SPEAKERS       CONTENTS       INSERTS    Tables

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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
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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
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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
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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
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    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

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    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
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    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

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    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
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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.
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    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.
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    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.

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    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.''
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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;
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 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.
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    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.

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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.

Table 1


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    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.

Table 2

Table 3

Table 4

    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.
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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.
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    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.
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    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.
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    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.

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    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.
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    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.

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    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).
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    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.
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    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.
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    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.
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    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.

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    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.
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    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:
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  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.
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    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.
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    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.
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    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.
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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.

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    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.
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    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.

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    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.
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    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.
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    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.
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    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.''
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    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.
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    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.

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    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.

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    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.

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    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?
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    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.
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    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.
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    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.
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    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.

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    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.
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    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.
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    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.
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    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.
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    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.

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    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?
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.

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    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.
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    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.
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    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:
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    (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.
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    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.
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    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.

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    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.
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    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;
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 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.
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    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.
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    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.''

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    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.
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    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.

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    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.
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    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.
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    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.

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    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.
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    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.
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    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.
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    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.
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    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.
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    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.

Table 5



    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.
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    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.
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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.
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    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)
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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.
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    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.
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    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?
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    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.
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    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——

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    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.
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    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.
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    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.
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    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.

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    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.
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    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.
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    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——
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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
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    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.

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    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.
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    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.
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    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.

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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:
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  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.

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  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.
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    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.
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    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.
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    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.
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    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.

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    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.
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    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.
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    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
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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

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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%.
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 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.
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— 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.
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— 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.
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— 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.
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    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)

Table 6

    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)

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    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.
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    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)

Table 7

    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.
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    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.
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    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.''
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 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)
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    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)
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  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.

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    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
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       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.
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    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.
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  (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.
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  (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.)
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    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.
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    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.
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    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.
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    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

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    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.
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    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.)

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    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.
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    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.
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    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.
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    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.

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    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.
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    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.)

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    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.''
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    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)
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    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.
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    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.
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        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)
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  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.

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    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.
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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.
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    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.
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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.
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    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.
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    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.
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    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.

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    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.
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    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.
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    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.
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    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.
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    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.

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    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.
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    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.
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    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.
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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?
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    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
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    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
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(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.
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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.''

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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.
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    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.

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    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.

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    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.
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    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.
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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.''
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    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.

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    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.
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 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.
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    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.

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    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.
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    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.
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    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.

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    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
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(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
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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/

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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
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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
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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.
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    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.
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    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.
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    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.
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    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.
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    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.

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    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.

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    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.

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    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.
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    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?

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    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.
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    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.

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    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.

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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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?
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    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 complaints just from the employees, they can be a complaint filed by any interested party. If that is the case and there are abuses, why haven't there been more complaints filed over the last number of years?

    Mr. MATLOFF. First of all, nobody wants to be blacklisted even if you are not the employee in question here. You don't want to be put on a blacklist where you can't get a job yourself.

    Secondly, a friend of mine just did this a couple weeks ago and he tried very hard to file a complaint. The Department of Labor told him that due to—that the Congress had tied its hands in terms of pursuing complaints. Now I don't know the details of that, but I was sort of playing the middleman in this thing because I know this person, and that is what he was told. I was a party to the e-mail.

    Mr. SMITH OF TEXAS. You mentioned in your testimony, the unemployment rate for programmers over the age of 50 is 17 percent. What was the source of that data?
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    Mr. MATLOFF. That is an interesting one because a reporter for the San Jose Mercury News disputed that, Miranda Ewell. What she had done was talked to a couple people in, I believe, the BLS and they said, well, you know, we don't exactly have that information and we don't think anybody has it, but here is something else that was pretty low. And so then I contacted the original reporter that reported this, the 17 percent, in Computer World, and she went through a detailed process of telling me who she had talked to, how she was very persistent until she finally got the information, that she reported the 17 percent. I believe that. However, I want to repeat again that I don't think that that is the major issue. The major issue is that people leave the field when they fail to get programming work and thus don't show up in the unemployment data.

    Representative Lofgren mentioned the EDD, employment development department, unemployment rates. I am sure they are current. Paul Peterson at Radio Shack is employed, there is no question of that. The point is they are irrelevant. The fact that only 19 percent of computer science majors are still in the field 20 years after graduation, compared to civil engineering majors, 52 percent 20 years later. Sure, people go into management, they do lots of things, but that is true for both civil engineering and computer science, and you don't need the statistics anyway. We all know if you go down to a high tech company, you will see it is dominated by the 20 and 30 somethings, we all know that. The question is why that is. A major reason is the older an employee gets, the more they find themselves shunned.

    Mr. SMITH OF TEXAS. Thank you, Dr. Matloff.

    Mr. Sullivan, a quick question for you. I noticed Dr. Matloff in his testimony talks about how a few campuses are visited by high tech companies for recruitment purposes. What about your companies, how many universities do you recruit at and why not more if it is not more than 20 or so?
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    Mr. SULLIVAN. I believe I shared in the testimony 108 campuses.

    Mr. SMITH OF TEXAS. Excuse me, I missed that.

    Mr. SULLIVAN. This is up from just a few years ago, where we were under 20, and have moved that up to 108. The total hires from—technical hires, represent about 17 percent from the college campuses. The rest of our hires are experienced hires.

    Mr. SMITH OF TEXAS. You answered my question. Thank you.

    Mr. Hatano, let me begin with a question to you and I am looking at your testimony here. Tell you what, I am going to pass on that question, and in lieu of that, and on the way to additional questions by my colleagues, for the benefit of my colleagues and for the benefit of the panelists, let me read into the record an excerpt from a Chicago Tribune editorial from yesterday that will sound familiar to you.

    ''Shouldn't U.S. immigration policy tilt more in favor of applicants with skills demanded by our economy? The high tech labor shortage also suggests that structural changes in immigration policy may be in order and more closely match the skills of newcomers with the demands of the U.S. economy. Congress should look beyond the immediate shortages and toward more permanent problems and solutions.''

    I will recognize the gentleman from North Carolina, Mr. Watt.

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    Mr. WATT. Thank you, Mr. Chairman. I was going to pursue this other question with Mr. Miller about the temporary agencies' pass-throughs, but I am not sure I want to chase that rabbit for five more minutes unless there is somebody on the panel who thinks that by some definitional revision to the H–1B program we could open up a number of new slots if we eliminated pass-throughs.

    Is there anybody on this panel who thinks that by eliminating pass-through agencies or—I don't even know how you would define it, you could get some of these temporary agencies out of the equation and that would help to solve the problem, or am I just chasing a rabbit here that is just a waste of time?

    Mr. MILLER. I think it would be much too complicated, Mr. Chairman and Mr. Watt. The best thing to do is to, number one, make sure the correct wages are being paid. Congress was pretty smart back in 1990. They said the way to control the labor market is to make sure employers are not allowed to bring these people in at below market wages. Number two, make sure enforcement is being done and there is a very open disclosure process. If you hire a U.S. worker, you don't post that person's salary or wage. If you hire an H–1B worker, you do. The wage data are also available at the U.S. Department of Labor. Anyone can walk down there right now and find out what those workers are being paid. We support the provision in the Abraham bill to increase the penalties for violators for the simple reason that, again, it is an unfair competitive advantage, not just to U.S. workers, it is an unfair competitive advantage to U.S. companies.

    Mr. WATT. You made reference a couple times to this enforcement process. I guess there are several different permutations and possibilities floating around. What is the problem, as you see it, with the enforcement process that allows the Department of Labor to do an investigation without a complaint?
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    Mr. MILLER. Mr. Chairman and Mr. Watt, our concern is the following. The Department of Labor has basically told you they don't like the H–1B program, and yet they are asking to be given additional authority and power beyond what they really have.

    Mr. WATT. That doesn't address my question. I am going to presume that the Department of Labor, and maybe I am crazy to think this, will do its job. Well, maybe I should ask the question this way. Is there an enforcement mechanism other than individual complaints that you would support in the H–1B program?

    Mr. MILLER. It doesn't have to be an individual complaint, Mr. Watt. My understanding is an organization could file a complaint.

    Mr. WATT. Is there an enforcement mechanism, other than the one you currently understand exists?

    Mr. MILLER. I support the current one with increased penalties.

    Mr. WATT. Other than the one you currently understand exists, is there an enforcement mechanism that you could support?

    Mr. MILLER. No.

    Mr. WATT. Okay. Is there an enforcement mechanism that anybody on the panel, other than Mr. Miller, would like to see in place, as an alternative to what currently exists, and would you advocate for that and tell me what it is?
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    Mr. MATLOFF. I would advocate for it and point out——

    Mr. WATT. What is it, first of all?

    Mr. MATLOFF. I was going to preface by saying you can do this under present law, I believe, and that is there is a fundamental discrepancy here between the basis on which somebody is hired and the prevailing wage determination that is used to determine if they are being fairly paid. What I mean by that specifically is, let's use the job of

    programming.

    Mr. WATT. I don't know what enforcement mechanism you are talking about, sir. You have to identify what enforcement mechanism are you advocating for at this point?

    Mr. MATLOFF. What I am saying is when somebody applies for an H–1B, either they should say programmer and—what I am saying is if they say programmer, an American should be allowed to take that job because there are lots of programmers. If they insist on a job of programmer, the prevailing wage ought to be set by job of programmers. What is happening now is they can be fully compliant with the law and get a job of programmer, which ought to cost more, for a generic programmer price. So if only at the time the applications are reviewed——

    Mr. WATT. You are on the front-end of the process. I am trying to figure out what we should be doing on the enforcement end of the process.
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    Mr. MATLOFF. I considered that enforcement, but in that case, I don't have an answer. Maybe somebody else does.

    Mr. WATT. I yield back, Mr. Chairman.

    Mr. SMITH OF TEXAS. Thank you, Mr. Watt.

    Ms. Lofgren.

    Ms. LOFGREN. Thank you, Mr. Chairman. We have had some spirited discussion that I think has been useful and to some extent, even enlightening, about this program. One of the things we haven't discussed on H–1Bs is the fact that 60 percent of them are going to people outside the high tech field. We really can't ask anyone on this panel about that because it is probably not within their bailiwick. But H–1Bs are going to physical therapists, nurses, chefs, and a number of people that may or may not mean a difference for the American economy in the next century.

    I know, Mr. Chairman, there is an interest which I share in addressing this issue promptly because of the deadline. But I think we ought to try and do some research on this issue as we move along. The bulk of the visas are not going to the high tech sector of the economy at all. How might we address that issue? That answer could be a key to solving some of the problems.

    I think that it is important to understand how prone H–1B visa holders are to being victimized. Mr. Miller, isn't it true H–1B employees can in fact shift from one employer to another?
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    Mr. MILLER. Yes, that is true, Ms. Lofgren.

    In fact, probably if it were up to the employer, they wouldn't allow them to shift. As a matter of fact they can. H1–Bs are just as much part of the labor market as anybody else and they will walk across the street for a major pay increase the same as a U.S. worker. It does take another month because the new employer has to go through the application process and has to file for a new visa, but as long as the individual H–1B is within the 6-year period, he or she can transfer from one company to the next, in as long a time as it takes for the new company to offer a job. In fact, they do transfer quite a bit. One of the problems the INS has in keeping track of the number of H–1Bs is the fact some of them do shift around.

    Ms. LOFGREN. So it really wouldn't be possible to bring in an H–1B programmer and keep him with you for $25,000 because you sponsored him? Could he walk across the street and get another job for $130,000?

    Mr. MILLER. The H–1B individuals are very intelligent individuals. They have friends. They work with people both foreign born and U.S. nationals. They know what the salary scale is. Are they somewhat intimidated? Sure, a foreign worker is somewhat intimidated maybe the first few weeks. But then they read the want ads every Sunday in the San Jose Mercury News, the Washington Post, the Raleigh Observer, they see the same things going on and they know they can move.

    Mr. MATLOFF. Can I add something to that?

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    Ms. LOFGREN. Sure.

    Mr. MATLOFF. The wrinkle comes in, and it is a big wrinkle, is when they are sponsored for a green card, which can take several years. Now do you want to drop your present employer in that situation and start all over again from scratch? Most would not, they will stick it out at the lower salary. So even though I agree with what Mr. Miller said, that they are aware there are higher salaries around, they are really stuck.

    Ms. LOFGREN. Because the labor certification takes such a long time and because of the backlogs and the visa numbers?

    Mr. MATLOFF. Exactly.

    Ms. LOFGREN. That is a worthwhile point.

    Also thinking about the job shops versus the direct employers, you said that you had some familiarity with the consulting firms. I have heard various things that some of these firms have 80 or 90 percent or better of H–1B employees. Would it generally be true that that situation would be a more isolating one, and might impair the ability of the market to adjust itself because of the ability of H–1B visa holders to move around and respond to salary?

    Mr. LARIVIERE. Well, I hesitate in my answer to characterize the entire industry in all of the uses of H–1B. But I know, for example, of many instances where some of the companies you named, for example, are willing to maintain considerable benches, 400 or 500 people, with specific skill sets, that are only needed temporarily by industries throughout the world, not just the United States. They bear the cost of this because they are cheaper labor, there is no question about it. And they can be brought in on very, very small—in very, very small numbers for very, very carefully targeted contractual relationships to do things that make it possible for U.S. companies to be competitive internationally. This labor pool is out there. If we can't figure out some way to integrate the world market into our international operations, we are going to get bypassed. In this industry, it can happen very, very quickly.
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    Ms. LOFGREN. I do understand that. It is hard to know what is true and what isn't true in this area, because so much of it is anecdotal. I receive e-mails from people who say I am a great programmer and I can't get a job. I am going to ask every one of those people to send me their resume and I have talked to a bunch of CEOs in the Valley who have agreed to look at the resumes. With some of these people, we may find out their record as the ax murderer has finally come out. In other cases we may find that they have been overlooked.

    But a concern that entices me is to the extent that you have a more isolated group in a consultancy firm, you don't have American employees comparing and contrasting right next to them in a direct sense because they are a temp agency. I am concerned that some of the market mechanisms that would ordinarily correct for problems may not be as much in place as they might be in other circumstances. It may be that you want to put in some additional protections or provide some extra attention to that area to prevent abuses.

    Mr. LARIVIERE. Personally, in my experience, in consulting in the industry and working closely with some of the American companies, I don't know of any instance of the sort that you just described.

    Mr. SMITH OF TEXAS. Thank you, Ms. Lofgren.

    I just have some quick comments and then we are getting toward the end.

    Ms. LOFGREN. Mr. Chairman, Mr. Miller was just about to grab the mike and say something on that point. Would it be possible to hear his comments?
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    Mr. SMITH OF TEXAS. Mr. Miller.

    Mr. MILLER. I know I am not going to get a chance to change the jargon, and ''job shops'' is a popular expression. But I would like to make the point that these firms are also in the same marketplace everybody else is in. They have to offer benefits, they have to offer training, they have to offer career paths. Many people chose as a life-style to stay in these firms. They would rather change assignments, rather than just work for AT&T or Citibank or someone else. Yes, they deserve labor protection the same way every other employee does. Just as independent contractors choose that life-style——

    Ms. LOFGREN. I know that is true and I know people in my neighborhood who do that and who prefer it. So that is accurate.

    Mr. MILLER. It goes back to Mr. Watt's question earlier. The whole industry has changed and many people choose contracting as a life-style. When I grew up, my father said go to work for Allegheny Ludlum for the rest of your life. That is the way people used to think. In the services industry, people choose to be independent contractors or to work for outsourcing firms because they would rather not be committed to one company for a long period of time because they like the opportunities and challenges.

    Mr. WATT. If the gentleman will yield.

    Mr. SMITH OF TEXAS. I think it is my time, and, yes, I will yield.
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    Mr. WATT. I just want to make sure Mr. Miller understands. I wasn't advocating anything, first of all. I was asking a question about what possibilities existed. But I certainly wasn't advocating taking away any labor status, other than the possibility of taking away the prospect of H–1B eligibility for these—I don't even know what you call them.

    Mr. MILLER. Outsourcing firms is a term we prefer, Mr. Watt.

    Mr. WATT. That is what you prefer. I'm told that ''job shops'' is the other term.

    Mr. MILLER. As I said, I know I am not going to change the jargon.

    Mr. SMITH OF TEXAS. I thought, Dr. Matloff, that was an interesting comment you made a few minutes ago about the disincentive for H–1B workers to change jobs or go where there might be a higher salary. If they are in the process of applying for a legal permanent status, the employer who began that process is not likely to continue it if they left. So this may be a disincentive for someone to walk across the street, for example, and change jobs.

    Mr. Payson, I appreciate what you said about the old pros. I think you might have a better argument if you were to tell us the old pros would be willing to give up the 18th hole.
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    Mr. PAYSON. Give up the what, sir?

    Mr. SMITH OF TEXAS. I think you would have a better argument if you made the case that the old pros be willing to give up some of their tee shots in order to earn a good income or supply some of the needs in our job market today. You don't need to respond.

    Mr. PAYSON. Okay.

    Mr. SMITH OF TEXAS. That is just a flip comment.

    Mr. Hatano, you will forever after be identified as flipping the coin and making us aware that 5 billion transistors got made during that time period.

    Mr. WATT. And 50 billion more 6 years from now.

    Mr. SMITH OF TEXAS. That is a very good visual aid.

    Dr. Lariviere, I appreciate what you had to say. As you know, and I am happy to say publicly, I agree with you as far as the need to change the Hathaway decision. As you know, we have been working with the Department of Labor over the course of at least the last year——

    Mr. WATT. That is because he is from Texas.

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    Mr. SMITH OF TEXAS. That is true, in part. The Department of Labor has agreed, as you know, to write regulations that are more supportive of universities and colleges. I also agree with the need to allow individuals who might be coming to be a guest speaker to receive honorarium if that is appropriate too. We will talk a little bit more about that.

    If there are no further questions, let me thank the panel not only for their contributions today but in the case of several individuals, for coming such a long distance. A couple people have come from California, one from Texas, and we appreciate the efforts that you made to be here today.

    The gentleman from North Carolina.

    Mr. WATT. Mr. Chairman, let me make sure we are keeping the record open for a while. There were several people who had submitted statements who did not testify that we wanted to try to get into the record, including Rep. Ron Klink of Pennsylvania, and the Institute of Electrical and Electronics Engineers.

    Mr. SMITH OF TEXAS. Without objection, we will leave the record open for 24 hours. That should be plenty of time to submit the testimony.

    Ms. LOFGREN. That includes statements from the Members of the committee as well?

    Mr. SMITH OF TEXAS. Without objection, so ordered.
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    [The information referred to follows:]

PREPARED STATEMENT OF HON. RON KLINK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA

    One of the great ironies of this Congressional session is occurring here today. The high technology industry, which prides itself on identifying and quantifying problems with unbiased, technical thoroughness and then solving them in a scientific manner, will come before this Subcommittee and ask us to solve an ''alleged'' worker shortage problem that it can neither identify nor quantify. As one of the leading lights of the industry said recently, ''Let's stop arguing about the numbers and solve the problem.''

    There is a ''conspiracy'' going on to benefit employers and discriminate against American workers, especially older workers. Its purpose is to make Congress believe that this nation has such a shortage of information technology workers and such an inability to ever meet the demand that the doors to foreign workers must immediately be flung wide open in the form of increased H–1B visas. Otherwise, life on the high-technology planet as we know it will disappear. One distressed industry spokesman described the future as the industrial age without a single ingot of iron. This alleged shortage is so important to our national well-being that the Commerce Department now issues periodic bulletins on ''America's New Deficit.''(see footnote 76) It must be pointed out, however, that this is the same department that determined there was a shortage months before beginning its research.(see footnote 77) This is also the same administration that told us if we passed NAFTA and GATT, Americans would lose low-wage jobs, but would gain high-wage jobs.

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    The conspirators are what we loosely call the high technology industry, the agencies that supply temporary computer programmers and other technology workers, university foreign student advisers, immigration lawyers, government officials and politicians trying to curry favor with these interests. They are supported by industry reports of labor ''shortages'' that have no credibility in the world of labor statistics, but generate great press headlines. However, serious studies which question these reports, such as the one my Committee commissioned from the General Accounting Office and you will receive testimony on today and that of the Urban Institute, are treated with great skepticism and disfavor. Nor is any one listening to the Educational Testing Service, which recently stated that the Administration is using only industry number, while ignoring those of the Bureau of Labor Statistics, ''becoming an employment service for the high-tech industry'' and giving the wrong message to American young people.(see footnote 78)

    These shortage headlines continue even as the same industry is beginning what the Wall Street Journal recently called

a steady drumbeat of layoff announcements in industry sectors that until recently have complained about personnel shortages. In Silicon Valley, layoffs have occurred at Seagate Technology Inc., Silicon Graphics, Netscape Communications Corp., Apple Computer Inc., Sybase Inc. and others. Some firms have cut hiring plans; help-wanted advertising has slumped since the start of this year. Elsewhere, high-tech giants are shedding staff. Last week, Xerox Corp. announced the layoff of 9,000 people.

  Some think high-tech payrolls still look bloated. . . .(see footnote 79) (Emphasis added; Attachment 1)
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    Given the normal volatility in labor markets and economic outlooks and the growing numbers of Americans training for information technology jobs, increasing foreign information technology workers now could very quickly result in an oversupply and rapidly dropping wages. But according to the industry's chief spokesman recently in the New York Times, that is exactly what it wants. ''[T]he wage stability that is the bedrock of this country's low inflation'' will disappear if these visa numbers are not immediately raised, Harris Miller, president of the Information Technology Association of America said.(see footnote 80)

    How quickly we forget that it was only a little over two years ago that American computer programmers were being laid off by the hundreds and replaced by cheaper H–1B workers in cost-cutting moves by this same industry. Congress took testimony from some of those laid-off programmers, and the industry just barely managed to kill an attempt to reduce the H–1B cap. Its argument was only a little different than it is today: The story was that Americans got paid too much, and temporary foreign workers should be used to keep down wages. Otherwise, the work would go to India.(see footnote 81) Some of the work has gone to India—and Ireland and the Philippines and the Ukraine—but industry is still unhappy with the wages.

