denying American workers opportunities to move into one of the most dynamic industries of the next century.
The U.S. workforce must be prepared to meet the challenges of a demands for high-tech skills.
Underlying the information technology industry's alleged shortage of skills are short-sighted human resource policies and a lack of effective training and education programs. The increase in demand for skilled information-technology workers should be viewed as a challenge to the industry and an opportunity for American workers to learn new skills and earn more money. Given the tools, American workers will rise to the challenge and meet the demand.
Page 137 PREV PAGE TOP OF DOC
Americans can be easily trained for the skills reasonably necessary for IT jobs. Many American workers rely on computers everyday in their course of work. Contrary to the claims of the IT industry, not every job in this category requires a degree in computer science, or an advanced degree of any kind. In 1993, only one-third of recent college graduates in the field of computer science or programming jobs had a degree in computer science. Less than two years of additional training will prepare American workers for many of jobs experiencing a labor shortage.
We believe the Administration should use this opportunity to bring together employers, educators and labor to develop education and training programs to enhance the skills of U.S. workers to meet the industry's employment needs. The Regional Skills Alliance provision in S. 1878, the High-Tech Immigration and United States Worker Protection Act introduced by Senator Kennedy and Senator Feinstein would create an especially effective mechanism to help achieve this goal. Specifically, it would provide seed grants of up to $2 million to consortia of various entities whose purpose would be to improve worker job skills and develop strategies to address critical skills needs. The eligible entities include employers, labor organizations, state and local governments, Private Industry Councils, post-secondary educational institutions, non-profit organizations representing businesses or industries, and nonprofit training organizations.
We believe that the overall concept of regional skills alliances is a good one, in that it allows for pooling of resources within industry sectors and regions to address their skills needs, through joint efforts in skills assessment, the development of skills standards, training curriculum, and apprenticeship programs, and the provision of training. The federal grants would leverage private sector investments in training and upgrading of workers skills that might not otherwise be made.
Page 138 PREV PAGE TOP OF DOC
An effective job training program for IT skills should include the following:
1. Strong preference to alliances that include employers, and especially to consortia that include partnerships of labor organizations and employers;
2. Great preference to alliances that address the training needs of incumbent workers, while also addressing grants to support the training of dislocated and unemployed workers, to enable them to compete in high-skilled job markets;
3. All alliance activities should ultimately be tied to the development and implementation of actual training programs or strategies designed to meet critical skills needs within an industry sector or geographic region.
Conclusion
Both U.S. workers and businesses are faced with the challenge of harnessing new technology and new skills that are necessary to deal with the new age of information technology. This should be seen as a great opportunity. Many times over the past 100 years, American workers have faced similar challenges as our economy moved from the farm to the factory and as services grew. We met those challenges and saw the development of the world's largest middle class.
But since 1990, the H–1B program has allowed U.S. employers to overlook the vast resources of American workers, and instead turn to cheap foreign labor that has dislocated American workers, and denied many others the opportunity to be considered for potentially well-paying positions. The needed reforms do not place undue burdens on employers; they simply level the playing field so that Americans have a first and fair opportunity for jobs and to upgrade their skills to qualify them for jobs in the future. If the H–1B reforms the AFL–CIO and the Administration advocate become law, business will still have the protection of a notice and comment period before the promulgation of rules by DOL, oversight hearings by at least two Committees of jurisdiction in both the House and the Senate, and the right of administrative and judicial review. Without the reforms, U.S. workers have nothing, not the right to file a complaint, to be protected against displacement, wage depression or lack of opportunity.
Page 139 PREV PAGE TOP OF DOC
In closing, I point out to you that the IT industry is fully capable of addressing its labor needs through recruitment and training, and, in fact, will do so when they do not have the option of importing foreign labor. I would like to read to you an excerpt from the webpage of Mastech Corporation, a firm which according to the Immigration and Naturalization Service uses the highest number of H–1B workers in the U.S. In response to a labor shortage, the webpage states Mastech took the following action ''In response to this attrition problem, the Company increased its U.S. recruiting efforts, enhanced its training programs and worked with the Department of Labor to revise its filing procedures to resolve the delays. As a result of these initiatives, the Company's employee attrition rate returned to normal historical levels in September 1996 and have remained at such levels since that date.'' Legislation increasing the H–1B cap is not the answer to solving a labor shortage. Utilizing American workers is the long-term solution.
Mr. SMITH OF TEXAS. Thank you, Mr. Smith.
Mr. Miller.
STATEMENT OF HARRIS N. MILLER, PRESIDENT, INFORMATION TECHNOLOGY ASSOCIATION OF AMERICA
Mr. MILLER. Thank you, Mr. Chairman. I appreciate the opportunity to be here, especially because I used to sit in the seat Mr. Fishman is sitting in.
I feel like I am in a bit of a time warp, Mr. Chairman, which was suggested by Mr. Watt's question. Last Wednesday I sat in front of the Secretary of Commerce and heard how the information technology industry has been growing dramatically. That while we were 6.1 percent of the GDP just a few years ago when the H–1B cap was set, we are now 8.2 percent. That 28 percent of the entire economic growth of our economy last year is attributable to the IT work force. Yet, now Mr. Fraser comes here representing the administration, telling the high tech community once again to drop dead on the H–1B issue. It is very unfortunate.
Page 140 PREV PAGE TOP OF DOC
Let me address the specific issues that are before your committee today. Number one, is there a work force shortage? We feel there are multiple sources of evidence: the Virginia Tech study that was done in 1998, as well as a study that was done by ITAA in 1997; Coopers & Lybrand released a study last week that asked 441 CEOs of the fastest growing businesses their number one issue, and a vast majority said the number one issue is a work force shortage; Texas A&M, as the Chairman knows, did a study in the State of Texas, showing 15,000 IT vacancies and 40 percent of the companies saying it might affect their decisions as to where to move their locations.
There are many wage studies available, including private sector studies, showing compensation, particularly when you include things like bonuses and incentive payments, going up 18 to 25 percent a year, as opposed to the BLS number of 7 percent a year. Even Mr. Fraser admitted wages have been going up dramatically in the last 2 years. There is a turnover of 20 percent in the industry right now.
Mr. Chairman, last but not least, this is an international problem. The government of Canada, the government of the U.K., the government of Japan and the government of Germany are facing a similar problem, and they are focusing on a solution.
Number two, the source of the problem is a rapid growth of the IT industry, of which we are very proud. Ms. Lofgren mentioned that in Silicon Valley alone, in the last 6 months, 58,000 jobs have been created. And yet we are worrying here about a few thousand jobs for IT workers through the H–1B program.
Page 141 PREV PAGE TOP OF DOC
The best estimate from the BLS is there will be 107 percent job growth in the industry over the next 10 years, as opposed to 14 percent for the overall work force, six times as fast for the computer industry. The challenge is there.
Number three, ITAA and the industry believe the number one solution to the IT work force shortage is growing a domestic work force. I remind the subcommittee, it was the ITAA, not the AFL–CIO, not the IEEE, not the Department of Labor, which organized the IT Workforce Convocation. This is the number one issue for our companies. We are the ones trying to solve the domestic work force problem.
I agree with the previous speaker: the solution primarily is to be found in the U.S. That is why we established numerous programs. The industry spent over $210 billion in training last year. According to the American Society for Training and Development, we spent $911 per employee for training, three times higher than businesses averaged and 60 percent higher than the next highest industry, financial services.
In short, Mr. Chairman, we do not believe that increasing the H–1B program and training domestic workers is, as others have said, an either/or proposition. Whatever this subcommittee and this Congress does on the H–1B program, we are going to move ahead to grow the domestic work force. That is the primary solution to the problem.
Number four, the H–1B cap does need to be increased and it needs to be increased soon. We are already apparently over 55,000 numbers for the first 6 months of the year. That is more than an 8,000 monthly take-up rate, even including the mortgaged numbers carried over.
Page 142 PREV PAGE TOP OF DOC
We hope the subcommittee and the committee and the Congress will move very quickly. The cap was set 8 years ago. Since that time, over 14 million new jobs have been created in this country. It is a much different economy, it is a much more global economy. Less than 10,000 people were on the Internet in 1990. Now it is one hundred million people on the Internet. It is a different economy and we hope the Congress recognizes that and increases the H–1B cap.
Next I would like to respond to some criticisms of the H–1B program you have heard. The first is that H–1Bs are cheaper or that somehow there are abuses of the program. What I suggest is we in industry are also concerned about it. It was our association in conjunction with Mr. Fraser and the Department of Labor which developed a form 3 years ago to encourage our members to file complaints about H–1B abuses. I would suggest to any Member of Congress, anyone on the panel, if you know of a company that is abusing the H–1B program, please file a complaint and let the Department of Labor do its job. Those companies which are cheating on the wage requirements which Congress put into the law in 1990 are disadvantaging my member companies because my member companies play by the rules. I keep hearing about all these abuses. Please take some action so that Mr. Fraser can go out and do his thing. If there are, in fact, abuses, DOL should take care of those companies and get them out of the program. We encourage that and always have.
The second myth is we don't want to train U.S. workers. I have addressed that. We are spending a lot of money as we go forward.
Next, that somehow ITAA dreamed up this work force shortage. I ask the subcommittee, why would the industry go out and tell its work force we have a shortage, thereby driving up wages, just to bring in a few more foreign workers? That is absolute nonsense. No industry in its right mind would encourage wage inflation by making up a story to bring in a few thousand foreign workers.
Page 143 PREV PAGE TOP OF DOC
The next myth is that people in this industry don't like the industry. A study was done recently by a magazine, Beyond Computing, which found, astoundingly, 98 percent of IT professionals and managers like their jobs. I suggest it is even higher than the rate among Members of Congress, though I could be wrong. Mr. Watt is nodding his head. Just 4 percent said they are looking to get out. This is an industry that has good opportunities.
The next argument I hear is that somehow we are only hiring younger workers as opposed to older workers. In fact, DOL's biannual survey of displacement found displacement of workers in the age group of 45 to 54 is the same as it is for the age group of 25 to 44, 3.4 percent. It also showed the professionals generally, though it didn't break this down by computer people, quickly get jobs when they lose them, compared to other workers, nonprofessional workers.
The other issue that I have heard is the unemployment rate for older workers is higher. That is also a myth. The Department of Labor in the Bureau of Labor Statistics said the numbers in fact are approximately the same for people in the older age groups.
In conclusion, Mr. Chairman, we need the H–1B cap increased. I appreciate the fact you are taking on this issue, and we hope the Congress will move quickly to solve the problem.
[The prepared statement of Mr. Miller follows:]
PREPARED STATEMENT OF HARRIS N. MILLER, PRESIDENT, INFORMATION TECHNOLOGY ASSOCIATION OF AMERICA
Page 144 PREV PAGE TOP OF DOC
Good morning Mr. Chairman and other distinguished members of the Subcommittee. On behalf of the over 11,000 direct and affiliate member companies of the Information Technology Association of America (ITAA), I want to thank you for allowing me to participate in today's hearing.
ITAA member firms work at the forefront of the information technology (IT) revolution, helping customers find the right solutions in IT software, services, the Internet, electronic commerce, systems integration, and telecommunications. I am also pleased to serve as President of the World Information Technology and Services Alliance (WITSA), comprised of 28 member IT associations throughout the world. This June, ITAA will host the XIth World Congress on Information Technology at George Mason University in Fairfax, VA.
Today I would like to focus my remarks on the IT worker shortage. Some individuals, including panelists you will hear from later this morning, have claimed that such a shortage does not exist. We completely disagree. I will use the next few minutes to acquaint you with the working realities of my industry and leave the myth-making to others. I will describe conditions to you that reasonable people can only interpret as a shortage, and I will forecast the impact that the shortage will have if we do not respond quickly and effectively to the situation.
I would also like to say at the outset that part of the ''quick fix'' to the worker shortage means a raised ceiling on temporary foreign workers. I urge you to support such a move and join me in being thankful that America remains a beacon to so many talented and educated people around the globe. Where would we be as an economic power if this were not so? Where would we be as an industry without pioneers like Andrew Grove of Intel or Charles Wang of Computer Associates? For every household name, I suggest that there are thousands of other foreign workers making major contributions to U.S. companies, advancing the state of technology, increasing our competitive advantage and, by the way, paying taxes.
Page 145 PREV PAGE TOP OF DOC
Responding to the short-term best interests of the U.S. economy, as well as U.S. companies, shareholders and workers, is not a bad, immoral or evil thing. Rather, business immigration should be viewed as one important component of a much longer term solution, a step complementing—not replacing—the need to help more Americans acquire the skills needed to compete in the information economy. It is also important to note that these skilled foreign workers create more economic opportunities for American workers. This is not a zero-sum game.
So let's begin with the good news: there has never been a better time to be an IT professional in America. The marketplace is confronted with a major shortage of appropriately skilled technical workers, and this gap between supply and demand has driven up wages, benefits, and opportunities for computer programmers, systems analysts, computer scientists and similarly skilled individuals. A recent study prepared for ITAA by Virginia Tech found that 346,000 slots for professionals in these categories are now unfilled. That equates to 1 out of ten positions across the country—obviously a seller's market.
What does that mean at the cash register? More groceries for this group of workers. Information systems jobs pay an average annual salary of $55,000. Individuals with expertise in particular technical areas earn far more. To keep this in perspective, remember that the average annual wage in this country is $27,845. The average starting salary for college graduates with software related degrees is over $40,000. Not bad for a young person with little or no work experience. My first job out of college as a Capitol Hill staffer paid $16,000. What about yours?
These top wage earning technology workers are also getting some of the best raises and benefits. The Bureau of Labor Statistics (BLS) says that the average salary increase for computer programmers last year was more than twice the rate of increase paid out across the board. And BLS salary statistics do not include bonuses, stock options and other benefits. If you are lucky enough to be a programmer in Washington State, your salary averaged only $58,860 in 1995 but, with exercised stock options, you brought home $135,000 a year! William Mercer and Company, a major provider of compensation and human resources related data, finds double digit salary increases for operating systems architects, network control supervisors, application program managers, customer service technicians and other specialists.
Page 146 PREV PAGE TOP OF DOC
Nice work if you can get it. But many Americans do not have the background, education or skills to qualify for these assignments. Training is an important response to this unfortunate situation, and the high tech industry in the U.S. invests three times the national average in training per employee, according to the American Society for Training and Development (ASTD). ASTD finds high tech spending $911 per employee versus $300 to $500 for other industry categories. Last year, the IT industry spent $210 billion to field its work force, with much of this total going to investments in training and retraining. But even that monumental number is at best a partial answer. Newly trained people do not hit the ground running on Day 1. On the contrary, many assignments may take months or even years to master.
Companies do not have months or years to be productive. Product development cycles in the information technology industry can be as little as 12 months. We do not ask medical residents to conduct brain surgery or flight engineers to pilot the plane. We expect fully qualified professionals to fill these roles. Why expect any less from the people who design our information systems? For a wide variety of reasons, we have too few individuals able to fill this role.
So employers are forced to bid up the price of critical human resources, not only paying inflated salaries but also using signing bonuses and other cash inducements, life-style accommodations such as telecommuting and child care credits, and a rich menu of insurance, vacation, tuition reimbursement and related perks.
The result is robbing Peter to pay Paul, with employers raiding other employers for a limited supply of human capital. Employees understand the rules, and many will change jobs once or twice a year just to keep the financial ball rolling forward. The shortage has caused the attrition rate among IT workers to double, leaving firms coping with annual turnover approaching 20 percent or more. This also forces companies to pay out tens of thousands of dollars in essentially non-productive search firm fees, referral bounties, and increased corporate overhead costs. The game destroys the traditional balance between employee contribution and compensation by pushing entire categories of employment forward.
Page 147 PREV PAGE TOP OF DOC
In this situation, you reap inflation, not productivity gains. The Gartner Group, a well respected market research firm, says IT labor costs will grow 35 to 50 percent by the Year 2000. Spiraling worker costs mean cooling market opportunities. Companies will delay, defer or dump new system development projects because a greater percentage of their IT budgets is going to pay salaries. In fact, IT labor costs are becoming the biggest single item in the IT budget—as much as 53 percent of the total. And that's the bad news in a worker shortage. Firms do not have access to the talent necessary to develop new products and services, enter new lines of business, implement new technologies, and, ultimately, grow their businesses. Higher salary and benefits means proportionately fewer budget dollars are available to invest in new information systems and equipment. Meanwhile, shortage inspired turnover produces nothing but disruption to existing operations and an inability to plan future operations.
Software metrics expert Howard Rubin, chairman of the Computer Science Department at Hunter College, estimates that the talent shortage could be responsible for as much as $500 billion in lost corporate revenue every year. Rubin computes that total by calculating that every IT salary dollar can be expected to generate $43 in revenue. At an average wage of $55,000 per year, that equates to $2.4 million in lost revenue per employee or $500 billion nationwide.
Companies that cannot get the help they need will look at other options. In Texas, where as many as 15,000 high tech jobs go unfilled, a Texas A&M University survey found that 40 percent of firms polled would consider locating or expanding outside the state if the work force shortage situation continues. Incidentally, that poll found that almost half of companies reported employees lacking critical job skills. The talent shortage is not a Texas problem: it is a national problem. And companies that do not see a light at the end of the tunnel will cross oceans and set up offshore operations to gain the skill sets required.
Page 148 PREV PAGE TOP OF DOC
If all the studies on job vacancies and rising wages do not convince you, just open your Sunday newspaper to the want ad section. You will see far more jobs for software professionals than any other category. You can also find this job surplus on the Web. You can find it talking to search firms. You can find it by visiting college recruitment offices. You can find it by picking up the phone and talking to just about any company around. You can find it by talking to most computer professionals about their career opportunities. I encourage you to do so.
The golden age of information technology has helped create an economy marked by major gains in production, the lowest jobless rate in 24 years, burgeoning consumer confidence, the lowest inflation rate in 30 years, and what was unthinkable just a few years ago—a Federal budget surplus. Just last week, the U.S. Department of Commerce released a report showing that information technology accounts for 8.2 percent of GDP and contributes more than twenty five percent of GDP growth. In 1990, when the H–1B cap was set at 65,000 annual, IT was only 6.1 percent of GDP. So while the IT industry has increased its share of the GDP by 30%, we are being asked to live by old rules on temporary workers.
The workforce shortage has the real potential to turn gold to lead. Our critics do not seem to share this perspective—and why should they? Who, after all, would want to kill the goose that laid the golden egg, even if the goose produces for only the relative few? They refuse to see the bigger picture—and instead throw around a variety of red herring claims.
It seems to me the logical conclusion of their claim that we do not have an IT worker shortage is that we should stop trying to increase the number of skilled IT workers in this country. That the opportunity to become the next high-tech entrepreneur should be limited to those who are already in the game. That the IT industry should not reach out to women, certain minorities, older workers, those with disabilities, and others who want to be part of the IT revolution.
Page 149 PREV PAGE TOP OF DOC
Let me give you some examples of their specious arguments. Our critics claim that industry is crying wolf on the shortage issue. Our real agenda, they maintain, is to swap out older, more expensive workers and replace them with young, less expensive workers. There would be no shortage and no need for temporary foreign workers, they charge, if companies would just hire and retrain the older displaced workers.
The hard data, of course, tell a different story. Trying to paint the picture of a sweat shop industry, they point to a National Science Foundation (NSF) study which indicates that only 19 percent of programmers remain programmers after 20 years. Industry critics forget to mention that people get promoted. They become project managers, program managers, or company executives. Or they start their own companies. Some analysts believe that promotion to technical management throws their data off by as much as 30 percent.
That would suggest that career employees are moving up, not out. While the flat earth chorus drones on about an industry discriminating against its older workers, the data in the Labor Department's bi-annual studies of displaced workers say that the displacement rate for employees aged 45–54 is the same as employees ages 25–44. And when IT workers do lose their jobs, studies show that they find new jobs faster and with more money then their non-IT counterparts. And as for training, BLS statistics of company provided formal and non-formal training show that workers in the 45 to 54 age group receive more training than their younger colleagues.
The naysayers paint the picture of a nightmare industry, working young people ragged and then throwing them out the door when they can no longer keep up. A survey by Beyond Computing magazine finds an amazing 98 percent of IT professionals and managers polled say they are satisfied with their career choice. Another 80 percent say they plan to stay in information technology as long as they are in the workforce. Just four percent told Beyond Computing that they are looking for other types of work. Fifty-seven percent say they are very satisfied with how their career has advanced and 41 percent say they are somewhat satisfied. Only one percent expressed dissatisfaction. Are those the numbers that give you nightmares? Would older workers express such views? Not likely.
Page 150 PREV PAGE TOP OF DOC
The truth of the situation is that in 1996, the economy generated 135,000 new positions in the software industry alone—while universities produced only 36,000 computer science graduates. Simple math tells us that the new graduates could fill only 27 percent of available openings. So where did the remaining 73 percent come from? Many from the existing base of seasoned IT professionals.
The myth merchants have at least one part of their story correct. In 1997, the number of students enrolling in computer science programs rose as did the number of new computer science graduates. The Computer Research Association's Taulbee Survey, measuring trends within universities offering doctoral degrees in computer science education, found 16,197 new enrollments and 7,586 undergraduate degrees granted in the 1996–1997 school year. That's up from 11,972 and 7,293 the previous year. Far from trying to suppress or hide this data, we say it is fantastic news—one indicator that our message is getting through. But we must also remember that this is one data point and that the number of degrees awarded between 1986 and 1994 dropped 43 percent.