    But there are many qualified U.S. workers still being left behind. Unfortunately, no one in Congress wants to hear their story. Yesterday, I received a letter from Stephen Schultz of Modesto, California. He is a consulting engineer who was laid off last November. He could not get another job until his old company called him back to—in his own polite phrasing—''mentor'' a foreign engineer who now does his job. Mr. Schultz asks the question that we in Congress must also answer, ''What shortage?''
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    Last week, the San Francisco Examiner (see footnote 82) ran an unprecedented series of letters from readers concerning the alleged shortage of information technology workers. Their conclusion: age discrimination was pushing out many qualified American workers, and employers want cheaper, more exploitable foreign labor.

    I want to quote at length from some of these letters because we in Congress are too busy rushing through legislation to please the high-tech industry to hear from the American workers who already have and will continue to lose their jobs.

  At job fairs, many older people, myself included, are rudely treated by young recruiters from human resources. In one blatent case, I saw a recruiter from a major local computer manufacturer and software firm refuse to talk to anyone who looked over 35. Resumes from older people were tossed in one pile. Resumes from younger people were put in another with attached notes from a mini interview. (Emphasis added)
—An older computer consultant

  I would state that most of the H–1B workers I have worked with are of mediocre quality. Most of the training they receive is on the job. They have in essence taken the place of a U.S. worker who could have been trained for this.
—Consulting engineer specializing in system
software components for Windows 95

  In fact, the shortage of technical talent should first be corrected by training older workers. . . . What the high-tech companies really want is servile, cheap labor for very ordinary programming tasks . . . I would be much more inclined to support some broadening of the visa program if the high tech businesses would commit, on their part, sufficient resources to first retrain older programmers in newer languages and concepts.
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—A programmer with 30 years' experience

    With letters like this, it should not surprise anyone that in FY 1997 the top users of H–1B temporary, high-tech guest workers were companies bringing in hundreds and sometimes thousands of foreign workers to do contract work here in the U.S. (See Attachment 2) Some of these companies are composed of 80 percent or more foreign workers. And this is totally legal. So much for the jobs being created for Americans.

    Mastech Systems, a company from my home state of Pennsylvania, was the top user of H–1Bs last year. It relies almost completely on foreign H–1B workers. Recently, in the Pittsburgh Business Times (Attachment 3), one of Mastech's recruiters was quoted as saying that a shortage of visas had forced the company to develop ''an ambitious program to train local people; we are recruiting throughout the United States . . .''(see footnote 83) This statement demonstrates better than any other how temporary workers can distort the labor market and deny valuable training to our own workers.

    Another company close to the top of the list of users is Syntel. In 1994, Syntel was investigated by the Labor Department for not paying the prevailing wage to H–1B employees. Under a consent decree, it was barred from using the program until September of 1997. Like Mastech, it was then forced to—as its 10–K filing states—''significantly increase its U.S. domestic recruiting and hiring efforts throughout 1996.'' Nonetheless, Syntel still managed to get 750 petitions for H–1Bs approved by September 30, 1997. Syntel employs only 1,260 persons in the U.S.

    I want to mention two other groups I have heard from this week who are greatly affected by this debate and not present here: the physical and occupational therapists. Senator Abraham's bill carved out a new H–1C category for them without even looking at the labor needs of those occupations. I have attached an excellent study from the American Physical Therapy Association finding the profession currently in balance between supply and demand and projecting an oversupply of 20 to 30 percent by 2005 because of changes in health care and expanded domestic training programs. (Attachment 4) The occupational therapists have expressed the same concern to me. But neither group was heard from in the Senate or is here today.
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    One of the tragedies of every immigration debate is that proponents of increased foreign workers allege that any questions about their claims of need are really based on hidden xenophobic agendas. But, like Senator Abraham, I am the grandson of immigrants. But I also know that my responsibility here in Congress is to have all the facts I need to do the best job that I can for American workers. I know that H–1B workers are too often high-tech braceros, with their destiny in the U.S. completely in the hands of their sponsoring employers. This can, and does, lead to abuse.

    We all do ourselves a disservice if we cannot hear from all parties and make measured decisions based on the most credible information we have available.

PREPARED STATEMENT OF THE INSTITUTE OF ELECTRICAL AND ELECTRONICS ENGINEERS, UNITED STATES OF AMERICA

SUMMARY

    Tight labor markets for information technology workers, including computer engineers and scientists, systems analysts, data-base administrators and programmers, are being widely reported in many parts of the country. Business and educational organizations contend that the nation faces IT worker shortages of crisis proportions. They insist that an immediate increase in the numbers of foreign nationals admitted to work temporarily in the United States on H–1B visas is needed to avert a serious threat to America's economic growth and technological competitiveness.

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    While demand for information technology workers has increased dramatically in recent years—and is likely to continue to grow in the future—the available supply of scientific and engineering talent needed to meet current and projected growth in demand is much broader and deeper than is generally assumed. Sources of available supply include 1) new graduates with degrees in engineering, computer science and other technical fields; 2) talented individuals with degrees in non-technical disciplines; 3) upgrading of non-degreed technicians and other support personnel; 4) re-entry or retraining of retired, unemployed and underemployed individuals; 5) stepped-up recruitment and retention of women, minorities, handicapped and economically disadvantaged Americans; and 6) admission immigrant and non-immigrant engineers and computer scientists.

    Because some employers may have immediate needs for specific skills that are not readily available in the United States, modest adjustments in H–1B admissions ceilings may be warranted. But increased admissions should not come without needed improvements in safeguards for U.S. workers, including foreign nationals who have been legally admitted to work in the United States. Current H–1B prevailing wage attestations should be expanded to include domestic recruitment and no-layoff requirements. Responsibility for H–1B administration and enforcement should be centralized in the U.S Department of Labor. The Department should be authorized to conduct routine audits to ensure compliance with attestation requirements and directed to impose stiff fines for non-compliance. Participating employers should be expected to pay a fee to defray the cost of expedited administration and better enforcement. And the duration of stays under the H–1B program should be reduced from six to three years.

    But temporary admissions programs should be viewed as a supplement to—not as a substitute for—continuing public and private efforts to improve the nation's technological capabilities through more effective education, training and lifelong learning programs and through better management and utilization of American workers, including U.S. citizens and legal permanent residents.
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    The IEEE is a transnational professional and technical society whose membership currently includes more than 320,000 electrical and electronics engineers and computer scientists in 147 countries. IEEE–USA promotes the professional careers and technology policy interests of the 219,000 IEEE members who live and work in the United States.

STATEMENT

    The Institute of Electrical and Electronics Engineers, Inc—United States of America (IEEE–USA) is pleased to submit this statement for inclusion in the record of hearings before the House Judiciary Subcommittee on Immigration and Claims on the subject of Immigration and America's Workforce in the 21st Century. We thank the Chairman and the members of the subcommittee for holding hearings on this important subject. We look forward to working with Members of Congress to help craft appropriate solutions to workforce readiness problems that will enable American business to increase its technological competitiveness and to create and maintain more high wage, high value-added jobs in the United States.

    For additional perspectives on high tech workforce issues, including special problems faced by older workers, we call your attention to a recent seven part series in the San Francisco Examiner entitled ''Valley's worker shortage: Fact or Fiction?'' We also request that it be included in its entirety in the hearings record. The full text of this series is available on the Web at http://www.examiner.com/workers.

IEEE–USA'S INTEREST IN IMMIGRATION AND THE WORKFORCE

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    The 219,000 IEEE members who live and work in the United States—by virtue of their education, experience and employment—are vitally concerned about public policies that affect opportunities to acquire and apply specialized engineering knowledge and skills to the solution of technological problems in an increasingly competitive global economy.

    Two key questions need to be answered before Congress votes to raise current H–1B visa caps. First, is there a shortage of information technology workers, including engineers and computer scientists, or isn't there? Second, if there is a shortage, is a substantial increase in the admission of foreign workers under the temporary H–1B visa program an appropriate remedy for the problem?

    The answers to both of these questions seem to depend on whom you talk to.

IS THERE A SHORTAGE OF INFORMATION TECHNOLOGY WORKERS?

    Tight labor markets are being reported by providers of computer, communications and data processing services in many parts of the country. In spite of continuing reductions in defense spending and layoffs by high technology companies, new jobs for computer engineers and scientists, systems analysts, data base administrators and computer programmers are being created at an unprecedented pace.

    Industry trade associations insist that there are critical shortages of information technology workers of all kinds and that these shortages pose a serious threat to U.S. economic competitiveness. The Information Technology Association of America (ITAA), for example, reports that there were at least 190,000 vacancies for IT workers at large and mid-sized companies at the end of 1996. That number has since been revised upward to 346,000 vacancies, based on a more recent survey, including small private sector firms.
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    On the basis of these findings, the ITAA has concluded that the nation faces worker shortages of crisis proportions that threaten not only the information technology industry, but the growth of the entire U.S. economy and its global competitiveness.

    The U.S. Department of Commerce has taken a more cautious approach. In 1997, the Office of Technology Policy compared educational degree awards in computer science between 1986 and 1994 with Bureau of Labor Statistics employment projections for these occupations from 1994 to 2005. Commerce concluded that ''the United States could face a growing shortage of information technology workers that may have severe consequences for U.S. competitiveness, economic growth and jobs creation.''

    The Department of Labor is much more skeptical. Labor says that ''if IT worker shortages do exist, the most reliable indicator would be the extent to which IT workers' wages are rising, relative to wage increases in comparable occupations. Bureau of Labor Statistics wage data for computer-related occupations between 1988 and 1997 do not constitute evidence of widespread shortages. Rather, such data is indicative of a gradual tightening of labor markets for IT workers in 1996 and 1997 and possible spot shortages in some occupational specialties, particularly for computer programmers,'' the Department has said.

    While demand for electrical and electronics engineers and computer scientists has increased substantially and real wages for certain specialists have begun to turn up since 1995, IEEE–USA agrees with the Department of Labor. We believe that the industry claims of worker shortages of crisis proportions are seriously overstated.

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EXISTING SOURCES OF AVAILABLE SUPPLY

    The available supply of workers with the kinds of knowledge, skills, aptitudes, interests and motivation needed to function effectively in IT jobs is much broader and deeper than the results of studies of degree trends in certain, narrowly specialized academic disciplines suggest.

    Workers who can be utilized to meet current and projected increases in demand come from several sources. They include: 1) new graduates from formal educational programs in engineering, computer science and information sciences; 2) transfers into these fields by persons with degrees in other disciplines; 3) upgrading of non-degreed technicians; 4) re-entry and retraining of displaced or retired personnel with applicable skills and experience; 5) stepped up recruitment and retention of women, minority, handicapped and economically disadvantaged Americans; and 6) the admission of immigrant and non-immigrant engineers and scientists.

New Graduates

    Departnent of Education statistics indicating a 42 percent decline in degree awards in computer science between 1986 and 1994 are often cited as dramatic evidence of a serious ''pipeline'' problem that threatens to undermine the nation's leadership in cutting-edge technologies. But enrollments in computer science and information management programs have turned up substantially in response to increases in demand since 1994. The National Association for Computing Research reports that enrollments in computer science grew by 5 percent in 1995–96, 40 percent in 1996–97 and 39 percent in 1997–98—reflecting a dramatic response to changes in domestic labor market conditions.
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Transfers from Other Fields

    Although enrollments and degree awards in various engineering and computer science disciplines have been flat or declining until very recently, the numbers of workers employed in these fields have been trending steadily upward since 1986. This is due in part to the widespread phenomenon of transfers from other fields.

    Data from the National Science Foundation shows that in 1995, 19 percent of the people working as engineers had not been formally educated as engineers, i.e., had not received academic degrees in engineering. For people working as computer scientists, systems analysts and programmers, only 29 percent had degrees in computer science. Another 35 percent had degrees in engineering or natural sciences. Fully 36 percent of the people working in these fields had degrees in the social sciences, business administration and other non-technical disciplines.

Upgrading of Non-Degreed Personnel

    Another increasingly important source of the talent needed to fill job openings in computer science and information technology (many of which do not require a four year college degree) are formal and informal instructional programs offered by community colleges and other educational organizations. Many offer short term, intensive training that degreed and non-degreed workers need to learn new technological applications and develop the communications, interpersonal and team-building skills required to function effectively in a knowledge-based economy.

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Re-employment of Retired, Underemployed and Unemployed Workers

    Professional, technical and administrative personnel who are currently unemployed or underemployed (working full or part time in ''low tech'' jobs) and older workers who have recently retired (voluntarily or involuntarily) or been displaced represent another important source of supply for qualified workers.

    At the same time that new jobs are being created, downsizing continues in the high tech and other sectors of the nation's economy. Recent issues of the Wall Street Journal describe recent and pending layoffs by Seagate Technology, Silicon Graphics, Netscape, Apple Computer, National Semiconductor, Sybase and Sun Microsystems in the Silicon Valley and by Xerox on the East Coast.

    A Chicago-based outplacement firm, Challenger, Gray and Christmas, reports that 473,000 Americans lost their jobs in 1997, up nearly 10 percent from 434,000 in 1996. Assuming that a minimum of 15 percent of these downsized or early retired workers could be placed in or retrained for IT jobs, many of the reported vacancies at high tech companies could quickly and easily be filled.

Women, Minority, Handicapped and Economically Disadvantaged Workers

    Women, minorities, handicapped and economically disadvantaged Americans have long been much less likely than white men to pursue careers in most scientific and engineering fields. Continuing leadership by policy makers at all levels as well as concerted efforts by business, educators, labor unions, professional societies and trade associations are needed to attract and make more effective use of talented individuals from these traditionally underrepresented groups.
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Immigrant and Non-Immigrant Workers

    Foreign nationals who come to study or work in the United States represent another important source of the talent needed to ensure the growth and profitability of public and private providers of high tech products and services. Engineering degree awards to foreign nationals have also been trending upward in recent years, particularly at the masters and doctoral degree levels.

    Statistics compiled for IEEE–USA by David North indicate that the number of foreign engineers and computer scientists granted immigrant (legal permanent admission) status has increased gradually—from a total of 9,431 in 1986 to a high of 18,464 in 1993. But the numbers of foreign engineers admitted to work temporarily in the United States on temporary (non-immigrant) visas, on the other hand, has been growing much more rapidly—from 21,800 in 1986 to 79,400 ten years later.

    Immigrant engineers and computer scientists have always made critically important contributions to America's economic and technological competitiveness. And the entry of skilled professionals on temporary visas helps many employers to meet legitimate, short-term needs for skills not readily available in the United States.

IEEE–USA'S PERSPECTIVES ON SKILLS-BASED ADMISSIONS

    The quality of our national engineering enterprise as well as job opportunities for engineers and computer scientists in the United States are directly affected by the permanent admission of foreign nationals under at least three of five current work-related visa programs. These programs include: EB–1 (for individuals with extraordinary ability, outstanding professors and researchers and certain multinational executives); EB–2 (for professionals with advanced degrees or exceptional ability) and EB–3 (for degreed professionals and skilled workers with at least two years of training or experience).
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    Engineering labor markets in the United States are also affected by the admission of foreign-born professionals under several educational and skills-based temporary visa programs. These temporary programs include: the B–1 (temporary visitor for business); F–1 (student); H–1B (specialty occupation); H–2B (temporary worker); H–3 (Trainee); J–1 (exchange visitor); L–1 (intra-company transfer); O–1 (extraordinary ability); TC (Canadian American Free Trade Agreement) and TN (North American Free Trade Agreement) programs.

    The temporary H–1B visa program, which is the primary focus of the current Congressional debate, was subject to serious abuses in the early 1990's and has been characterized as a sham by the Department of Labor's Inspector General.

    The H–1B program, as originally authorized by Congress in 1990, was intended to help employers meet urgent, short-term needs for specialized skills not readily available in the United States. Unfortunately, it has been widely used by many employers as a probationary, try-out employment program for foreign students, workers and visitors who are already here to determine if they should be sponsored for permanent resident status. And the attestation requirements that were intended to help safeguard job opportunities, wages and working conditions for U.S. and foreign workers have proven to be weak and ineffective.

    IEEE–USA favors skills-based admissions programs that permit employers to hire foreign professionals based on a verifiable lack of appropriately skilled or easily trainable American workers—not because it is easier or less expensive to hire foreign nationals who will work for substandard wages to enter or remain in the United States.
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    Weak investigative and enforcement provisions continue increase the potential for abuses under the H–1B program. Although sponsoring employers are supposed to post notices indicating how many foreign workers they plan to hire and how much they will be paid, many never do.

    Others submit applications for scores of workers and include an identical wage or salary range for the entire group. Because it cannot initiate investigations without complaints, the Labor Department hands are effectively tied when it comes to taking prompt and decisive action against abusers. Displaced Americans are likely to be long gone before foreign replacements show up for work. And H–1B visa holders—who are virtually indentured to sponsoring employers for periods of up to six years—can hardly be expected to complain if employers fail to live up to the labor condition attestations included on requests for authorization to hire foreign workers.

NEEDED REFORMS IN THE H–1B PROGRAM

    With respect to skills-based admissions, we agree with the U.S. Commission on Immigration Reform's observation that the nation's interest in helping American businesses compete in the global economy must be balanced by an equally compelling need to develop and make better use of our own human resources.

    Administrative and procedural reforms in the H–1B temporary admissions program are absolutely essential in order to balance the interests of U.S. employers, including businesses and educational institutions, and IT workers, including engineers and computer scientists. Employers' legitimate needs for access to specialized skills not readily available in the United States should not be met at the expense of workers' needs for safeguards against unfair competition for jobs in domestic labor markets. Absent effective worker safeguards, responsible employers are also vulnerable to unfair competition from less scrupulous, corner-cutting rivals, many of whom have come to rely almost exclusively on H–1B workers.
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RECOMMENDATIONS

    Because some companies have immediate needs for specific skills that are not readily available in the United States, modest adjustments in H–1B admissions ceilings may be warranted. But not without more effective safeguards for job opportunities, wages and working conditions for citizens, legal permanent residents and foreign nationals who have been legally admitted to work temporarily in the United States.

    In order to strengthen worker safeguards, IEEE–USA makes the following recommendations:

    Employers who wish to hire professionals, including engineers and computer scientists, under the temporary H–1B admissions program should be required to apply for authorization to do so with the U.S. Department of Labor. On their applications, petitioning employers should have to attest:

1) that they have tried and failed, using industry-wide recruitment procedures, to fill existing vacancies with appropriately qualified American workers;

2) that they will pay foreign workers prevailing labor market wages; and

3) that they have not laid off and will not lay off or displace comparably qualified American workers for 90 days before and 90 days after filing for an authorization to hire foreign workers.

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    To deter abuses involving job contractors, IEEE–USA recommends that their clients also be required to subscribe to the recruitment and no lay-off attestations.

    Petitioning employers should be expected to post copies of their applications, including their recruitment, prevailing wage and no-layoff attestations, at locations where foreign workers will be employed and pay an appropriate application fee to cover the cost of program administration and enforcement.

    Responsibility for administration and enforcement of the H–1B program should be centralized in the U.S. Department of Labor—not scattered among two departments and two other federal agencies (the Departments of Justice and State) as it is under current law.

    The Department should be explicitly authorized to conduct routine audits and investigations to verify that employers comply with their attestations.

    The agency should also be provided with the human and technological resources needed to administer the program efficiently and be authorized to impose heavy fines on employers for non-compliance and to ban repeat offenders from participation in the H–1B program.

    And finally, the duration of stays under H–1B visas should be reduced from six to three years.

CONCLUSIONS

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    While the demand for information technology workers, including engineers and computer scientists, has been increasing in recent years—and can reasonably be expected to continue to increase in the future—EEE–USA believes that the domestic supply of workers needed to meet this demand is much broader and deeper than is generally assumed. And while some adjustments in H–1B admissions may be warranted, we have serious reservations about the wisdom of legislation that places too much emphasis on temporary guest worker programs to meet employer's needs for better-educated and more highly skilled workers.

    IEEE–USA believes that temporary admissions programs should be viewed as a supplement to, not as a substitute for, concerted public and private efforts to improve America's economic and technological competitiveness through better preparation and more effective utilization of American engineers, computer scientists and other information technology workers.

San Francisco Examiner

Valley's worker shortage: Fact or fiction?

    WORKER SHORTAGE DEBATE, PART 1: E-mail pours in on controversial issue. Want to join in on the dialog? E-mail your opinion to technews@examiner.com or fax us at (415) 957-9428. (April 19, 1998)

PART 2
PART 3
PART 4
PART 5
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PART 6
PART 7

    WHAT SHORTAGE?: As Silicon Valley firms call for more immigrant visas, qualified unemployed U.S. workers like Bill Spence are struggling to find a job. (April 12, 1998)

    JOB FAIR PHENOMENON: High-tech companies prefer low-tech method of finding employees. (April 12, 1998)

    READERS SPEAK OUT: Pro and con e-mails in response to management consultant C. Giovanni Enrico's view that Silicion Valley's worker shortage is a myth. (Jan. 25, 1998)

    NO SHORTAGE OF TALENT: C. Giovanni Enrico's says high-tech companies would rather raid competitors than hire people who really need jobs. (Jan. 18, 1998)

     

THE EXAMINER

San Francisco Examiner

April 12, 1998

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Workplace war intensifies in Silicon Valley

As companies demand more immigration visas, many Americans ask, 'What's wrong with us?'

BY BOBBY MCGILL
SPECIAL TO THE EXAMINER

    Bill Spence, 47, holds a bachelor's degree from MIT, one of the premier technology schools in the world, and a doctorate from UC-Santa Cruz. He has more than 20 years experience in high technology. One would think Silicon Valley would be hungry for an employee with Spence's background. Think again.

    ''I went to all of the job fairs and open houses. I have sent out a couple hundred resumes,'' said Spence, from his home in Ben Lomond, Santa Cruz County. But thus far he has received only two interviews and a ''few phone calls'' since his layoff from Stanford's linear accelerator laboratory in February 1997.

    ''I did a lot of software work and computer programming during, essentially, my whole career. I see a lot of jobs being advertised that I believe I qualify for,'' said Spence.

    Ironically, Spence's dilemma comes at a time when high-tech industry leaders are vigorously lobbying Washington to remedy what they claim is a shortage of qualified domestic labor by bringing in more foreign tech workers.

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    They have asked the government to increase the cap on H–1B visas, which permit immigrants to enter the country and work for up to six years.

    Despite strong labor opposition, the Senate Judiciary Committee last Thursday approved a bill sponsored by Sen. Spencer Abraham, R-Mich., that aims to push the current visa cap from 65,000 to 95,000 in the first year, then jump it to 115,000 per year from 2000 until 2002.

    The most ardent supporter is industry lobbyist Harris Miller, president of the Arlington, Va.-based Information Technology Association of America (ITAA). His organization represents giants Microsoft, Oracle and IBM.

    ''The data are clear, we have the lowest unemployment rate in the country in more than three decades. The economy has created 3 million jobs over the past few months, the white-collar unemployment rate in this country is at an historically low rate of 1.2 percent. All of those data trends indicate to me it would be very unusual for a white-collar worker who can't find a job.''

    Regardless of the economic indicators, Spence is not alone. Pete VanHorn, 31, a tech worker from Mountain View, is evidence of what some see as contradictory statements from the industry regarding just what kind of workers they want. VanHorn completed his master's degree in computer science from Cal-Poly and went on a job hunt for a computer graphics position in early 1998. After three months of searching, he did get a job: programming a robotic caddie for a Santa Clara company called Golf Pro International.

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    ''The main part was lack of experience. A lot of these companies are looking for experienced individuals,'' he said.

    Industry leaders say the education system is one major reason for the lack of qualified workers. Says Miller: ''(The problem) is going to be here for the medium- to long-term unless we change our educational programs in this country.''

    Marty Kropelnick, vice president and CFO of Hall-Kinion, a high-tech industry recruiter, agrees.

    ''It's really tough. If you look at the demographics of how many people are graduating with a degree in computer science . . . the numbers are going down yet the demand is going up. You have a decline of people graduating in the disciplines that we look for.''

    Citing the lack of qualified, well-educated workers has become the mantra of the high-tech industry, but is it completely accurate? According to the Computing Research Association, a national consortium of university computer science departments, computer science enrollment has reversed its declining trend, increasing by 5 percent in 1995–96, 40 percent in 1996–97, and by another 39 percent in the 1997–98 school years.

    ''This whole thing really is a ruse,'' says Dr. Norman Matloff, a professor of computer science at UC-Davis. ''It's a gigantic public relations campaign. It pushes all Americans' buttons when they say 'Johnny can't do math' and all that kind of stuff. And then you find out that Johnny can do math, he just can't get a job.''
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    Matloff says the high-tech industry is ignoring numerous ''employable'' American workers, such as Bill Spence, who already have college degrees. He feels certain workers like Spence get typecast by employers.

    ''He's a little bit older, that means he may not be single, that means he can't work 80-hour weeks because he's got a wife or maybe even children, and he's probably going to have somewhat higher salary expectations. That's the way they would look at him, so they avoid him.''

    The industry denies age discrimination; many employers claim older job candidates are not up to date on technology and retraining them isn't cost-effective.

    Spence says this misses the point. ''Over the length of my career, I have experienced big changes in the way computing is done. I was always in a constant state of learning new things. The notion that you somehow get out of date in the type of field I've been in just because of the length of time since you've been in school, I think really shows a lack of understanding on how the field works.''

    Even Microsoft founder Bill Gates admits that specific knowledge isn't so important as the ability to learn. In a 1994 interview with the Wall Street Journal, Gates, whose company supports the H–1B increase, said, ''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.''
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    John Reinert, president of the 220,000-member Institute of Electrical and Electronic Engineers, says the industry has other motives for wanting foreign labor besides ''education.''

    ''While they are here they are virtually indentured servants, subject to deportation if they lose their company sponsorship. As a result, H–1B workers earn on average one-third less than the prevailing wages in their field,'' Reinert said.

    Researchers back up Reinert's premise. A 1997 article by Paul Ong, a UCLA professor of Asian American Studies, states: ''Recent immigrants in engineering earn about one-third less than their U.S.-born counterparts.'' Additionally, he writes, it is largely because they ''may be willing to accept lower salaries in order to obtain full-time employment in the U.S., a prerequisite for permanent residency.''

    Bonnie Stern Wasser, an immigration law specialist in Southern California, counters this as untrue.

    ''The H–1B program makes it impossible to pay low wages unless the company is violating the law,'' said Wasser, referring to a Labor Department law that says the employer must pay the ''greater'' of the ''prevailing wage'' based on the average salary of the American worker.

    According to Matloff, the law has an inherent loophole when it comes to specialized jobs. For example, programmers who code popular languages, such as Java, can be paid the same scale as those who write generic code, in languages such as C or C+. The programmers of popular languages, due to their novelty in the market, would normally demand a higher wage. When based on the industry's average wage for all programmers, however, companies can hire the ''hot'' H–1B java programmer at the average programmer wage while still observing the letter of the law.
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    Meanwhile, the high-tech industry continues to push for more foreign workers.

    In a letter to Vice President Al Gore last week, Scott McNealy, chairman of Palo Alto-based Sun Microsystems, said growth of the sector depends on it.

    ''The cap on visas needs to be raised quickly to give us access to foreign professionals so our company and our industry, can continue to grow,'' wrote McNealy.

    Washington initially responded to industry lobbying with two proposals for an increase in H–1B visas. A milder version of the Abrahams bill—introduced by Sens. Edward Kennedy, D-Mass., and Dianne Feinstein, D-Calif.—would have boosted the current cap to 90,000, but for only three years. It also called for greater government oversight of hiring practices. Industry leaders threw their support behind the more aggressive Abraham bill.

    ''It's not just the numbers that we're worried about. Sen. Kennedy and Sen. Feinstein are trying to give with the one hand and take with the other. They're adding additional, burdensome regulations and reducing the length of stay and doing other things to the program that we believe would be unacceptable,'' said industry lobbyist Miller.

    The ''burdensome'' regulations in the Kennedy-Feinstein bill, according to Miller, were those that would have given the federal government easier access to company employment records.

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    The Kennedy-Feinstein position is bolstered by a Department of Labor study released in 1996 entitled, ''The system is broken and needs to be fixed.'' The study found that the H–1B visa ''programs are easily manipulated and do not protect American workers' jobs and wages as intended.''

    Calls for government oversight of H–1B in an effort to protect Americans such as Bill Spence are nothing new. As early as 1995, former Labor Secretary Robert Reich warned the Senate Judiciary committee of abuses.

    ''It has become increasingly evident that the H–1B program is being utilized by some as the basis for building businesses which are dependent on the labors of foreign workers, in some cases in unfair competition with U.S. workers,'' Reich said.

    As the battle is fought in Washington, D.C., Bill Spence tries to keep his head up in his continuing battle for employment in Silicon Valley. For him, it all boils down to one truth: He has been unable to find a job in an area that holds more technology-related positions than anywhere else in the world.

    ''It's pretty much the best area for finding a job,'' Spence said. ''I go to these job fairs and meet people that have flown in from other states because this is where the jobs are.''

     

THE EXAMINER
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San Francisco Examiner

The worker shortage debate: Part 1

April 19, 1998

    Editor's note: On April 12, we asked readers whether they felt there was a shortage of labor in the high-technology field. The ''First Person'' solicitation ran with a story entitled, ''What shortage? '' In short, the story questioned recent efforts by Silicon Valley to raise the number of immigrant quotas the Federal government allows into the country yearly, told through the eyes of current job seekers in the market.

    The issue is particularly timely as high-tech industry leaders are vigorously lobbying Washington to remedy what they say is a shortage of qualified domestic labor by bringing in more foreign tech workers. They have asked the government to increase the cap on H–1B visas, which permit immigrants to enter the country and work for up to six years. Despite strong opposition from labor leaders, the Senate Judiciary Committee voted two weeks ago to pass a bill sponsored by Sen. Spencer Abraham, R-Mich., that aims to push the current visa cap from 65,000 to 95,000 in the first year, and then increase it to 115,000 per year from 2000 until 2002.

    Here's what readers said:

     
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LAURENCE HOWARD, SAN FRANCISCO

    I have grave concerns about opening the computer consulting market to more foreign temporary workers. For over 15 years I have make my living as a temporary programmer. I have had the opportunity to work closely with a number of excellent foreign temporary workers, and so I see the situation from the other perspective.

    I doubt the truth of the claim by industry management that there are severe shortages of qualified people now. It is, of course, to the benefit of management that the numbers be increased so as to keep the wage rate down, to hire at lower scale technicians from less vigorous economies, and to ''discipline'' the work force. To me the parallel to the sweat shop is obvious. If management had its way, it would:

    Treat us as employees in terms of work conditions but deny us benefits and other rights of protection due employees.

    To protect themselves from the obligations due employees, companies would hire us only through jobbers. As temporary employees of an employment agency, we get no benefits, no security, and no protection when there are misunderstandings between us and the client. We are paid W–2 wages, whereas the fact of our work is more accurately reflected by 1099 wages, and therefore we also lose the tax benefits due to independent consultants. Finally, the employment agency receives 25 to 35 percent of the earnings the client pays.

    Once in place on a contract, which lasts anywhere from six to 18 months, we are often herded together in sweatshop conditions, ten to a room, desks pushed together, inadequate facilities and support to do the professional work for which we are contracted. We have no union or other representation by which we can assert the right to decent treatment. We work at the pleasure of our client and can be dismissed with no notice and no consideration, financial or otherwise. A single misunderstanding with an individual manager can result in our future employment at that firm being jeopardized.
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    Because our work is technical and we often report to non-technical management, there can be a significant breech between the client's expectations and our ability to deliver product. Frequently the technical consultant is blamed for errors made by employees and for bad and inconsistent instructions given by management. As non-employees, we have no standing to dispute unfair treatment. If you make it easier for us to be replaced, you only lower our compensation and make us more subject to abuse.

    As temporary workers, we often provide software that is of great value to a company, that is used for years, that leads to enormous profit, that displaces other workers, and for which we are compensated only by day wages that rarely reflect the value of our contribution.

    By opening this labor market to more foreign workers, you will be exacerbating a difficult condition, undercutting our wage rate, and denying us any opportunity to form professional organizations by which we transient individuals will have any power to represent ourselves in the market. I urge you to talk to us workers and not accept the complaints of industry executives as valid.

    (Editor's note: A version of this response was sent to Senators Dianne Feinstein (D-Calif.) and Edward Kennedy (D-Mass.)

     

CHIEH CHANG, HILLSBOROUGH
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    As a person involved in a lot of start-ups, I do feel the difficulty of finding qualified personal. On the other hand, I can see the frustration for people like those portrayed in last week's article.

    I think this points out an inefficiency in the tech job market. Which is the results of the ''restructuring'' of large U.S. companies. Historically, these companies train young workers and move them through the ranks until they retired.

    However, under the pressure of ever demanding higher earnings, they need to be more efficient, thus cutting down the training of young workers and laying off older workers.

    The new jobs created by small companies does not match the profile of these displaced workers, hence creating the inefficiency in the job market.

    I don't have a simple solution for this problem, in the mean time, I am still looking very hard for people to fill jobs at the company I am associated with.

     

MAUREEN CASTRO, ALAMEDA

    I am a frustrated job seeker. Very. I can't believe I haven't found a job yet in what's supposed to be a great market.
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    My search started in earnest last February when the health care company I was working for went through a reorganization. It was time, emotionally and career-wise, to make a forward move (or so I thought). It's now mid-April and I'm almost out of money. Very scary. My objective is finding a marketing job in the high-tech industry.

    My resume is impressive, or so I've been told. My USF bachelors degree is is in English and communication arts. The callback response rate to my resume is between 35 to 50 percent and I've interviewed at approximately 18 companies, reaching the final stage five times.

    Everywhere I go I hear the same optimistic refrain, ''I was very impressed with you but I've decided to hire another candidate.'' I gather my interviewing skills need work, so I've read books and made the follow-up calls for feedback always getting a new tip but generally finding satisfaction—except they hire someone else.

    So what's my problem? I wish I knew.

     

LINDA MUGGLI, MILPITAS

    I do not believe there is a worker shortage in the high-tech industry at all. I am an independent contractor in telecommunications that has worked in Silicon Valley for four years and finally bailed out to S.F. At one of the Silicon Valley jobs, I was in charge of telecom moves, adds and changes. Eighty percent of all new hires added to the telephone/data systems were of Indian descent arriving on H–1B visas. All the employees that left were American and Caucasian.
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    Also, my husband is a Swiss green card holder and has been looking for a job in the data world for the past five months. He is educated and has excellent interpersonal skills and 20 years of experience. He is 38 years old and has been on four interviews, sent out 200 plus resumes and gets bogus offers at $12.00 per hour.

    What is going to happen to our country with this attitude? Are we going to resort to becoming a racist nation? How can we do something about this?

     

THE EXAMINER

San Francisco Examiner

The worker shortage debate: Part 2

April 19, 1998

    Editor's note: On April 12, we asked readers whether they felt there was a shortage of labor in the high-technology field. The ''First Person'' solicitation ran with a story entitled, ''What shortage? '' In short, the story questioned recent efforts by Silicon Valley to raise the number of immigrant quotas the Federal government allows into the country yearly, told through the eyes of current job seekers in the market.

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    Here's what readers said:

     

ALAN READ, FREMONT

    This claim of a ''high-tech worker shortage'' which employers say must be ended by shipping in hundreds of thousands of foreign high-tech workers is nothing but the standard tactic in any labor-employer conflict.

    Of course, employers want to be able to hire engineers for $30K instead of $70K! Crocker, the superintendent of the Central Pacific Railroad construction, used to parade troops of newly hired Chinese past surly Irish workers whenever the Irish got uppity with demands for another 50 cents per day.

    I personally know three highly qualified individuals in their 50s and early 60s who, because of the current large surplus in chemistry Ph.D's, will probably never find employment again in their areas of expertise.

    Raising the visa cap will mean that hundreds of thousands of older Americans, the very men and women who ignored the taunts of their ''cooler'' high school classmates to take the hardest classes such as physics, chemistry, calculus, etc., will find themselves permanently out of work—and perhaps be unable, financially, to care for the parents who sacrificed to send them to college. What do you think of that, T.J. Rogers?

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PHILIPPE ARGOUARCH, PACIFICA

    Your article in last Sunday's business section is misleading. The case of Bill Spence is a very bad example and even withheld some critical information.

    I worked with Bill Spence for many years when I was an Accelerator System Operator at SLAC.

    What the article did not mention is that Accelerator Physics is a highly specialized field where the number of labs you can work for is limited to a dozen at the maximum.

    In addition, SLAC continues to use obsolete computing systems. Until recently they were using VM, which nobody uses anymore. The Accelerator control system at SLAC is still VMS from DEC, which has been overtaken almost everywhere by UNIX. Worst, SLAC uses exclusively Macs on desktops when 95 percent of the rest of the world uses PCs and Window 95.

    The article should have mentioned that a government laboratory does not prepare in any shape or form a young physicist to work in the Silicon Valley, even if this physicist has a Ph.D.

    I have been laid off also from SLAC and was able to reconvert only because during the last two years I spent over there I did prepare, on my own, my reconversion to the real world by picking up contemporary Internet skills. At first I had to take a serious pay cut as a transition for a better job.
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DICK MYERS, ARCATA

    Yes, there is a worker shortage in the high-tech industry, but the industry plea to admit more workers under H–1B visas is the not the free market fix these companies claim to support. The definition of shortage is ''the amount by which the quantity demanded exceeds the quantity supplied at a particular price.''

    In 1974 there was a ''shortage'' of gasoline at 35 cents a gallon. I'm sure most of your readers remember the lines, the closed stations at night and on weekends. Then the prices were allowed to go up, and, lo and behold, the ''shortage'' disappeared. A similar situation occurred again in 1979, with similar results.

    At the risk of sounding too Reaganesque, I would remind you and your readers that it is easy to eliminate a shortage: i.e., let the prices go up to their equilibrium level. I am sure that the high-tech industry would not want artificially low prices placed on the products and services they sell. Nor should they be forced onto the services (high-tech workers) they buy—through an artificial increase in supply brought about by increasing the H–1B cap.

    Thanks for your fair and balanced article, and thanks for asking.

     
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KIRK KNIGHT, SAUSALITO

    There are several extremely significant trends in your story which are either missed or addressed in passing.

    First, there is a real issue with high tech companies being suspicious of anyone over 40 looking for work. Second, the reason high tech companies desperately want to import foreign talent is the same as it has been with every other wave of immigrant worker. Both of these trends are indications that the high tech sector is becoming a mature industry rather than a boom industry.

    I would like to echo Bill Spence's anecdotal evidence that there are plenty of high tech workers with the skills that companies need, but many of us are over 40. Like Bill, and too many others, I have been viewed with suspicion at job fairs and interviews. If we set goals and met them shouldn't we be upper management, not job seekers? If we're so talented why aren't we rich from stock options? If we're so savvy why aren't we doing our own startup? Are we looking for work because we're incompetent? Do we lack the social skills to use our connections to network?

    The claim that people over 40 aren't worth retraining is at best naivete, at worst disingenuous. These are people with very high intelligence who have spent their entire lives mastering new tools and envisioning new opportunities. The tech business has a long history of recapitulating many of the same concepts on ever smaller platforms. Mainframe concepts from the '60s were repeated in the '70s on minicomputers, the '80s on PCs, and now the '90s on the Internet. Having a couple of decade's experience is a shortcut to beating the market, or at least preventing an earlier mistake. Hewlett-Packard is famous for coupling a senior engineer with a junior engineer so that each can contribute insights of which the other is unaware.
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    Regarding imported tech talent, the real issues are far more critical to companies than just lower salary. Like the other waves of immigrant labor during this nation's history, new immigrants are more maleable to the company's desires, less likely to change jobs, more likely to accept whatever benefits are offered, less likely to complain about conditions and less likely to expect meaningful stock options. In simplest terms, an MBA's dream employee.

    Given the choice between Bill Spence and a candidate of even questionable abilities on an H–1B visa any MBA or senior executive would be regarded a fool for permitting the company to hire Bill. For anyone to pretend otherwise is an insult to our intelligence.

    I have to conclude that the current H–1B visa program is a canard.

     

THE EXAMINER

San Francisco Examiner

The worker shortage debate: Part 3

April 19, 1998

    Editor's note: On April 12, we asked readers whether they felt there was a shortage of labor in the high-technology field. The ''First Person'' solicitation ran with a story entitled, ''What shortage? '' In short, the story questioned recent efforts by Silicon Valley to raise the number of immigrant quotas the Federal government allows into the country yearly, told through the eyes of current job seekers in the market.
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    Here's what readers said:

     

BILL SWAIN, SAN MATEO

    I think there is a shortage of skilled workers in the high-tech industry. Instead of hiring foreign workers, however, the companies should retrain the workers they already have. I think it would be cheaper in the long run.

     

STAN L. FRIEDMAN, OAKLAND

    I find it incredulous that the one industry that has done more to displace ''human capital'' as America's economic engine than any other in world history is now whining that there's not enough ''qualified'' workers to go around. It's time for the high-techs to reinvest not divest in helping to retrain and reeducate the work force, both white and blue collar. After all, they have earned so many billions of dollars in profits, why wouldn't they wish to reciprocate to the workplace community whom they have helped to make extinct? Or will the push of the high-tech ''worker shortage'' cries supplant ''Just Do It'' as America's international motto?

     

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JILL P. NANNIZZI

    I think the shortage is exaggerated. Employers are trying to hire only those who have done the exact job rather than hire someone who could quickly learn to do the job. Most engineering and programming work is highly-specialized and the skill set frequently changes. Older workers can learn new skills. However, they may not be as willing to work the many hours of unpaid overtime that high-tech employers seem to expect.

    I have never worked with any immigrant programmer who had special skills. All had basic programming skills. I don't know what they were paid, but I know that they lived three and four to one apartment. I think the main goal of increasing the quotas is to drive down wages.

     

DOUGLAS BAKER, OAKLAND

    My own personal experience in the job market makes me very skeptical that there is a labor shortage. Despite having a masters degree in computer science, and taking several classes recently to keep my skills current, I have been unemployed for six months now. I have found that employers are hiring extremely selectively.

    If you don't have experience with the programming language that they are using, on the same platform (PC, Mac, or mainframe) in their industry, they are not interested in talking to you. Employers don't seem to believe that you're capable of learning anything new.
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    A few years back, I was turned down for a C programming job even though I have C experience with Bell Labs, the inventors of the language, because that was on a mainframe rather than on a PC. Recently, I've even seen help wanted ads that specify five years experience with Windows 95 or Java. Presumably only someone from the Microsoft or Sun development teams would qualify.

    All this is in marked contrast to the true boom times of the '80s, when employers were looking to hire good people regardless of their specific skills and train them. Of course, part of the reason for this is that back then employers were hiring for the long term, whereas today even permanent employees are being treated as contractors, hired for specific projects and then let go.

    Or maybe its because of my advancing age. I am admittedly approaching 40, and in the computer field that is considered the age of obsolescence, too old to learn anything new. If there were truly a labor shortage, employers would not be able to be so selective. When workers are treated as valuable resources rather than as disposable commodities, then I will believe that there is a true labor shortage.

     

THE EXAMINER

San Francisco Examiner

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The worker shortage debate: Part 4

April 19, 1998

    Editor's note: On April 12, we asked readers whether they felt there was a shortage of labor in the high-technology field. The ''First Person'' solicitation ran with a story entitled, ''What shortage? '' In short, the story questioned recent efforts by Silicon Valley to raise the number of immigrant quotas the Federal government allows into the country yearly, told through the eyes of current job seekers in the market.

    Here's what readers said:

     

BARBARA LANDY, LARKSPUR

    First, thank you for your reporting on this issue. Of course, older programmers can be retrained in new languages, platforms, and concepts, and it doesn't take that much of an investment either.

    The idea that people have to be discarded because they are not capable of learning something a little new is a revolting myth, completely at odds with the American ideal of human potential. But why am I not surprised that executives looking at the bottom line are making this claim?

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    I am a 54-year-old programmer who has been programming for 30 years. I have, throughout my career, learned new skills, sometimes things that I taught myself and sometimes learning skills on the job. I started doing COBOL on IBM, went to assembler, to DEC, to Tandem and TAL, to UNIX and C and now C++, Perl, CGI and Web.