Also consider the fact that one in three young people who declare a computer science major fails to earn the degree itself. Those that do receive degrees take four years to do so. Nothing wrong with that, of course, but our workforce problems are problems today. Those students that do graduate may elect to stay in school for graduate study and, even if they do decide to enter the workforce, they may not elect a computer science occupation. Like retrained workers, few college graduates can be productive from the first day on the job. Additional employer training is usually necessary. And a substantial number of computer science graduates are foreign born; 50 percent of these simply get on an airplane at the end of their college careers and leave the country.
Page 151 PREV PAGE TOP OF DOC
My purpose this morning has been to clear the air on the workforce issue and clear away some of the myths that cloud the issue. I would like to conclude my remarks by making a few points about the H1–B visa program.
One of the most egregious fabrications spread about this program is that it is a sham used by companies to import cut-rate workers. The shame is that there are people who should know better and still choose to spread this nonsense. I am amazed that companies providing high paying employment to hundreds, even thousands of Americans, are still the subject of this mindless xenophobic vitriol.
I understand it may be easier to point fingers and berate IT companies as greedy corporate pirates. But I also remember, even if others would rather forget, that in creating the H1–B program Congress put in place the kind of controls that prevent employer abuses. In electing to hire a foreign worker, the employer must pay the higher of two wage rates: either the prevailing wage in the geographic area or the wage paid to other company employees performing the same work. Those wages must be posted on the company premises and the H1–B visa applications themselves are available for public inspection at the Department of Labor. Not following these rules is a violation of federal law. ITAA members support the enforcement of this law for sound business reasons, and, as an Association, we encourage our members to report violators to the Department of Labor.
Not the stuff that exposes are made of, but true none the less. Also true is that actually hiring a temporary foreign worker—processing the visa application and related activity—causes the employer to pay more, not less, to bring such an employee on board.
Page 152 PREV PAGE TOP OF DOC
If the myth-makers were right and the H1–B program a ruse to drive down wages, why have there been so few violations? In recent testimony before Congress, Department of Labor (DOL) official Raymond Uhalde admitted that his Department had uncovered only 90 violations over a six-year period. That's 90 violations in a visa category used for IT professionals, but also to gain access to foreign born university professors, physical therapists, fashion models, and others in specialty professions. And although the program has been in place for over six years, why did we exhaust the annual number of available H1–Bs for the first time only last year if it is used primarily by employers to hire cheap foreign labor?
The twin issues of jobs and immigration are a flashpoint in this country; finding the right path through this difficult terrain will not be easy. But as you continue your deliberations, please remember this simple reality: the market will not wait. We compete in a global economy. Every week we at ITAA receive calls from companies in countries such as India, the Philippines, China, Russia, Hungary, Mexico, Germany, Israel, Ireland and elsewhere-all interested in helping the U.S. overcome its workforce shortage. Just like Japan was ready to help Detroit back in the 1970s.
We fiddle in a fruitless debate over the obvious skills shortfall while our companies and their new business opportunities burn. That's just not acceptable to many U.S. companies. If the people needed to fill these jobs are not available in this country, many of these firms will take their business, jobs, spending, and taxes to countries that do have the right workforce.
As a nation, America has always embraced the new frontier. We reach out to our destiny, not shrink from its obligations. This Congress has the opportunity to take a bold step past those whose nativistic jargon simply does not compute in the information age.
Page 153 PREV PAGE TOP OF DOC
Our work is before us. We must improve math and science education so that American children have the foundation necessary to compete for high tech American jobs. We must improve the image of the IT professions so that ''nerd'' and ''geek'' are not the natural synonyms of our industry's most important employees. We must do a much better job of insuring that women and minorities opt in rather than out of IT careers. And we must forge more effective partnerships between industry and academia. These are the long term issues. ITAA and its members are focusing tremendous time and resources on these solutions—and progress seems to be coming.
In the short term, U.S. competitiveness depends on reasonable, rational and regulated access to an adequate number of temporary foreign workers. You will soon have legislation before you to raise the cap on H1–B visas. I urge you support it.
Thank you very much.
Mr. SMITH OF TEXAS. Thank you, Mr. Miller.
Dr. Matloff.
STATEMENT OF NORMAN MATLOFF, DEPARTMENT OF COMPUTER SCIENCE, UNIVERSITY OF CALIFORNIA AT DAVIS
Mr. MATLOFF. Thank you.
Of course I am going to represent a very different point of view. There is no desperate software labor shortage, period. You can see that, for example, from the low hiring rates in the industry. Typically it is 2 percent. It doesn't matter whether it is a big company or small company, they are only hiring 2 percent of their applicants for software positions. There is no way you can square that with desperation. The employers say they are desperate. If they were desperate, they just could not be that picky. And if you call any employer, which I invite you to do, all of them will admit they get tons of resumes, but they throw most of them away without even an interview. Again, if they were desperate, they would give every resume royal treatment.
Page 154 PREV PAGE TOP OF DOC
Look at wages, that has been brought up several times today. Let me correct something that several people have said here today. It is not just the Bureau of Labor Statistics that says that wage growth in this field is only single digit. It is, for example, the employers themselves. If you look at my written testimony, which is very detailed, you will see a number of other sources, including private employers, including head hunters, meaning employment agencies, you will see academic sources, and they all give single digit wage growth in this industry, and I am talking about 1997, last year. There is just a mild growth in wages there. It is not consistent with desperation. If you were an employer, wouldn't you be willing to pay a premium of more than 7 percent to get somebody? If you were desperate, of course you would. So you can see they are not so desperate after all.
The only shortage here is indeed one of cheap labor. Let's talk about the H–1Bs first. I want to make it clear that I am not saying every employer of H–1Bs is exploiting them, but most of them are. You can see that from multiple studies that are independent studies. Two of the studies in particular that I cite in my written testimony are from immigrant advocates, one of them is an immigration attorney. And they find that the foreign nationals in the computer field are paid 15 to 30 percent lower, on average, than the comparable natives. Okay, so we have a real problem here.
You have Sun Microsystems, a major player in the field, who testified on the Senate side on this issue. Sun actually boasted that they hired people in Russia, now they didn't come here, but at bargain prices to be programmers. That was a verbatim quote. I don't think anybody should be shocked. Of course, employers want to see lower wages. It is a major component of their expenses, and, yes, cheap labor is driving this to a large extent.
Page 155 PREV PAGE TOP OF DOC
I urge people on the committee to look at the work of Dr. Eric Weinstein. Dr. Weinstein is a math professor, well, a mathematician, I should say, at MIT. He has found what I consider a smoking gun in this area on the salary issue. He found that the National Science Foundation, a Federal agency, actually planned for wages to be held down by the influx of foreign labor, and the National Science Foundation, as some of you know, was crucial in the development of the modern H–1B program. The documents that Dr. Weinstein has acquired say in very explicit terms, we have to keep down the wages of scientists and engineers and the way we should do it is to bring in foreign labor, not necessarily even by paying them less, just, again, as somebody said, the laws of supply and demand, bring in more people so salaries are held down. I think this is an outrage.
Oracle was brought up. I know a case right now. I know it secondhand, I should say. But this guy at Oracle is making 40,000 a year. According to my source, whom I trust, who is also at Oracle, he should be making 70,000 a year, and he is an H–1B. Not only that, he was told by his employer, he was actually subcontracted by somebody else to Oracle, but he was told exactly what to say when he came through customs, you know, to lie to them basically. I am told by other people at Oracle that there are many people there that are being underpaid that are H–1Bs. It is not just the job shops, it is not just the job shops, who are exploiting the H–1Bs.
The other source of cheap labor is indeed the new college graduates. You can see in my written testimony statements by the employers themselves that say that they have shifted their focus largely to hiring new college graduates. Some of them even explicitly say it is because they are cheaper, although, again, nobody should be shocked that that is the reason.
Page 156 PREV PAGE TOP OF DOC
Intel has an official acronym, NCG, for new college graduate, and RCG for recent college graduate. You can see how much attention they pay to this. Intel has been sued for age discrimination a number of times, by the way. The new Intel CEO, Craig Barrett, when he was asked about corporate downsizing, he dismissed the question by saying the half-life of an engineer, software or hardware, is only a few years.
I would urge everybody to look at the web site of the San Francisco Examiner, www.examiner.com/workers. They ran a piece a week ago disputing the claims of a high tech labor shortage. They were flooded with mail from readers, so they decided, the Examiner did, to put it on the web site, and you can see it there. The overwhelming majority of the letters dispute the claims of a labor shortage, and you have angry people there. You are developing a class of professionals here who are bitter and angry. I think that is a very serious consideration.
Mr. SMITH OF TEXAS. Dr. Matloff, we are going to need to move on.
Mr. MATLOFF. Can I take one more minute?
Mr. SMITH OF TEXAS. Well, let's make it a half minute.
Mr. MATLOFF. Okay. The skills issue, any competent programmer can pick up a new software skill within a couple of weeks. There is no need for even retraining programs. They just do it, if you give them a chance.
Page 157 PREV PAGE TOP OF DOC
Also, two quick points on statistics. At the undergraduate level, the percentage of foreign students in computer science is only 6 percent. There are not a lot of foreign students at that level. Six percent. And you have to be careful, there are some people who came here as immigrants, they are green card holders, they came with their families, whatever. But foreign students, I mean, on an F–1 visa, the kind of people who then would go on to H–1B, as was described, is only 6 percent at undergraduate level. At the graduate level, it is about 40 percent. On the other hand, we are overproducing Ph.D.s as it is, and I go into that in my written testimony.
Last statistic, appeal to common sense, of going to the National Software Alliance, which supports and is lobbying for an increase in the H–1B quota. The number of H–1B visas given to the computer professionals went up 352 percent from 1990 to 1995, while the number of jobs only went up by 35 percent. In other words, the growth rate in H–1Bs is 10 times the growth rate in jobs. You don't have to be a techie to see something is wrong with that picture, okay, just appeal to common sense. Common sense would say this program is indeed broken. As many others have said, the quota ought to be reduced, not expanded.
Thank you.
[The prepared statement of Mr. Matloff follows:]
PREPARED STATEMENT OF NORMAN MATLOFF, DEPARTMENT OF COMPUTER SCIENCE, UNIVERSITY OF CALIFORNIA AT DAVIS
Page 158 PREV PAGE TOP OF DOC
1. OVERVIEW AND EXECUTIVE SUMMARY
''Vaporware.'' That is the term used in the software industry when a firm announces a new product which actually does not exist. Extending the term a bit, one can say that the industry's latest vaporware is the claim of a desperate software labor shortage. The fact is that there is no such shortage.
Due to an extensive public relations campaign orchestrated by an industry trade organization, the Information Technology Association of America (ITAA), a rash of newspaper articles have been appearing, claiming desperate labor shortages in the information-technology field. Frantic employers complain that they cannot fill many open positions for computer programmers. (We use the term programmer to include software developers having various job titles, including software engineers, system analysts and so on.(see footnote 15)
Yet readers of the articles proclaiming a shortage would be perplexed if they also knew that Microsoft only hires 2% of its applicants for software positions, and that this rate is typical in the industry. One does not have to be a ''techie'' to see the blatant contradiction here. If employers were that desperate, they would certainly not be hiring just a minuscule fraction of their job applicants.
A summary of the situation is as follows:
There is no desperate software labor shortage. Employers only hire about 2% of their software applicants.(see footnote 16) If employers were so desperate, they could not afford to be so picky. Average wage increases for programmers have been mild (7% in 1997), and again contradict the claims of huge shortages. If employers were desperate, they would be willing to pay wage premiums much higher than 7%.
Page 159 PREV PAGE TOP OF DOC
The allegedly ''desperate'' employers are actually willing to hire only from three subgroups of the programmer labor pool:
— New or recent college graduates, who are cheaper in salary than established programmers, cost less in terms of benefits because they are typically single, and whose single status facilitates working large amounts of unpaid overtime.
— Foreign nationals on work visas, who often work for lower pay.
— Those few mid-career programmers who are fortunate enough to have work
experience in a currently-''hot'' programming language.
Age discrimination is rampant in the industry:
— There is a reported 17% unemployment rate for programmers over age 50, in spite of employer claims to be ''desperate'' to hire. And this actually understates the problem, since many programmers simply leave the field when they cannot find programming work, so that they do not show up in unemployment statistics.
As a stroll around any high-tech company will show you, most people who work in this field are young. Among graduates of college computer science programs, only 19% are still in the field 20 years after completing their studies, compared to 52% for civil engineering majors.
— Many industry officials have admitted they have shifted their hiring focus to new college graduates. Intel has such an interest in this group that its recruiting literature is riddled with the acronyms NCG and RCG, ''new college graduate'' and ''recent college graduate,'' respectively.
Page 160 PREV PAGE TOP OF DOC
— An official statement by Sun Microsystems, one of the major industry voices claiming a desperate labor shortage, classifies anyone with six years of experience—typically only of age 28—as the ''Senior'' level. This is common in the field. Cypress Semiconductor even advertised one ''Senior'' position for engineers with only three years of experience.
— Intel has been a defendant in several age discrimination lawsuits, and reportedly sets policy on the basis of advice a management consultancy gave the firm to weed out the older workers.
— Employers cite outdated technical skills as their reason for shunning older programmers. For many firms this is just a pretext for avoiding the older, more expensive workers. Moreover, even in the case of employers who sincerely believe that they must hire only programmers with a given software skill, this is an unreasonable practice akin to what would happen if Chevy dealers refused to hire seasoned mechanics with experience on Fords.
Our educational system is producing sufficiently many graduates trained in computer science:
— Contrary to industry claims that American students do not have the interest or qualifications to study computer science, university enrollment in computer science curricula exploded by 40% nationwide in 1996–1997, and then by another 39% in the 1997–1998 academic year.
— One does not need a college degree in computer science to be a programmer. Traditionally only about 25% of computer programmers have had such degrees. This is the same proportion we see today; it has not declined. And on the postgraduate level, we are actually overproducing Ph.D.'s in science and engineering.
Page 161 PREV PAGE TOP OF DOC
— In spite of the industry's focus on hiring new college graduates, even there the industry is not casting its hiring net widely. For example, only a handful of the thousands of San Francisco Bay Area high-tech firms recruit at San Francisco State University, right in Silicon Valley's backyard; Intel, for all of its emphasis on ''NCGs'' (see above), does not recruit there. Cypress Semiconductor, whose CEO TJ Rodgers has been most vocal in claiming labor shortages, admits that it only recruits engineers at 26 colleges in the nation, out of the 320 accredited engineering schools in the U.S. Even the ITAA has conceded that employers do not recruit at very many colleges.
By demanding that Congress increase the yearly quota for the H–1B work visa for importing foreign-national programmers, the computer industry is asking for an expansion of a program that is already overused and badly abused:(see footnote 17)
— The number of H–1B work visas requested by industry for computer programmers increased by 352% from 1990–1995, during which time the number of programming jobs increased by only 35%.
— Employer hiring of foreign nationals, rather than being based on ''need,'' is often motivated by the fact that those workers will often take lower salaries. A number of independent academic studies, including one by a prominent immigration attorney, have shown that the H–1B workers are paid lower salaries, ranging from 15 to 30%.
— An audit by the Inspector General of the Department of Labor found rampant abuse in the program. It noted that applications for H–1B visas by U.S. employers are merely ''rubber stamped,'' and found that in 19% of the cases employers were not even paying the salaries they had promised in their applications, which as mentioned above are often low to begin with.
Page 162 PREV PAGE TOP OF DOC
— Though I highly support facilitating the immigration of professionals who are of exceptional talents, the vast majority of H–1Bs are not in that category at all. A Hewlett-Packard executive admitted under oath in a lawsuit that his H–1B workers were not as good as his regular employees. Only a small fraction of H–1Bs have graduate degrees (and again, most of those who do have such degrees are not in the ''outstanding'' category). Sun Microsystems, which claims to scour the world for ''the best and the brightest,'' seems to be also interested in the cheapest; it boasted to the Los Angeles Times that it had employed programmers in Russia ''at bargain prices.''
— Though industry lobbyists dismiss the H–1B workers as comprising only a small fraction of their workforces, this is highly misleading, as it does not count the workers who first began work in the U.S. under the H–1B program but then were sponsored by the employers for permanent residence. About 35% of Silicon Valley programmers and engineers are foreign born, and most were originally hired via the H–1B program.
Moreover, the problems of age discrimination in the industry stem directly from the presence of the H–1B workers. Without the pool of foreign labor to draw upon, employers would be forced to pay more attention to the older workers.
Many critics believed in 1997 that access to cheap labor-both in the form of foreign nationals and new college graduates-was the ''hidden agenda'' behind ITAA's campaign at the time to develop an image of a software labor shortage in the public consciousness. Though ITAA's Harris Miller originally denied this in the case of foreign nationals (Electrical Engineering Times, December 8, 1997), the ITAA stated around the same time that its ''number one priority'' in 1998 would be to push Congress to increase the yearly quota of H–1B work visas (San Jose Mercury News, November 21, 1997), which of course turned out to be the case.
Page 163 PREV PAGE TOP OF DOC
Similarly, savings in salary costs seem to be the motivation behind ITAA's (false) claim that university computer science enrollment is currently on the decline. As stated above, that enrollment does in fact respond to market demands, but since the industry has been focusing its hiring on the cheaper new and recent graduates, employers feel the larger that pool is, the better.
Ironically, the worst victims of current hiring policies are the employers themselves. This is detailed in a later section.
2. THERE IS NO DESPERATE SHORTAGE OF COMPUTER PROGRAMMERS
There are a number of open positions,(see footnote 18) but employers are not willing to fill them with most programmers who apply for them, as can be seen from the extremely low percentages of applicants whom they actually hire, such as:(see footnote 19)
There is simply no room for argument here—these low hiring rates (and low offer rates; see below) flatly contradict the industry claims of a desperate labor shortage. On the contrary, the fact that employers can be so picky in their hiring demonstrates an oversupply of labor. Indeed, when asked about the author's citing of a low 2% hiring rate, Microsoft admitted that it is ''very, very selective.''(see footnote 20)
Page 164 PREV PAGE TOP OF DOC
It also should be noted that it is not just Microsoft that is hiring only a tiny proportion of the applicants. The above companies comprise a broad range of employers, from giants to the tiny five-programmer startups, from the software vendors to the applications firms that write software for their own internal use, and so on.
The situation is typified by the fussy John Otroba (Washington Post, November 30, 1997), who
. . . has no shortage of incoming résumés. When he logs onto his office computer every day, he has at least 50 in his electronic mailbox . . . But only about one in 12 résumés leads him to pick up the telephone to call the job seeker. Some don't pass that screening step. Of those who come in for an interview, fewer than a quarter are offered jobs [making an overall rate hiring rate of under 2%].
In other words, there is no shortage of ''bodies,'' i.e. there is no shortage of experienced computer programmers. The problem is that employers are not willing to hire them. Employers are only willing to hire from three narrow categories of programmers:
New or recent college graduates, who have cheaper salaries.
Foreign nationals on work visas, who have cheaper salaries.
Programmers who have experience in certain highly-specialized software technologies.
It should be emphasized that tiny hiring rates seen above are for programming positions, not for, say, marketing jobs. In my own interviews, for instance, I was very specific in asking for rates for programming jobs.
Page 165 PREV PAGE TOP OF DOC
The companies' résumé-scanning machines search for key words corresponding to currently-''hot'' skills desired by the employer. Any résumé lacking these words is rejected, untouched by human hands. The same is true for the employment Web sites set up by most companies in the industry, which filter responses based on skill sets and reject any applicant who lacks the given skills.
Moreover, the industry claims of a labor shortage are even more strongly contradicted by the fact that even among applicants who have the skills demanded by ''picky'' employers, few are made offers. Patrick Schmidt of Deltanet notes that the programmer employment agencies he uses will only refer an applicant to an employer if the applicant is an exact match to the skill set defined by the employer—and yet even then Schmidt says he hires well under 10% of such applicants, due to the large number of agencies which send him applicants.
In this light, it is very instructive to look at offer rates, meaning the proportion of those made offers among those who are interviewed (in person, not just on the telephone). Those who are interviewed have already been prescreened for skills criteria; the employer will have chosen the applicant's résumé because of specific skills listed, and will typically performed a mini-interview with the applicant by telephone. Here are some typical offer rates:(see footnote 21)
Note that these low rates are for offers, not hires. Thus the low rates cannot be explained away, for instance, by postulating that an applicant gets multiple offers but can only accept one, or by suggesting that many résumés are casually submitted via e-mail by programmers who may not really be in the job market but are merely ''testing the waters.'' So we do indeed see that employers are very picky in their hiring. Again, note that Microsoft admitted this, and we saw that its hiring rates are typical for the industry.
Page 166 PREV PAGE TOP OF DOC
Instead, it is clear that even if one grants the employers' claim that they must hire someone with a given skill set (which I strongly disagree with), they still are being very selective in their hiring-contradicting their claims to be ''desperate'' to hire.
Much has been made of dizzying claims of numbers of open positions made by the ITAA and its partners (Dept. of Commerce and the Virginia Polytechnic Institute). The methodology underlying these claims has been criticized by the General Accounting Office(see footnote 22) and the Bureau of Labor Statistics. However, as Urban Institute/American University economist Robert Lerman pointed out in his testimony before the Senate Judiciary Committee on February 25, 1998,(see footnote 23) the size of the demand for labor is irrelevant anyway; what matters is the difference between the supply and demand, and these studies do not address that question. Instead, Dr. Lerman points to wages, whose mild rate of increase does not indicate a massive labor shortage.