    This is not difficult. Once you can program in a language—I mean figure out how to get from the start, through the middle and to the end in a seemly fashion—you can program any language. You just have to be able to read and have the time and opportunity to try one application.

    In fact, the ''shortage'' of technical talent should first be corrected by training older workers. High-tech companies may, indeed, have a need for very specialized skills that require years of training, but in reality, the few positions that need these skills could be filled from the existing visa program.

    What the high-tech companies really want is servile, cheap labor for very ordinary programming tasks since these tasks demand people who are literate and often college educated and able to concentrate on programming logic, and that category of people in itself is expensive in our society because our education system is broken.

    In recent years, there has been an influx of immigrant programmers from third world countries, especially countries in which some English is spoken such as India, to do very ordinary programming. These people work for much less than the prevailing wage for the same work, despite the claim made by industry lobbyists that this lowered wage scale is not legal.

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    This kind of programming could be taught to older programmers and would-be programmers, but neither the government nor the business community wants to make that investment.

    I would be much more inclined to support some broadening of the visa program if the high tech businesses would commit, on their part, sufficient resources to first retrain older programmers in newer languages and concepts.

     

OSCAR DEPINERES, PHD., VALLEJO

    There is no shortage, except when companies have high expectations and are greedy. Usually, they are not willing to help public education, nor training in-house workers, nor retraining available work force for their specific need at a giving time. Nor are they willing to hire workers older than 30 years, if they do not have 20 years of experience and a Ph.D—all these for the level of salary paid in England or Poland.

    By the way, have you seen the lengthy ads placed in newspapers and magazine by State Unemployment Benefit agencies? Take a look. The above expectations are exactly what companies want to look for workers in the USA. I understand they must place these ads by federal laws before they hire foreigners. These agencies do not understand what they are requested to look for by these companies and innocently place these ads exactly as told. Of course, they get no takers in the USA, therefore, they comply with the law and can follow on hiring overseas the exact worker they want. In a nutshell, shortage can be created depending on your expectation and greed.
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BILL ROUSSEAU, LIVERMORE

    There is no worker shortage for high-technology in the Bay Area.

    Age discrimination is rampant. It has been common as far back as I can remember. Certainly at least as far back as the 1970s. Then, everyone wanted engineers with five years experience—not much more as they might cost too much and no less because they didn't have sufficient experience to be trusted with real responsibility.

    Downsizing and putting people over age 40 in a protected class have exacerbated the problems. Downsizing increased the pool of older and unemployed technical workers. Being in a protected class has provided some protection to the older worker from the abusive practice of firing older workers to hire cheaper, younger ones. However, it also gives an employer a good reason not to hire an older worker.

    It you don't hire, discrimination is virtually impossible to prove. Firing anyone in any protected class, even with good cause, can be very expensive. H–1B visa workers are easy to get rid of.

    As one of the older and unemployed workers, I've turned to consulting and have done quite well (Having a Ph.D. from Stanford and being very entrepreneurial by nature helps.) From what I've seen, I'm not typical. Many older and technically competent workers are not doing well.
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    At job fairs many older people, myself included, are rudely treated by young recruiters from human resources. In one blatant case, I saw a recruiter from a major local computer manufacturer and software firm refuse to talk to anyone who looked over 35.

    Resumes from older people were tossed in one pile. Resumes from younger people were put in another with attached notes from a mini interview. I watched for a while and wished I'd had a hidden video camera. Company managers are a little older and smarter and, therefore, more polite, but not much more willing to hire the older technical worker.

    Consulting is no picnic either. Large companies have largely decided to avoid self-employed consultants to prevent difficulties with the IRS. Instead they turned to contract employee firms—typically a bad deal for the contract employee.

    I do not advocate additional laws against age discrimination. But I do believe that the IRS should be stopped in its over zealous attempts to collect taxes and penalties from employers thorough ambiguous rules about independent contractors (and sometimes to collect twice: both social security and self-employment taxes).

     

BRIAN CONRAD, WALNUT CREEK

    As a former technical director of a major computer game software company I have been watching this issue with great interest. Do I believe there is a shortage? Maybe, but only in some areas. Much of the problem, in my opinion, is due to business people who don't understand software development or the technology in general. They are the ones that believe that they need people with computer science degrees to do their programming. That is not so. In the department that I ran, only a few of the programmers on staff had computer science degrees.
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    The ability to be a good programmer is not dependent on knowledge of the science of computer programming but rather creative ability and specifically the ability the solve problems. Computer languages are relatively easy to learn, you don't need to be a rocket scientist to learn one.

    Once you have learned one language the next one is easier to learn. Since the ability to be a good programmer is the ability to be creative and solve problems, those skills might be better learned through studies in the liberal arts.

    For instance, I studied music, worked as a professional musician and had many on my staff that were musicians. We found that writing computer programs was not that different from writing music.

    But look what is happening to our arts programs in the schools. It is indeed a misguided public that thinks that more math and science programs are needed to graduate more technology workers. Also, just like studying music in college will not make you a musician, studying computer science will not make you a programmer. You need the inherent talent and inclination to be a good computer programmer just as you do to be a good musician.

    Another problem that seems to create this worker shortage are job descriptions that are too specific and often too naive. I had to work closely with my human resources department to make sure that the job descriptions were not so tight that no one felt they qualified. There is a joke that programmers like to tell about companies advertising for ''Java programmers with 5 years experience'' when Java had not even been around that long.
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    By liberalizing the job descriptions I got more applicants and was to find people who could adapt to the task. On the age issue, certainly younger employees often have the exuberance to put in 80 hour weeks but older employees often have the maturity and experience to accomplish the same tasks in far less time.

    A worker shortage? Maybe our high tech executives and managers need to be more creative in solving their staffing problems.

     

THE EXAMINER

San Francisco Examiner

The worker shortage debate: Part 5

April 19, 1998

    Editor's note: On April 12, we asked readers whether they felt there was a shortage of labor in the high-technology field. The ''First Person'' solicitation ran with a story entitled, ''What shortage? '' In short, the story questioned recent efforts by Silicon Valley to raise the number of immigrant quotas the Federal government allows into the country yearly, told through the eyes of current job seekers in the market.

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    Here's what readers said:

     

JACK MCCAULEY, OAKLAND

    I am a consulting engineer specializing in system software components for Windows NT and 95. I have been working in the Valley for the past 14 years.

    I have a noticed a significant increase in the number of foreign workers, particularly with H–1B visas in the past two years. These workers work for less money, that is the bottom line—and that is all most companies are concerned about. They are sponsored by the company that hires them. Eventually the company clears the H–1B to a green card which allows them to work anywhere they want.

    In regards to education, most H–1B workers do not possess anything above a bachelors degree. To suggest that the U.S. education system does not produce quality engineers is absurd. Remember that Jobs, Wozniak and Gates don't have anything above a high school education.

    I would state that most of the H–1B workers I have worked with are of mediocre quality. Most of the training they receive is on the job. They have in essence taken the place of a U.S. worker who could have been trained for this.

    I suggest since foreign workers enjoy all of the privileges of citizenship, that there be a competency examination prior to entry into the U.S. This test could determine if the H–1B worker should replace a U.S. citizen.
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CLYDE H. SPENCER, SONORA

    There may be a shortage of workers skilled in certain very new, specialized areas of computing. However, I think the general problem is one of there not being enough young, and/or inexpensive workers.

    I have been having an increasingly difficult time of finding any employment since my late forties. I have many friends who are in their fifties who are well-educated, obviously experienced, and are quite computer literate, who are having similar difficulties.

    Some of them are being forced into an early, unfunded retirement, others have accepted a much lower standard of living, and others such as myself have chosen to be self-employed rather than wait for a job offer that may never come. In the last eight months, I have sent out over 200 resumes and had two interviews and no offers. I had previously spent nearly five years sending out four or five resumes a week until I finally found a temporary, contract position.

    Companies advertising to fill specialized jobs for which I believe I am quite qualified, never get back to me. I have had my resume examined by a professional career counselor and been told it is quite impressive—perhaps too impressive. I believe that age-discrimination is rampant in this country, especially in the computer industry. Its the dirty little secret that industry won't own up to.
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ANNETTE A. AURRECOECHEA, GRASS VALLEY

    I'm retired and confess I don't know if there is a worker shortage in the high-tech industry.

    We can't afford to let the U.S. fall behind in technological leadership and it would seem then that if they say they don't have enough workers, we should allow them to import them.

    Having said that, I feel strongly that for every ''importee'' the company must prove the required expertise cannot be found in their market area. My concern is that it's possible the expertise can be found but because of the high concentration in the Silicon Valley of high-tech companies, these firms are simply not willing to pay the price these highly valued technical people deserve.

    If they're allowed to import it's important that the salary and benefits structure be equal to that paid to a U.S. employee. I'm concerned they'd bring in these folks who would willingly work for less just to get into the U.S.

     

RICHARD WALKER, OAKLAND
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    It is wrong for the government to increase the cap on H–1B visas, thereby allowing more foreign high-tech workers to take jobs in the US, for several important reasons:

    1. At a time when this country should be encouraging more students to pursue computer science degrees, it instead sends a discouraging message notifying them that there will be more competition and less demand for their skills if they should choose a high-tech degree.

    2. It will surely exert downward pressure on wages for American workers in the high-tech industry. H–1B workers earn on average one third less than the prevailing wages in their field.

    3. Anyone who follows economic news knows that for the past two decades real workers' earning power has declined while corporate profits have skyrocketed. It is wrong for government to fashion laws that benefit a few to the detriment of many.

    If the government is truly concerned about the health of the high-tech industry, then its first priority should be to encourage training and employment of American workers in it.

    I am myself a computer science student who has decided to commit considerable time and energy to gain an education that will help answer this need. I am hoping that my efforts will be met with commensurate reward. But with the prospect of dramatically raising the cap on the number of foreign high-tech workers, I feel like the rug is being pulled out from under me.
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THE EXAMINER

San Francisco Examiner

The worker shortage debate: Part 6

April 19, 1998

    Editor's note: On April 12, we asked readers whether they felt there was a shortage of labor in the high-technology field. The ''First Person'' solicitation ran with a story entitled, ''What shortage? '' In short, the story questioned recent efforts by Silicon Valley to raise the number of immigrant quotas the Federal government allows into the country yearly, told through the eyes of current job seekers in the market.

    Here's what readers said:

     

PENELOPE SUTHERLIN, SAN FRANCISCO

    Until the American Educational system is on par with European universities in tuition cost to students and academic excellence, the quotas for H–1B visas should be lower, not raised. Until American and multinational corporations operating in the United States provide American graduates from American educational institutions with job and wage protection, no more H–1B visas should be issued. Our government should act immediately to protect skilled, ''specialized'' American workers in all fields.
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    The Europeans, Asians and everyone who benefits under the H–1B system is largely the product of a superior educational system, which is available to them at a nominal cost or it is free. Some European countries, i.e., Denmark, Germany and Switzerland, provide their top students with full-tuition and living expense scholarships, and further, if their ''field'' of study is not available within their own country, their government will subsidize education elsewhere.

    The H–1B visas are a ruse of all American companies with ''specialized'' jobs. The H–1B visa is undermining American wages. The visa system circumnavigates the 40-hour work week, health benefits, and other benefits of employment. Technology is not alone in its search for ''cheap'' labor, it is joined by advertising, nursing, any company can claim ''specialized'' and thus claim an exception for anyone.

    No more H–1B visas, now.

     

J. R. MOORE, MOUNTAIN VIEW

    Of course there is a high-tech worker shortage! It has been with us for several years. Trillions of dollars in high profit/earnings multiples and private company valuations are riding on the bet that high-tech will continue to grow at double- and triple-digit rates. It is hard to do this with single-digit labor force growth. Thirty thousand more H–1B visas are but drops in the bucket from a macroeconomic perspective. And, while increased engineering and computer science enrollment is encouraging, the resulting new workers are years away from the labor force and far fewer than the high-tech growth machine requires.
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    So, where is the problem? First, we do have a K–12 education crisis. Dr Matloff is talking through his input buffer when he calls ''Johnny can't do math'' a ruse. The fact is, Johnny also cannot read, think and speak coherently.

    Second, some people do have a hard time finding new work. This often correlates with time spent in a particular job or company. Job hunting is a skill: Use it or lose it! Yes, age probably is a factor, but ''you're as old as you feel'' is an effective counterbalance. Many Java and C++ programmers carry AARP cards in their backpacks.

    Finally, I do not have a problem with new workers [be they H–1B holders or young graduates] paying a few dues by receiving below-average starting salaries. One look at the young buyers of $1 million-plus homes suggests that success comes quickly to those with talent, drive and luck.

     

ROCCO MANZONE, SANTA CRUZ

    The ploy of the industry to get additional visas is appalling. They get these individuals to come to the United States and work six or seven days a week, long hours, all for the visa.

    There are a lot of people out of jobs who can be trained to fill these positions. We need to accept responsibility for the boom and act accordingly. There are many who would do whatever they could to get into this lucrative industry. We should not sacrifice the potential livelihoods of Americans for the greedy stockholders and executives. The corporate greed needs to be curtailed.
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THOMAS NG, SAN JOSE

    I believe that the process for matching applicants with the actual job requirements is still recovering from the recent downturn in high tech.

    A few years ago, many openings were filled by extremely overqualified people. Nowadays, with most of the new graduates taken, firms are finding it much tougher to evaluate the remaining applicants for senior positions.

    Crying about a lack of qualified applicants and raising the H–1B visa cap seems to be a CYA compromise—if the foreign applicant doesn't work out, one can just say ''Foreigners! Who could've known they were a mistake?''

    There is no shortage of well-qualified domestic job applicants, it's just that most firms just aren't searching for them very efficiently. For a senior-level opening, they need to relearn how to evaluate experience. In my last contract interview, the engineering managers interviewed me directly and offerred me a written contract in less than 24 hours, because they had the experience to see that my experience was also sterling and didn't want to lose me.

    As Charles Rau says, ''The Jordan moves aren't in the NBA rulebook.''

     
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THE EXAMINER

San Francisco Examiner

The worker shortage debate: Part 7

April 19, 1998

    Editor's note: On April 12, we asked readers whether they felt there was a shortage of labor in the high-technology field. The ''First Person'' solicitation ran with a story entitled, ''What shortage? '' In short, the story questioned recent efforts by Silicon Valley to raise the number of immigrant quotas the Federal government allows into the country yearly, told through the eyes of current job seekers in the market.

    Here's what readers said:

     

MICHAEL A. SCHRINER, VACAVILLE

    In those areas of the computer industry that are the currently hot, there are undoubtedly shortages. In turn there is a time lag that will exist until skill sets can be matched to demand. However, there are those who deliberately keep the spin level high to fulfill their own agendas. Will Java be hot or boring this time next year? The average worker couldn't care less.
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    I was interviewed for the position of PC technician on Thursday, April 10. I was informed at the outset that there were 11 applicants for one position. Do I expect to be offered the job? No: I am 50 and one of the interviewers was in his 20s. This is just one of a 50 or so interviews where at the outset it was an obvious waste of time. When I was in my 20s, I didn't like having to work with people who were the same age as my parents.

    One interview I went on was nothing more than a quick tour of the facility and the pointed question as to whether or not I was willing to work 36 hours straight. After that I was escorted to the front door.

    Too-high salary expectations also are nothing more than another way of weaseling out of hiring, and are an indication of a corporation's or manager's agenda. Every job I have applied for during the last year stated the pay scale up front.

    Education, or lack thereof, is an another excuse not to hire. As a PC tech I do not need nor do I want a degree in CS/IS/etc. At a number of interviews I have been ''tested,'' since the graduates previously hired failed to understand which end of a hot soldering iron one hangs onto.

    After being ''downsized,'' I was sent to network training as a skills enhancement to insure I would be able to get a decent job. What a joke. The training I received on Novell CNE (3.12 & 4.1x) is largely useless, thanks to Microsoft's low-balling of the price of Windows NT. This is combined with the Catch-22 of (begin infinite loop) having extensive technical experience and little opportunity to apply the network training since I haven't got the necessary experience gained from having a network job.
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    I have found that when I interview with those who deal with the plumbing aspects of computers on a daily basis that their attitude is strongly positive. Contrariwise, the attitude of management is less than enthusiastic, if not decidedly negative. Productivity versus agendas.

    As for Human Resources: Ha, what a joke! Read the ads and on-site job descriptions. Scott Adams is right. The only items missing from many job descriptions, which read like an 8-year-old's Christmas wish list, is the puppy, the pony, the Barbie doll and a partridge in a pear tree. Programmers with 5 years of Java experience? NT engineers with 6 years' enterprise experience? I was interviewed for a position that I had responded to based solely on a stated requirement—must be a Novell CNE. The interview focused on Windows95/NT. Has 'duh' been entered into the Oxford English Dictionary yet? Stay tuned.

    So where did I work, and what did I do? I worked for a GSA contractor. I was one of a small team of individuals who supported one mainframe, 20 minis (9 in a ring on the network), 40 network servers, 2,000 PCs and printers, 1,500 dumb terminals and printers and 7,500 users along a fiber ring on a Class B Internet site. There should be no misunderstanding: There are no references on my resume to any affiliation to the federal government during my employment as a PC technician. Such references are the kiss of death in the Bay Area/Sacramento corridor. If you think the economy is booming, come to Solano County, count the empty storefronts and see what happened after Mare Island closed.

    What about the agencies? Another farce. I was sent on an interview for a job with Sacramento County by a national recruiter/outsourcing corporation. My skill set is clearly defined. The interview was for an IBM environment—AS400s, OS/2 servers and workstations. No Novell, no repair work (a different contract) and no job. Someone at the outsourcing agency didn't know enough to know which questions to ask. These people merely match buzz words. For those fools who truly believe that the network is the computer, understand that if the hardware doesn't work, nobody works.
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    After a year of retraining and a year of searching I am fed up, but persistent. Like the kid who dug vigorously through the pile of horse dung, I too am looking for the pony.

     

ROBERT MONTALVO, APTOS

    After working in the Bay Area as an engineer for over 20 years, my observation is that the perception of worker shortage has been promoted by medium to large companies in order to allow them to hire foreign employees at a lower cost. I have witnessed friends and contemporaries leaving their technical field of expertise because they found it increasingly difficult to find employment as they grew older. The bottom line is that companies are pressured to lower costs and they either transfer work to locations where the labor and other cost is cheaper, or they import foreign workers who are willing to work for a much lower salary than domestic workers.

     

THE EXAMINER

San Francisco Examiner

April 12, 1998
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The job fair phenomenon

High-tech companies prefer low-tech method of finding employees

BY BOBBY MCGILL
SPECIAL TO THE EXAMINER

    In an ironic twist of technological evolution, it turns out the very companies that pioneered electronic communications prefer face-to-face contact when considering prospective employees.

    While many Silicon Valley job seekers depend on e-mail, voice mail, pagers, fax machines and mobile phones to make contact with their company of choice, a simple trip to the job fair might be a better alternative.

    In an attempt to bridge the chasm that has formed between employers and potential employees, job fairs have become an increasingly popular option, spanning both sides of the search.

    For example, the West Tech job fair, held in Santa Clara this past week, is a bimonthly, two-day event that consistently attracts about 13,000 people.

    These fairs are a relatively new phenomena that many feel lend a more personal touch to what can otherwise be an arduous task.
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    ''You're leaving voice mails here, you're leaving e-mails there, your spending less and less time face to face with your peers,'' said West Tech job fair president, Fred Faltersack. ''As that happens, venues like this become more popular because it reconnects people.''

    The West Tech job fair brings in roughly 400 representatives from the high-tech industry. Giants such as Intel, Microsoft and others regularly set up booths in venues like these across the country in search of new lifeblood for their companies.

    The success of these shows, say employers, makes it all worthwhile. ''We typically get in the neighborhood of four (new hires) out of each show—that more than pays for us coming here,'' said Sandra Chroman from Asante Technologies, of San Jose. The cost of a single booth at West Tech was $4,150.

    The job fair gives employers a chance to sidestep many of the tedious aspects of prospecting, according to Rob Lake, staffing manager for Advanced Micro Devices in Sunnyvale.

    ''Job fairs in general offer you the opportunity to get in front of people and do an immediate assessment that no other medium allows you to do.'' This avoids the sometimes drawn-out process of contacting potential employees to appraise their qualifications. ''It allows you to call the resume right on the spot,'' Lake added.

    Not everyone was so enthusiastic. Many people say that the shrinking job market is hitting them hard—especially staffing agencies that specialize in finding qualified workers for needy companies.
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    ''These shows usually bring in college grads that have no U.S. experience. We simply can't place these people,'' said Wendi Geisler, a placement manager for Chamberlain Associates in San Jose.

    Additionally, there is the problem of finding people with the right kind of experience. ''I come up with gentlemen all the time who send their resumes to me, who are maybe 40 or 50 years old,'' said Geisler. ''They come from the defense industry. I can't do anything with them because they are not trained on the current tools. A lot of these guys worked on mainframes.''

    The job fair isn't just for the unemployed. Many attend the free event just to look around. ''What makes a job fair attractive to these technology professionals is that they aren't looking for jobs,'' said West Tech president Faltersack. ''This is just a venue for them to come out and see what's happening in their industry—what's changing, who's coming out with new technology and new products that will change the way they do business.''

    Luan Nguyen, of San Jose, sees the job fair as a stepping stone from his current job. Coming to West Tech already employed offers him a chance to be more discerning. ''Companies have called me, but I turn them down because I already have a job. I am looking for a higher position.''

    Window shopping seems to be the most fitting description for many. ''It's like going down to FAO Schwarz for a day. You're sampling and out there playing with all of the toys. You didn't have the intention on buying anything, but you end up finding a toy you just can't live without,'' said Faltersack.
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    Some people, such as software engineer Victor Devadoss, have more ''toys'' to choose from than others. He is known as a hired gun: A software writer who is skilled in the popular Java programming languages, he can come right into a job and immediately begin work with little, if any, training.

    ''Consultants'' such as Devadoss can demand wages of more than $100 per hour. Aside from the money, he enjoys the fact that he is not encumbered by a long-term position. ''I prefer being a consultant if I am not confident with the (company's) prospects after a year or so. I feel it's better.''