Similarly, the ITAA claims a 10% vacancy rate for IT positions—but does not mention that the industry always has had high vacancy rates. ECbridges' Raymond Lim even considers 10% low, saying that rates of 20% were typical a few years ago.(see footnote 24)
3. RAMPANT AGE DISCRIMINATION—AT AGE 35
Mid-career programmers actually have a very difficult time finding programming work, so much so that large numbers of them leave the field.
Page 167 PREV PAGE TOP OF DOC
There are two underlying factors here:
Older workers often lack the most up-to-date software skills.
Employers like to hire new or recent college graduates, because they work for lower salaries, and they generally are single and thus can work large amounts of overtime without being constrained by family responsibilities. Employers may also perceive that the new graduates have more modern skill sets, though this effect is limited.(see footnote 25)
Intel lobbyist Eva Jack conceded to Computerworld magazine (IEEE Computer, February 1996) that the firm often focuses its hiring policy on new graduates. Tim Jackson's book, Inside Intel (Dutton, 1997), provides a number of disturbing details:
FACE Intel, an employee activist group, discovered last year that Intel policy had been that 70% of its engineering hires would consist of new graduates.
Intel has also been the defendant in several age-discrimination lawsuits, including by one of its top salesmen, 40-year-old Bill Handel, who Jackson reports ''was a great deal more expensive to keep than a newcomer only a few years out of college.''
Intel's policy apparently was instituted in response to a suggestion ''by management consultants who feared the company was aging too fast, [recommending] easing older employees out of the company and replacing them with younger ones.''
Page 168 PREV PAGE TOP OF DOC
Craig Barrett, Intel's Chief Operating Officer, replied to a corporate downsizing question raised at a stockholders' meeting dismissively, commenting ''The half-life of an engineer, software, hardware engineer is only a few years . . . ''
Intel's focus on new or recent college graduates is so intense that it even has a special acronym for the term, RCG (Recent College Graduate), which dominates its employment recruiting literature.
In a television debate between the author and Intel representative Coeta Chambers,(see footnote 26) the author offered to give Intel a list of mid-career unemployed or underemployed software specialists who are seeking jobs. Intel declined the offer.
There is no better way to show the industry's emphasis on youth (and its general disinterest in workers who are in their 40s or even 30s) than to look at how firms in this field define ''senior'' workers. Consider for example the employment Web page of Sun Microsystems,(see footnote 27) one of the most vocal firms claiming a labor shortage. One of the first questions asked of the job seeker there is ''Experience Level,'' which of course is a proxy for age, and thus possibly an illegal question. But even more interesting is the choices the user is given for answers to this experience question:
[ ] Entry Level (0 2 years )
[ ] Intermediate (3 5 years )
[ ] Senior (6+ years)
Page 169 PREV PAGE TOP OF DOC
In other words, if you are 28 years old, six years out of school, Sun classifies you as ''Senior''! A position for Senior Software Engineer posted on Intel's employment Web site(see footnote 28) sets the cutoff at five years of experience. The author debated the issue of the alleged labor shortage with Warren Leiden, president of the American Immigration Lawyers Association.(see footnote 29) Leiden was one of the drafters of legislation proposing an increase in the yearly cap on temporary work visas for foreign professionals During the debate Leiden defined ''mid-level'' programmers to be those having only ''a year or two of experience.''
Employment agents tell the story clearly. Andrew Gaynor notes(see footnote 30) that anyone with 10 or more years of experience without currently-''hot'' skills ''is at a complete disconnect'' in finding work. Susan Miller says(see footnote 31) that former defense industry programmers ''are usually shunned by the industry. I get a tremendous number of résumés from them but I can't place them.'' Gaudi Lucca told the author in August 1997 that very few programmers with 10 or 15 years of experience but lacking current skills would be able to find programming work. And Kim Lee, of the Network Connections employment agency in the Silicon Valley remarked,(see footnote 32) ''In 1988 the employers would have retrained [mid-career] people but they're not desperate enough to do so today.''
Many employers' insistence on hiring only programmers who have a specific software skill is sincere, though again, misguided since any competent programmer can learn a new software skill quite quickly. But for too many employers, especially the ones who lobby heavily in Congress, the skills issue is just a red herring, a pretext for avoiding the mid-career programmers and hiring cheaper workers. Age discrimination is rampant in the industry, as more and more employers focus their hiring on the cheaper new college graduates. We have seen this above for Intel, for instance. It has also been described for Microsoft. (The Microsoft Way, by Randall Stross, Addison-Wesley, 1996.) A hiring manager in a Silicon Valley firm who is a former UC Davis student told the author,(see footnote 33)
Page 170 PREV PAGE TOP OF DOC
Well, I want to state that this is in my opinion not a good policy, but the top management in our company has directed us to focus our hiring on new or recent graduates only. These are people who have no family and can work long hours. Yes, salary is a major factor; that's what it boils down to. You work the young ones for five years and then replace them. I have objected to this, because I believe that many of our projects are being hurt by the fact that everyone is so inexperienced.
Prominent software project management guru Edward Yourdon comments, '' . . . a lot of [mid-career] programmers have disappeared—I've visited organizations that used to have 100 software people . . . then returned two years later to find that the staff had been reduced to a dozen younger and less expensive people.'' (The Rise and Resurrection of the American Programmer, Yourdon Press, Prentice-Hall, 1996.) He then notes that a major trend (in the computer applications realm) has been to replace mid-career workers with ''cheap, young C++ programmers.''
A July 14, 1997 article in the Washington Times reported:
Lockheed Martin Federal Systems of Gaithersburg . . . is working hard to nab its share of qualified graduates from area schools. By the end of this year the 2,300-employee defense contractor will have hired about 500 people, two-thirds of them recent college graduates. Next year the company, which focuses on computer systems integration, software development and technical systems for satellite navigation and surveillance, expects to hire the same number, but officials hope about 90 percent will be recent graduates.
Page 171 PREV PAGE TOP OF DOC
The article then quotes NeuroSystems CEO Ed Robertson as to why the new graduates are so attractive: ''If we go out to the marketplace and find a 40-year-old software engineer, we'll have to pay that individual more.''
One CEO (Bob Forman of IMI Systems) who heard me speak on this subject approached me after my presentation and said, quite angrily, ''You are wrong that the industry does not hire mid-career people who don't have hot skills. My company is anxious to hire as many programmers as it can get.''(see footnote 34) I then suggested that my wife, a software engineer with 15 years of experience, send his company her résumé, and that if the résumé were rejected without an interview, I use his firm as an example in my future writings on this topic. He quickly backpedaled, saying that my wife's résumé might be rejected because the firm perceives that her salary is too high.
My reply to Forman was that this indeed is the problem. The industry claims there is a shortage of workers when what they really mean is that there is a shortage of cheap workers, in the form of new college graduates and imported foreign nationals. I discovered later that Forman is Chair of the ITAA's Immigration Policy Committee.
As a result, most careers in the programming field are short-lived. Below are data, extracted from the National Survey of College Graduates in 1993, showing the percentage of computer science graduates working in software development various numbers of years after they finish school:
yrs after B.S.% working as progrs
Page 172 PREV PAGE TOP OF DOC
6.5 57%
8.5 57%
10.5 47%
12.5 42%
14.5 37%
16.5 34%
18.5 29%
20.5 19%
Five years after finishing college, about 60 percent of computer science graduates are working as programmers; at 15 years the figure drops to 34 percent, and at 20 years—when most are still only age 42 or so—it is down to 19 percent. Clearly part of this attrition is voluntary, but most are forced to seek other work when they see the handwriting on the cubicle wall: Employers do not want to hire mid-career programmers.
As noted earlier, because people who cannot find programming work leave the field, unemployment statistics for programmers are meaningless. The former programmer who becomes an insurance agent counts in government statistics as an employed insurance seller, not an unemployed programmer, so unemployment rates do not give an accurate picture of the employers' general refusal to hire the mid-career workers. Nevertheless, it is significant that there was a high 17% unemployment rate for programmers over age 50 as of August 1997.(see footnote 35)
As a stroll around any high-tech company will show you, most people who work in this field are young. It should be noted that other technical fields do not show this rapid decline of work in their field. For example, consider civil engineering majors. Six years after graduation, 61% of them are working as civil engineers, and 20 years after graduation, the rate is still 52%. True, Some computer science majors eventually go into management, start their own consulting firm and so on, but the same is true for civil engineers. Careers in programming are far shorter than in civil engineering, even though both fields are technical and require attention to detail. The difference is that skill sets change rapidly in programming, but not in civil engineering. And again, it is not that programmers are incapable of acquiring the new skills, but rather that the employers won't give them that chance.
Page 173 PREV PAGE TOP OF DOC
Such policies have spawned a cottage industry in self-help books for programmers who find that they are no longer desired by employers, such as The Computer Professional's Survival Guide, Downsized But Not Out: How to Get Your Next Computer Job and The Programmer's Job Handbook: The Skills You Need for Long-Term Job Security and Programming Success.
After seeing me quoted in the press on this topic, many mid-career programmers have sent me laudatory e-mail, saying my description of the plight of such workers fit them perfectly. Here are a few geographically-diverse samples:
(From a man in Tennessee:) Based on personal experience, I'd say you are right in your summary of the true state of the IT job market: Nobody wants to pay serious money except for a handful of super-hot areas like Year2000 or fixing some Microsoft problems. I've got an MSEE from Caltech, six years at NASA, and six years running a PC business, and I quit to get one of those ''hot jobs'' that was supposed to be plentiful. Big mistake!!! At least I've found nothing meaningful in the Nashville area.
(From a man in the San Francisco Bay Area:) I have programmed since 1976, but lost ''hot skills momentum'' during 1991–1995, during which time I worked as an applications specialist for a local oil company. I was replaced by a much younger worker. Since then I have been studying networks, Visual BASIC, and other newer languages, but can't obtain so much as an interview offer. I now earn about $24,000 per year in retail sales and management.
(From a woman in Seattle:) Your statements about ''middle age'' programmers are right on target. I am 41, and had been out of the industry for five years [running my own business]. Upon my deciding to go back into software engineering, I [could only get offers for nonprogramming positions] . . . This after 15 years experience in software QA, as well as five years running my own business . . . I was fortunate enough to eventually find my current employer, and they were willing to take a chance and offer me a job based on REAL experience and intelligence . . . [but] as long as employers think that I'm out of date because I was studying computer science before they were born, I guess it will be hard to do anything based on my background.
Page 174 PREV PAGE TOP OF DOC
(From a man in New York City:) With over 10 years of experience in programming, I've been out of work and looking for over a year and a half with absolutely no luck . . . A friend suggested to me that looking in California for a Java job would be better, so I faxed my résumé to a recruiter two weeks ago. I spoke with the recruiter in San Francisco this afternoon, and she told me that my experience in other languages was worthless . . . and also that in my present circumstances (unemployed) that I was ''out of the field'' . . . She mentioned to me another person, with 10 years experience in the [software engineering] field whom she was helping, [but] who could not get a Java job because he had no paid experience in Java. I asked her if there was any age-discrimination in California (in the software field), and she indignantly replied ''no.'' She also suggested that I look in New York because the companies out there [in San Francisco] wouldn't want to interview me (i.e. bring me such a ''long distance ''). I replied that they didn't seem to mind bringing people from China, which was an even greater distance.
(From a 47-year-old man in the San Francisco Bay Area:) I believe I have highly transferable skills in several key areas of strong demand and intensive growth in Silicon Valley, but in 15 months of essentially full-time searching have really only gotten two formal interviews . . . Emphasizing modest salary requirements and an eagerness to accept 'entry level' positions has proven entirely futile, as have all offers to submit to some form of testing to prove my competence . . . I claim competence in C++, perl, Unix, Windows95, etc., and in the course of my career have rapidly adapted to many computing environments, from various mainframes, Crays, to PCs. One anecdote you may appreciate: in stepping up to a contract agency's booth at a recent job fair, I was almost immediately greeted with ''We haven't been getting many legacy jobs lately'' (I have a mostly gray beard). Another very large agency told me flat-out that most of their clients are only interested in younger people.
Page 175 PREV PAGE TOP OF DOC
(From a man in the Southwest:) I am an India born US citizen and am opposed to this program allowing 95000 work visas for foreign hi-tech workers. I believe that the shortage, if any, has been created by laying off older hi-tech people such as myself.
I am 51 years old . . . I have over twenty years of experience . . . I applied for a job at [company name deleted] and I got a reply from them saying they did not have a suitable position for me. Since they have large advertisements in the paper for software jobs for people with my background, I believe that I was rejected on the basis of my age. [This company is] actively recruiting in India. I know this because my brothers live in India and keep me posted of this.
(From a 27-year-old man on the West Coast who graduated three years ago:) [When I interviewed for a position for a Java project], not one difficult technical question got thrown at me—all the questions were behavioral or opinion type questions. The most frequently repeated question was ''When did you graduate—I don't see that date here.'' After I was offered the job, I pointed out that I knew a coworker who is much more passionate about Java programming. He has one more year of experience over me. The manager shook his head, ''I don't think you understand—we are looking for more recent college graduates. Your case is a special case because we have to change the requirements to hire you.''
(Similar themes were published in letters to the editor in the San Jose Mercury News, January 24, 1998, as well as in articles in US News and World Report, March 16, 1998, the San Diego Union-Tribune, March 7, 1998, the San Francisco Chronicle, March 9, 1998 and Wired Online News, February 25, 1998.)
Page 176 PREV PAGE TOP OF DOC
University students are beginning to be aware of this problem, and though computer science enrollment trends are currently on the upswing (more details below), in the future this may deter many of them from pursuing computer science majors. An article in the January 13, 1998 edition of the New York Times says that
[current Stanford computer science student Graham Miller] is already thinking about an exit strategy [from the computer field]. ''Programmers only last up to 10 years or so,'' Miller said. ''After that, you need to find something else to do.''
It is crucial to keep in mind that the plight of the mid-career programmer cannot be solved simply by the programmer taking some refresher courses in the new software skills. Even if a programmer takes a course in, say, the new Java programming language and then applies for a job requiring Java, employers will still not hire him or her. As noted by software employment agent Maryann Rousseau, ''Taking a course is just not going to work for a senior person, given his salary.'' Why hire a newly-retrained but more expensive 40-year-old when a newly-trained cheap new graduate is available?
4. TRENDS IN UNIVERSITY COMPUTER SCIENCE ENROLLMENTS
The ITAA claimed throughout 1997 computer science enrollments are declining, and is calling on the federal government to fund programs to attract more college students to the field. But ITAA's assertion was so misleading as to border on fraud.
The ITAA report lists declining computer science enrollments from the late 1980s to 1994. But computer science enrollment reversed its declining trend in 1995, increasing by 5% in 1995–1996, and by a whopping 40% nationwide in 1996–1997, and then by another 39% in 1997–1998, according to the Computing Research Association (CRA), a national consortium of university computer science departments.(see footnote 36) Taking into account ''compound interest'' effects, this means that enrollment in computer science has nearly doubled nationwide in the last two years.
Page 177 PREV PAGE TOP OF DOC
This information (the original 40% increase) was conveyed to ITAA's Harris Miller and Tony Vickers by a CRA official when ITAA distributed a preliminary draft of their report at a roundtable discussion organized by the Stanford Computer Industry Project on February 19, 1997. Though ITAA stated at the time that they were soliciting comments and suggestions for improving their report, they did not include this information about the sharp increase in computer science enrollment in the final version of the report, apparently because it undermined their argument. In fact, ITAA continued to claim enrollment is declining,(see footnote 37) even after ITAA's suppression of the 1995 reversal trend was brought up in an interview with ITAA by the Electronic Engineering Times (September 29, 1997), until forced to stop when even the Department of Commerce found ITAA's claim to be untrue. Since that time, the ITAA statements have avoided using the present tense in the word decline, but they continue to obfuscate the issue by discussing what happened in 1994, leading the listener to believe the situation still holds today.
Moreover, even industry representatives (including ITAA) interviewed by Business Week (March 10, 1997) blamed the earlier decline in enrollment partly on ''a glut of programmers in the mid-1980s.'' The recent increase in enrollment is due to the rapid expansion of the industry which began around 1994. In other words, market forces are working quite well here; the supply of computer science students has been quite elastic to demand. So, quite contrary to ITAA's assertion that students do not want to study computers (due to claimed ''nerd'' images) or do not have the background to do so (see discussion on mathematics below), the fact is that computer science enrollment has responded quite well to labor markets demands.
Those new computer science students are at the advanced stage of the pipeline, and are graduating now. In 1996–1997, the year of the 40% increase in enrollment, there was already a 10% increase in the number of computer science graduates, according to the Computing Research Association.
Page 178 PREV PAGE TOP OF DOC
The industry lobbyists also say that college computer science curricula are only producing 25% of the nation's needs for programmers, again claiming this is due to a decline in enrollment. But it has always been the case that programmers have always come from many different fields, not just computer science. For instance, according to the National Science Foundation's SEASTAT data, only 26% of all those working as programmers in 1993 had computer science degrees. In other words, the situation today is no different from the past, quite contrary to the alarmist tract written by the ITAA.
In this light, it should be mentioned that Clifford Adelman of the federal Department of Education has found that large numbers of non-computer science majors take at least mid-level courses in computer science.(see footnote 38)
It should also be noted that most firms recruit at only a few colleges. For example, at San Francisco State University, right in Silicon Valley's back yard, only a handful of computer industry employers do on-campus recruiting.(see footnote 39) Even Intel, with its heavy emphasis on new or recent college graduates, does not recruit there.(see footnote 40)
At the University of Nebraska, Microsoft does engage in on-campus recruiting, but very few other high-tech firms do.(see footnote 41) TJ Rodgers of Cypress Semiconductor, testifying in support of claims of an engineering labor shortage,(see footnote 42) stated his firm recruits at only 26 colleges nationwide, out of the hundreds which have engineering programs; Cypress was not listed in the yearly recruiting schedule posted at the Massachusetts Institute of Technology, the nation's premier engineering school.
Page 179 PREV PAGE TOP OF DOC
Indeed, even the ITAA's Harris Miller has admitted this to Tech Tech Week' Umberto Tosi:(see footnote 43)
TW: It is possible that high-technology companies are contributing to the shortage by all looking to the same small pool of elite universities for candidates rather than opening up their searches?
Miller: That's part of the mind-set change we need to get from the companies. Some of them are there, some are not yet.
(Miller goes on to say that he believes employers should hire more programmers who have only Associate of Arts degrees. Again, this is motivated by a desire to reduce salary costs. A similar statement holds for efforts aimed at retraining secretaries or other nontechnical workers into programmers.)
The ITAA also claims that American students do not study computer science because (a) they think it is ''nerdy,'' and (b) the lack math skills. But the fact that computer science enrollment has been skyrocketing in the last few years shows that there are plenty of students with the interest and background to study this subject. By the way, one does not use math in software development in the first place.(see footnote 44)
5. SALARIES
Page 180 PREV PAGE TOP OF DOC
In very narrow segments of the programmer labor market, some salaries have indeed risen substantially. As stated earlier, employers are overdefining job requirements, with ads like ''Must have experience writing C++ code for TCP/IP applications on SPARC platforms.'' The pool of programmers satisfying such conditions is of course small, thus raising salaries for those within that narrow pool.
However, outside of these subsegments, programmer salaries are not rising rapidly. Bureau of Labor Statistics data show that salaries of programmers overall—i.e. both the ones who have currently-''hot'' skills and the ''ordinary'' programmers—rose about 7% from 1996 to 1997, compared to about 3% for all American workers. Again, this overall 7% figure includes the programmers who are commanding a high salary because they know a new language like Java; so we can see that the salaries of ''ordinary'' programmers are not rising much, if at all.
The ITAA criticizes the BLS data as being inaccurate, yet TJ Rodgers, CEO of Cypress Semiconductor, testified before the Senate Judiciary Committee on February 25, 1998, said he is raising salaries by 6%, quite in line with the BLS figures.(see footnote 45)
Comparisons of 1996 and 1997 salaries in Silicon Valley by the employment agency Heuristics Search Inc., were presented in Tech Week, March 9, 1998. Salaries were tabulated for five areas of skill sets (software engineers, client/server, communications, database and graphical user interfaces), over four levels of experience (0–2 years, 3–8, 8–9, 10 or more). Once again, the differentials between 1996 and 1997 were in most cases in the 6–9% range. Similar (and somewhat lower) figures were found for other regions of the country in the Datamasters survey, cited in the same article.
Page 181 PREV PAGE TOP OF DOC
Salaries for new college graduates in computer science rose 3.9% during 1996–1997.(see footnote 46) Qualcomm, another firm which insists there is a high-tech labor shortage, admits that its starting salaries have only be rising about 4% per year.(see footnote 47) Starting wages for new computer science graduates of UC Berkeley have been rising at the rate of 5% yearly.(see footnote 48)
And in spite of wild newspaper stories about new Bachelor's graduates getting salaries approaching six figures, the going rate is in the low $40,000 range.(see footnote 49)
6. ON SKILLS REQUIREMENTS
Employers claim, ''We cannot hire 'just any programmer.' It is crucial that the programmer have experience in a specific software technology.'' But this is quite incorrect. What counts is general programming talent, not experience with specific software technologies.
Bill Gates has described Microsoft hiring criteria thusly: ''We're not looking for any specific knowledge because things change so fast, and it's easy to learn stuff. You've got to have an excitement about software, a certain intelligence . . . It's not the specific knowledge that counts.'' (Wall Street Journal, November 8, 1994.)
Page 182 PREV PAGE TOP OF DOC
Jim McCarthy, one of Gates' software development managers at Microsoft, points out in his book, Dynamics of Software Development (Microsoft Press, 1995, p.168),
The biggest mistake I see managers make as they hire people for software development teams is that they overvalue a particular technology. To verify this tendency, all you have to do is look at the want ads: 'Wanted: foobar programmers. Experience with whatsit required.' Obviously, conversance with a given technology is a wonderful attribute in a candidate, but in the final analysis it's an extra, not mandatory. After all, most software development technologies have a half-life of about one year.
Ironically, Microsoft has grown so large that Gates' and McCarthy's philosophies don't reach down to the shop floor, and managers there are now just as obsessed with skills as the rest of the industry. The first demand made of users accessing Microsoft's employment opportunities Web page (and those of most other software firms) is ''State your skill set.''
Programmers can become productive in a new software technology in a month or so. As Garrent Bechler, a recruiter with RHI Consulting in Walnut Creek, California put it, ''Any programmer who already knows C [the industry standard for the last 15 years], needs only a week, maybe two, to reach proficiency in Java.''(see footnote 50)
This point on the quickness with which new software technologies are learned can be seen in data on factors affecting completion time for software development projects, cited in one of the central works on software engineering, Software Engineering Economics, by Barry Boehm (Prentice-Hall, 1981, p.530). Those data indicate that programmers reach perhaps 80% of their full productivity level by one month, and full productivity by the next time period studied, four months.
Page 183 PREV PAGE TOP OF DOC
Amit Kamra, head of Information Systems Transition Services, said that his company could not afford to hire someone who would have to learn the given technology on the job, say Microsoft Windows programming.(see footnote 51) But when I asked him how long it would take for an experienced programmer to become productive in Windows if he/she did not know this technology beforehand, he answered, ''[Up] to two weeks, maybe all the way up to a month and a half to become truly productive.'' I asked why they did not hire such people, given the shortness of such time periods, to which Kamra replied, ''Well, we could, and we did so once with good results [he then gave the details] . . . But well, during those two weeks [of learning] the project is slowed down a bit, especially since others on the project would have to help the new person.'' Though Kamra's remarks show that learning on the job is of course not ideal, the point is that they certainly show that the industry is wrong in claiming that possession of specific skills is an absolute necessity.
Note that the Boehm reference and the Kamra quote above, as well as numerous others in my long Web document referenced earlier, demonstrate that programmers in general learn quickly, not just the programmer ''superstars.''
7. ON THE GENERAL UNWILLINGNESS OF EMPLOYERS TO RETRAIN MID-CAREER PROGRAMMERS
After Senator Alan Simpson introduced his 1995 bill to tighten up our policy on high-tech hiring of foreign nationals and employers protested that they need the foreign workers to fill a software labor shortage, Secretary of Labor Robert Reich stated that the problem was that employers are not retraining their existing employees, industry officials protested that they do spend vast sums of money on retraining.
Page 184 PREV PAGE TOP OF DOC
However, the fact is that most employers are not willing to retrain their programmers and engineers. As mentioned earlier, Kim Lee, of the Network Connections employment agency in the Silicon Valley has noted that(see footnote 52) ''In 1988 the employers would have retrained [mid-career] people but they're not desperate enough to do so today.''
The point was made quite forcefully by Susan Miller, a computer industry employment agent who says that 90% of the workers she places are foreign nationals.(see footnote 53) Pointing out frankly that her own high income as an employment agent depends largely on the fact that the industry is not providing retraining for existing employees, she nevertheless feels that
It's a very closed industry in that respect [retraining]. The trap the industry falls into is that they don't spend time retraining. It would be much more cost-effective for them to retrain the employees they already have; by not retraining they are driving salaries way up, since so few people have the ''right'' skill sets. The employers haven't been smart. They have been very closed-minded, with blinders. If I could change one thing about the industry, that would be it.
Andrew Gaynor, another employment agent, called the industry ''very short-sighted'' in this regard.(see footnote 54)
The industry has been a mass of contradictions on the retraining issue. Intel has said that it does retrain (Bay TV, San Francisco, March 3, 1998) and that it is not willing to retrain (IEEE Computer, February 1996; also CNN, March 1998). Cypress Semiconductor also said yes (California Report, NPR, March 27, 1998) and no (The Newshour with Jim Lehrer, April 3, 1998) to the retraining question.
Page 185 PREV PAGE TOP OF DOC
The industry often says it cannot afford the time to retrain, because they need to hire personnel for a project immediately. But this is disingenuous, as the industry is also claiming that as many as 30% of software positions take six months or more to fill.(see footnote 55) During this time the same programmers employers are unwilling to hire now because of lack of a hot skill could learn the given technology and be productive.
The industry also says that if they retrain their programmers in a ''hot'' skill, the newly-enfranchised programmers will leave them for higher pay elsewhere. This is correct, but the employers are missing the point: If the industry did not pay a premium for these skills in the first place (a consequence of refusing to hire programmers who lack the skills), this frequent job-hopping would not occur.
As pointed out earlier, programmers seeking work cannot remedy the problem by retraining on their own. Employers will not hire a mid-career programmer for a Java project on the basis of the applicant's having taken a Java course.
For this reason, retraining programs for engineers and programmers are largely a waste of money, not helping employers cope with their claimed shortage of such professionals. Such programs often have a high placement rate, but the problem is that the engineers and programmers who ''graduate'' from them don't get jobs as engineers and programmers. Then tend to get jobs as technicians, customer support personnel and so on.(see footnote 56) These don't help employers fill the engineering and programming positions they say they are desperate to fill.
Page 186 PREV PAGE TOP OF DOC
The retraining programs may not be so beneficial to the engineers and programmers either, since the jobs are often lower-paying and of a nature that the participants in the programs could have obtained on their own, without the programs. Gene Nelson, for example, had been making $46,600 as a programmer before being laid off, and now makes only $23,000 staffing a software help desk. These programs are analogous to what would occur if there were unemployment among doctors, and they were ''retrained'' for paramedic positions.
Anyone who thinks that ''education is the answer'' should consider the case cited in the Sacramento Bee, March 14, 1998:
One such prospective high-tech employee [with an advanced degree in computer science who cannot find work] is Peter Van Horn, 31, who is looking for a job in computer graphics. He has an undergraduate degree in aeronautical engineering and a master's in computer science from California Polytechnic State University, San Luis Obispo.
In nearly four months of looking for a job, he has applied to more than 38 companies and has, so far, talked to only two. ''At Cal Poly, I always heard how great the market was, how if you have a degree in computer science you could get a job,'' said Van Horn, now a Bay Area resident.
''My credentials are good . . . Companies are constantly talking about a shortage of workers, but if that were the case, you would think I'd have more than two interviews.''
Van Horn has done ''all the right things,'' everything society told him to do, and yet he could even get an interview, right in the middle of Silicon Valley, for four months. In addition to sending out re'sume's on his own, he also was working through employment agents, but with no results. After four months, at the end of March 1998, Van Horn did finally get a programming job, but his experience shows quite graphically that these supposedly ''desperate'' employers are not so desperate after all.
Page 187 PREV PAGE TOP OF DOC
Van Horn's experience is shared by Bard-Alan Finlan, age 43, who also went back to school and was shunned by employers after he graduated. (San Diego Union Tribune, March 7, 1998.) Armed with a new computer engineering degree from UC San Diego, he applied four times to Qualcomm, a large San Diego firm which claimed to be desperate to hire engineers, and yet Qualcomm did not even give him an interview. He had no luck with all the other firms he applied to either; at the time the newspaper article appeared, Finlan had had only one interview in a year and a half. He finally did secure a job, but even then it was only as a technician, a job typically paying only half what an engineer makes.(see footnote 57)
8. THE ROLE OF IMPORTED WORKERS
As we have seen, industry employers tend to shun mid-career programmers. One of the major factors underlying this is that employers have another labor source to turn to, in the form of foreign nationals whom they sponsor for immigration or work visas. For example, about one-third of Silicon Valley programmers and engineers are foreign-born, most of them sponsored for immigration originally by employers.(see footnote 58)
Without the foreign-national labor supply, employers would be forced to use the existing domestic labor pool of mid-career people. For this reason, the foreign-labor issue is central to our theme here, and will be addressed briefly. (See the author's analysis at http://heather.cs.ucdavis.edu/svreport.html for extensive details.)
Page 188 PREV PAGE TOP OF DOC
It is easy to see that there is something very wrong with the H–1B program, in that its growth rate is far out of balance with the growth rate of jobs: The number of H–1B work visas requested by industry for computer programmers increased by 352% from 1990–1995, during which time the number of programming jobs increased by only 35%.(see footnote 59) The ''country of choice'' among employers importing this labor is currently India.
Many employers find foreign-national programmers and engineers attractive because they will accept lower salaries and poor working conditions. The Department of Labor has found widespread abuse of the work-visa program.(see footnote 60) Among other things, they found that 19% of the employers were not even paying the salaries they had promised in their H–1B applications, even more remarkable because the salaries in the applications tend to be low to begin with. The employer requesting an H–1B is supposed to pay the prevailing wage, but there is such a large variation in wages anyway that it is easy to mask an offer of an unfairly low salary.
DOL also found that though state employment departments are supposed to refer domestic candidates for jobs for which an employer-sponsored green card is pending, ''Of the 28,682 applicants referred on 10,631 job orders during the period, only 5 (0.02 percent) were hired.''
General Dynamics, the aerospace giant, even admitted in federal court that the imported workers from England were presented as attractive due to their ''indentured'' status; the pitch made by the British employment agency to General Dynamics said that its clients were ''prepared to work here in the United States for as much as a 40% reduction in current United States salary levels.''
Page 189 PREV PAGE TOP OF DOC
A researcher with the pro-immigration Carnegie Endowment for International Peace put it this way:(see footnote 61)
''Do you want me to call it a sham?'' asks Demetrios Papademetriou, a former Labor Department immigration official now with the Carnegie Endowment for International Peace. ''Do you want me to call it a hoax? Sure it is. This program has never worked, and it never will.''
Papademetriou and Stephen Yale-Loehr—who is an immigration lawyer and thus would be expected to oppose reform of the H–1B process—reported in their book, Balancing Interests: Rethinking U.S. Selection of Skilled Immigrants (Carnegie Endowment for International Peace, 1996), on their study of wages paid to foreign nationals in various professions. In data from the labor certification applications in the process of sponsoring the foreign workers for green cards. the foreign applicants in Computer Programmer positions in New Jersey were being offered salaries which were on average 21% below the mean for that profession, with an 11% figure in Texas. In the Computer Systems Analysts and Scientists category, gaps of 30% and 21% were found in New Jersey and New York, respectively. By law the gap is supposed to be no more than 5%.
Moreover, Department of Labor regulations allow the employer to provide his/her own data on prevailing wages, such as listing typical salaries in his/her own firm, rather than being determined by the DOL, clearly producing enormous potential for abuse.
Even if an H–1B employer pays a prevailing wage determined by a government survey, that wage will usually be lower than the market rate for the job's skill requirement, as follows. As explained earlier, the only programmers who are enjoying large increases in salary as those with ''hot'' skills, say Java. H–1Bs are brought to this country ostensibly for those skills. Yet the employer need only pay the prevailing wage for programmers in general, rather than the prevailing wage for, say, Java programmers. Thus the employer gets a Java programmer for the price of a generic programmer—all while complying with the prevailing-wage requirement of the law. As noted by immigration attorney Donna Fujioka of Oakland, California,(see footnote 62) ''[The prevailing wage system] takes a meataxe approach . . . It doesn't appreciate how hot a skill is [such as SAP] . . . This is great if you are an attorney representing an SAP programmer.''(see footnote 63)
Page 190 PREV PAGE TOP OF DOC
Asian-American Studies Professor Paul Ong of UCLA, after correcting for a host of important variables—including English proficiency—found that immigrant engineers were paid up to one-third less than their native counterparts, and that the gap took 20 years to close.(see footnote 64) And though Ong hypothesized various factors, he noted that ''Companies took advantage of immigrants.''(see footnote 65) An industry analyst in Bangalore, India quoted by MSNBC News in August 1997 also says that Indian programmers imported to the U.S. under the H–1B program make 30% less than their American peers.(see footnote 66)
The author's own analyses of the 1990 Census data on programmers and electrical engineers in Silicon Valley found that the immigrants were paid on average 15–20% less than natives of comparable age and education. Abuses also occur abroad; Sun Microsystems, a firm often cited by ITAA analyst (and now Senate Immigration Subcomittee staffer) Stuart Anderson as paying fair wages to foreign nationals, has boasted of hiring programmers in Russia at ''bargain prices.''(see footnote 67)
It is ironic that even a Wall Street Journal article(see footnote 68) claiming that American firms recruit abroad because of a labor shortage stated that ''recruiting foreign talent is cheaper than hiring Americans.'' The article quotes an American recruiter of foreign programmers as saying that he pays them $20,000 to $25,000 less than Americans with the same skills.
Page 191 PREV PAGE TOP OF DOC
Moreover, even sincere employers save in salary costs, since the H–1B program expands the available pool of younger—thus cheaper—workers. Even if they pay the foreign programmers the same wages as they pay domestic programmers of the same age and education, they still save money because the temporary nature of the H–1B work visa means they can continually replace workers as they rise in the salary scale.
Moreover, the simple law of supply and demand tells us that, again, even the sincere employers who hire H–1Bs bring down the price of labor, by increasing the supply. Industry officials have admitted this, such as this comment on CNN on February 9, 1998:
Robert Walley, executive vice president of Gemini, says that unless his company and others are able to find a new source of workers, ''it would increase the prices of the resource pool. The people out there looking for jobs, they're demanding premium salaries now, and it will just drive that higher.''
The industry lobbyists say it actually costs them more to hire the foreign nationals because of the legal fees involved. This is one of their most misleading arguments. First of all, filing for an H–1B is quite simple, and the typical legal fee for it is only about $1,500 for small employers who hire only a few H–1Bs, and down to about $700 for large employers who file many H–1B applications.(see footnote 69) This is far less than the $10,000–$20,000 ITAA claims for the H–1B.(see footnote 70) Second, many employers have the foreign employees pay the legal fees (for both kinds of processes) themselves, and even when employers foot the bill, the cost is often less than they save in salary.
Page 192 PREV PAGE TOP OF DOC
Note that an H–1B employee is essentially immobile during the two or three years while the green card is pending, thus refuting ITAA's argument that H–1Bs who are exploited in terms of salary can simply move to another job. The workers certainly do not want to start the green card process all over again. The anonymous author of an op-ed piece in TechWeb News, March 16, 1998, wrote,
I am an immigrant from India . . . the H–1B visa allows someone to work only temporarily at a high-tech job for a few years. An employer has to sponsor one for an H–1B visa. These engineers cannot switch jobs at will. To do so requires a new H–1B visa.
Companies love these H–1B workers, as they are eager to please their sponsors [in the hope] that they can be sponsored for green cards. These engineers are virtually ondentured slaves'' of their sponsors.
Once a company initiates the process of sponsoring a candidate to green card, it can currently take three to four years. Companies love this and frequently delay the process on purpose. Some big companies have this delay built into their sponsoring process. During this period, candidates are virtual slaves. They are forced to work long hours at low wages. And usually they do not get good raises or promotions . . .
I myself left my company when I got a green card and I got a raise of 40 percent.
Industry lobbyists have threatened that if the yearly cap on H–1B work visas is not raised, employers will ship software work to foreign countries. Yet such extortionary language is not backed by action, and in fact will not be in the future. While it is true that some companies are experimenting with having work done abroad, this will not become the major mode of operation of the industry. The misunderstandings caused by long-distance communication, the problems of highly-disparate time zones and so on result in major headaches, unmet deadlines and a general loss of productivity. See the author's analysis at http://heather.cs.ucdavis.edu/svreport.html for extensive details on this point, including many quotes from industry figures. For example, Bill Gates says,(see footnote 71)
Page 193 PREV PAGE TOP OF DOC
For a company like Microsoft, it's worth a real premium for us to have very strong collaboration. We have found projects that make sense to do other places, in Israel, in Tokyo for example. But it makes sense for the bulk of our operations to be in one location and for the foreseeable future we're going to stick with that. We will spend what is necessary to have most of our development groups at our headquarters and have them meeting face-to-face every day. We want to make sure there is a place where customers can come in and talk to us in person and make sure the products fit together in the right way.
It is my opinion that in the case of foreign nationals of extraordinary talent, our immigration law should indeed facilitate the ability of employers to hire such workers. I personally have helped a number of extremely bright foreign students, mainly Chinese and Indians, find jobs with Silicon Valley employers, and have strongly supported making offers to many outstanding foreign applicants for faculty positions in our Computer Science Department at UC Davis. However, workers of extraordinary talent comprise only a small fraction of the overall population of H–1Bs and employer-sponsored green cards.
The industry lobbyists say that the H–1Bs are needed to retain the industry's technological edge, but the fact is that the vast majority of technological advances in the computer field have been made by U.S. natives. This can be seen in rough form, for example, in the fact that of the 56 awards given for industrial innovation by the Association for Computing Machinery, only one recipient has been an immigrant. Of 115 U.S. recipients of computer-related awards given by the Institute of Electrical and Electronic Engineers, only nine of the recipients have been immigrants.
Page 194 PREV PAGE TOP OF DOC
Mary Dumont, a Palo Alto attorney representing Californians for Population Stabilization in a lawsuit against Hewlett-Packard's hiring of Indian engineers via the Tata Corporation. Dumont describes the judge's questioning of a Hewlett-Packard representative. When the judge asked about the quality of the imported Indian workers relative to natives from, say, the nearby University of California at Berkeley, the Hewlett-Packard executive conceded that the UC graduates were better. Recall that Sun Microsystems, which claims to scour the globe for ''the best and the brightest,'' seems to be also interested in the cheapest; it boasted to the Los Angeles Times that it had employed programmers in Russia ''at bargain prices.''
Lobbyists also point to the fact that about 40% of U.S. Ph.D.'s granted in engineering go to foreign students.(see footnote 72) But this ignores the fact that we are overproducing Ph.D.'s in the first place. A report by William F. Massy of Stanford University and Charles A. Goldman of the RAND Corp., The Production and Utilization of Science and Engineering Doctorates in the United States, studies the problem in great detail,(see footnote 73) finding for example that we are overproducing Ph.D.'s in electrical engineering by 44%.(see footnote 74)
Another class of foreign nationals sponsored for H–1Bs consists of university instructors and researchers. While this is outside the scope of our report here, I wish to point out that there is no shortage here either—our Computer Science Department has been receiving approximately 400 applicants each year for faculty positions (for typically two or three openings).
During the 1995–1996 Congress, Senator Alan Simpson (R-Wyo.) proposed that a fee be imposed on employers who hire H–1B workers. Originally set at $10,000 and then lowered to $5,000, the fee would go to retraining domestic workers. The industry lobbyists furiously opposed the proposal (which was then dropped), and expressed the same fierce opposition in February 1998, even for a tiny fee of $250. Clearly, this shows that the insincerity in the lobbyists' claims that they are desperate to hire people, that they are not seeking H–1Bs as a source of cheap labor, etc.
Page 195 PREV PAGE TOP OF DOC
9. EMPLOYERS ARE SHOOTING THEMSELVES IN THE FOOT WITH THEIR HIRING POLICIES
The fact is that the industry lobbyists are not doing right even by their industry constituents, because under current hiring policies the employers are shooting themselves in the foot:(see footnote 75)
Employer obsession with skills is resulting in sharp increases in salaries within the very narrow segments of the software labor market corresponding to those highly-specific skills. (Again, programmers outside of those narrow segments are not experiencing sharp increases in wages.) It is simply not cost effective to pay someone $10,000–15,000 more in salary simply because he/she knows Java, given that any competent programmer can learn Java and be productive in it within a couple of weeks. So employers are shooting themselves in the foot under their current policies.
The fact that the industry pays a premium for certain skills is resulting in frequent job-hopping by programmers who are out to maximize their salaries. Employers say they place high value in finishing projects under deadline. Yet if a programmer who knows a project inside out suddenly leaves the employer in the lurch by jumping to another company, clearly this has a sharply adverse effect on the first employer's ability to complete the project on time. So here too, employers are shooting themselves in the foot under their current policies.
By using unimportant skills as their re'sume'-screening criteria, employers are not using the criterion which far outweighs any other: General programming talent. The best way to ensure success of a software project-finishing under a short deadline, minimizing the number of program bugs, maximizing innovation and so on—is to hire talented programmers, not people with specific software skills. So again employers are shooting themselves in the foot under their current policies.
Page 196 PREV PAGE TOP OF DOC
The fact is that although employers shun the mid-career programmers in favor of new college graduates and foreign nationals in an attempt to reduce personnel costs, if the employers were to utilize a more broad-based hiring policy, then their overall costs (not to mention headaches) would actually decrease.
10. AUTHOR'S BACKGROUND AND FURTHER READING
Dr. Norman Matloff is a professor of computer science at UC Davis, and was formerly a statistics professor at that institution. He is also a former software developer in Silicon Valley. For his bio, see
http://heather.cs.ucdavis.edu/pub/MyBio.html
This document will be frequently updated; see
http://heather.cs.ucdavis.edu/itaa.html
A wealth of further information is available; see
http://heather.cs.ucdavis.edu/itaa.others.html
Mr. SMITH OF TEXAS. Thank you, Mr. Matloff.