    The job fair is also a place for people who are tired of their current trade and seeking a new line of work altogether. ''I am looking for a career change,'' said Silicon Valley resident Kathy Pai. According to Pai, she has been on the business end of the high-tech industry for most of her career; she came to the job fair hoping to find work that would make use of her creative side.

    ''I am in sales and marketing,'' said Pai, who chose to keep the name of her employee anonymous. ''Since I was a little kid, I loved to draw things, and I think that I can combine art and computers.''

    Not everyone here is fortunate enough to be choosy. Some, like Robin Bjorjan, have been looking for months with no success. In his 40s, he attributes the difficulty to his age. ''We're like the old soldiers and the young ones are coming up. From my point of view, if you're 40, there is a wall.''
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THE EXAMINER

San Francisco Examiner

Readers debate worker shortage

Jan. 25, 1998

    Editor's note: On the Jan. 18, 1998, Computers and Technology page, C. Giovanni Enrico gave his views on the availability of technology workers in Silicon Valley. Entitled ''No shortage of workers in Silicon Valley,'' Enrico's piece garnered a large variety of responses, both in support and in opposition. What follows is a synopsis of Enrico's Viewpoint and a selection of readers responses.

     

MARC P. ROTH, SAN FRANCISCO

    Mr. Enrico, your commentary is striking for the following reasons. It seems as if you have mixed up the ideas of workers and talent. Your analysis includes new immigrants, fresh graduates, and non-specific, unemployed people, all defined as workers. I'm not sure how you make your hiring decisions, but if you need a junior, you hire a junior. If you need a senior, you hire a senior—that is, if you can shake one loose.
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    You seem to be suggesting hiring junior people for senior positions and then training them. This sounds OK, except, who exactly is doing all the work while these juniors are running around getting trained? So you need to think a lot harder about the difference between workers and skilled employees before you lump these groups together and call them the same.

    Talented, skilled employees also know the policies, practices and procedures for operating in specific corporate environments. I'm not sure if your fresh graduates and new immigrants necessarily fall into this category.

    Later in your commentary, you are obsessed with real estate prices. Are you judging people by how much they're willing to spend on real estate? If they can afford to buy it, why should you care? Yes, I paid a lot for my condo on Russian Hill, but my salary and the price of real estate are both governed by market supply and demand.

    This is the Bay Area—a great place to live! That is the same supply and demand system called capitalism in which Amdahl, Oracle, Cisco and everyone else competes for business as well as human resources. Whether real estate property is over-priced is determined by market forces, not your opinion.

    Similarly, how valuable particular individuals are is determined by market forces related to the scarcity and value of their and abilities. Surely you're not blaming high-tech employees for the level that their compensation has reached?

    I am well paid, not overpaid, as I am trained, educated with a Masters degree from Indiana University and have ten years of industry experience. I suppose that's all part of being a so-called ''greedy immature yuppie'' with no motivation or ambition, right?
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    Finally, your corporate area unemployment tax idea suffers from similar lapses in reasoning. First of all, you're mixing real estate and corporate finances. Second, this type of tax would certainly discourage corporations from building or moving facilities to high-unemployment, low-economic areas.

    Third, what do you mean by area? Who determines what area a corporation falls into. It would seem like that type of tax would inevitably fall prey to gerrymandering by local politicians, special interest groups and Dilbertesque management consultants.

    You know the type—they're the ones who glean a few buzz words and hot topics from recent media reports and then try to develop strategies for corporate America based upon poorly conceived, loose and shallow associations between them.

    Either that or they write newspaper commentaries about it.

SUMMARY

    My commentary is inspired by the perceived ''skilled worker shortage'' in the computer industry. Countless newspaper articles and television panels have laid out a scenario where high technology firms are forced to look overseas to hire qualified, educated workers.

    The local workforce, apparently, is just not up to snuff. Much of this purported ''cascading brain drain'' is self-induced by the companies themselves. It is the Valley's greed that has created the current situation.
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    Rather than actively developing talent through education, cross training and internal promotion, companies prefer to raid their competitors' talent pool. Instead of creating new opportunities, the same old opportunities are recycled to members of an elitist club. That club consists of those who are employed, whether or not they're looking for a job. I believe that the public should no longer encourage or subsidize this behavior.

    A levy should be put on all corporations. This levy should equal the average unemployment rate in their area. This would tie the corporations to true ''best prices'' in regard to management, education, training, hiring and retention.

KEN JACOBS, VICE PRESIDENT, ORACLE CORP.

    We were extremely disappointed to see the cheap and wholly inaccurate shots made by your Jan, 18 Viewpoint columnist, C. Giovanni Enrico, regarding Oracle Corp.

    Enrico states, ''One wonders where the Oracle8 project would be without those engineers from Informix. Word on the street had it that much like Apple's 'Copland' fiasco, Oracle8 was behind schedule, over budget and could not be finished by the existing talent at Oracle.''

    The answer is that the Oracle8 project was in fact exactly where it was meant to be by June 24, 1997 (that is, shipping on time and within budget), without the help of ex-Informix engineers.

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    The Informix engineers who voluntarily approached Oracle in early 1997 looking for work were assigned to the Application Server Division and the newly formed Portland Development Center in Oregon. As such, they simply never had anything to do with Oracle8.

    Oracle will once again also state for the record, Oracle8 was delivered on time, on schedule, within budget, within the first half of calendar 1997, just as it had always been promised. Oracle8 was announced as a shipping product June 24, 1997 at Radio City Music Hall.

    Enrico's article was a naive jab at Oracle's ethics in an attempt to try and make his article interesting. Sorry Mr. Enrico—get your facts right before you take up your soapbox.

J.A. VANDERPOOL, ED.D., SONOMA

    I've long thought that the ''captains of industry''—today's robber barons—were mauling kids and the schools to train more high-tech specialists just so these same barons could lower the cost of labor in their various enterprises. Of course, they are already buying more influence in Congress to bring in people willing to work for considerably less—or are shipping their work to India, et al. I am old enough to remember when engineers were glad to have a chance to sell Fuller brushes door to door—the result of the last push to produce engineers. The piece was superb. Bully for you!

JUSTINE ROBERTS, MILL VALLEY

    I must confess to a couple of things. First, my bias. I identified with several of the passed-over groups of workers named in Enrico's Viewpoint. Luckily, timing let me become employed in developing computer systems at an academic medical library, which fulfilled my career goals. Also, I nearly skipped your article when I read ''consultant'' and ''recruiting'' in your biography. Another blame-the-victim pundit, I was sure. However, I read ahead and your piece impressed me. Your proposed tax solution is brilliant, though I suppose it is doomed not to pass. What a difference it could make! Alas, living in Mill Valley, I can't even vote for you if you decide to run for office.
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RAJESH VISWANATHAN, SAN FRANCISCO

    The rather innocuous title ''No shortage of talent in Silicon Valley,'' unfortunately hides the fact that this Viewpoint of Mr. Enrico's doesn't stop short of being extremely xenophobic, at the least. If it weren't for the fact that the entire opinion is a ramble of contradictions, and hyperbole, readers would in no way miss the tinge of racism involved here. Just to highlight a few inconsistencies:

    *In the opening couple of paragraphs, Mr. Enrico thinks there is a ''hype'' regarding shortage of technically skilled workers. Later, on he indicates that this could be alleviated by hiring undergraduates, handicapped people and senior citizens. So, now the accusation is one of age and disability discrimination? I don't know any company in the current cutthroat environment who would pass up qualified senior citizens or handicapped people.

    As for new graduates, I don't believe there has been any significant drop-off in unemployment amongst that group, has there? In any case, I don't feel for certain positions new graduates possess the requisite skills.

    Training them is an option, if you're not trying to push out a product in Internet years. The production cycle is pushed so rigorously that a new product is demanded every six months.

    *Greedy, immature yuppies are bidding up property prices? What about the responsible, mature property owners taking advantage of the real estate markets to sell their homes? Those poor owners, they're being taken advantage off by these greedy, immature yuppies from faceless, nameless, uncaring, society bottom feeding, community ignoring, corporate behemoths.
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    *Have you heard of a capitalist market? Let me explain. In a free market society public corporations trade shares on the stock market. The stock market bets that companies like Oracle or Microsoft will continue to grow at a certain percent. To continue their growth, these companies have to find ways to improve on their products, and deliver new products. To do this they need intellectual assets, i.e., employees.

    This same free market is reflected in the employment arena. Similar to the way an investor may like or dislike a company's strategy for growth, an employee might like or dislike a company's technological direction. This might induce him to make an employment decision of some sort. I have yet to come across employees who work in an environment where they do not enjoy their work, but will choose to remain. Its common sense. You call it greed. Fine.

    *I won't even go into your racist stereotypes, and xenophobic crap. I'm sure you'll receive enough communication on that from others.

    In conclusion, Mr. Enrico, there is demand for qualified workers in this country, whether you choose to believe it or not. Supply is nowhere close to demand, I know, because I am actively looking for people whose technical skills are of paramount importance—not their age, disability etc.

DANIEL LONG. SAN FRANCISCO

    The situation, especially in the Valley, has risen to preposterous heights and deserves to be looked at with a magnifying glass. The people who continue to cultivate miserable employee relation habits are to be exposed and ridiculed. I very much look forward to more of these insights.
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ROBERT DONALDSON, MINNEAPOLIS

    In reflecting about your article I have a few reactions. First, the economics of the industry are being driven by Wall Street. The money flowing into Silicon Valley projects is awesome.

    But I recall this phenomenon as being in existence back in the '60s when I was in school at Stanford. We had several very wealthy professors who had made money with the Hewlett Packard, Varians and others that existed then.

    The amount of money that is made available by the market is rational in that it is freely allocated capital with the expectation of a predictable return. Nowhere in the world can we generate the growth and return on capital that the technology industries of Silicon Valley, and now Seattle, have consistently generated for the past four decades.

    I heard the statistic that we are turning out fewer computer science college graduates today than we did a decade ago (less than half). Nonetheless, the technology sector is the largest value creation sector in our economy with the fastest growth rate.

    Having observed the technology industry for over thirty years, the demand is up in all sectors and I don't see this changing in the near future. As far as a corporate culture is concerned, the driving dynamic is the ability to do more with less that has been fueled by our dynamic technology sector.

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    Philosophically, I am not opposed to the shrinking of corporate and large institutional power as manifested by large payrolls—i.e., large pools of human resources performing, largely, low-skill tasks. I believe the long-term impact of the technology boom will be to ''de-massify'' institutions and I think this is good.

    The reality of the institution to protect us as employees has always been an illusion. While there is a dislocation that is a consequence of downsizing, it is a short-term pain against a long-term gain. While it may be idyllic to tax our economic institutions to provide for the unemployed, I can't see making business the seers of human resource development looking at the long haul when things change as fast as they do. I seem to be finding myself disagreeing with you.

DAN SLEETER, SAN LEANDRO

    That was the most kick-aXX, brilliant, relevant and well-written piece I've read in a long time.

    Your bold suggestion at the end of the piece sounds like it could catch on. The idea of linking a corporate tax to local unemployment rates is an excellent and elegant idea. But, in my opinion, it may need to be sugar-coated somehow.

    How about this? Make each percentage point below 5 percent a tax break and each percentage point above 5 percent a tax premium. Pick any percentage point you want here. The idea will be more marketable, and still provide the inducement you want, even if it is less elegant or ''responsible.''
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THE EXAMINER

San Francisco Examiner

No shortage of talent

BY C. GIOVANNI ENRICO
SPECIAL TO THE EXAMINER
Jan 18, 1998

    This commentary is inspired by the perceived ''skilled worker shortages'' in the computer industry.

    Countless newspaper articles and television panels have laid out a scenario where high technology firms are forced to look overseas to hire qualified, educated workers. Americans, apparently, are just not up to snuff.

    Adding fuel to the hype was a visit to Berkeley this past week by Clinton administration members who announced plans for funding American education programs, hoping to create more qualified, homegrown talent.

    Media reinforcement of this idea is pervasive, but I will refer to an article that ran May 3, 1997, in the San Jose Mercury News. In the article, entitled ''Job recruitment becoming innovative feeding frenzy,'' Michael McNeal, human resources manager for Cisco Systems, made a poignant statement by revealing, ''One of the things I'm not interested in are the folks actively looking for work. They're going to job fairs; they're knocking on your doors already. It's the people that aren't. How do I get them to take a look at Cisco?''
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    This statement is both revealing and representative of several problems that manifest themselves within Silicon Valley and Corporate America in general.

    Much of this purported ''cascading brain drain'' is self-induced by the companies themselves. It is the Valley's greed that has created the current situation.

    Rather than actively developing talent through education, cross training and internal promotion—or recruiting individuals who are ambitious, have a genuine need and are willing to add value—companies prefer to raid their competitors' talent pool.

    Oracle is a prime example of this ''best practice''—which translates to ''preferred method of operation'' in typically cryptic corporate babble.

    Gerald Corvino, senior vice president and chief information officer for Oracle, admits as much in the same Mercury News article, saying, ''If you want to target a skill, you just go out and buy it, and throw stock options at it.''

    One wonders where the Oracle 8 project would be without those engineers from Informix. Word on the street had it that much like Apple's ''Copland'' fiasco, Oracle 8 was behind schedule, over budget and could not be finished by the existing talent at Oracle.

    It is no mystery why attrition rates are high and the time needed to fill vacancies is increasing. This mercenary behavior escalates the cost of doing business, as well as the cost of living in this already inflated area.
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    Instead of creating new opportunities, the same old opportunities are recycled (at an ever-escalating cost) to members of an elitist club. That club consists of those who are employed, whether or not they're looking for a job.

    Let's get something straight: As a ''best practice,'' employers prefer to dedicate scarce resources and time to lure those who do not need a job and who do not have the motivation to actively seek a better opportunity.

    It would seem that these types of individuals have their heads buried in the sand. This is a reflection of the type of person that is considered a fit in today's corporate culture. Only those lacking ambition and motivation need apply.

    These are the same people who are climbing over one another in a frenzy to bid 10 percent above already ridiculous real estate asking prices, paying sellers' closing costs, taking the property ''as is,'' submitting resumes, family and pet pictures—all in an effort to beg for the privilege of paying $500,000 or more for a small, dilapidated property in Palo Alto.

    Enough said for the purported intelligence of these individuals. Much like the sensitive and intelligent members of the Heaven's Gate cult, these lemmings and corporate clones are the architects of their own demise.

    As if the recycling of jobs were not bad enough, corporations are now attempting to leverage this strategy into a bigger payoff. All this whining about the demand for skilled workers outstripping the supply by 10 to 15 percent is amusing at best. There are plenty of fresh graduates, unemployed individuals, handicapped people and senior citizens who could be trained and placed to fill the needs.
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    ''Best practices'' prevent hiring American people in need. The perception that demand is outstripping supply is created. With the manufactured need for additional skilled labor, employers lobby Congress and the president to relax immigration quotas under the guise of a threat to competitiveness crisis.

    Next thing you know, you have two cabinet members in Berkeley throwing money at this self-fulfilling problem.

    The loosening of immigration quotas would make a fresh supply of foreign programmers available. These foreign workers will be hired at 50 to 60 percent of the going rate. They will be glad to take less money than their American co-workers because it's more than they can get at home. The real benefit for them is an open door to America for themselves and their family members.

    They will be glad to live with five or six people in a one-bedroom apartment renting for $1,200 a month. This is not a lowered standard of living for them; this is a step up. They also will be quiet about sweatshop hours and management abuses and are less likely to unionize. Who can blame them?

    Once the production crisis is over, management decides to retrench and cut back in an effort to strengthen the bottom line. The first to be laid off will be the now overpriced domestics.

    This move creates a flood on the market of formerly expensive talent, which further depresses the compensation rates. The only objective of this scenario is to control the cost of labor to increase profits. This is greed, and, as the ''Wall Street'' character Gordon Gecko said, ''Greed is good.''
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    In a recent ABC–TV news report, some major corporations were raving about a new source for a cheap, stable and compliant workforce, which they called ideal. This wellspring includes one additional benefit: All of its members are incarcerated. Yes, the ideal workforce referred to consisted of prison inmates.

    Only during the '80s did corporate America's morally bankrupt management and hiring practices display a more wanton disregard for society as a whole. Let the corporate spin doctors say what they may, the fact remains that employers are actively discriminating against those who need the jobs and would benefit the most.

    These are the same spin doctors that promulgate a corporate culture supposedly respecting individuality and diversity while draping itself in the ubiquitous sensitivity to issues and pervasive political correctness in the work environment.

    Silicon Valley creates, perpetuates and plays to a ''more value out of fewer people'' mindset. Despite record profits, many companies are streamlining and laying people off. Visa and Levi Strauss have seen record profits. Yet, over the last two years, they have and or are planning to, lay off tens of thousands of employees. Remember the corporate dictum, executives are only as good as their quarterly results, and their bonus is predicated upon it.

    Corporations are allowed to exist by the public for several reasons. One of the main reasons is to add value to society. One of the components of this value-added service is the creation and maintenance of income-producing employment opportunities for people.

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    Anyone old enough to have experienced the catastrophic '80s knows what is around the bend.

    In the '80s, we became experts on how to make money without producing any tangible products. Mergers, acquisitions, leveraged buy-outs, junk bonds, Milken, DeLorean and Keating, service sector growth, no R&D spending and escalating real estate costs all contributed to trickle-down, voodoo economics.

    All the harbingers for another collapse are on the horizon. There is rampant speculative investing in a stock market totally lacking in fundamental values, mostly based on technology that so far is unproven and yet to deliver tangible results. Greedy, immature yuppies are bidding up property prices. Questionable hiring practices and corporate behavior, coupled with wholesale avoidance and ignorance of fundamental societal problems, begs to be addressed.

    I believe that the public should no longer encourage or subsidize this behavior. A levy should be put on all corporations. This levy should equal the average unemployment rate in their area. If the average rate of unemployment is 3.5 percent, then all corporations operating in the area must pay 3.5 percent of their net profits as a tax premium.

    This would tie the corporations to true ''best practices'' in regard to management, education, training, hiring and retention.

    They would have a vested interest in creating and maintaining actual new jobs, rather than recycling old jobs. This would stop the current discriminatory practices and end spiraling costs and inflated property values. This would also re-introduce something that has been sorely lacking in recent times: social and civic responsibility in the corporate equation.
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BIO: C. GIOVANNI ENRICO

BORN: 1960, San Francisco

TITLE: Principal management consultant, operations services and consulting, Amdahl Corp.—A Fujitsu company

EDUCATION: BS, business administration, computer methods, Cal State University at Long Beach, 1985

FAMILY: Live in San Carlos with wife, Laura, and the cats, next door to John Sr.

WORK COMPUTER: Fujitsu Lifebook 555Tx

HOME COMPUTER: Acer Pentium 100

E-MAIL: JENRICO@msn.com

WHAT DO YOU LIKE BEST: The autonomy to conceptualize, define, create, align, position and evangelize new service and product offerings within the IT domain. Fostering the internal and external alliances which will help make the offerings a reality and a success. Being able to work from home, this allows me to be closer to my 84-year-old dad, my crazy cats and the local wildlife.

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WHAT DO YOU LIKE LEAST: As with any job, dealing with suppressors—internal or client based. These are people who exist to drag others down, rather than push them up. They lack imagination, vision and the ability to see the bigger picture. Suppressors are very conservative, afraid of change, innovation or taking risk.

LAST BOOK READ: ''Implementing SAP R / 3,'' by Nancy Bancroft

LAST MOVIE: Austin Powers

FAVORITE ESCAPE: A slow gondola ride through Venice; or the surf lapping at the sand beneath my curled toes on Tunnel's Beach in Kauai; or nightly spooning with my wife and cats.

     

THE EXAMINER

    Mr. SMITH OF TEXAS. Thank you again, and I appreciate everyone's interest.

    [Whereupon, at 1:18 p.m., the subcommittee was adjourned.]

A P P E N D I X E S
APRIL 21, 1998
Additional Material Submitted for the Hearing Record

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Appendix 1.—Prepared Statement from American Electronics Association
American Electronics Association

Representing the U.S. electronics, software, and information technology industries

STATEMENT FOR THE RECORD
FOR THE
AMERICAN ELECTRONICS ASSOCIATION
BEFORE THE
HOUSE JUDICIARY COMMITTEE
SUBCOMMITTEE ON IMMIGRATION
PREPARED BY MICHAEL D. PLATZER
VICE PRESIDENT, RESEARCH AND POLICY ANALYSIS
AMERICAN ELECTRONICS ASSOCIATION
APRIL 21, 1998

AEA

www.aeanet.org

INTRODUCTION

    The 3,000 members that comprise the American Electronics Association (AEA) span the spectrum of electronics and information technology companies, from semiconductors and software to mainframe computers and communications systems. For over 50 years, AEA has helped its members compete successfully in the global marketplace.
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    AEA recently issued a report, entitled U.S. High-Tech Workforce: Supply not equal to Demand. In a nutshell, we concluded that the current supply of high-tech workers does not meet industry demand.

THE U.S. HIGH-TECHNOLOGY WORKFORCE

    America's electronics and information technology industry is driving national economic growth and affects nearly all segments of the U.S. economy. As an industry, we employed nearly 4.5 million workers in 1997, earning an annual average wage of $50,000. In fact, high-tech jobs pay 73 percent more than the average private sector wage in the United States. Many of these jobs were added recently. Indeed, some 450,000 new high-technology jobs were added to the U.S. economy between 1995 and 1997. This extraordinary growth is expected to continue. The Bureau of Labor Statistics projects that employment in the computer and data processing services industry will double from 1.2 million in 1996 to 2.5 million by 2006.

    Our hottest new industries—microelectronics, robotics, and electronic commerce—require a highly skilled, knowledge-based workforce. Unfortunately, the future growth of the U.S. high-technology industry, the most prosperous industry in the world, is threatened by a limited supply of skilled workers.

    The Federal Reserve Board also has raised concern about the shortage of technical computer workers and engineers across the country. The Fed reports that already some firms are scaling back high-technology production or expansion plans due to the short supply of engineers and information technology workers.
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    Obviously, if demand continues to outstrip supply, U.S. electronics and information technology industry growth will be hampered, and will ultimately affect the entire U.S. economy.