Mr. Sullivan.
Page 197 PREV PAGE TOP OF DOC
STATEMENT OF DANIEL L. SULLIVAN, SENIOR VICE PRESIDENT FOR HUMAN RESOURCES, QUALCOMM, INCORPORATED
Mr. SULLIVAN. Good morning, Mr. Chairman and members of the committee. I would like to first congratulate you and thank you for the opportunity to participate in what clearly is a panel with disparate perspectives and opinions, and I will move the discussion over to the other side of the argument relative to Mr. Matloff.
I am Daniel L. Sullivan, Senior Vice President of Human Resources for QUALCOMM. On behalf of QUALCOMM and the U.S. Chamber of Commerce, I thank you for the opportunity to testify on the future of the H–1B skilled worker visa program.
First, a few words about the company I represent specifically. Founded and headquartered in San Diego, QUALCOMM is recognized as a leader in digital wireless communications and is the developer of Code Division Multiple Access technology, an international standard. With over 2.1 billion in annual sales, 500 patents issued and pending, and 10,400 employees worldwide, the company develops, manufacturers, markets, licenses and operates advanced communication systems based on our wireless technologies.
As you know, Mr. Chairman, the annual cap of 65,000 visas, predicted to be reached in a manner of weeks, has not been adjusted since its inception in 1990 and does not meet the increased employment demand within the technology industry. It failed to consider increasing demand for skilled workers, as evidenced by the lowest U.S. unemployment rates in 24 years and virtually nonexistent unemployment in the technology sector. Parenthetically, whether we choose to call this a shortage or not, I think few would disagree, the demand is very, very high for these skilled workers.
Page 198 PREV PAGE TOP OF DOC
While legal immigrants make up only 5–1/2 percent of QUALCOMM's work force, they are vital contributors to our success. For QUALCOMM and thousands of other U.S. businesses, access to the best and brightest is a key component to our ability to compete in global markets. QUALCOMM's main competitors in the field of wireless communications include much larger companies like Ericsson of Sweden, Nokia of Finland, Samsung of Korea and many other multinationals with operations in multiple countries. With only a fraction of the technical work force of our global competitors, we need access to an international talent pool to create American jobs and American exports.
QUALCOMM currently employs 476 H–1B workers, and a total of 572 workers on visas of all types. These workers, rather than taking jobs from American labor pools, are creating jobs for U.S. workers, through the application of their specialized skills.
Since our founding, QUALCOMM has hired 343 H–1Bs from college campuses, representing 60 percent of our total visa holders. During the past year alone, QUALCOMM hired 174 engineers from U.S. university campuses. Sixty-seven percent of those hires were foreign nationals and have come to work at QUALCOMM on extensions of their F–1 student visas. These highly skilled students all need to roll over to H–1B visas prior to May or June of this year when their F–1 extensions expire.
National trends reflect our experience. According to a 1994 report of the American Association of Engineering Societies, 33 percent of all Master of Science and 52 percent of all Ph.D. degrees conferred by U.S. institutions in the '93,'94 school year went to foreign nationals. Specific to our engineering field, the same report found that 52 percent of Ph.D. degrees in electrical engineering went to foreign nationals. To solve this problem over the long term, we must recognize that our educational and training systems need to fundamentally change in order to be globally competitive. To that end, QUALCOMM is actively involved in providing enhanced educational opportunities at all levels, including defense conversion, to create highly skilled future engineers.
Page 199 PREV PAGE TOP OF DOC
QUALCOMM's efforts, however, do not mitigate our need to hire a relatively small but critically important group of foreign nationals with advanced skills in education. Limiting the number of H–1B visas granted each year will only force U.S. companies to hire these students and settle them in countries of their origin or in another country that does not have the same restrictions on incorporating highly skilled workers in its labor force.
Current regulations require QUALCOMM and every other business to pay H–1B employees at the same rate we pay nonimmigrant personnel in the same categories. We support the increased enforcement provision in Senator Abraham's bill that has been introduced on the Senate side, including increased fines for willful offenders of prevailing wage regulations of up to five times the current level. While we see no evidence that employers are attempting to evade the prevailing wage regulation, increasing penalties will protect the integrity of the program and the businesses that use this. And we see in my company, for example, no indication of the kind of wage differential that Mr. Matloff is contending occurs in his personal, secondary observations.
Other proposals which would give the Department of Labor new enforcement authority require new regulations of business using the H–1B visa program and shorten the length of stay of an H–1B visa. And we believe this would burden the technology sector with unnecessary new regulations and render the H–1B program unusable by QUALCOMM and other technology companies.
Specifically, the new attestations proposed on recruitment would require businesses to wait for Department of Labor approval before hiring each H–1B worker. Delays associated with such regulatory oversight are unacceptable and will cause businesses to miss important production and R&D deadlines.
Page 200 PREV PAGE TOP OF DOC
The layoff attestation is similarly unworkable because the deal would prevent companies from laying off even one entry level test or mechanical engineer if it had availed itself of a high-end software electrical engineer to the H–1B program, and limiting the length of stay of an H–1B visa prevents businesses from realizing the full potential of an employee's talents.
Again, I thank you for the opportunity to testify today and my written testimony is included.
[The prepared statement of Mr. Sullivan follows:]
PREPARED STATEMENT OF DANIEL L. SULLIVAN, SENIOR VICE PRESIDENT FOR HUMAN RESOURCES, QUALCOMM, INCORPORATED
SUMMARY
The U.S. Chamber of Commerce is the world's largest business federation, representing more than three million businesses and organizations of every size, sector, and region.
More than 96 percent of the Chamber's members are small businesses with 100 or fewer employees, 71 percent of which have 10 or fewer employees. Yet, virtually all of the nation's largest companies are also active members. We are particularly cognizant of the problems of smaller businesses, as well as issues facing the business community at large.
Page 201 PREV PAGE TOP OF DOC
Besides representing a cross-section of the American business community in terms of number of employees, the Chamber represents a wide management spectrum by type of business and location. Each major classification of American business—manufacturing, retailing, services, construction, wholesaling, and finance—numbers more than 10,000 members. Also, the Chamber has substantial membership in all 50 states.
The Chamber's international reach is substantial as well. It believes that global interdependence provides an opportunity, not a threat. In addition to the U.S. Chamber of Commerce's 83 American Chambers of Commerce abroad, an increasing number of members are engaged in the export and import of both goods and services and have ongoing investment activities. The Chamber favors strengthened international competitiveness and opposes artificial U.S. and foreign barriers to international business.
Positions on national issues are developed by a cross-section of Chamber members serving on committees, subcommittees, and task forces. Currently, some 1,800 business people participate in this process.
STATEMENT
Good morning. Mr. Chairman and Members of the Subcommittee, I am Daniel L. Sullivan, Senior Vice President, Human Resources for QUALCOMM. On behalf of QUALCOMM and the U.S. Chamber of Commerce, I thank you for the opportunity to testify on the future of the H–1B skilled worker visa program.
Founded and headquartered in San Diego, QUALCOMM is recognized around the world as a leader in digital wireless telecommunications, and is the developer of Code Division Multiple Access (CDMA) technology, an international standard. With over $2.1 billion in annual sales, 500 patents (issued or pending) and 10,400 employees worldwide, the company develops, manufactures, markets, licenses, and operates advanced communications systems based on its wireless technologies.
Page 202 PREV PAGE TOP OF DOC
Much of QUALCOMM's success can be credited to the contributions of engineers who came to the company as foreign nationals. They came to this country for opportunity—both in education, and in the workplace. Our engineers stayed because America gave them H–1B visas that allowed them to contribute to our economy before they became U.S. citizens.
As you know, Mr. Chairman, the annual cap of 65,000 visas, predicted to be reached in a matter of weeks, has not been adjusted since its inception in 1990, and does not meet the increased employment demand within the technology industry. It failed to consider increasing demand for skilled workers, as evidenced by the lowest U.S. unemployment rates in 24 years, and virtually non-existent unemployment in the technology sector.
To remain competitive, American companies are asking Congress to pass legislation similar to Senator Abraham's American Competitiveness Act (S. 1723), which would increase the H–1B cap and introduce important reforms to the program for the benefit of companies and workers alike.
While legal immigrants make up only five-and-a-half percent of QUALCOMM's workforce, they are vital contributors to our success. For QUALCOMM and thousands of other U.S. businesses, access to the best and brightest is a key component of our ability to compete in global markets. QUALCOMM's main competitors in the field of wireless communications include much larger companies like Ericsson of Sweden, Nokia of Finland, Samsung of Korea and many other multinationals with operations in multiple countries. With only a fraction of the technical workforce of our global competitors, we need access to an international talent pool to create American jobs and American exports.
Page 203 PREV PAGE TOP OF DOC
QUALCOMM currently employs 476 H–1B workers, and a total of 572 workers on visas of all types. These workers, rather than taking jobs from American labor pools, are creating more jobs for U.S. workers through the application of their specialized skills.
Since our founding, QUALCOMM has hired 343 H–1Bs from college campuses, representing 60% of our total visa holders. During the past year alone, QUALCOMM hired 174 engineers from U.S. university campuses. 67 percent of those hires were foreign nationals who have come to work at QUALCOMM on extensions of their F–1 student visas. These highly skilled students all need to roll over to an H–1B visa prior to May or June of this year, when their F–1 extensions expire.
National trends reflect our experience. According to a 1994 report of the American Association of Engineering Societies, 33 percent of all Master of Science and 52 percent of all Ph.D. degrees conferred by U.S. institutions in the 1993/94 school year went to foreign nationals. Specific to the engineering field, this same report found that 52 percent of Ph.D. degrees in electrical engineering went to foreign nationals.
To solve this problem over the long term, we must recognize that our educational system needs to fundamentally change in order to be globally competitive. To that end, QUALCOMM is actively involved in providing enhanced educational opportunities at all levels, including defense conversion, to create highly skilled future U.S. engineers.
QUALCOMM's efforts, however, do not mitigate our need to hire a relatively small, but critically important group of foreign nationals with advanced skills and education. Limiting the number of H–1B visas granted each year will only force U.S. companies to hire these students and settle them in their countries of origin, or in another country that doesn't have the same restrictions on incorporating highly skilled workers in its labor force.
Page 204 PREV PAGE TOP OF DOC
Current regulations require QUALCOMM and every other business to pay H–1B employees at the same rate we pay non-immigrant personnel in the same job categories. We support the increased enforcement provisions in Senator Abraham's S. 1723, including increased fines for willful offenders of the prevailing wage regulations of up to five times the current level. While we see no evidence that employers are attempting to evade the prevailing wage regulation, increased penalties will protect the integrity of the program and the businesses that use it.
Other proposals, which would give the Department of Labor new enforcement authority, require new regulations of businesses using the H–1B program, and shorten the length of an H–1B visa, would burden the technology sector with unnecessary new regulations, and render the H–1B program unusable by QUALCOMM and other technology companies.
Specifically, the new attestations proposed on recruitment would require businesses to wait for DOL approval before hiring each H–1B worker. The delays associated with such regulatory oversight are unacceptable and would cause businesses to miss important production and R&D deadlines. The layoff attestation is similarly unworkable because the DOL would prevent companies from laying off even one entry-level test or mechanical engineer if it had availed itself of a high-end software or electrical engineer through the H–1B program. And limiting the length of stay on an H–1B visa prevents businesses from realizing the full potential of an employee's talents.
Thank you again for the opportunity to testify today. I'd be pleased to answer any questions you might have.
Page 205 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. Thank you, Mr. Sullivan.
Mr. Payson. Mr. Payson, may I suggest something as you testify, because I know you have more than 5 minutes worth and we are on a deadline. To the extent you can address your concerns about age discrimination, particularly in the information technology industry, that would be helpful.
STATEMENT OF WILLIAM S. PAYSON, PRESIDENT, THE SENIOR STAFF
Mr. PAYSON. Mr. Chairman, I can do it very, very quickly indeed. Read my button: Hire the old pros. That is our message right across.
We represent the professional work force over 50. We have approximately 3,200 members in the Silicon Valley database, which includes everyone from CEOs to receptionists. We have approximately 10,000 people in a national and international database, of what we call legacy professionals. These are people who have identified their skills in connection with the millennium crisis, the millennium bug that we are all reading about. This came about because I read in the Wall Street Journal there was a serious need for COBOL programmers to cope with this crisis, so we put out a release, a news release, called old pros to the rescue. And this started a chain reaction of news stories all across the country. The people that we have in our database, unfortunately, do not match the requirements of employers. The needs of the employers do not match the reality of the labor force.
Page 206 PREV PAGE TOP OF DOC
Let me give you some specific examples. Retired programmers live in three types of communities in the United States. Upper New York State, for instance, outside of Washington, D.C., these are retired people that are from IBM or from the government. They live in golf course communities, like southern Florida and San Diego County and Phoenix, and they live in communities, such as God's Little Acres, we call them. These are Boise, Idaho and Salt Lake City and Colorado Springs, places with no crime, no smog, no drugs. And these people are very, very hard to pry loose.
I will give you an example. One of our members told me that he had gotten a call from a recruiter in downtown Chicago asking him and offering him all kinds of money to move to Chicago to help them solve the year 2000 mess, and this gentleman said to him, do you expect me to give up my golf course existence and move into a motel in downtown Chicago to pull your chestnuts out of the fire when I told you 20 years ago you were going to have this problem and you didn't listen to me. Swing in the wind for a little while, friend, we are all eagerly watching.
So there is a reservoir of loyal Americans, very much like the days after Pearl Harbor, not the end of civilization but the end of complacency. Call up the reserves, bring out the militia, we are here to help you, but you are going to do it on our terms because you didn't listen to us the first go-round.
Another example, we have a gentleman here in the Washington, D.C. area. He told one of our employers, listen, I have $125,000 thousand a year annual unearned income, I am a guru right straight across the board in professional competence. I like to go to Europe twice a year, I like to play golf twice a week. If you accept me on those terms, you can get me for $35 an hour. The employer grabbed him fast. But most employers tell me over and over again, no part timers, no contract workers, no telecommuting, no remote employment, we want them in downtown Chicago, right next door, right now.
Page 207 PREV PAGE TOP OF DOC
And the next thing they say is that these people in your data bank have a lot of experience and they have a lot of skills, but they haven't done it in 10 years. Okay. What do you do to correct that observation? We have started a program with UC Extension in California, and we have a deal with employers right now, they tell UC Extension what they want taught, UC Extension will teach the old folks the new tricks, and the employers have made a commitment that they will interview every person that graduates from that class and they will reimburse anybody that they hire for the cost of their training. Why doesn't the rest of America follow that path?
[The prepared statement of Mr. Payson follows:]
PREPARED STATEMENT OF WILLIAM S. PAYSON, PRESIDENT, THE SENIOR STAFF
My name is William S. Payson. I am President and CEO of The Senior Staff Job Information Exchange, Inc. We are located in Silicon Valley, California and we manage and maintain the largest databank in the U.S. devoted to job information for the professional workforce over fifty. I reside at 1994 Josephine Avenue, San Jose, CA 95124.
We manage two databanks of job information: The first, about five years old, covers job titles from CEO to receptionist, and is limited to Silicon Valley. There are about 3,200 individuals in this database. We have a second, larger database of what we call ''Legacy Professionals'', old pros interested in helping to solve the greatest technology challenge in history, the Year 2000 Software Systems Crisis, often called ''The Millennium Bug.'' We have about 10,000 professionals in this database from all over the world, although most people are in the USA and Canada.
Page 208 PREV PAGE TOP OF DOC
I am not a computer technologist. I have been a management and marketing consultant for over 40 years. I started The Senior Staff for one simple reason: At age 70, I couldn't find a job. So I created one. And here's what I have learned in the last five years:
The largest untapped resource of skill & talent in America is the professional workforce over 50.
This resource is ignored by many employers, especially high technology companies who are notoriously youth oriented and dedicated to the proposition that anyone over 35 is ''over the hill.'' Such attitudes are wholly unwarranted and totally unsupported by facts, to wit:
30 million Americans over 50 want to work.
63% want to work because they are bored, want to be useful, or their spouse has said, ''Out of the house, or else!''
37% want to work because they need the money.
85% are willing to work in part-time, temporary, interim or contract positions.
27% are willing to work on commission.
83% prefer telecommuting to on-site employment.
Page 209 PREV PAGE TOP OF DOC
FABLES OR FACTS?
The attitudes of many employers toward the professional workforce over 50 can be summarized by the following Fables, which many high-tech executives regard as Facts:
FABLE 1. ''Workers over 50 belong in a porch rocking chair.'' In fact, many prefer to stand on their feet in a productive working environment.
FABLE 2. ''They're slow.'' In fact, studies have shown that workers over 50 are actually more productive than many younger workers, having fewer errors and accidents.
FABLE 3. ''They won't stay long.'' In fact, professional workers over 50 are less transient, so they actually keep jobs longer. They don't ''jump around.''
FABLE 4. ''They're often out sick.'' In fact, studies show that seniors get higher marks for on-time and attendance than any other age group. Check your own office staff. How many ''old timers'' show up on the dot . . . head colds, snow and ''Monday Blues'' notwithstanding?
FABLE 5. ''Older workers can't hack it.'' In fact, the professional workforce over 50, comprises a huge reservior of experience and skill that companies ignore at their peril. Two examples: If we run into an economic down-turn, how many young managers have experienced a major recession? If you're out on the ocean and a hurricane is approaching, how comforting is it to learn that your skipper and crew have never been in a howling storm before?
Page 210 PREV PAGE TOP OF DOC
FABLE 6. ''They are set in their ways and can't be taught a damn thing.'' In fact, seniors are the fastest growing demographic segment of internet users in the U.S. Example: In connection with the Year 2000 Crisis, employers told us that our database of older workers have great experience and high skills, but ''they haven't done any of this stuff in ten years.'' In conjunction with the University of California, Santa Cruz, Extension, we have set up refresher courses for professional programmers. In the first course, twenty-some COBOL programmers with a total of over 250 years of programming experience spent their own money to brush up on the latest techniques in date conversion. We obtained a committment from a high-tech employer to interview all students who passed the course, and to reimburse any candidates they hired for the cost of their training. At latest count they have hired four... not a large number but it shows what can be done when employers, trainers and senior candidates work together to achieve a common objective.
FABLE 7. ''They are inflexible and unwilling to change.'' In fact, over the last five years in the job information business, I have come to the conclusion that the professional workforce over 50 is far more flexible and innovative than the employers themselves . . . who, I my opinion, are as dead set against change as the old monarchies of Europe. For instance, despite the fact that 83% of our database is ready, willing and able to telecommute . . . and the technology is here in place right now to do it . . . not a single Year 2000 employer will even consider telecommuting. They'll ship their data half way around the world to New Delhi . . . but not to Denver, or Boise, or Phoenix . . . where the old pros of America are standing by, ready to help.
SUMMARY
Page 211 PREV PAGE TOP OF DOC
In my opinion, there are three reasons—in addition to the above simplistic prejudices of ageism—why the high-tech industry prefers foreign workers to America's professional workforce over 50:
1. Foreign workers are cheaper.
2. Foreign workers are easier to hoodwink.
3. Foreign workers are so anxious to come to America that they willingly accept long hours, high pressure and minimum benefits.
Utilizing the experience, skill and talent of the professional workforce over 50 will help all Americans meet the challenges of the 21st century.
Thank you very much.
REFERENCES:
In connection with the testimony of William S. Payson of The Senior Staff, April 21, 1998
THE COMMONWEALTH FUND
1 East 75th Street
New York, NY 10021
Page 212 PREV PAGE TOP OF DOC
(212) 606–3853
Mary Mahon, Public Information Officer
The Commonwealth Fund, a major private foundation, conducted the definitive research on the workforce over fifty in a five year project completed in November, 1993.
SYSTEMS PARTNERS—IMI
Two Theatre Square, Suite 315
Orinda, CA 94563
(510) 254–3110
Steven H. Laine, Vice President
Systems Partners is a major technology consultant involved with Year 2000 challenges facing such clients as Bank of America, Wells Fargo, Charles Schwab & Co. Systems Partners has hired workers from The Senior Staff databank, retrained by UCSC Extension, Cupertino, California.
UNIVERSITY OF CALIFORNIA, SANTA CRUZ, EXTENSION
10420 Bubb Road
Cupertino, CA 95014–4150
(408) 342–0306
Sandra Clark, Director, Corporate Training Programs
UCSC Extension is providing refresher training for experienced technologists in connection with the Year 2000 crisis. UCSC Extension also offers a wide range of technology courses in Computer Science & Engineering, Hardware and Systems Technologies and Software Technologies.
Page 213 PREV PAGE TOP OF DOC
AUTOMATION TRAINING SPECIALISTS
3180 De La Cruz Boulevard, Suite 105
Santa Clara, CA 95054
(408) 748–9891
Frances T. Nevarez, President
ATS provides technical training for such high-tech industry leaders as Hewlett Packard, Lockheed Martin and AT&T. They are currently training Senior Staffers in connection with the Year 2000 problem as it affects the huge number of companies comprising the U.S. Vendor Supply Chain.
THE SENIOR STAFF
William S. Payson, President
The Senior Staff Job Information Exchange, Inc.
P.O. Box 1382
Campbell, CA 95009–1382
(408) 371–9064; Fax (408) 371–3255; www.srstaff.com; srstaff@value.net
The Senior Staff is the largest Job Information Databank for the Professional Workforce over 50 in the United States. We manage two databanks: 1) a local database of professional workers of all types, limited to Silicon Valley, California; and 2) a national database of high technology professionals, primarily qualified to help solve the Year 2000 Software Systems Crisis, known as ''The Millennium Bug.''
Page 214 PREV PAGE TOP OF DOC
The largest untapped resource of skill & talent in America is the professional workforce over 50.
This workforce is ignored by many employers, especially high technology companies who are notoriously youth oriented and dedicated to the proposition that anyone over 35 is ''over the hill.''
Such attitudes are wholly unwarranted and totally unsupported by research studies.
Primary reasons for age prejudice in the high-tech industry are such ''fables'' as: ''Older workers can't hack it.'' ''They are set in their ways, inflexible and can't be taught a damn thing.'' These myths have been proven false by such studies as the definitive five-year assessment of the workforce over fifty by The Commonwealth Fund of New York, and they are confirmed by the experience of The Senior Staff since 1994.
In my opinion, there are three reasons—in addition to simplistic prejudices of ageism—why the high-tech industry prefers foreign workers to America's professional workforce over 50:
1. Foreign workers are cheaper.
2. Foreign workers are easier to hoodwink.
3. Foreign workers are so anxious to come to America that they willingly accept long hours, high pressure and minimum benefits.
Page 215 PREV PAGE TOP OF DOC
Utilizing the experience, skill and talent of the professional workforce over 50 will help all Americans meet the challenges of the 21st century.
Mr. SMITH OF TEXAS. Thank you, Mr. Payson.
Mr. Hatano.
STATEMENT OF DARYL HATANO, VICE PRESIDENT FOR INTERNATIONAL TRADE & GOVERNMENT AFFAIRS, SEMICONDUCTOR INDUSTRY ASSOCIATION
Mr. HATANO. Thank you, Mr. Chairman. This morning I would like to cover three things: First, describe our industry and the market in which we compete; second, outline our companies' efforts to help train America's work force; and, finally, conclude with the impact that the H–1B cap has had on our ability to compete in the future.
The semiconductor industry is now America's largest manufacturing industry in terms of economic value. We are contributing 20 percent more to the U.S. economy than the next leading industry. We employ 260,000 people, and these are high paying jobs. The average wage is twice the average of private industry overall, and since 1991, our industry wages have increased about 10 percent a year versus 5.6 percent for total private industry. Unfortunately, I don't have the same graph they had earlier. There is no such person in our industry as the cheap foreign worker.
Page 216 PREV PAGE TOP OF DOC
Propelling the ever growing semiconductor industry is the ever shrinking transistor. The transistor is the basic building block of a semiconductor chip. A decade ago, we were able to integrate thousands of transistors on a single chip. Today, we can put millions on a chip. In fact, worldwide production of transistors today is measured in the quadrillions. You have heard a lot of numbers this morning. Let me put it a little bit differently. In the time it takes me to flip this coin . . . we have just produced some five billion transistors worldwide. Now that is a lot of computing power.
The implications of this technological progress cannot be overstated. The Internet, for example, is really a World Wide Web of semiconductor chips. Competition in this environment is fierce. The U.S. lost its worldwide market share lead to Japan in 1986 and we fought hard to come back, and come back we did. We increased from 37 percent market share a decade ago to today, where we enjoy over a 50 percent market share. This comeback would not have been possible without the ingenuity of our workers, and that is why we are here today. To get the best and brightest, U.S. companies have to give priority to training the current employees as well as supporting America's education system, which trains future employees.
At the K–12 level, our companies have a variety of initiatives. As one example, in 1997, AMD, Advanced Micro Devices, contributed about $285,000 to a wide variety of school programs in Austin, Texas alone. The industry also provides some $30 million to universities through the Semiconductor Research Corporation, which is centered in Triangle Park in North Carolina. Some of the funds support graduate fellowship programs for study in semiconductor-related fields at the Master's and Ph.D. levels. This program has produced over 2,000 graduates since it began in 1982.
Page 217 PREV PAGE TOP OF DOC
Industry efforts to educate America's future workers are complemented by aggressive efforts to train our current workers. For example, Texas Instruments asks its employees, young and old, to take a minimum of 40 hours of training per year. This training occurs on company paid time and at company expense. But despite our efforts to educate and train the American work force, we still need access to the foreign nationals graduating from the engineering programs at U.S. universities. Non-U.S. citizens now represent a third of all Master of Science and half of all Ph.D. electrical engineering degrees recently granted by U.S. universities. To hire the foreign talent graduating from our U.S. Universities, American companies must apply for H–1B visas. If Congress does not pass legislation to raise the cap by May, our companies may be forced to turn away some of the brightest graduates of American universities. Instead of working to make America stronger, these engineers would be forced by our government to work for our foreign competitors.
Now some people are concerned that raising the cap will cost U.S. jobs. I think this is dead wrong. Highly skilled foreigners are actually creating manufacturing, marketing and administrative jobs at our companies. Representative Lofgren, during the last panel, mentioned Intel CEO, Andy Grove, as the most renowned example of an immigrant who has created jobs in the U.S. Less well-known but another Intel example would be the foreign national engineer who co-developed the PC-based video conferencing system. With this product, this foreign engineer created about 500 jobs at Intel alone.
If I were to testify before you some 5 years from now, I expect to say that we are producing 50 billion transistors during the time I flipped that coin, compared to the 5 billion I said today. Five years from now we will be making products that only existed in science fiction novels a mere 5 years ago.
Page 218 PREV PAGE TOP OF DOC
Foreign engineers trained at American universities will play an important part in shaping this future world. The only question is will these foreign engineers apply their skills working at American companies, filing American patents, and supporting jobs at American factories, or will the H–1B visa cap force these foreign engineers to compete against American industry.
Mr. Chairman, you opened this hearing by noting how our economy is like a car hitting pot holes with its engine stuttering. If I can extend that metaphor. Our industry is in the Indianapolis 500 against our foreign competitors. We are several laps ahead. Our government is now telling us that after May, we may have to give our competitors half of our gas and tires. This is not a winning strategy.
Thank you.
[The prepared statement of Mr. Hatano follows:]
PREPARED STATEMENT OF DARYL HATANO, VICE PRESIDENT FOR INTERNATIONAL TRADE & GOVERNMENT AFFAIRS, SEMICONDUCTOR INDUSTRY ASSOCIATION
I appreciate this opportunity to appear before the Subcommittee on Immigration and Claims of the House Judiciary Committee to present the views of the Semiconductor Industry Association (SIA) on immigration and the American workforce.
Today I would like to discuss the importance of technology to the semiconductor industry and why increasing the cap on the H–1B visa is critical to our technological and economic leadership. But first let give you some background on the U.S. semiconductor industry.
Page 219 PREV PAGE TOP OF DOC
THE U.S. SEMICONDUCTOR INDUSTRY
The semiconductor industry is now America's largest manufacturing industry in terms of economic value-added—contributing 20 percent more to the U.S. economy than the next leading industry. This industry has surged to first place from 17th place in ten short years, surpassing industries such as aircraft, aircraft parts and equipment and pharmaceuticals.
U.S. semiconductor makers employ about 260,000 people nationwide, and the presence of the industry is widespread—35 states have direct semiconductor industry employment. And these are high paying jobs. The average wage in the semiconductor industry is approximately $55,000, nearly twice the average of private industry overall.
Semiconductors are an increasingly pervasive aspect of everyday life, enabling everything from computers to automobiles to modern defense systems to the Internet which is, in fact, a world wide web of silicon chips. They have sparked the growth of the U.S. electronics industry, which provides employment for 4.2 million Americans in all 50 states.
Behind this enormous economic success is the ever shrinking transistor. A transistor is an electronic circuit, which is the basic building block for an electronic system. A decade ago, we were able to integrate thousands of transistors on a single chip. By steadily shrinking the size of the transistor, we now place millions of transistors on a single chip.
The industry has succeeded in doubling the number of transistors per chip every 18 months over the last several decades. The resulting steady decreases in the price of a chip's capability is called ''Moore's Law.''
Page 220 PREV PAGE TOP OF DOC
The implications of Moore's law cannot be overstated. The Commerce Department tracks the revenues our industry collects. However a future historian looking back at this century might instead focus on the revenues we do not collect—that is the effect of the rapid and constant price decline of the transistor. Economist Kenneth Flamm has concluded that the impact of chip price declines has had from two to five times the impact on the U.S. economy that the railroad had during a comparable period during the last century.
Worldwide the semiconductor industry's revenues grew last year by 4 percent, yet its output in transistors increased by 90 percent. In America today we consume about 50 million transistors per person, a tenfold increase over the amount consumed five years ago. That is a lot of computing power.
Moore's law has become the axiom of the information age. New product generations are introduced every few years. If a company is a few months late to market, it can miss the most profitable period of that product generation as others quickly pass it by.
Competition in this environment is fierce. Given the strategic importance of the industry, a number of countries around the world have targeted semiconductors as an industry in which that they must participate. The United States lost its worldwide market share lead to Japan in 1986, and by 1988 had fallen close to 12 percentage points behind Japan. In 1993, the United States was able to regain the lead in world market share. Today U.S. companies have over 50 percent of the world market in this critical industry, but our competitors around the world are focused on grabbing back our gains.
Page 221 PREV PAGE TOP OF DOC
America's leadership position is based on the ingenuity of its workers. To remain competitive in the environment of fast-paced technological advances and explosive unit growth, our companies must be able to hire the best and the brightest people in real time. It is our skilled workforce that enables us to develop more powerful products at lower and lower costs. If our companies do not have timely access to the most skilled engineers—whether U.S. or foreign born—we will not be able to remain competitive in today's global marketplace.
EDUCATION AND TRAINING
A company's intellectual property springs from the minds of its workers. To develop these minds, U.S. companies give a high priority to training current employees and to supporting America's education system, which trains future employees. U.S. companies annually spend an estimated $210 billion on training their workforce and donate over $4 billion per year to U.S. schools at the K–12, college and university levels. Semiconductor companies are also deeply committed to supporting education improvements at the K–12, community college, and university levels.
To help its members share the best practices in the K–12 arena, SIA is cataloging the efforts of its member companies. Among the many initiatives our companies have undertaken are the following three:
Hewlett Packard is creating university partnerships with nearby K–12 school districts to engage women and minority students in math and science from the time they enter kindergarten until they graduate from college. Currently this $4 million program centers around UCLA, San Jose State University, Northeastern University, and the University of Texas at El Paso.
Page 222 PREV PAGE TOP OF DOC
National Semiconductor has launched a $2.5 million program to train and encourage teachers to use the Internet in the classroom. This ''Global Connections Training Program'' has three main components: 1) providing teachers with the knowledge, skills, and support necessary to integrate the Internet into their curriculum, 2) developing an interactive website for educators interested in utilizing the internet as a resource for learning (http://www. nsglobalconnections.com) and 3) recognizing demonstrated creativity in the use of the Internet in the classroom with monetary Internet Innovator Awards.
Intel has funded 150,000 teacher guides (one for every fourth grade teacher in America) for the Emmy award-winning ''Bill Nye the Science guy'' public television show.
In addition, the semiconductor industry trains future technicians and skilled operators through its remarkably successful community college program, Partnering for Workforce Development. Through this program, SIA companies have been successful in increasing the number of community colleges with semiconductor manufacturing technology curriculum by an impressive 50 percent since the program's start in 1996. Student enrollment in these programs doubled after the first year of the program in 1996 and is expected to triple for a total of 6000 students in 1998.
The U.S. semiconductor industry also funds the Semiconductor Research Corporation (SRC) in North Carolina. The SRC funds graduate fellowship programs for study in semiconductor-related fields at the Masters and Ph.D. levels. This program has supported over 2000 students who have gone on to enter the high-tech workforce since its inception in 1982, and currently there are another 700 students in the pipeline. The SRC is now developing plans to expand the program to the undergraduate level, which will supplement the support which individual companies have long provided to universities.
Page 223 PREV PAGE TOP OF DOC
Industry efforts to educate America's future workers are complemented by aggressive investments to train current workers. It is not uncommon for semiconductor companies to require their employees to take 40 hours or more of training per year. This training occurs on company time and at company expense.
But despite our efforts to educate and train the American workforce, serious shortages remain in key skill areas. Raising the cap on foreign specialized workers under the H–1B visa program would serve as a temporary measure to alleviate the critical situation facing the domestic high-tech industry today until there are greater numbers of U.S. professionals available. But the H–1B program will always have a place in helping our industry to benefit from the best talent wherever it is found.
HIGH-TECH WORKFORCE
Overall job growth in the industry, coupled with a decline in the number of U.S. students majoring in fields such as engineering and computer science, has led to an increasing need for skilled foreign nationals, many of whom are trained at U.S. universities.
Recently, the U.S. Department of Commerce projected that one million new computer scientists, engineers, systems analysts and programmers will be needed between 1994 and 2005. There are thousands of openings at U.S. semiconductor companies, many of which can be found by reviewing the career opportunity pages on our companies' websites—a list of which is attached to this testimony.
Page 224 PREV PAGE TOP OF DOC
Non-U.S. citizens now represent over half of the Ph.D.s graduating from U.S. universities in semiconductor fields. According to a report of the American Association of Engineering Societies, 33 percent of all Master of Science and 52 percent of all Ph.D. electrical engineering degrees recently conferred by U.S. institutions went to foreign nationals. There are a number of reasons for the high percentage of foreign graduates at U.S. universities. One reason is that many American students choose to enter the job market rather than continue their studies in math and science disciplines. Another reason is that America's universities are the envy of the world, and therefore attract the best from around the world.
To have access to the foreign talent graduating from America's universities, U.S. companies must apply for H–1B visas for their foreign professional workers. The number of available H–1B visas is capped at 65,000 per year. We hit the cap for the first time last year and expect to reach it again as early as May this year.
If Congress does not pass legislation to raise the cap, our companies will be forced to turn away some of the brightest graduates of American universities. Unable to get visas, these professionals will return home or go to other countries to work for our competitors. Having trained these foreign students in the United States, in many cases at taxpayer financed universities, it would be foolish if U.S. companies could not hire them to alleviate our current shortage of critical skills. It makes no sense to push highly skilled workers into the arms of our competitors.
H–1B PROFESSIONALS CONTRIBUTE TO U.S. JOB GROWTH
Let me also say a few words about the benefits of legal immigration to illustrate why foreign professionals are such a critical asset to our industry. Highly skilled foreign workers provide an important economic contribution by creating new jobs and products. The technologies and other innovations produced by foreign nationals have helped our industry reach its worldwide leadership position. Employment-based immigrants represent a very small portion of the high-tech workforce but contribute substantially to the United States and its ability to maintain its technological edge internationally.
Page 225 PREV PAGE TOP OF DOC
Economic studies consistently show that foreign workers do not increase unemployment or decrease wages; on the contrary, their contributions and innovation create jobs and spur growth. I would like to tell you about some of the foreign nationals employed by our industry and their contributions.
In 1986, Texas Instruments (TI), an SIA member company, found itself in a difficult position. The company that had invented the integrated circuit found the industry rapidly moving to a new technology called CMOS. TI needed to change to the new technology or lose market share. In TI's research lab a foreign national researcher, Dr. Chatterjee, had not only mastered the new CMOS technology, but had invented a new form of transistor with major performance improvements. It was introduced into TI's DRAM product and then into other logic chips. Today, this is the technology the industry lives by. Because of the pace of technological change in our industry, even a delay of several months in hiring needed talent could cause a company to fall behind the curve, losing market share and employees. Foreign nationals like Dr. Chatterjee play an important role in helping American companies to stay on top of the competition and keep jobs and production in the United States.
In the late 1980s, the U.S. industry was having difficulties applying inventions from the R&D labs to manufacturing. Dr. Chatterjee and his team at TI engineered a new way of applying technology to manufacturing called harmonized technology. This made TI one of the most efficient companies in opening new factories with the latest inventions, and allowed TI to bring inventions to market quickly and successfully. These changes brought to TI by a foreign national employee, have contributed to keeping TI at the leading edge with billions of dollars in growth and profit and 23,000 employees in the United States.
Page 226 PREV PAGE TOP OF DOC
Another SIA company, Motorola has also benefited from increased sales and job growth as a result of the contributions of foreign nationals. A foreign national research process engineer at Motorola developed and implemented new package designs for ULSI (ultra large scale integration) devices. This product is a cutting-edge package with no counterpart in Japan or any of the Asia-Pacific countries. Multi-million dollar sales and several hundred jobs will be generated through the employee's contribution.
The founder and CEO of Intel, Andrew Grove, is perhaps the most renowned example of an immigrant's contribution to economic growth and job creation in the United States. He came to the United States at age 20 from his native Hungary with nothing more than the clothes on his back. With a U.S. college education, he moved into the semiconductor industry in its early days and helped found Intel. This company is now the world's largest semiconductor company, producing processor chips for 80 percent of the world's personal computers. Intel has approximately 40,000 employees in the United States.
One of these employees, an Intel Senior Technical Marketing Engineer and a legal immigrant, worked with another employee to develop Intel's video conferencing system. Intel's Pro Share (TM) Video System 200 (a desktop video conferencing system) is a PC-based product that allows people to work together on documents, spreadsheets and other applications and to see each other using video conferencing. The practical implications of this new mode of communication are numerous. For example, during the Los Angeles Earthquake, Vice President Gore was able to visit the earthquake site, and still remain in touch with the nation's capital with the aid of this technology. This one technological advancement has created about 500 jobs.
Page 227 PREV PAGE TOP OF DOC
It is truly the creativity, ingenuity and skills of our workforce that make the U.S. semiconductor industry the best in the world. To remain on top, we must have access to the best and brightest workers, whether U.S. or foreign born.
CONCLUSION
Continued advances in semiconductor technology will allow the chip industry to move from the era of the megabit (millions of transistors per chip) to the age of the gigabit (billions of transistors per chip). The result will be high technology products that today only exist in science fiction novels. Over the past few decades, the microchip has profoundly changed how we work and play, yet the information age is still in its infancy.
Foreign engineers trained at American universities will have an important role in shaping this future world. The only question is whether these foreign engineers will apply their skills working in American companies, applying for American patents, and supporting jobs at American factories, or whether the cap on H–1B visas will force these foreign engineers to compete against American industry.
The Senate Judiciary Committee has just reported a bill that takes an important first step on this issue. I urge this committee to do the same.
I would be happy to answer any questions. Thank you.
Attachment 1
Employment Opportunity websites at SIA Member Companies
Page 228 PREV PAGE TOP OF DOC
(Company name and principle locations)
Advanced Micro Devices (California, Texas)
http://www.careermosaic.com/cm/amd/amd12.html
Analog Devices (Massachusetts, North Carolina, California, Texas, Washington)
http://www.analog.com/world/jobops—index.html
ATMEL (California, Colorado)
http://www.atmel.com/atmel/career/career1.html
Fairchild Semicondcutor (Maine, California)
http://www.fairchildsemi.com/careers/index.shtml
Harris Semiconductor (Florida, Pennsylvania, Ohio)
http://www.semi.harris.com/employment—opportunities/
Hewlett Packard (California, Oregon, Colorado,
http://www.jobs.hp.com/USA/
Intel (California, Arizona, New Mexico, Oregon)
http://www.intel.com/intel/oppty/index.htm
IBM Microelectronics (New York, Vermont, Texas, North Carolina, Massachusetts)
http://www.empl.ibm.com:80/empl/ehdiv08.html
Page 229 PREV PAGE TOP OF DOC
International Rectifier (California)
http://www.irf.com/career/
LSI Logic (California, Oregon)
http://www.powerwithin.com/jobopp.html
Lucent Microelectronics (New Jersey, Pennsylvania, Florida)
http://www.lucent.com/work/work.html
Micron Technology (Idaho, Utah)
http://www.micron.com/html/employment.html
Motorola (Arizona, Texas, Virginia)
http://www.mot.com/Employment/
National Semiconductor (California, Texas, Maine, Utah)
http://www.careermosaic.com/cm/national/national1.html
Rockwell Semiconductor Systems (California)
http://www.nb.rockwell.com/jobs/index.html
Sarnoff Corp. (New Jersey)
http://www.sarnoff.com/HR/
Page 230 PREV PAGE TOP OF DOC
Texas Instruments (Texas, California)
http://www.ti.com/cgi-bin/recruit/jobbrws.cgi
Unitrode (New Hampshire)
VLSI Technology (California, Texas, Arizona)
http://www.vlsi.com/employment/employtop.shtml
Zilog (California, Idaho)
http://www.zilog.com/frames/fjobs.html
As of April 19, these sites included over 500 openings for semiconductor positions with ''engineer'' in their title. This number does not include positions at several large companies where the company lists engineering positions that are typically and constantly needed, but did not include the number of specific job openings. The data also does not include management or sales positions where a engineering B.S. is required, but the word ''engineer'' is not in the title.
Mr. SMITH OF TEXAS. Thank you, Mr. Hatano.
Dr. Lariviere.
STATEMENT OF RICHARD W. LARIVIERE, ASSOCIATE VICE PRESIDENT OF INTERNATIONAL PROGRAMS, UNIVERSITY OF TEXAS AT AUSTIN
Page 231 PREV PAGE TOP OF DOC
Mr. LARIVIERE. Mr. Chairman, thank you very much. Mr. Watt, thank you for the opportunity to testify before you today.