WANTED: THE BEST AND THE BRIGHTEST

    Indisputably, the U.S. high-technology industry needs the best and the brightest workers with the right skills and education to maintain its global competitive edge. The industry is concerned about the decline in the number of high-skilled, highly educated workers entering the workforce with science and engineering degrees—the high-technology industry's most valuable resource.

    Bachelor's degrees in such critical industry disciplines as electrical engineering and computer sciences have dropped precipitously. Between 1985 and 1997, Bachelor's degrees in engineering declined 16 percent. An even sharper drop occurred with Bachelor of Science (B.S.) electrical and electronic engineering degrees. In 1985, 22,000 students graduated with a B.S. degree in electrical engineering. Last year, that figure dropped to 13,500.

    The U.S. high-technology industry also finds that many students from the U.S. university system, especially at the graduate level, are not from the United States. In 1997, 42 percent of all Master of Science degrees in computer engineering and electrical and electronic engineering by U.S. universities were awarded to foreign nationals. And 48 percent of all Ph.D.s in computer engineering and electrical and electronic engineering were awarded to non-U.S. citizens.
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    Many of these individuals have the requisite education and skills to make a major contribution to the global competitiveness of the U.S. high-technology industry by creating new jobs and products, and many have already done so. The technologies and other innovations produced by foreign nationals have helped industry reach its worldwide leadership position.

ADDRESSING THE SHORTAGE

    One near-term solution to the current high-tech workforce shortage is to employ technically skilled foreign nationals, especially those educated in U.S. universities. Many of these individuals possess skills needed by the U.S. high-technology industry. But these workers require H–1B visas, currently capped at 65,000 per year. This arbitrary visa cap on skilled workers is a hindrance for the growing and dynamic high-technology industry.

    A legislative solution to increase the cap is needed. Last September, the Board of Directors of the American Electronics Association unanimously passed a resolution to make increasing the number of H–1B visas a priority. This is because recruiting the right talent—ideally the top skilled professionals whether American or foreign nationals—makes the difference between commercial success or failure, especially for those firms developing leading-edge technologies.

EDUCATION

    The key to the future success and continued global competitiveness of our industry requires an investment in education, training, and retraining of America's workers. Without aggressive investment in the workforce pipeline, the problems we are facing today will only worsen.
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    U.S. education—particularly K–12—is inadequate by any conceivable standard and does not provide American students with the skills needed to navigate in today's sophisticated technological world. A February 1998 study showed that U.S. twelfth graders scored nineteenth out of 21 countries in math and sixteenth out of 21 countries in science. The nation's elementary and secondary education systems simply are not doing an adequate job of preparing students in math and science skills necessary to compete in the workforce of the future.

    At the same time, it is critical for the high-tech industry to continue to address workforce training. Already, a significant amount of company resources are spent on training and retraining, university investment, community college partnerships, and K–12 commitments.

THE FUTURE

    As detailed in the attached report, whatever the future of the high-tech industry, we will want to hire the best and the brightest to continue to grow the industry and the U.S. economy.

58001f.eps

58001g.eps

58001h.eps

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58001i.eps

58001j.eps

58001k.eps

58001l.eps

58001m.eps

58001n.eps

Appendix 2.—Prepared statement from The American Council on International Personnel, Inc.

Statement
Submitted for the Record To
April 21, 1998, Hearing:
''Immigration and the Workforce''

Committee on the Judiciary
United States House of Represenatives

By

The American Council on International Personnel, Inc.
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    The American Council on International Personnel (ACIP) appreciates this opportunity to submit for the record a statement relating to the April 21st hearing of the House Immigration Subcommittee Committee. ACIP is an organization which has been serving the business community on immigration related matters for over twenty-five years. A not-for-profit organization with over 250 corporate and institutional members in all sectors of the economy, ACIP provides crucial information both to its members and others with respect to the current state of immigration law and procedures. All of our members have over 1,000 employees worldwide and most are Fortune 500 companies. As leaders in the global marketplace, ACIP members are keenly interested in issues affecting the international movement of personnel. U.S. businesses in all industries must have access to foreign nationals who possess skills, education and special expertise necessary to compete in a global economy.

    Reports on the shortage of high-tech workers have been widespread. What has not been widely reported is that these shortages affect all industries and encompass many noninformation-technology related occupations. Design engineers developing solar-powered automobiles, biochemists directing worldwide pharmaceutical R & D operations, management consultants revamping the entire production and distribution process for a consumer goods company, and financial analysts implementing a new trading system for a brokerage firm are just a few examples of the new breed of high-tech worker. These workers, found in all industries, combine specialized scientific/technical backgrounds with international management skills and business acumen. The ability of U.S. multinationals to attract these high-tech workers and deploy them throughout their worldwide operations is key to continued U.S. dominance in many global industries.

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    Worldwide competition for this limited pool of high-tech workers is intense. Clearly, some of the people with the most sought-after skills are not U.S. citizens. In most cases, the H–1B is the only appropriate visa for these foreign national professionals. It must be emphasized that the H–1B visa is not used just to fill shortage occupations. Multinational corporations also use the H–1B to employ professionals who will help them gain special expertise in overseas markets or emerging technologies. Some of these H–1B workers are truly at the top of their fields; others are new graduates of U.S. universities who will receive formal training in the United States before being stationed abroad. Their employment and training in the U.S. operations is necessary even if U.S. workers are generally available. These H–1B professionals currently comprise less than one-tenth of one percent of the U.S. workforce but are vital to multinational corporations building a global workforce.

    If the H–1B visa cap is reached prior to the end of the fiscal year, companies and institutions in all sectors of the economy will be unable to hire needed, highly skilled foreign workers until at least the beginning of Fiscal Year 1999 on October 1st. It is estimated that we will hit the cap in May—during peak hiring season. This will not only devastate companies seeking to fill shortages of high-tech workers, but will cripple the ability of multinational companies to recruit the most talented minds off our college campuses and from our global competitors and to build an international presence. ACIP urges Congress to eliminate the arbitrary cap on H–1B visas. In our view, elimination of the H–1B cap is a competitiveness issue not an immigration issue. U.S. multinationals are in the business of making money—not offering jobs to unqualified or unnecessary workers. As long as protections are in place for U.S. workers, there is no reason for government to set artificial limits on the number of skilled foreign workers who may be employed by U.S.-based, multinational companies.

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    Employment of skilled foreign nationals is not inconsistent with efforts to educate and train U.S. workers for the 21st Century. With U.S. unemployment at a 25 year low, U.S. companies are heavily involved in education and training programs to develop needed skills in the American workforce at all levels. ACIP member companies spend billions of dollars annually on programs ranging from K–12/pre-collegiate education to internal/external programs in support of career development through the Ph.D. level. Such spending has increased as the economy has grown. However these steps are only part of the equation of building a global workforce. While education and training programs may eventually alleviate the shortages in particular occupations, they will never meet all of our needs. Global companies must retain ready access to talent from all countries. We must recognize that language and cultural skills are often as important to international high-tech workers as education and experience. These skills cannot be taught easily. Moreover, education and training programs can facilitate the development of the best and brightest minds but the creativity inherent in the minds of the true leaders cannot be taught. U.S. companies are no longer competing just with each other—they must also outbid companies around the world to build a first-rate workforce.

    Many of our trading partners, such as Canada, Australia and Singapore, have recognized the new realities of the global economy and have adjusted their laws to facilitate the entry of high-tech workers. The United States must do the same. ACIP urges Congress to eliminate the arbitrary and unjustified H–1B visa cap. Mechanisms are already built into the current system to protect the wages and working conditions of U.S. workers. The low number of complaints received by Department of Labor (DOL) reflects the tact that these protections work. Coordinating worldwide human resources operations is difficult enough without worrying about H–1B visa backlogs.

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    Congress should also streamline the administrative processing of H–1B visas. Companies should have access to H–1B workers within weeks, not months as is currently the case. Paperwork should be minimized. Well-known multinational corporations should not have to submit annual reports to the INS time and again. Finally, DOL regulatory requirements should reflect real world recruitment, hiring and promotion practices. U.S. companies do not need government micromanagement of their human resources practices.

    Above all, Congress must not impose new burdens or develop solutions to the H–1B crisis which give preference to a particular industry or occupation. U.S. companies, not the government, can best determine which workers they need, when and where.

    ACIP appreciates the opportunity to convey the very real and urgent concerns of the business community on these issues.

Appendix 3.—Prepared statement from American Engineering Association, Inc.

TESTIMONY SUBMITTED FOR THE HOUSE JUDICIARY IMMIGRATION SUBCOMMITTEE HEARING 9:30 AM ON Tuesday, April 21st 1998

THE INFORMATION TECHNOLOGY WORKFORCE-FINDINGS AND RECOMMENDATIONS

by Robert A. Rivers, P. E. Chair, Manpower Committee
American Engineering Association, Inc.

    The author is not anti-immigrant. Three of his grandparents were immigrants. His mother was an immigrant. This report is about opportunities for talented legal immigrants and U.S. Citizens, opportunities that are reduced by foreign temporary worker admissions.
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INTRODUCTION

    This testimony is necessary because of the crisis atmosphere created by claims of shortages of Information Technology (IT) workers by a trade association and lobbying organization of the IT industry. Opposing the claims of shortages are engineering associations representing the concerns of members of the profession. The word ''shortage'' is ill defined when related to the supply of workers. Webster's calls ''shortage'' a ''deficiency''. The industry claims that shortages exist when they have job vacancies at offered wages and working conditions. Others claim that no shortage exists because employers are not offering adequate salaries and are over specifying skill requirements unnecessarily. By doing so they are eliminating from consideration large numbers perfectly viable talent. The result is unfilled jobs caused by actions of the industry itself.

    The ITAA uses the word shortages synonymously with job vacancies. Neil Rosenthal, Associate Commissioner of the Bureau of Labor Statistics recently at a meeting organized by the ITAA stated that vacancies are not shortages. Through press coverage of the ITAA report claiming 190,000 IT and non-IT industry vacancies, a crisis has been artificially created that demands action by someone. The someone is the government to increase the educational output specifically tailored to the industry's latest fad requirements and when that can't be done immediately, to open the immigration gates to satisfy the demand. No mention is made of the domestic supply of talented workers several times what the industry needs. No analysis is done of the ITAA surveyed fact that 66% of IT employers spend less than $99.00 per year per employee for training. Another 3% spend nothing at all. Large numbers of talented workers are available with minimal training. It is no wonder that the IT industry lobbying organization is supporting the desire of industry to have someone else foot the bill for their trained supply of manpower. The taxpayers however, may feel that the industry should do their own training since they know what they need and how to do it.
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    This testimony aims to put reason instead of hype into discussions of the availability and utilization of the technically competent workforce of the IT industry and of industry in general. Concentration on the IT industry is done because of the high percentage of technical IT workers compared to industry in general. Technically competent is defined as those having four year degrees, extensive technical training and/or experience. The purpose of the technical definition is to limit discussion to those workforce groups that have or need to have technical training and educational or experiential background that is needed to function effectively in the industry in some capacity. It is not meant to include secretaries, accountants, buyers, factory assembly workers or similar support personnel.

    The first part of the report, (Findings of Fact) will provide the statistically reliable facts that bear on the supply demand situation. The reader will find that there may be large numbers of vacancies, but that the data does not support that there are generalized shortages of skilled workers for the IT industry. The second part of the report, (Recommendations for Action) focuses on what an adequate response to future expansion of demand requires. Those factors include extensive modification of employer's recruitment practices, worker compensation and training. Government may be required to provide subsidies for long term training. On the job employer based training will be seen as the focus of providing adequate availability of talented workers with current skills.

    The principle hype introduced into discussions of workforce supply for the Information Technology industry is the use of the word ''SHORTAGE'' supported by surveys of job vacancies. Job vacancies are a symptom of the difference between what the employers say they want and what they are willing to pay for, not a proof of ''shortages''. We do not have a planned economy, (former USSR style) where state planners determine the need and allocate the supply, we have a market economy that functions by allocating the supply of goods and services to those having the most need and are willing to pay the market price. There are always those in a market economy that are deprived of the goods and services because of inability to pay or lack of interest in paying the market price. There is usually a supply of goods and services at prices in excess of the current market price. An employer may characterize what is seen as a ''shortage'' when nothing is available at the price the employer wants to pay. If the offers are below the market, the lack of response is the normal working of the marketplace. Some of the sellers simultaneously may see what they believe is a ''Surplus'' when they find no takers for their offers of services at above market prices. That too is the normal working of a market economy.
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    An employer with real needs to get a job done will adjust salaries offered, job specifications, tenure and benefits to meet the market price and thus fill their job vacancies. Another employer will complain that they, (the government, educators etc.) are not supplying enough prospects at the price the employer desires to pay and back it up with: ''1ook at all the (over specified and/or underpaid) job vacancies I have.'' Then in the next breath, the employer threatens to move the jobs. No one has a right to expect a supply of workers exactly with the wanted characteristics and wages. Good management can mold a less than ideal group into an elective productive team. The employer does have a right to hire and train anyone that wants to work for the employer at agreed to wages within the law and in conformance with labor contracts.

    As a frame of reference, the following is quoted from the IEEE-USA Entity Position Statement on Interpretation of Engineering Supply and Demand Surveys. The IEEE-USA is able to anticipate situations that may occur and develops guidance for handling them in the form of Entity Position Statements. It was generated by its Workforce Committee and approved by the IEEE United States Activity Board in 1994:

    Beginning of Quotation:

  Supply and demand for engineers are affected by market forces, and compensation is an important determinant of the availability of supply and the level of demand. Extreme caution must be exercised to ensure that underlying assumptions and definitions as well as data collection and analysis techniques are sound before the merit of any resulting survey findings can be considered.

  Demand for engineers has been driven historically by national economic forces (especially by major governmental procurement programs) and is increasingly being conditioned by international economic factors.
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  Under utilization of engineers increases demand. More effective utilization of engineers and support personnel can reduce the potentially adverse effects of increases in demand.

  Temporary imbalances in supply and demand for engineers may exist from time to time in certain localities due to changing economic conditions. Such local imbalances should not be extrapolated to suggest the existence of nationwide imbalances.

  Temporary imbalances in supply and demand for certain engineering disciplines or subspecialties may also develop from time to time due to changes in technology and its applications. Such imbalances should not be extrapolated to suggest the existence of shortages or surpluses in other disciplines or subspecialties, or for all engineers.

  Engineers are much more broadly trained than a particular disciplinary title or specialty designation implies and can generally apply the knowledge, skill and experience to the solution of a wide range of problems in a variety of engineering fields

    End of quotation.

    All of the findings of fact covered below are related to the supply demand situation for IT technical workers. Knowing the supply demand situation however does not allow us to understand the problem of imbalances except by inference from the known facts. Occasional statements from executives and Human Resource personnel allow us to get a peek at the actual hiring criteria. Those criteria hidden under the cloak of needed technical skills sometimes are real but sometimes involve age, sex and ethnic discrimination; sometimes involve benefit cost considerations, sometimes involve expectation of free overtime and sometimes just arbitrariousness when confronted with 50 applicants for every hire. Where we can get at the reasons for rejection of 98% of applicants by inference, the Congress can get at the reasons by compelling direct testimony under oath. It is recommended that Congress do just that by holding hearings and receiving sworn testimony from CEO's and Human Resources executives controlling the hiring decision. While there is little direct statistical evidence of the hearing criteria, there is sufficient inferential and anecdotal evidence to direct the inquiry.
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FINDINGS OF FACT

There are no shortages of IT workers.

    Shortages are endemic in centrally planned economies such as the now defunct USSR We had labor shortages in WW II when there were wage controls and restrictions on changing jobs. We now have a relatively unfettered market economy where employers have the right to hire anyone at any wages above the minimum. Any IT employer can hire their needed workers if they offer sufficient wages. Escalating wages may be undesirable to an employer. It is wage inflation but it is not a shortage. Wage escalation is desirable from the employees point of view.

The IT Industry is Expanding.

    The Information Technology (IT) industry technical employment has been expanding between 1983 and 1997 at a 6.2% exponential rate. That employment is characterized by the Bureau of Labor Statistics (BLS) categories of Computer Programmers and of Computer Scientists and Systems Analysts. Nothing ever expands exponentially forever because eventually it would use up everything available. Expansion eventually flattens out at some saturation point. It is reasonable to expect that we will be in the early stages of the industry expansion and at the 1983-1996 exponential rate of 6.2% for at least a few yews. For the year 1997 the previous 5.8% rate forecasted an employment expansion of 96,000. The actual expansion in employment achieved in the so called shortage environment was 197,000. The total number of new workers supplied was greater due to the replacement demand to cover those leaving the specialty. The expansion never occurs at exactly the forecasted rate but is sometime more and sometimes less dependent upon usually unpredictable economic influences.
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Some employment categories are expanding and some are not.

    The more rapidly expanding subset of the IT industry technical employment has been that of the Computer Scientist and System Analyst, (CS&SA) BLS category. That subset has been expanding annually at a 10.8% exponential rate between 1983 and 1997. The Computer Programmer, (CP) category however had not been expanding between 1990 and 1996. In the year 1997, however, CP employment expanded rapidly to the 666,000 level in the last quarter of 1997. Because of the non-standardization of employment titles in the IT industry, and the resulting shift from one category to another from time to time, it is more useful to discuss the total of the CP and CS&SA categories when discussing employment trends of the core technical IT employees.

The numbers of vacancies do not indicate a shortage.

    The ITAA survey showing 190,000 job vacancies at IT and non-IT employers is subject to serious question because of response bias, questions about what the respondents thought were an IT worker, and the unknown method of the extension to 190,000. There was an average of 33 vacancies at the actual 149 IT companies responding and an average of 4.5 at the 122 non-IT companies responding for a total of 5466 vacancies. It is known that the minimum size of the IT companies was 1000 and of the non-IT companies 500. It is not known what the average size was. Even at the minimum size, there were 33 vacancies for each IT employer and only 4.5 for each non-IT employer. The 33 vacancies for a 1000 employee organization is not unusual. Four and one half vacancies for a 500 person organization is not unusual. The IT organization probably classified all of its vacancies including guards, typists and clerks as IT workers since it was an IT organization while the non-IT only responded with those employees actually needed for IT activities. The vacancy rates found by the survey were 3.3% for the IT industry. Overtime of 1.33 hours per week would cover the IT worker under supply.
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    Subsequently, in January of 1998, the ITAA and Virginia Tech released a preliminary briefing of a new survey conducted during December of 1997. That survey claimed an increase in vacancies to 346,000, (still being called a shortage by ITAA). In addition, that survey report indicated that there were 1,877,000 programmers as extended from their survey sample. That extended number of programmers is to be compared to the long term series of programmer employment maintained by the BLS-CPS of 666,000 in the fourth quarter of 1997. That is a difference of 282% casting serious doubt of the validity of the ITAA-VT computer programmers population estimates and their estimates on the number of vacancies in that category. Confirming our questioning of the validity of the vacancy numbers, the General Accounting Office reported that the two surveys had such low response rates as to render their results useless for proving shortages. Neither the 190,000 vacancies of the previous year nor the 346,000 of this years surveys are sufficiently credible to contribute to policy decisions.

The-median salaries of IT technical workers did not indicate a shortage for 1996.

    The latest available median weekly salary data from the BLS does indicate an abnormal rise in salaries of Computer Programmers, (CP), however Computer Scientists and System Analysts, (CS&SA) median salary increases are below the general wage inflation rate. The median salary data is available only on an annual basis and is only available in the third week of the month following the close of the year. Data was available for 1996 and before indicating a straight line growth in median weekly salaries. That straight line growth showed annual increases of $25.00 per week for the CP specialty and $27.00 per week for the CP&SA specialty. The actual increase for 1996 was $29.00, (3.9%) per week from $743.00 in 1995 to $772.00 in 1996 for programmers. The actual increase for computer scientists and systems analysts was $19.00, (2.2%) per week from $872.00 in 1995 to $891.00 in 1996. Neither figure was significantly different from the general wage inflation rate and was an absolute indication of the absence of a general shortage of IT technical workers. In the high demand 1996 environment, what the salary data indicated was that employers were holding the line against offering increased salaries to recruit workers. They were accepting the higher job vacancy rate rather than filling the jobs at higher salaries.
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    The year 1997 saw a significantly different employment situation for programmers. Employment rose to 666,000 in the last quarter of 1997. At the same time, the median weekly salaries took a significant jump of 8.8%. What this means is that contrary to the 1996 period, employers raised their offered salaries to a broad spectrum of workers both presently employed and to new entrants. As a result they increased the available employees by 65,000 over the previous year. The economic system worked. Increased compensation drew in the talented supply from other activities. In the case of the CS&SA category, employment increased by 143,000 without any significant increase in annual median weekly wages. There is no shortage indication in the CS&SA category.

An adequate supply of talent is available to the IT industry.

    Has the IT industry been able to find the talent with which to expand in the past? The simple answer from historic BLS data is yes. In the last four years, data on a quarterly basis for the CS&SA categories has shown three expansions ranging from 143,000 to 194,000. During the four quarters of 1997, the CS&SE employment has hovered around 1,250,000 after the sharp rise of 194,000 from the third quarter of 1996 to the first quarter of 1997. Has the availability of Computer Scientists educational output impeded the growth. The answer is no. From 1980 to and including 1995, some 432,000 CS degrees have been awarded in the U. S. Only two thirds of CS degree holders are employed in the National Science Foundation IT categories. The balance or CS degree holders are elsewhere and are prospects for employment in the IT industry.

There are a wide variety of sources for IT talent.

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    Where has the talent been coming from to fuel the previous IT expansion? It has been coming from practically everywhere that there are educated or trained talent. Below are three categories of data available from the National Science Foundation (NSF) 1993 SESTAT survey files. The data indicates the wide variety of backgrounds used today in the IT industry. It destroys the arguments that there is a one to one correspondence of Computer Science degrees and the needs of the IT industry contrary to the repeated arguments by ITAA that there is a massive shortage of new graduates because of the low number of CS graduates. Condensed information is shown here. Data is not shown where there are less than 10,000 degrees in a specialty. The rest of the detail is available on the NSF Web Page at www.nsf.gov.

    The following data is shown to illustrate the diversity of degree holders employed in three of the IT employment sectors.

    Computer & Information Sciences Employment
    641,266 Total Employment
     10,344 Without Deg.
    631,022 All Degrees
     80,951 All Eng. Deg.
     (1) 162,888 Comp. & Information Sci. Deg. (25.8% of all Deg.)
     (2) 89,628 Business Deg.
     (3) 56,320 Other Social Science Deg.
     (4) 33,187 General/Applied Math Deg.
     (5) 24,523 Psychology Deg.
     (6) 22,854 Other Social Science Deg.
     (7) 22,707 Economics Deg.
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     (8) 21,047 Education Deg.
     (9) 18,210 Political Science Deg.
    (10) 14,121 Physical Science Deg.

    Computer Programmer Employment
    204,918 Total
      5,502 Without Degree
    199,416 All Deg. (35% of BLS Programmer Employment)
     (1)  75,743 Computer Science Deg. (38% of all Deg. 13% of BLS employment.)
     (2) 33,956 General/Applied Math Deg.
     (3) 25,099 Engineering Degrees
     (4) 13,028 Electrical/Electronic Computer Deg.

    Electrical/Electronic & Computer Engineering Employment
    578,588 Total
     11,917 Without Degrees
    566,641 All Degrees
    366,284 Engineering Degrees
     (1) 315,207 Electrical, Electronic & Computer Eng. Deg.
     (2) 58,915 Computer & Information Science Deg. (10.4% of all degrees)
     (3) 34,822 General/Applied Math Deg.
     (4) 27,872 Physical Sciences Deg .
     (5) 27,137 Engineering Technology Deg.
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     (6) 14,208 Mechanical Engineers Deg.
     (7) 12,193 Business Degrees
     (8) 11,777 Other Liberal Arts Deg.

The nationwide supply of science and engineering graduates is great.

    There are twelve million, (NSF) science and engineering degree holders in the population with less than half of those employed in science and engineering occupations. While many are perfectly satisfied with their current situation, a significant percentage are not and are candidates for IT training and employment. There are 330,000 new science and engineering graduates every year in the U.S. There were 1,160,134 Bachelor's degrees awarded in 1995 alone. The millions of non-science employed previous graduates and the current graduates are enough to overwhelm the IT industry if utilized. There are 1,851,000 technical employees of the IT industry with at least 350,000 of the programmers that do not have 4 year degrees. Considering that the IT industry only expanded by a record 197,000 in 1997, there should be an adequate supply with just the current science graduates. In addition there are many more with BA degrees that add to the supply. Given the above facts, the argument that we are exhausting the supply of talented workers is obviously invalid.

The number of engineering immigrants is exceeding the number of U.S. Graduates.

    There are 65,000 temporary visas for engineers available each year. In 1996 there were 2800 admissions in excess of the quota that was borrowed from 1997. In fiscal year 1997, again 3800 were borrowed from fiscal year 1998. There were 11,600 Computer Scientists and 9,900 Natural Scientist temporary admissions. There are approximately 15,000 engineering and science permanent admissions many of whom work in the IT area. From time to time there have been refugee quotas such as 50,000 for the USSR of which about 30% were engineers. Eastern Europe had a quota of 75,000 of which about 10% were engineers. There are additionally other immigration categories that result in increased availability of IT workers. Working foreign students add to the supply. Finally there are the unknown number of working illegal immigrants.
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    There are approximately 65,000 BS Engineering degrees awarded yearly in the U.S., of which approximately one third are in electrical engineering that today is generally in the same departments as Computer Science. These 165,000 new technical people comprised of immigrants (100,000) and U.S. engineering graduates (65,000) supply the core of the expansion of employment in the IT industry. They do not supply the whole as is illustrated previously by the degree composition of the IT technical workforce. When reviewing the dominance of immigrant temporaries one should consider the impact of a need to expand our defense effort. Most of the immigrant temporaries would not be able to obtain clearances. Below is some recent history of degree awards and immigration:

Table 8



    Source IEEE-USA, from data compiled by David S. North

    References on Immigration in the appendix:

    Exhibit I, Engineering Electrical Engineenng Supply and Demand, is an engineering employment input-output analysis. It tracks year to year inputs to the engineering employment specialty along with deaths and retirements to come up with a displacement number. The displacement is the number of individuals that have been forced to leave the profession. The particular example tracks the engineering recession of 1970 and shows high levels of immigration right through the period of high unemployment that resulted in displacement of 96,002 engineers by the end of 1972. The total engineering immigration from 1969 through 1972 was 32,906. Some 34% of the displacement was due to immigration. It is particularly unconscionable to allow high levels of immigration of engineers during recessions.
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    Exhibit II is an issue of the Engineering Manpower, (EM) Newsletter entitled Engineering Unemployment Increased by Immigration. In the later sixties as a result of the Vietnam buildup and the Space program, engineering demand was extremely high with engineering unemployment going as low as 0.3% in one quarter of 1966. As a result, permanent engineering immigration increased to high levels. A look at the graph, however, shows that the high levels of immigration continued through almost the entire period of the early 70's recession. The recession was a career crisis to many professionals that was aggravated by the continued high levels of immigration. The post 70's level of regular engineering immigration rose slightly from year to year until 1989 as shown graphically. There was little response to three recessions that followed the 1970 debacle.

    Exhibit III is another EM Newsletter issue entitled Engineering Occupational Preference Immigration Exacerbates Unemployment Problems. It shows the significant rise in Preference immigration during the high demand 1965–1969 period. It shows the continued high level of immigration during the high unemployment period and the rapid decline only after the recession had ended. In the 1976 recession, the immigration started up, then rapidly turned around probably due to the memory of the 1970 recession. Preference immigration rose rapidly to high levels through most of the 1983 recession. Then immigration bounced back to high levels throughout the 1987 recession. Preference engineering immigration appears to be more sensitive to economic conditions, but has response lags that create dislocation throughout recessions.

    Exhibit IV entitled Real Salaries Decreasing has plots of real salaries from 1965 to 1991 along with an inverted unemployment curve for purposes of visually correlating the data. What is shown is that real salaries decline in recessions. One can infer from the data that a contributing factor is the competition between immigrants and U.S. citizens for the available jobs.
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    Exhibit V is an issue on Engineers Facing Exploding Competition. Plotted here are the H, J, and L temporary admissions growing to the 30,000 to 40,000 level between 1990 and 1992, the start of the most devastating engineering recession in the post WWII era. Added to that was the regular engineering immigrants growing from the 10,000 to the 16,000 level. The graph of engineering employment shows a topping out of the expansion in late 1989 and then a significant decline in late 1991. In the meantime, engineering immigration and temporary workers had grown to a total of 52,455. That large quantity of immigrants and temporary workers were displacing significant numbers of working U.S. citizens some of whom were prior year's immigrants.

    Exhibit VI is an issue on New Engineering Grads Aren't Making It Into Engineering Employment. There are three curves of populations of Engineering workers versus years from graduation. The solid line curve is for data from 1983 showing that 80% of the graduates found employment in industry upon graduation. The curve for 1990 shows that approximately one half of the new graduates found employment the first year. Some were displaced from gaining employment because of the 36,457 engineering immigrants and temporary workers admitted that year. It will get worse. The third curve for 1993 shows that approximately one third of the new graduates found employment their first year out of school. In the meantime, the immigrant and temp admissions had grown to 53,819. Engineering graduates that year were 65,001. Immigrant and temp admissions were probably responsible for a lot of grief for our own students. How can congress continue the temporary programs when they cause so much grief for our own children?

    Exhibit VII report on the Abnormal Loss of 1990 Engineering Employment for Ages 59 Through 66 Validated. The graph shows superimposed data for the age distributions for the years 1990 and 1991, from the Engineering Workforce Commissions Salary Surveys for the Electrical, Electronic and Computer industry sector. From graduation up to age 59 (36 years from graduation), the curves are superimposed showing retention of those age groups. From age 59 through age 66, the curves are significandy different. The difference adds up to 3.62% of the sector population. The normal attrition was calculated to be 1.1% of the total population. The abnormal attrition was calculated to be 2.52% or approximately 15,000 engineers employed in that sector. Some of that elimination of the older age group was made possible by the availability of 36,457 engineering immigrants and temporary workers in 1990.
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    Exhibit VIII discusses New Grad Hiring Record of Industry Sectors. Data is prepared for 19 industry sectors for 1992 new grads and for 1993 new grads. In no case did any industry sector hire more of the new grads than they did in their peak year. The fabricated metal products sector came closest with 75 and 87 percent for 1992 and 1993 respectively. In 1992, the Aerospace sector had only 9% as many new grads as they had peak year employment. In 1993 they had only 5% of their peak population year in new grads. Opportunities for new grads were diminished in all industry sectors in 1992 and 1993. The new grads really didn't need competition from over 50,000 immigrant and temporary worker engineers.

    Exhibit IX is a stock and flow analysis of engineering employment entitled Displaced Engineers Returning to Work. It is a table showing the inputs and outputs from the engineering workforce. The year 1986 starts out roughly in balance. 1987 with a mini recession displaced 66,000 engineers that were not brought back in as 1988 ended. From 1989 through 1993, each year added more engineers to the displaced population. The year 1992 added 133,000 to the displaced population. The peak year for displaced population was 1993 when a correlative 438,000 engineers had been displaced. The year 1994 saw a turnaround reducing the displaced to 365,000. During this buildup of displaced engineers, from 1989 through 1993 there were 40,650 permanent engineer admissions and 169,481 temporary admissions. The total was 201,131 foreign workers added to the supply. Foreign workers accounted for 45.9% of the displacement of engineers during that 1989-1993 period. Simple justice for American workers would call for reductions in the number in the numbers of engineering immigrants and temporary admissions.

    Exhibit X is entitled Why Forecasts Go Awry but for purposes of consideration of the implications for immigration, it shows the magnitude of the reduction of demand during the early 90's when engineering immigration was burgeoning. Part of the reduction in jobs was due to the banking problem and its reduction in loans to businesses. The other part of the demand reduction was due to the cutbacks in defense procurement. In any event it occurred and no steps were taken to curtail immigration.
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    Exhibit XI is entitled ''Shortages'' Here We Go Again. The present shortage crisis has been promoted by the Information Technology Association of America, a lobbying organization for the IT industry. The ITAA uses job vacancies as surveyed synonymously with shortages. In a classical economic sense, if a vacancy cannot be filled at the previously established market price, then a shortage exists. In the same way, if gasoline dealers prices all rise by a penny a gallon, then a shortage exists. In the latter case, people pay the price and seldom resort to requiring the government to take action to increase the supply. In the case of IT workers, the ITAA wants the government to take action to immediately increase the supply by opening the immigration gates and expanding or removing the limits on temporary foreign workers. This report identifies the expansion in demand and acknowledges its existence This report also identifies several binges of expansion and the ability of the present workforce to supply the needs of the industry. Three recent binges have supplied the expansion needs of the IT industry by 143,000 to 197,000 in a few quarters. There is a long history of shortage forecasts that never occurred. The Engineenag Manpower Commission was wrong two thirds of the time. The National Science Foundation predicted a 700,000 shortfall of scientists and engineers and instead the demand slumped and displaced 438,000 engineers. Now the ITAA is forecasting a shortage running into the first part of the next century and they do not even have a model to show the basis of their forecast.

    Exhibit XII, 47.8% of Recent Engineering Graduates Missing from Electrical Machinery/Electronic/Computer Industry Employment. Previously we treated the inability of the new grads to get into their chosen field when they graduated. Here it is shown that the cohort never has become employed in their chosen field. The excess supply denied them initial entry and forced them to transfer to other activities. The excess immigration supply bears part of the responsibility.
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    Exhibit XIII is a two page report, Hard Data Discredits Shortage Promoters. It shows the expansion of Computer Science and System Analyst employment and the fact that the expansion has been accommodated without inflationary median salaries. In the same way, Computer Programmers have been shown to have had no significant inflationary salary history through 1996 and in fact had not been expanding since 1990.

    Exhibit XIV is ITAA and Virginia Teat's New IT Vacancy Sunrey. It purports to show a markedly increased (346,000) number of job vacancies over that initially were promoted by ITAA (190,000). It has run into difficulties because it shows that there are 1,877,000 computer programmers in the U.S. force while the BLS shows that there are 666,000 in the last quarter of 1997. That is a 282% inflated error somewhere. I have advised them of the problem and I assume that technical integrity will require them to provide justification for the large difference. The use of that number is beneficial to the agenda of ITAA but cannot be supported. It was hoped that the new survey could be made more meaningfu1 in the determination of why the large number of vacancies exist. There can be large numbers of vacancies even without expansion. A large vacancy number provides unwarranted support for the mission of ITAA to increase temporary worker quotas

    Exhibit XV treats the ability of the store of U.S. talent to supply the massive expansion of the IT technical workforce. The most recent annual average data shows computer programmer employment rising by 65,000 over the previous year. This was accomplished with an 8.8% increase in median salaries. It indicates that employers have raised all wages in order to retain present employees and to acquire new ones. With those incentives, the system supplied an 11.3% increase in workers. The supply system provided 143,000 more CS&SA workers for a significant increase of 13.8%. Median salaries rose only at the trend and non inflationary level. The response of employment supply and the lack of wage escalation does not indicate a shortage.
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Large numbers of underutilized talented women

    Women in the IT technical workforce are significantly underrepresented. In 1996 there was a total employment in the CS&SA category of the BLS CPS of 1,093,000. Of these 786,000 were men and 307,000 were women. Parity would provide opportunity for 479,000 women. There is an untapped supply of women that would satisfy the expansion needs of the IT industry at the present rate of expansion for five years. The Accounting and Auditing category employs 677,000 men and 862,000 women. If that numbers oriented work can employ more women than men, the IT industry can do the same. If one looks at the white worker category, a difference of 417,000 is observed. White male employment is 655,000 and white female account for 238,000. To add to the inequity, the Computer Programmer category contributes a 215,000 difference between male and female job holders. There are 388,000 males and 173,000 females employed. White males hold down 334,000 and white females 137,000 jobs. The argument that the disparity is representative of the job market in general is simply wrong. The total over 16 year employment has 68,207,000 men and 58,501,000 women working. While women are over represented in data entry occupations, they are under represented in the technical IT occupations.

There is a big source of underutilized talent in the employed and unemployed IT workforce.

    Employers are neglecting their own back yards. The IT industry employs 398,000 computer operators and 690,000 data entry keyers for a total of 1,088,000. These individuals almost universally are highly skilled in entering data, a skill also appropriate to programming. A screening of that population would make available a large number of trainable individuals. In the case of computer operators, 60% are female. For data entry keyers, the female population is 85% of the total. Upgrading of these populations by on the job training after screening for aptitude would improve the female population representation in programming. A supply of CS&SA and computer programmers is immediately available from the 22,000 third quarter 1997 BLS unemployed. In the high demand 1966 period for engineers, the unemployment rate went to as low as 0.3%.
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RECOMMENDATIONS FOR ACTION

A little flexibility in employer's job specifications would solve IT worker supply problems.

    IT employers are expressing concerns about the ability of the labor market to supply their needs for talented labor with the exact desired experience the very instant a need is determined and with salaries, benefits and tenure to which the employer is willing to commit. Such an expectation is unrealistic in a market economy during periods of high demand. It was possible in the period of low demand of the early nineties. Instead of looking for the individual meeting the exact specifications and rejecting 98% of their applicants, employers should look at each applicant's talents and skills and determine not if, but where the individual could be used now or with some on the job training. The employer must be willing to meet the marketplace salaries, benefits and working conditions of the industry. An executive of GE advised during one of the previous periods of high demand, ''When we want someone, we pay what it takes to get them.'' In today's market it might well be amended to say ''and to hold them''.

    The detailed recommendations are as follows.

Recommendation #1: that employers cease over specifying the qualifications needed to fill positions.

    The over specifying of job requirements is rampant and counterproductive. Company after company when surveyed state that they only hire 2% of their job applicants. In the best cases, 5% of applicants are hired. That being the case, they could double their hires by minor relaxation of their specifications. Perhaps a week of two or even four of training might be necessary for the other 2%, but that is a small price to pay to avoid paying hiring bonuses or the fees of Head Hunters. It used to be said by some technology companies that they hire only the top 10% of the graduates. Of course that is absurd because what is possible for a few is impossible for the many. Now we have those companies being so picky that they only want the top 2%. A system set up to take the rejects from one company and offer them to another company would probably show that the second company could still satisfy their 2% requirement.
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Recommendation #2: that employers have qualified technical personnel reviewing resumes and applications for employment.

    The use of computer key word filtering results in an excessive number of rejects because of the inability of an applicant to guess what key words are used for filtering. Matching key words does not measure innate talent. Similarly, filtering of applicants should not be done in a HR department that is not technically competent in the range of technical expertise of an applicant. Technical competent reviews lead to evaluation of the actual skills, adaptability and talent not necessarily described in the simplistic key words of a requisition. Where an applicant has not done exactly what has been specified, technically competent evaluation can determine the adaptability of the applicant to produce results quickly.

    Recommendation #3: that employees and employers recognize the implications of the new paradigm in employer employee relationships.

    The new paradigm in employer employee relations is that the employer is not responsible for the employee's career, the employee is responsible. Translating this, it means that you come to work, you work and we pay you. When we think that the work can be done just as well and cheaper by someone else, we no longer have any obligation to you. If you do not keep up with the technology, then we will replace you. The employee's career is their own problem. The problem is that the employee comes to a job with a capital investment of $200,000 that should be amortized over the career lifetime. There is at least one industry CEO that has stated that the half life of an engineer is 5 years. If that is in fact true, there is a need to depreciate the investment at the rate of $20,000 per year after taxes. The employment of the individual should either produce added payment for the depreciation of the educational asset or should produce training to renew the asset value. The employee should be treated no worse than a piece of machinery. The depreciation payment or training should be concurrent with the employment. The old paradigm of career employment provided for payment later in ones career. The new at will environment calls for payment from month to month. The consequences of not covering the investment depreciation is that the educational investment will not be made when potential new entrants realize the lack of return on investment. Present salary structures do not provide for after tax return of the educational investment. In order to provide for future supplies of talent, an educational depreciation credit should be allowed or should be covered by increased salaries.
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Recommendation #4: that employers budget at least 3% of salaries in IT skills training of their workers.

    The American Management Association has found that industry in general has expanded its training in the face of increased technology utilization from what was 0.5% to 2% of salaries. It has also recommended that manufacturers increase those expenditures to 3%. The Information Technology industry report from 149 companies of 1000 or more employees actually responding indicated that 66% of them spent $99,000 or less per year. That is less than $99.00 per employee, a minuscule amount when you consider that the all-industry average wages are a little under $13.00 per hour or 26,000 per year. That works out to a maximum possible of one day a year and probably much less. The above historic training expenditures have included those for affirmative action training, benefits information meetings and support staff training rather than for technology training. The high growth rate, product innovation and high technology content of the work demands a much higher than overall industry average expenditure for skills enhancement training.

Recommendation #5: is that employers provide on the job technology training for new hires and the current workforce.

    It is employers that have the facilities to provide the most efficient training of people with basic skills. On the job training is known to be the most efficient. Three percent of payroll can be translated into 60 hours or a week and one half per year per employee. Such a training expenditure would make it possible to train every employee in a new skill once a year. That training might not be enough to produce top efficiency but would be enough for the employee to start working independently. Such an expenditure should be made to provide for continued utilization of the worker and to provide backup in case other employees resign.
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Recommendation #6: that employers cease writing off downsized ex-defense or commercial workers.

    While there are occasional pronouncements of the end of downsizing, at the same time that the pronouncements are made a number of pronouncements of additional down sizing appear. At this instant it is 12,000 at Raytheon, 1900 at Polaroid, an increase from 10,000 to 19,900 at Kodak, and a closing of the McDonnell Douglas Aircraft production lines by Boeing with an expected 12,000 job loss. Those employees are a selected group of reliable productive individuals, the primary needed characteristics for employees of any organization. What they may be lacking is some detailed current specific technology training for new jobs. That technology training is can be imparted most efficiently by on the job training at the new employer. Selected groups can be retrained in weeks or a month on the new job. Others may take longer and may require subsidized longer term training again in a real world situation. Both employers and employees must accept the new valuation by the job market of the new employment, the employer by accepting the fact that the employee can adjust to the new market evaluation and that the employee will be satisfied with the new valuation.

Recommendation #7: that employers adjust compensation and benefits of current employees to market rates.

    Employers in any organization must have salary structures that are understandable and acceptable to all employees. Otherwise some groups become significantly dissatisfied and are difficult to retain. While an employer may have attained an acceptable salary structure in the past, sudden expansions in demand in specialties should result in compensation adjustments for the group. If not done, the result will be raiding by others or simply drifting of the high demand specialty segment to other employers offering more money, better working conditions or better opportunities for advancement. The most rational approach is to adjust the high demand area salaries and other benefits to the current market. If however there is general wage inflation then across the board adjustments must be made. Fixation on an established internal salary structure in a high demand market is a dangerous position.
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Recommendation #8: that employers pay station allowances for high living cost areas such as Silicon Valley.

    The idea of station allowances is not new. The State Department does it. The IRS does it, and many commercial organizations do it that routinely move executives around from one world wide location to another. The idea should be adopted by the IT industry especially in Silicon Valley where Real Estate prices and apartment rentals have escalated significantly. The IEEE Salary Surveys have shown the salary differentials for various geographic areas. The survey shows algorithms for salaries versus geographical locations as well as for other variables. These could be used as guidelines for establishment of station allowances. Temporary, contract and consulting personnel should be paid adequate per-diem rates to cover the costs of maintain temporary or multiple residences. An example of the Federal Supply System maximum allowable daily expenses are generally $50.00 for lodging, $30.00 for meals and incidentals for a maximum of $80.00 per day. The DC allowances are respectively $124.00, $42.00 and $166.00 total. Arena California is the same. The highest rates found are for Nantucket in the summer at $179.00, $42.00 and a total of $221.00 The schedule for the U.S. is available at www.fss.gsa.gov.

Recommendation #9: that employers provide support personnel for skilled personnel.