My name is Richard Lariviere. I am the Associate Vice President for International Programs at the University of Texas at Austin, also a professor of Asian Studies, and I do a fair bit of consulting to the information technology industry, and I know very well who Wipro and Tata Consultancy Services are. I would be happy to answer any questions about them.
I am here today, however, well, with a real honor, in fact, I represent today the American Council of Education, Association of American Universities, College and University Personnel Association, NAFSA: Association of International Educators, Council of Graduate Schools and the National Association of State Universities and Land-Grant Colleges, altogether, about 2,000 colleges and universities.
We have three issues we want to talk about. First of all, academia has to recruit from an international talent pool. Secondly, academic use of temporary workers is fundamentally different from the business sector. And, three, we have two major problems with the H–1B program, the cap and the prevailing wage issue.
American higher education is, I think, without any question, the best in the world. We are swamped with people who want to get into our schools. The University of Texas is the largest graduate school in the United States; it squeezed out Berkeley by a handful this year. Since we are from Texas, we like to have everything be bigger than everybody else's. The graduate school is the biggest in the country this year. It beat Ohio State by a handful. We have more than 11,000 graduate students, and this year we have 43 percent of our applicants for graduate school from international sources. Almost half of our applicants to graduate school are from abroad. This is because we are a very good institution. This is not just for the sciences and technology, this is across the board. We have very good programs, worldwide rankings in many programs; the best and the brightest want to come to UT Austin. And this is true for all of the institutions that I represent. They are seeing more international applicants than ever before. There has been a glitch because of what happened in Southeast Asia recently, but that is only temporary, we know.
Page 232 PREV PAGE TOP OF DOC
We are so good because we can choose from among the world's great talent. If we need somebody who is going to study some peculiar genetic disease, we want the best person who can do that. And because we have been able to do that, because we have been able to recruit internationally, we have been able to build institutions that are literally the envy of the world and the engine for Mr. Hatano's tires and gasoline in that race.
We are working very hard to develop working relationships in K through 12. We work all the time, both with the school districts and with industry to promote opportunities and the enthusiasm for higher education with K through 12, but the simple fact of the matter is if we want to maintain our rankings we have to recruit internationally.
Academic use of temporary workers is inherently different than in the business sector. We very frequently engage in collaborative research over long periods of time at a distance with colleagues abroad, and from time to time it simply becomes necessary to bring them on campus to conclude research, to present results, to give lectures and for extended course work.
These people are passing on their knowledge to U.S. students. They are engaged in research for research's sake, but the benefit of having these people around is clear and palpable to our citizens. We face two major obstacles, however. The H–1B cap is a real problem for academic institutions because if you hit the cap in May, and our academic year begins at the end of August or the beginning of September, we are at out of the race. And it becomes nearly impossible, from a budgetary standpoint, from a technical standpoint, from a class scheduling standpoint, from a student advising standpoint, to say to someone that the course that is going to be taught by this distinguished visiting scholar will only start sometime after October 1 when the clock gets set back to zero on the H–1B numbers.
Page 233 PREV PAGE TOP OF DOC
The second problem we face is the prevailing wage issue. The OES numbers we get back are routinely grotesquely higher than what our markets require. In my formal testimony, I give you several examples. I could have given you 10 times that many examples of instances when we have offered people anywhere from $30- to $40,000 less than the OES said we should be paying them, and this is simply a function of inadequate data on the part of the people coming up with these statistics, but it is nevertheless a serious problem for us.
I would be happy to discuss any of these in greater detail, and I want to thank both the chairman and his colleagues for the opportunity to testify.
[The prepared statement of Mr. Lariviere follows:]
PREPARED STATEMENT OF RICHARD W. LARIVIERE, ASSOCIATE VICE PRESIDENT OF INTERNATIONAL PROGRAMS, UNIVERSITY OF TEXAS AT AUSTIN
My name is Dr. Richard Lariviere. I am the Associate Vice President of International Programs at the University of Texas at Austin and want to thank the Subcommittee, particularly Chairman Smith, for inviting me to testify today on the current status of the H–1B visa program and its impact on U.S. colleges and universities. I want to commend the members of the Subcommittee for addressing this timely and important issue, and for attempting to seek solutions to the many problems that exist.
My testimony is given on behalf of the University of Texas as representative of the nation's higher education community, and has been endorsed by the American Council on Education, the Association of American Universities, the College and University Personnel Association, NAFSA: Association of International Educators, the Council of Graduate Schools, and the National Association of State Universities and Land-Grant Colleges. The combined memberships of these associations represent over 2,000 colleges and universities across the country.
Page 234 PREV PAGE TOP OF DOC
As I mentioned earlier, I serve as Associate Vice President of International Programs at the University of Texas at Austin, which has a total enrollment of 48,000 students, a student cohort which includes one of the largest populations of foreign students and scholars in the nation. Each year, more than 1,000 scholars from all parts of the world come to the University of Texas at Austin to teach and perform research. At any given time, we have about 500 persons holding H–1B visas. In the context of academia, these positions generally refer to trainees, post-doctoral researchers, medical residents, research assistants, and professors, among other positions.
As you know, the H–1B visa classification has undergone a significant amount of redefinition over the past few years as a result of the Immigration Act of 1990 and subsequent regulations and technical corrections legislation. As evidenced by this hearing today, the H–1B program is regularly being reevaluated. In fact, few other classifications have experienced so many changes in recent years. H–1B status is particularly appropriate in the world of academic research where many positions and projects are, by nature, temporary. It follows, therefore, that any changes in the H–1B program will strongly impact colleges and universities.
In order to qualify as an H–1B professional, the academic researcher or other such short-term professional campus employee, must have the requisite professional training and experience to assume a professional position with an employer. In addition, the position filled by an alien must require the degree that is commonly recognized for entry into the profession, which in the case of most scholars, is a minimum requirement of a master's degree. H–1B professionals may only be employed in the United States by the U.S. firm, organization, or institution that files a petition to gain H–1B status for a temporary worker. The salary for an H–1B must be within five percent of a corresponding ''prevailing wage determination'' made by the appropriate State Employment Security Agency. In Texas, the salary for an H–1B must be within five percent of a corresponding ''prevailing wage determination'' made by the Texas Workforce Commission. Finally, H–1B professionals may remain in the United States no more than six years.
Page 235 PREV PAGE TOP OF DOC
Academic institutions as well as H–1B scholars have certain responsibilities under the H–1B program. For one, institutions must pay the higher of the ''prevailing wage'' or the ''actual wage'' for salary purposes. Also, employment of the alien must not degrade the working conditions of similarly situated employees, and institutions must keep detailed records on H–1B workers. An H–1B professional is not authorized to begin work until the H–1B petition is approved, and the alien has either entered the U.S. to work, or has had his or her status changed to H–1B.
In my appearance here today, I would like to tell the Subcommittee the importance of the H–1B program as it relates to colleges and universities, and to outline some difficulties in the implementation of the program. First, I want to emphasize that the role of H–1B workers on college and university campuses is essential. U.S. universities are the best in the world, and therefore they draw both students and scholars from around the world. This is clearly beneficial for the students, in that they receive the best education the world can offer, and for scholars, who join a remarkably productive community of colleagues. It is also very good for the U.S. universities because these professionals, no matter where they come from, are leaders among their peers. Their contributions in working with their American colleagues and teaching American students increase the research and educational capacity and breadth of U.S. colleges and universities, helping to make U.S. schools the preeminent higher education institutions in the world.
The presence of H–1B professionals in academia is an integral part of training and educating the American workforce. Each of the positions I described earlier, from research assistant to visiting professor, are an integral part of the fabric of colleges and universities and non-profit research institutions, providing these institutions with thousands of talented experts from a variety of foreign nations. Increasingly U.S. students find themselves entering a global workforce, and exposure to foreign nationals while still in college is extremely beneficial to them and their employers. On campuses across the country, multinational teams of researchers perform cutting edge research in engineering, medicine, physics, economics, and many other fields. Any significant reduction in the number of foreign scholars at our nation's schools would create a knowledge and learning deficit that could adversely affect American students, scholars, and institutions of higher learning. It would also create a similar deficit within the business community, which obviously uses academia as a valued resource as it builds on the cutting edge of academic research to develop products and services for the marketplace.
Page 236 PREV PAGE TOP OF DOC
The contributions of H–1B professionals at the post-graduate level fill a crucial need for U.S. academic institutions from an academic and training perspective. For example, H–1B professional scholars often work on collaborative efforts with U.S. researchers that contribute greatly to a specific field of knowledge, educate U.S. students and scholars, and in many instances, create significant benefits for all of society. In this manner, H–1B professionals are directly passing on their knowledge to U.S. students and scholars. In some instances, H–1B professionals are the facilitators of learning in particular academic fields. I would like to illustrate this point with some examples from the University of Texas that typify the contribution of these H–1B professionals. In each of the three examples, the special perspective brought by an international scholar has added value to the activity.
Example 1: H–1B professional, born in Nigeria, educated in France, performing research in drug metabolism and neurotoxicity in the Department of Pharmacology and Toxicology. This professional will develop in vitro models of the blood brain barrier and characterize the endothelial cell morphology of the choroid plexus. This professional will also help direct the research of graduate and undergraduate students in pharmacology. Her unique background from Africa through Europe has greatly enhanced this research effort.
Example 2: H–1B professional: born in Germany, educated in both France and Germany, conducted research in Cameroun, Ecuador, Ghana, South Africa, and Niger prior to coming to University of Texas, holding an endowed Chair in the Division of Musicology and Ethnomusicology at the School of Music. This professional is responsible for teaching graduate and undergraduate students. He is well traveled, well published, and well respected in his field. He was nominated for a Grammy Award in 1987 for ''Best Traditional Folk Recording.'' Imagine the superior educational experience a student has in his classroom.
Page 237 PREV PAGE TOP OF DOC
Example 3: H–1B professional: naturalized citizen of the United Kingdom, educated in Rhodesia and the South Africa, conducting research in Economic Geology, specifically to investigate geophysical data for oil and gas research projects. This professional is well respected worldwide and has received numerous awards and fellowships for his past accomplishments. His current research is of particular interest to our economy as it is directed at the discovery of undiscovered petroleum reserves. He will supervise a team of scientists and researchers to carry out this endeavor.
The U.S. academic community is strongly committed to expanding the existing talent base of outstanding students and scholars from the U.S., and has actively pursued this mission for many years. For example, American colleges and universities provide grants and scholarships to students who show promise in the applied sciences. Furthermore, institutions of higher education have formed outreach partnerships with the K–12 education system to increase and improve the pipeline of technologists. Despite our efforts to expand the U.S. talent base, we must also seek outstanding talent from other parts of the world to contribute to America's technological pre-eminence.
Colleges and universities have a very positive record in recruiting trainees and scholars under the H–1B visa program. Our employment of H–1B professionals does not undercut U.S. employers or U.S. workers. In fact, we are aware of no Department of Labor penalties ever imposed on academic employers and the DOL has generally agreed that academic institutions are model employers in this regard. Academic institutions employ H–1B scholars not only because of shortage problems, but because U.S. colleges and universities attempt to populate their campuses with outstanding talent from around the world to contribute to making America's universities the premier academic institutions anywhere. By promoting the free exchange of ideas and knowledge, without regard to national borders, the academic community is only fulfilling its duty and mission to educate and train American students and workers.
Page 238 PREV PAGE TOP OF DOC
Given the critical importance of the H–1B program to academia, we are particularly concerned with three issues that greatly impact H–1B professionals and their institutions: 1) the yearly numerical caps placed on H–1B workers as a result of the 1990 Immigration Act; 2) the Department of Labor Administrative Law Decision on the Matter of Hathaway Children's Services; and 3) the Department of Labor Occupation Employment Statistics (OES) Prevailing Wage Surveys. Each of these issues has had a severe and negative impact on the ability of colleges and universities to hire H–1B professionals for academic research and teaching. We are pleased to see that the Senate Judiciary Committee has reported out a modified bill, S.1723, the ''American Competitiveness Act,'' which addresses these issues.
1) Annual Cap on H–1B Workers
As you know, the 1990 Immigration Act set specific numerical levels for H–1B workers on a yearly basis. The Act imposed a cap of 65,000 on the number of H–1B petitions that the Immigration and Naturalization (INS) may approve each fiscal year, which runs from October 1 to September 30th. While the cap did not initially present a problem during the recession of the early 1990s, as the economy grew in the mid 90s, so did usage of the H–1B category. For the past two years, the cap has been reached before the end of the government's fiscal year, meaning many H–1B petitions were stalled for weeks once the cap expired. In 1998, the cap is projected to be reached as early as the end of April, meaning that no further H–1B workers will be allowed until October 1.
The current cap on H–1B scholars creates many problems for academia. If the cap is too low, which we believe it is, it hinders the ability of U.S. colleges and universities to access some of the best academic talent in the world. This problem is compounded by the fact that if the cap is reached too early in a given year, schools will not be able to obtain timely approvals of the H–1B petitions, which in turn will hamper important budgeting and hiring activities. Delays in such activities will negatively impact a number of teaching and research activities on campuses.
Page 239 PREV PAGE TOP OF DOC
The inadequacy of the current limit has caused significant problems for colleges and universities which are unable to fill on-campus positions and obtain qualified professionals for various positions near the end of each fiscal year. Even the Immigration and Naturalization Service seems to recognize this problem and has issued a proposed rule on December 30, 1997 explaining that INS has changed its policy on counting H–1B workers, and will count such workers by individuals rather than by position in education.
In education, as in business, the flow of human capital and ideas across borders is a key to success in a global society. From an academic perspective, H–1B professionals are essential not only to our mission of helping to create a highly skilled U.S. workforce, but to developing the ideas and training that will help guide U.S. academia and the U.S. workforce into the 21st century. An increase in the cap must occur soon, or the teaching and the research that take place on campuses will suffer again.
2) Department of Labor Hathaway Decision
Another key issue for the academic community is the ''Hathaway'' decision (Matter of Hathaway Children Services), which asserts that the universe of all employers must be factored into the calculation of the prevailing wage. As a result, salaries offered for occupations at academic and nonprofit research institutions must be compared with salaries offered by non-academic, for-profit entities. Clearly, academic researchers, by the non-profit nature of their work, should not be required to pay private sector wages. In effect, the Hathaway decision requires schools to pay artificially inflated wages to H–1B professionals in academic research.
Page 240 PREV PAGE TOP OF DOC
On March 20, 1998, the Department of Labor issued a ruling reversing the Hathaway decision. However, the critical nature of the research being done in academia demands a more definite and secure solution than a regulatory one. Therefore, the higher education community would still welcome statutory changes with respect to prevailing wages for a number of reasons. First, such codification would clarify that academic wages are inherently different than for-profit, private sector business wages. Academic researchers should be classified as a distinct group for purposes of determining prevailing wage rates and colleges and universities should pay such researchers accordingly. Second, the Department of Labor's ruling does not cover affiliated nonprofit research institutions, a vital component of the American higher education enterprise. As entities which perform irreplaceable academic research, wages at these affiliated institutes should be treated as academic wages as well.
Although it is beyond the scope of this testimony to analyze the pay differentials for technical experts in academia compared to those in industry, it is certainly true that academics are paid less. We have a huge amount of anecdotal evidence of this disparity as we regularly compete with industry for the best Ph.D. graduates in America.
3) OES Wage Determinations
Another major problem related to the Hathaway decision is the issuance of new Department of Labor Occupation Employment Statistics (OES) wage surveys, which are designed to determine the specific numerical ''prevailing wage rate'' for a given occupation in a given geographical area. This January, the Department of Labor instituted the OES system with the goal of creating centralization and uniformity of these wage surveys among the fifty states. Previously, the Department's methodology tracked market behavior accurately, but the new method results in artificially high wage rate determinations that are nearly impossible for institutions to pay since the amounts paid in salary are frequently limited by federal government agency policy. In some instances, the Department of Labor surveys have determined salaries for post-doctorate researchers to be twice or three times the level paid by academia in prior years.
Page 241 PREV PAGE TOP OF DOC
It is very important to remember that stipends or reimbursements for researchers at academic and non-profit institutions are frequently established by specific grants of federal agencies. Institutions routinely supplement such grants with funding from other sources. For example, the NIH has set a specific pay schedule for grants upon which most schools operate. Therefore, under federal grants, institutions must use money from other campus accounts to supplement payments from the federal grant. In many cases, institutions are simply unable to pay these new higher rates. The OES system combined with the effect of the Hathaway decision have the potential to seriously disrupt academic research.
The problem with OES is that it collapses what used to be a six or seven tiered wage structure into two tiers, so that jobs that require minimal experience are being compared to jobs with several years of experience. Under OES, the mean salary is seriously inflated, and does not accurately reflect what ''entry'' level positions like those below offer. I say ''entry'' level, because all of those listed below are just entering these professions. Following are five specific examples of a difference between prevailing wage and a University of Texas employment offer that illustrate the problem:
1) Research Associate
degree: PhD, Astronomy
Working in the Department of Astronomy
UT offer: $33,744 per year
OES wage; $74,194 per year
2) Assistant Professor
Page 242 PREV PAGE TOP OF DOC
degree: Master of Music,
Working in School of Music
UT offer: $38,531 per 9 month academic year
OES wage: $54,269 per year
3) Assistant Professor
degree: PhD, History
Working in Dept. of History
UT offer: $44,334 per 9 months
OES wage: $67,220 per year
4) Research Associate
degree: PhD, Geophysics
Working at Institute of Geophysics
UT offer: $45,000 per year
OES wage: $65,041 per year
5) Research Scientist Associate III
degree: PhD, Geology or Engineering
UT offer: $35,028 per year
OES wage: $65,041 per year
Salary comparisons between academia and industry are difficult to make because of structural differences, such as 9 month versus 12 month employment and fringe benefits, but there is a generally held belief that academics are paid less than their equivalents in industry. Therefore, the academic community would welcome the usage of non-governmental wage surveys to determine the prevailing wages in individuals academic employment categories.
Page 243 PREV PAGE TOP OF DOC
Finally, I would like to take this opportunity to highlight another issue of importance to higher education: the problem of colleges and universities not being able to pay honoraria to temporary business visitors to the U.S on B–1 visas. The practice and custom of providing an honorarium for a lecture or a speech as a gesture of appreciation fosters the exchange of ideas and information, the hallmark of an educational experience. The ban on honoraria is very often a disincentive for distinguished international scholars who travel as business visitors to U.S campuses for teaching and educational purposes. With such a disincentive against the exchange of thoughts and ideas in place, American students are denied to opportunity learn from a number of prominent scholars and visitors. We urge you to permit the payment of academic honoraria to these short-term visitors.
Once again, I appreciate the opportunity to testify before this committee on these important issues that affect the higher education community and the U.S. workforce. I wish to thank all the Members of the Subcommittee, especially Chairman Smith from the state of Texas, for your attention to the concerns of colleges and universities on the H–1B program and for your efforts to explore new ideas to address existing problems. Thank you.
Mr. SMITH OF TEXAS. Thank you, Dr. Lariviere.
Let me say to my colleagues and also the panelists, I anticipate, and I am sorry to go into our lunch hour, I anticipate probably two rounds of questions. That would explain why I am only able to get a couple panelists into my questions. I just want to put my colleagues on notice as well, in case they have additional questions, that I am hoping the panelists can stay another half an hour so that we can get all of our questions answered.
Page 244 PREV PAGE TOP OF DOC
Mr. Miller, let me start my questions with you. I noticed that you in your testimony, and others who want us to lift the cap, have used similar language in their testimony. We have heard the word quick fix, increasing the cap, a short term, temporary, and so forth. What does your industry think of as a quick fix or a short term; how many years should the cap be raised?
Mr. MILLER. Mr. Smith, we certainly hope the U.S. domestic market forces, which are beginning to work in terms of increased enrollments in freshmen programs, in terms of community college programs, in proprietary school programs, in worker retraining, in finding a lot of workers who want to come back into the work force, will all have a quick impact. But my guess is we are looking at somewhere between 4 to 7 years, particularly because the Bureau of Labor Statistics is estimating that in addition to the hole we already have, there will be at least 130,000 more jobs created each year over the next few years.
Mr. SMITH OF TEXAS. The reason I mentioned that is because I find it interesting that when you say a temporary or quick fix or short term fix, when you say 3 or 4 or 5 years, this really amounts to something close to at least 9 years, because these individuals are coming in for 6 years and I expect and hope the free market would respond perhaps more quickly than that, even though I understand we are trying to give incentives to individuals who may be in elementary or middle school as well. But with a 3-year cap, that is 9 years, that still seems to me to be a fairly significant length of time.
I would like, Mr. Miller, with you and Dr. Matloff, to ask you questions based upon the others' testimony, and you will both get equal time on this. Before I get there, I have another question, Mr. Miller, based upon an article in a major newspaper that says that companies applying for the most H–1B visas are using them for the kinds of jobs that critics say many Americans could easily be trained to perform. The 10 companies using the most visas last year all provide contract labor and services, jobs like computer and software installation and maintenance that critics contend do not necessarily require college level math and science degrees.
Page 245 PREV PAGE TOP OF DOC
What would be your response to that assertion?
Mr. MILLER. The companies that are referred to actually do two types of work, Mr. Chairman. I think that needs to be distinguished. One is they actually supply short-term labor when a company, for example, a bank or a pharmaceutical firm or a manufacturing firm or government agency for that matter, doesn't have enough workers. The second, which is more complicated, is when they actually take over the operations and that is where most of the fastest growth is shown. We had a survey released at our association conference 2 weeks ago to show that outsourcing—which is when a company organization turns over its back office computer operations to an outside software organization or service organization—grew by 40 percent last year.
In both instances, I think you will find, Mr. Chairman, particularly when you are providing staffing services to a client, the client will insist the person have at least a baccalaureate degree and some experience. It is the client——
Mr. SMITH OF TEXAS. Even if it is for maintenance and servicing?
Mr. MILLER. Yes, because the client sets the specifications. If you hire an accountant or a bookkeeper from an agency, you as the client set the specifications. The clients have very high expectations. When you are doing the work yourself, you can be more flexible because you are responsible for total outcome of the project and you can have more flexibility.
Page 246 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. I have a number of other questions. Let me just go on as quickly as we can.
What about the claim that salaries for computer programmers rose 7 percent last year, not a rate that would indicate employers are desperate for new labor.
Mr. MILLER. Several points to that. Number one, we have independent surveys which show the numbers have increased in double digits. Number two, those numbers do not include what is quite common in the computer industry, which are stock options, bonuses. Yesterday, two human resource directors from two large companies told me they are now paying 50 percent of their current employees a compensation bonus each year for recruiting new employees, new major element of recruiting. For example, in Washington State, a study was done showing that the average salary in 1995, if you only include base wage compensation, is $58,000. If you added in stock options and other benefits, the total compensation package was, in fact, $135,000.
Mr. SMITH OF TEXAS. Dr. Matloff says in his testimony that a number of information technology companies do not recruit on college campuses today, one well-known company only recruits on 26 college campuses, and that ITAA has conceded that employers do not recruit at many colleges. Why is it that information technology companies are not recruiting on all college campuses where there might be computer programming majors or engineers?
Mr. MILLER. I never conceded such a thing. On the contrary, what my human resource directors tell me is they had to dramatically increase their budgets because they have to hit many more campuses. AMS, which is a local company based here in Northern Virginia, told me they went from recruiting at 40 campuses 2 years ago to 200 campuses this year and had to hire the equivalent staff to do that dramatic increase in recruitment.
Page 247 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. My time is up. I am going to squeeze in a couple more questions, and I will have to pick up in a minute.
The Department of Labor Inspector General found, we heard a few minutes ago, in 19 percent of the cases employers were not paying the salaries they had promised to their applicants. What is the explanation for that?
Mr. MILLER. Again, Mr. Chairman, if that is true, I wish the Inspector General would file a complaint with Mr. Fraser so he could do the investigation. I keep hearing about these alleged abuses. My members don't like them either.
Mr. SMITH OF TEXAS. The other side of that was these individuals have every incentive in the world not to file a complaint if they want to keep their job.
Mr. MILLER. Mr. Chairman, anybody who is an interested party under the law that you crafted can file it. You can file a complaint.
Mr. SMITH OF TEXAS. It does not have to be the employee?
Mr. MILLER. No, the AFL–CIO can file a complaint, Dr. Matloff can file a complaint. Anybody who wants to file a complaint can. Mr. Fraser has to do an investigation, as required under the law.
Page 248 PREV PAGE TOP OF DOC
Mr. SMITH OF TEXAS. What about the fact a lot of these high tech companies only hire anywhere from 2 to 25 percent of the number of employees whom they are interviewing, even after screening.
Mr. MILLER. Obviously they only hire qualified people. But if you take the 2 percent logic that Dr. Matloff has, that means 98 percent of the work force is walking around saying we will program for food. That is absolute nonsense. We have a 1.1 percent unemployment rate.
Mr. SMITH OF TEXAS. In some of these instances, as I understand it, there has been a fair amount of screening going on already, but you are saying the low percentage of actual hiring is due to the qualifications or lack thereof.
Mr. MILLER. That is right. And the other thing that is important to note is we spend $210 billion a year training workers because many times people don't have the skills but companies hire them and then they train them.
Mr. SMITH OF TEXAS. We know we can solve that by giving priority to immigrants with an education level.
Mr. MILLER. I knew you were going there, Mr. Chairman.
Mr. SMITH OF TEXAS. The gentleman from North Carolina, Mr. Watt.
Page 249 PREV PAGE TOP OF DOC
Mr. WATT. Thank you, Mr. Chairman.
Let me start with Dr. Lariviere.
Mr. LARIVIERE. Lariviere.
Mr. WATT. Lariviere, and see if I can——
Mr. LARIVIERE. Guys named Smith and Watt are my envy, I will tell you.
Mr. WATT. Let me see if I can figure out a way to solve the educational institutions' problems. First of all, I take it you are not saying that the prevailing wage requirement does not serve a useful purpose generally. You are saying that it really disadvantages people in academic settings, am I clear on that?
Mr. LARIVIERE. Yes, sir, and the Hathaway issue is also a problem for us, in that you have to go to the universe of employers for the data. It went from six tiers to two tiers, so you have the minimum and the maximum in a field, and you use that average. Well, as you can well imagine, in these very, very narrowly drawn technical fields, let me just tell you, for example, we have an expert on myotonic dystrophy we are trying to bring in on an H–1B visa. Well, the universe there isn't very great, and the Bureau of Labor Statistics doesn't have minimums and maximums on people doing myotonic dystrophy research. So we end up with numbers that are $30- and $40,000 over what we know the market really is.
Page 250 PREV PAGE TOP OF DOC
Mr. WATT. Do they have the statistics on what is being paid in academic provisions nationwide?
Mr. LARIVIERE. If that was the universe of employers, we would be very happy, but it is all industries.
Mr. WATT. So if we could craft something that dealt specifically with university settings or academic settings, that would address the concern. I want to be clear on the purpose that the prevailing wage standard serves generally. You fully support having that as a standard?
Mr. LARIVIERE. Absolutely. We recognize and support the necessity for the prevailing wage standard; it is just that we would like it to reflect the real world instead of what we have been having to deal with.
Mr. WATT. Would you advocate for some kind of separate subcategory for academic settings of the H–1B program or what?
Mr. LARIVIERE. To be honest with you, sir, I don't know the answer to that because this is an issue that is in the hands of the statisticians and since I am not a statistician, they can dazzle me with numbers, but I still look and see the real world, and the simple fact of the matter is that if we want to hire somebody in astronomy and they include the—someone with the same technical qualifications who is working for Intel or Xerox or whatever, we just can't compete with those kinds of salaries, and we get a number back that is $20,000 or $30,000 higher than what we can afford to pay.
Page 251 PREV PAGE TOP OF DOC
Mr. WATT. Let me ask a general question to help my own understanding about these temporary or sweat shop situations, if there is such a thing. You mentioned that you were familiar with a couple of people who don't necessarily fall into that category. I am not suggesting that Wipro falls into that category. But are there temporary agencies, basically, that are using a number of positions in the H–1B allocation now?
Mr. LARIVIERE. I'm sorry, sir, are there——
Mr. WATT. Are there basically people who are using the H–1B category to place folks in permanent employment?
Mr. LARIVIERE. If your question is does the existence of Wipro and HCL America and so on, are they using the H–1B to get people here for permanent employment, the answer is, in my experience, no.
Mr. WATT. Are they using them as pass-throughs, as opposed to direct employment for their own company? Are they employment agencies? What are they?
Mr. LARIVIERE. No, they are software companies that do application development, development and maintenance of other people's products, for the most part.
Mr. WATT. But why wouldn't they have a job shop there?
Page 252 PREV PAGE TOP OF DOC
Mr. LARIVIERE. I have never been to the headquarters of Wipro and to Tata Consultancy Services, but I have been to HCL America and they have probably 5,000 square feet where their developers are working in cube farms and employ a significant number of Americans, generate $100 million worth of business in Silicon Valley. I mean, this is an American company.
Mr. WATT. Mr. Chairman, I would like to come back to this issue and get some of the other panelists to address it. I am trying to figure out whether this is a major loophole that is in the law now. Maybe we ought to look at trying to address that, if that is driving a shortage, to make sure that people who are coming into the H–1B program are really working for the employers that they profess to be working for, as opposed to being contracted out or subcontracted out or something like that.
Mr. LARIVIERE. I understand. I can only speak anecdotally because I don't have a grip on these dubious statistics that we have heard from so many different sides here. From what I see, there is a terrific shortage, and companies like EDS and like Oracle, and so on, want to undertake jobs and they simply don't have the muscle to do it and they have to bring them in from India, China, and other places.
Mr. WATT. Can I just ask, Mr. Sullivan, quickly, the situations where you contract with other—do you hire through any agencies H–1B employees; does your company, or do you know of other companies that do that?
Mr. SULLIVAN. We are solicited from time to time by firms that purport to have access to technology workers, and to a small extent, we utilize some of those contracting services, for example, in the deployment of a new communications system.
Page 253 PREV PAGE TOP OF DOC
Mr. WATT. Are these employment personnel agencies, temporary agencies, who is it that is doing the soliciting here?
Mr. SULLIVAN. I think they take many forms. One common form would be to subcontract work out to an organization who might perform a task that you are unable to provide if you do not have other resources to do so. Other firms might have temporary workers. In the case of my company, we are a light user of such services, probably somewhere in the vicinity of 25 or 30 employees in those technical categories, out of our total technical work force.
Mr. WATT. Mr. Chairman, thank you. I will come back to this issue.
Mr. SMITH OF TEXAS. Thank you, Mr. Watt. The gentleman from Indiana, Mr. Pease, is recognized.
Mr. PEASE. Thank you, Mr. Chairman.
Dr. Lariviere, my background is in higher education before coming here, and among my duties was to make sure we were always in compliance with Federal and State law and sometimes that involved trying to recruit faculty to vacant positions. And I am wondering if you can tell me what your experience is, either at Texas or at NASULGC or any of the other groups you are speaking for, with the ability of universities as employers to deal with the H–1B issue.
Page 254 PREV PAGE TOP OF DOC
My limited experience in that area, because we had few hires in that area, was that the governmental attitude seemed to be if we were hiring a Ph.D. in home economics, if there was an American Ph.D. with a home ec degree, we couldn't go overseas, and we were frustrated in our ability to point out that there were differences in capabilities, even within Ph.D.s in the same field and so forth. Was that just because I wasn't able to get the job done or is that fairly representative in the higher ed community, or do you even have a feel for it?
Mr. LARIVIERE. No, sir, I think that is quite representative, and this goes to the issue of our wanting to maintain our position as the greatest higher education system in the world, and for the most part simply because it is a real hassle to get somebody in on an H–1B. When a department chair comes to the university and says we want to hire somebody who is going to require an H–1B, we make very sure the department really has to have that person, simply because of the demand on our resources in order to get that person in the U.S. My understanding is that the Department of Labor looks on higher education as a model for compliance with regard to H–1Bs. It is not that we are chafing at our ability to comply, it is that the current cap and the OES numbers are stacked against us.
Mr. PEASE. Thank you.
Mr. Miller, sometimes when you read stories, you have mental images that come from them and I read in the newspaper within the last few days about Intel's layoff decisions and I have these images of people in metallic space suits dancing in an unemployment line. Is that likely to happen, I mean, what is your feel for these adjustments that apparently now we are seeing more of in the industry, with folks being laid off.
Page 255 PREV PAGE TOP OF DOC
Mr. MILLER. I think the short answer is if there were an unemployment line, it would be for about 15 seconds. The demand for a skilled work force in Silicon Valley is so dramatic that those people who will lose positions at Intel, either because of voluntary retirements or downsizing, whichever they choose, to reduce the positions over a long period of time, will have dozens, if not hundreds of opportunities instantaneously.
The nature of our business is every time a company like Intel goes through a problem, someone else grows. Otherwise the trend lines we are seeing, which is a 10 percent growth of the work force annually, would not be there, Mr. Pease. So clearly, while the press understandably focuses on big companies occasionally announcing layoffs because it makes big news, the reality is that overall the growth of industry is dramatic. It is dramatic in Silicon Valley, it is dramatic in North Carolina, it is dramatic in Boston, it is dramatic in Northern Virginia, it is dramatic in Texas, it is dramatic in Utah. So that is why the overall unemployment rate is so low, and that is why I said at the beginning of my testimony that I feel like I am in a time warp. People pick out the isolated bad stories where some particular company may be going through a temporary setback and try to generalize to the big picture. The big picture numbers are very clear. We have the lowest unemployment rate in this country in 30 years. White collar unemployment is virtually nonexistent. That is the challenge and the opportunity for the IT industries to produce more domestic workers so we are not facing the shortage we have now.
Mr. PEASE. Thank you very much.
Mr. Hatano.
Mr. HATANO. Since Intel is a semiconductor maker, I wonder if I might have the opportunity to also answer that question.
Page 256 PREV PAGE TOP OF DOC
Mr. PEASE. Please.
Mr. HATANO. First of all, what was in the headlines was Intel ''layoffs.'' In fact, what is happening is Intel is having a reduction in their head count by 3,000, and over the time period that they are talking about, they expect that almost all of that will be handled through attrition, not layoffs.
The second point is that the reason for the decline in head count is right now our industry is not growing as fast as it had in prior years. We are a very cyclical industry. Long term there is a very good growth path with dollar revenues growing about 17 percent a year, but there have been a lot of downturns in this industry. So what a company has to do is try to match its head count growth with expected growth in revenues. In Intel's case, they increased by about 1,000 new workers every month last year; in other words, 12,000 new workers last year, but they missed the projection, which was anticipating certain growth levels in dollars, which they now believe would not materialize.
Also, they have not announced they are laying off the sorts of engineers that we are talking about here today, in terms of the H–1B category. So we have to keep in mind there are a lot of different types of jobs, and in fact I hopped on the web site at Intel the other day after the announcement was made and still found a number of engineering postings on their web sites, so supposedly they are still open to hiring in some of those things.
Also, we can't just sit down and train new people in 6 weeks for the type of chip design work that we are talking about with the H–1B, so it is not a very quick thing to get that sort of training.
Page 257 PREV PAGE TOP OF DOC
Furthermore, Intel has been investing about $95 million per year in U.S. schools for math and science, so they are definitely seeing that long term they are going to be growing, they are going to be adding to head counts in the long-term and want to make sure that that pipeline is available to get the U.S. college graduates and graduate students in the future. And I think as you are looking at legislation, you have to think long-term, not from a headline you happened to read last week.
Thank you.
Mr. MILLER. One other point, Mr. Pease. Intel recently announced they were going to become the new sponsor of what had been known for 40 or 50 years as the Westinghouse Science Talent Search. I think that shows their long-term commitment. It is costing them a lot of money to do that, but they are stepping in for exactly the reasons Mr. Hatano just mentioned.
Mr. MATLOFF. I would like to mention something, now that the precedent has been set. The point has been brought up several times about unemployment rates. The fact is the unemployment rates really don't tell you much, and the reason is that when somebody is laid off and can't find a job in their field, they have to live, they have to make a living so they take another kind of job. They are employed all right, but they don't show up in the unemployment statistics even though they failed to get programming word.
I will give you a case and I will use the name, because he was in a national article, Paul Peterson. He was a programmer for 20 years, he was laid off, he couldn't find another job as a programmer, so he took a job at Radio Shack for $24,000 a year in retail sales, a third of his previous salary.
Page 258 PREV PAGE TOP OF DOC
And I have loads of people who send me e-mail who are in that situation. So the unemployment rates that have been bandied about here are interesting, but they are not relevant to the discussion. These people just don't show up in the unemployment rates because they have taken other jobs in other fields.
Mr. PEASE. Thank you.
Mr. PAYSON. Can I make a point?
Mr. SMITH OF TEXAS. The gentlewoman from California, Ms. Lofgren, is recognized.
Ms. LOFGREN. Thank you, Mr. Chairman. I am just getting into the statistics. I am sorry that Mr. Smith had to leave, although I do understand he had to catch a plane. But the 1.6 percent unemployment rate I mentioned in computer programming and the 1.1 percent unemployment rate in computer systems analysts and scientists from the Bureau of Labor Statistics are not my figures. They are statistics from the Bureau of Labor Statistics. And in terms of unemployment overall, we have a good economy in the county. In Santa Clara County at 2.8 percent unemployment overall, we have a very tight labor market.
Looking again to the salary data, in Silicon Valley, we have something called the Joint Venture, which is made up of a broad cross-section of our community, representatives from the educational community, the Mayor of San Jose who is a cochair, and organized labor. Joint Venture sends out reports that I think are very helpful and which add some light to the situation. One of the useful things that they have just sent out is salary information in a variety of different job clusters. What they report is that in the software clusters, the average salary, excluding stock options, according to Employment Development Department is $85,000 a year. I know that in terms of some of the companies, such as a major Internet company, the median stock option value for employees, excluding management, is $100,000 a year.
Page 259 PREV PAGE TOP OF DOC
So, clearly, wages, if you throw in stock options and other benefits, are growing dramatically, according to the State employment development department.
Given the overall shortage, we need to address what we need to do to maintain our prosperity, but we also need to address the fear. We haven't received data, to support the fear that somehow American workers would be harmed or their wages lowered. That is not something I would want, or that any member of this committee would want.
So the question is how do we address the fear, and at the same time that we are ensuring that American workers are not disadvantaged, ensure that we have enough workers to create this economy. Do we need to create some kind of new definition for the spectacular? For example, there is only one Einstein in the world. You can't advertise, ''Wanted,'' someone who can create Java. There are just some things that are special and unique. I am not sure that the way we define the outstanding really works in today's economy. I wonder if you, Dr. Lariviere, or Mr. Hatano, have any suggestions to define the exceptional versus just the general shortfall.
Mr. LARIVIERE. Well, that is our business, is to identify talent, and there has been only one Einstein, but that is because we only know of one Einstein. We don't know how many Einsteins there have been.
Ms. LOFGREN. Well, an Einstein would not have qualified under the H–1B program.
Mr. LARIVIERE. That is exactly right. My job at the University of Texas is to press everybody to look internationally. One of the things nobody has mentioned here is that this information technology industry we keep focusing on is a very important industry, it is unlike anything we have ever seen ever in history. It is the most important set of phenomena since the invention of the steam engine. The Industrial Revolution took 100 years to unfold. This is an industry in which hardware products have a shelf-life of about 15 months. If we are looking at training now freshmen to take jobs in the industry, you are going to have three and four product cycles.
Page 260 PREV PAGE TOP OF DOC
Ms. LOFGREN. I understand product cycles are less than 12 months at this point. Is there a way to define the exceptional versus the general shortfall.
Mr. HATANO. I think a couple comments on what you just mentioned. First of all, you mentioned the wage impact on jobs and all that, and again I think it is worth repeating what we are also talking about is a lot of manufacturing jobs that are created as a result of the ingenuity of the engineers on H–1B programs. In our industry, I cited some statistics earlier about our overall wages we are paying and average wages. That includes the engineers and the production workers. If we just look at our production workers, we are paying about $35,000 compared to about $28,000 for manufacturing jobs in general. So just looking at production workers, these are high paying jobs that are being created as a result of the ingenuity of engineers.
Now specifically on the outstanding category, my understanding, it is for ''Einsteins'' or people who have received awards and recognition in their home country. The H–1B category obviously includes a lot of other people. If you were to try and stay within that, the highest priority would certainly be the Master's and Ph.D. candidates or graduates in EE programs, electrical engineering programs, computer science, chemical engineering and some of the other engineering fields. But having said that, we shouldn't forget the fact that a B.S. in EE is not something trivial, that that is also very significant, and that those people are making a lot of contributions. So I wouldn't want you to try to make sure we encourage the Masters and Ph.D.s to come here and somehow discourage or not allow the B.S. Engineering students. If you want to really recognize these engineers at the Master's and Ph.D. levels, you ought to be attaching to their diplomas a visa that allows them to stay in the country. We ought to be encouraging them to come, not discouraging them to stay.
Page 261 PREV PAGE TOP OF DOC
Ms. LOFGREN. I see that my time has expired, Mr. Chairman.
Mr. SMITH OF TEXAS. Thank you, Ms. Lofgren.
I have one last question for Mr. Miller, and then I would like to go to Dr. Matloff.
Mr. Miller, as you know, under current law, when a foreign worker is hired, the employer has to pay either the actual wage or the prevailing wage. As I understand it, the prevailing wage as defined is 95 percent. Why shouldn't the prevailing wage be 100 percent?
Mr. MILLER. That was a Department of Labor regulatory decision based on historical precedent, Mr. Chairman.
Mr. SMITH OF TEXAS. Meaning close enough?
Mr. MILLER. I don't have all the background. I assume there are some court cases the Department of Labor went through. Mr. Fraser may have more information about that.
Mr. SMITH OF TEXAS. Thank you.
Dr. Matloff, let me ask you to respond to a couple points that Mr. Miller has made in his testimony. The first is that it seems to me, and I agree with what Mr. Miller said here, it seems to me there is a disincentive for American companies to hire foreign workers, high tech workers, because of the expense and the time required to process the H–1B workers. Why wouldn't that be a disincentive?
Page 262 PREV PAGE TOP OF DOC
Mr. MATLOFF. It was already explained by the gentleman from the Department of Labor for the labor condition part of the H–1B process. It is a simple one-page form that has to be returned in seven working days. The expense is minimal. You are talking about $1,000, maybe a little bit more, in attorney's fees, okay, so there is nothing to it. And a lot of times, by the way, the employer has the H–1B himself or herself pay the fee. And the same goes for the green card, the fee is higher there, but in many cases, the employer has the employee pay the fee.
Mr. SMITH OF TEXAS. Mr. Miller also said, and thank you for that answer, that the complaints that can be filed are not limited to complain