    Increased output of skilled personnel can be enhanced by support personnel. Activities such as telephone answering, copying, filing, letter writing, faxing and e-mail reviewing and responding can be relegated to support personnel freeing time for the professional to work at what is most needed.

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Recommendation #10: that employers use paid overtime for their current employees in order to increase output during periods of high demand.

    A 10% shortage of personnel can be covered by overtime of 4 hours in a 40 hour week. The temporary use of overtime can achieve the results needed much quicker than the hiring of additional personnel. Excessive overtime however can be counterproductive in the long run resulting in burnout of the individuals. Fairness requires compensation or compensatory time off.

Recommendation #11: that Congress modify labor laws for exempt personnel compensation to require at least average 40 hour week hourly rate compensation for overtime.

    The excessive use of free overtime by employers of exempt personnel results in a number of adverse consequences. It provides for excess demand for young, single and non-family obligated workers and discriminates agamst those older with family obligations. It leads to early burnout of overworked individuals and a loss to society of workers talented and experienced in a specialty. The free overtime provides an economic stimulus to age discrimination counter to public policy. It is within the province of Congress to legislate against predatory labor practices in the same manner it has legislated minimum wages.

Recommendation #12: that employers set up satellite operations in the U.S. in areas of excess supply.

    Satellite operation are normal corporate solutions to the exhausting of needed talent in a local labor area. General Electric is a long time example of diversification geographically with satellite operations. It provided for access to dependable talented local supplies of labor. More recently Intel became an example of geographical diversification. The setup of Denver, Boulder and Colorado Springs operation by California electronic firms are examples. Cabletron of Rochester New Hampshire setting up an operation near the Massachusetts border is an example. Even though there was high technical unemployment at the time, they could not get the desired technical help to move to the Rochester NH area. They set up a satellite plant that was able to access the northern Boston metropolitan area technical labor supply. The AEA Manpower committee chairman moved his company to New Hampshire from Boston in 1966 to solve a labor supply problem and found the moving solved the problem.
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Recommendation #13: that employers provide expanded opportunities for telecommuting.

    Telecommuting is the ultimate example of geographical diversification. With that there is only one person per geographical location. While theoretically desirable in many cases, it does not satisfy the average employers desire to control the employees time. If employers could rationalize losing time control, that would open up telecommuting to much wider use and access a much larger supply of talent that is bound by family, interest preferences or cost of living to other geographical areas. The availability of workgroup software now makes possible the synergism of face to face daily contact even though telecommuting. All the employer has to do is to develop and administer performance policies to get the required work done.

Recommendation #14: that employers use temporary workers, contract personnel or consultants to fill temporary voids in staff talents.

    Temporary staffing operations or consultants should be used to handle peak load requirements or to fill the needs for expertise for which there is not a long term need. The temporary route eliminates the need for costly and time consuming reductions in force of permanent employees. There are a wide variety of national and local temporary technical worker suppliers. Even for long term assignments the temp is an at-will worker whose utilization can be carefully tailored to the project requirements.

Recommendation #15: that employers make positive attempts to access the supply of under represented groups.

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    Women, Blacks, Hispanics, Native Americans, Mid-career and Mature workers are under represented and under utilized. Accessing the supply begins with the process of evaluating the 98% that are routinely rejected. Evaluation should be followed by training both on the job and with industry conducted training to fill real vacancies. Temporary training employment should be provided that is not subject to unemployment charges against the employer should the individual not be hired permanently. The temporary training employees should not be eligible for any of the company fringe benefits. There are many sources of training grants around which such training could be structured. A temporary employment agency is the vehicle for achieving the closeness required for training and the employer protection against encumbering the company fringe benefits until such time as permanent employment is offered. The temporary employ agency is used by industry extensively today. The temporary employment agency's mission should be expanded to include training.

    Recommendation #16: that the Congress reduce the number of temporary admissions available for Scientists and Engineers and to encourage IT employers to utilize the large supply of talented U.S. Citizens. The Inspector General of the Department of Labor has characterized the immigration and temporary worker system as ''Broke''.

SUMMING UP

    The IT industry is expanding with CS&SA employment expanding at a 10.8% annual rate while CP employment in 1997 expanded significantly. The combination of the two specialties is now expanding at a 6.2% annual rate. The increased numbers of job vacancies is being used as a self serving call for drastic action by others. Industry has control of the vacancy rate by making adequate salary offers and by eliminating excessive experience requirements. While it is impossible to determine explicitly what the purpose is of the over specified requirements, it is possible to tell that they had not been offering significantly higher median salaries to attract and keep employees. When they did in 1997, the CP employment increased significantly. There is no abnormal wage inflation for the CS&SA category. There are no ''shortages'' as occur in centrally planned economies such as in the now defunct USSR. There are no legal restrictions on offering more wages and such increases will make the supply available even with the over specification of skills. Historic ability to expand employment has shown there to be an adequate supply of talented workers from a wide variety of sources. Those sources include current and past Science, Engineers and Liberal Arts degree holders. The number of engineering immigrants and temporary workers exceed the number of U.S. engineering graduates, a situation needing review and downward adjustment of temporary worker quotas. There is a large supply of underutilized women and of those in ethnic groups. Finally there is a large supply of trained and reliable talent from those unemployed, downsized, too old or overqualified. There is an uncounted supply working in unrelated jobs.
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    It is recommended that employers relax their over specified experience requirements and provide skills training for their present employees and their new hires. It is recommended that applications for employment be reviewed by technically competent individuals with instructions to review on the basis of how the individual could be used rather than on the basis of exactly meeting over specified experience requirements. In order to access a larger talented population, it is recommended that industry budget for increased training levels of the order of 3% of payroll or more. It is recommended that available downsized, ex defense and unemployed workers be given consideration by the employers consistent with the worker's experience, reliability, dedication and training. It is recommendeded that compensation levels of current employees be adjusted to market levels thereby limiting attrition and providing the basis for getting new employees. It is recommended that employers provide salary supplements to cover excess living costs in high cost locations. It is recommend that working conditions be reviewed and improved in areas such as support personnel and working over 40 hours without compensation. Legislators should review the exempt employee laws to eliminate the unpaid overtime. It is suggested that the appropriate response by employers in high living cost areas is higher salaries or the establishment of satellite operations in lower cost areas of the United States. The ultimate in bringing work to the individual is telecommuting. It is recommended that industry develop performance criteria to permit increasing the amount of telecommuting. It is recommended that the quotas on temporary workers be reduced in order to encourage the use of the large supply of talented U.S. Citizens. That supply is several times what the industry needs.

    Robert A. Rivers, P. E.
    PO Box 98
    Orange, MA 01364
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    T. 978-544-3942
    F. 978-544-9902
    e-mail RRivers297@A0L.com

    The following is an excerpt from an article appearing in IEEE TRANSACTIONS ON AEROSPACE AND ELECTRONIC SYSTEMS, VOL. AES-10, NO. 1, JANUARY 1974

Engineering and Electrical Engineering—Supply and Demand

    ROBERT A. RIVERS
    Main Street
    Union, N.H. 03887

ABSTRACT

    Change in employment of engineers is shown to be related to the Deutsch and Shea Index of Engineering Demand. A relationship is given that shows the changes in engineering employment on a quarterly and annual basis. Engineering employment has turned upward for the first time since the last quarter of 1969. We have displaced and stored over 90,000 qualified engineers since 1969, in addition to displacing over 40,000 not qualified by an engineering education. Estimates by some of the need for 48,000 engineers per year is shown to be highly questionable. Current demand is still insufficient to absorb the current output without displacing some currently employed. It is suggested that demand in specialties can be determined by advertising lineage devoted to specialties in the same manner that the engineering demand is determined by the Deutsch and Shea Index. The years 1970, 1971, and 1972 were characterized by a decrease in employment of 62,000 engineers, 150,000 new graduates, 25,000 immigrants, and only 55,000 normal retirements and deaths.
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INTRODUCTION

    An approximation is derived that correlates the Deutsch and Shea Index of Engineer/Scientist Demand with the U.S. Bureau of Labor Statistics Current Population Survey engineering employment data. Changes in employment from this approximation are much smoother than the Current Population Survey sample and permit the development of an input-output table. The cumulative surplus or deficiency of engineers appears to correspond with reality in the period from 1962 to 1971. Continuation of the calculations through 1972 indicates a continuing buildup of displaced engineers. Engineering supply as characterized by the Bureau of Labor Statistics, or the Census Bureau, is a rather flexible quantity. A large percentage of engineers are non-degree holders. Another significant percentage of engineers are other than engineering degree holders. Again, not all engineering graduates stay in engineering occupations. The calculations shown tend to substantiate the fact that there is a large displaced pool of engineers that could be available if the society decides that it wants to support more engineering work with public or private funds.
    The supply of engineers is determined by the output of the educational institutions, and the upgrading of experienced non-degree people. The demand for engineers is determined by the level of the economy and expenditures for future growth. While it would be desirable to be able to tell an individual just what the demand is for his services, we are far from the point of being able to address ourselves to any of the specialties of electrical and electronic engineering. We do have a statistical base available to address the problem of engineering in general, and, by inference, the problems of electrical engineering supply and demand. It is hoped that dedication to the collection of detailed electrical engineering statistics will produce results in the future.
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DISCUSSION

    Table I is an input-output table for engineering supply and demand. It summarizes the supply-demand flows and shows the cumulative surpluses and shortages. It shows a cumulative surplus of 29,531 engineers in 1964, a year of engineering recession. It shows a cumulative shortage of engineers amounting to 5198 in 1967, at the peak of the Vietnam escalation. It also shows a cumulative surplus of 96,002 at the end of 1972.

    The ''degree'' column of Table I is the number of engineering degrees awarded and projected to be awarded in the United States. The numbers are good out through 1976, because the class of 1976 is in the educational system, and these people are fairly well committed. Beyond 1976, the projections are based on a return to normalcy for which there is no supporting evidence. Engineering graduate starting salary data for 1973 does show a 4.8 percent increase for B.S. graduates over the 1972 figure. This number is in the middle of the range of increases over the previous years, and will probably result in a slight increase of students for the class of 1977. Relative starting salaries and their influence on course selection is treated by Freeman [1].

    The ''58 percent degree'' column of Table I is the long-term yield of engineering students into engineering occupations. This illustrates the fact that most of those educated in engineering stay in engineering. Table 3.18 from the 1960 U.S. Census Study [2] of the college educated poulation shows 58 percent of the Bachelors degree holders staying in engineering. The percentage of Bachelors-plus degree holders is the same. The percentage for Masters degrees is 57 percent, and the Doctors degrees number is 80 percent. When the argument is made that many engineers go into other fields, the above figure will support such an argument. The majority, however, does not go into other fields. We have thus taken into account ''loyalty'' in determining the effective supply.
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    The ''56 percent expansion'' column is 56 percent of the expansion or contraction of employment of engineers. It is made up of 39 percent to account for non-degree people taking engineering jobs and being classified as engineers. Table 4, ''Age and Highest Degree, etc.,'' from U.S. Current Population Reports [3] shows 61 percent of those employed having Bachelors degrees or higher, leaving 39 percent without Bachelors degrees. The other 17 percent is to account for those with other than engineering degrees being classified as enginers. Table 4.2 from the 1960 U.S. Census Study [4] shows the sources of other degree people. No 1970 data is available.

Table 9



    Notes:

    Col. 2. Includes engineering technology degrees, estimates 1972 and after, from the U.S. Office of Education.
    Col. 3. This is 58 percent of the engineering degrees awarded, and represents the percentage that stays in engineering.
    Col. 4. 39 percent of the employment expansion is to cover non-degree people coming into or leaving the field. Another 17 percent of the employment expansion is to cover non-engineering-degree people who enter or leave the field. This hypothesis is verified within less than 1 percent by the accumulated surplus or deficiency (–5198/1,163,000).
    Col. 6. Deaths are based on an average population sample equivalent to the 1972 Salary Survey, leading to a 6.322 per thousand rate.
    Col. 7. Retirements are based on propagation of 9.52 percent population in the 55–65 age group into retirement at 65.
    Col. 8. This is the number employed from two different series, the latter with corrections in 1972–1973.
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    Col. 9. This is the computed employment expansion or contraction from the Deutsch and Shea Index, which equals 75,200 x [(DSI– 90)/100], where DSI is the yearly average Deutsch and Shea Index.
    Col. 10. This is the yearly contribution to a surplus or deficit of engineers.
    Col. 11. This is the accumulated surpluses or deficits. It shows the 1964 recession surplus, the 1966–1968 shortage, and the massive surplus from 1970 through the present.
    Col. 12. This is the accumulated electrical engineer surplus or deficiency at 22 percent of the engineer population.
    *Changed series from National Science Foundation 68–38 to Bureau of Labor Statistics Current Population Survey (unpublished).

58001o.eps

58001p.eps

58001q.eps

58001r.eps

58001s.eps

58001t.eps

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58001u.eps

58001v.eps

58001w.eps

58001x.eps

58001y.eps

58001z.eps

58001aa.eps

58001ab.eps

58001ac.eps

Appendix 4.—Prepared statement from Federation for American Immigration Reform

STATEMENT OF
DAN STEIN
EXECUTIVE DIRECTOR
FEDERATION FOR AMERICAN IMMIGRATION REFORM
FOR THE
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HOUSE JUDICIARY COMMITTEE
TUESDAY, APRIL 21, 1998

    This statement is for the record of the hearing on proposals to raise the
65,000 annual ceiling on H–1B temporary worker visas. It explains why this proposal is not based on actual need and is not in the national interest.

SUMMARY

    Last fiscal year, the 65,000 annual limit on nonimmigrant temporary worker (H–1B) visas was reached for the first time, and is likely to be repeated again this year. As a result, one of the big users of temporary worker visas, the information technology (IT) industry, is pushing for Congress for a major increase in the 65,000 annual limit on the number of visas issued.

    The fundamental question is: Is it in the national interest to turn the H–1B program into a major, ongoing source of skilled labor for U.S. employers' needs? FAIR believes that the answer to that question is no. Rather the H–1B program should be returned to its original purpose which was to provide employers with a temporary source of labor for acute, demonstrable, short term labor market needs.

    Why?

    (1 ) Raising the H–1B ceiling every time it's reached avoids finding a real solution to the problem that carries with it important benefits for American workers and American families. They are
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 greater job opportunities

 rising real earnings

 more on-the job education and training

    (2) Rising real incomes sends an important signal to American labor market participants that is crucial to the development of long term domestic solutions.

 increased enrollment in colleges and universities

 increased entry by women, minorities, and lower skilled job seekers

 increased emphasis by employers on work force training and development

    Despite the economic boom of recent years, average real household income is still 2.7 percent below the level it reached in 1989.(see footnote 84) Economists from Laura D'Andrea Tyson to Alan Greenspan acknowledge that the size of current immigration has had a significant impact on the supply side of the labor market. According to the Joint Economic Committee of Congress, U.S. income inequality is now at the highest level since World War II. FAIR contends that high levels of immigration, including skilled immigration has played a significant role in these developments.

    FAIR further believes the proposed increase in H–1B visa levels is unwise for the following reasons:
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    (1) The evidence presented to support industry claims that there is an acute shortage of skilled workers in the information technology industry has been challenged by the Government Accounting Office and other researchers.

    (2) Government reports show that the H–1B program as it currently functions is being seriously abused and manipulated by employers and immigration system practitioners.

    (3) There is no consensus in the information technology industry itself that the solution to worker shortages is increased immigration.

    (4) Increasing the supply of foreign labor will seriously aggravate employment difficulties expected to flow from the Asian financial crisis and which are expected to be felt later this year.

    (5) The solution to the problem of skilled labor shortages that is in the national interest is to increase the supply of labor qualified for these jobs from domestic sources through education, job training, and better recruitment.

    (6) The existing ceiling of 65,000 visas in the temporary skilled worker program, if properly administered for the purposes for which the program was created by Congress, are more than adequate for the demonstrable, acute, short term labor needs of industry.

FAIR'S ANALYSIS OF THE WORKER SHORTAGE CLAIM
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''We believe that the labor markets for IT [information technology] professionals have been artificially distorted by industry hiring practices. There is a reluctance to invest in re-education, instead of discarding old workers for new ones.''

Carol Iseu, vice president of International Federation of Professional
and Technical Engineers, Tech Web News, January 13, 1998

    Data supplied to Congress by the immigration-practitioner-dominated Information Technology Association of America (ITAA) to demonstrate that a skilled labor crisis exists is seriously flawed and widely disputed within the industry itself. It should be clear that the ITAA is not an impartial source of information.

    One piece of evidence used is a university study commissioned by the ITAA that simply relied on asking employers how many high-tech job vacancies they had open and simultaneously tabulated employment ads. The evidence is flawed for several reasons. The number of vacancies maintained by a company's employment office is frequently nothing more than a wish list of proposed hirings and openings based on a company's forecasted rate of employee turnover. Few companies operate on the basis that all such vacancies would suddenly be filled.

    Secondly, major information technology companies such as Microsoft admit to hiring less than 2 percent of the people who apply to fill its job vacancies. These facts do not support the thesis of an acute labor shortage.

    The only true and impartial barometer of acute labor shortages in an industry is rapid wage and salary inflation that outstrips inflation. There is no evidence to show that this is occurring on a widespread scale in the information technology industry today.
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    The ITAA itself, is a trade association dominated by immigration law practitioners and employment consultants. Their objectives are propelled by their interest in an ever larger pool of available immigration visas. Moreover there is reason to believe their preferred solution does not even reflect the consensus views of the industry itself. A survey of 400 top hi-tech industry executives who attended a recent technology management conference in Dana Point, California found 56 percent opposed to the idea of increasing immigration as a solution to the industry's labor needs.(see footnote 85)

    Two industry groups, the American Engineering Association and the IEEE have expressed their doubts about the size of alleged shortage and their opposition to the solution of expanding H–1B visa levels as a remedy.

    A 1996 audit of the H–1B program by the Department of Labor's Inspector General found that the program has already been turned into a virtual ''rubber stamp'' for the admission of skilled and unskilled foreign labor which become permanent additions to the U.S. labor supply. The study found 98.7 percent of temporary worker petitions were for aliens already in this country. The audit also found that 75% percent of temporary workers admitted worked for employers who did not adequately document their wages and another 13% were paid below the advertised prevailing wage. The report noted ''The program has become a stepping stone to obtain permanent resident status not only for the best and brightest specialists but also for students, relatives, and friends.''

    In 1996 Secretary of Labor Robert Reich testified to Congress that nearly 570,000 temporary foreign workers were admitted to the U.S. between 1992 and 1994 and said the program was ''displacing American workers and dragging down wages in important high-wage, high skill jobs.''(see footnote 86) Nearly three-quarters were already working for the employer who filed the petition, and over one-eighth were working illegally. FAIR believes the evidence is conclusive that the H–1B program is subject to serious fraud and abuse, and that reforms should be made to return the program to its original purpose before any further changes are undertaken.
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    Opening the door to increased foreign labor at this time also carries a serious risk of aggravating the unemployment impact of the Asian financial crisis on skilled U.S. workers. The California State Finance Department estimates that the Asian slowdown could cost California alone up to 65,000 non-agricultural jobs this year which would come primarily from the state's hi-technology industry.(see footnote 87) In the current atmosphere of economic uncertainty stemming from the continuing crisis in Asia, it would be unwise for Congress to increase the number of foreign workers employers can hire.

    The correct, long term solution that is in the national interest is to focus our attention on upgrading the education and skills of our domestic labor force, and refocus the H–1B program on its original purpose.

    University enrollment in computer science curricula is increasing. This is the appropriate response in our job market to a present or future skills shortage. Further infusions of foreign labor as a solution will undermine the free market attraction of more American youth into the high technology employment sector. It will also deny high paying job opportunities to tens of thousands of older, experienced computer science professionals.

    Current data on the H–1B program shows that only 42 percent of the labor market certifications under the program are computer related. The majority are for therapists, accountants, university faculty, nurses, and other health professionals. The Department of Labor's audit shows that many existing H–1B visas are being used for the admission of foreign workers that have no real relation with meeting critical short term labor market needs. If the program was reformed and properly administered in accord with the Dept. of Labor's recommendations, there would be no current need to raise the H–1B ceiling.
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CONCLUSION

    This is not a crisis that requires Congressional action. It is a challenge for the industry and an opportunity for America's universities and America's youth. Congress should not underwrite the industry's destructive reliance on foreign labor which is not in the nation's long term national interest.

FAIR'S POLICY RECOMMENDATIONS

    1. Clean up the systemic fraud found by the Department of Labor in H–1B labor certifications (1996 Inspector General's Report).

    2. Adopt Dept. of Labor recommended changes to protect American workers and stop H–1B's from undermining U.S. workers' wages and bargaining positions.

    3. Return the H–1B visa program to it original purpose of being truly a temporary labor program by restricting the maximum length of a foreign worker's stay to three years.

    4. Enact effective entry and departure controls for non-immigrant visas—now virtually nonexistent.

Appendix 5.—Prepared statement from The National Association of Manufacturers

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STATEMENT
''IMMIGRATION AND THE WORKFORCE''
OVERSIGHT HEARING

The National Association of Manufacturers

Submitted for the printed record of the April 21, 1998, hearing before
the Immigration and Claims Subcommittee of the
House Judiciary Committee
United States House of Representatives

PREPARED STATEMENT OF THE NATIONAL ASSOCIATION OF MANUFACTURERS
''IMMIGRATION AND THE WORKFORCE''
APRIL 21, 1998

    The National Association of Manufacturers (NAM) appreciates the Immigration and Claims Subcommittee's interest in examining the serious shortage of highly skilled technical workers in the U.S. and whether the H–1B program, which provides temporary visas to foreign skilled workers, should be expanded to address this growing problem. Simply stated, the NAM supports an expansion of the H–1B program that will update our legal immigration policies to reflect the competitive nature of the global workforce.

    The NAM is the nation's oldest and largest broad-based industrial trade association. Its more than 14,000 member companies and subsidiaries, including approximately 10,000 small manufacturers, are in every state and produce about 85 percent of U.S. manufactured goods. The NAM's member companies and affiliated associations represent every industrial sector and employ more than 18 million people.
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    The NAM supports efforts by Congress to increase the number of immigrant hightech workers allowed wider the H–1B visa program and eliminate barriers that impede companies' abilities to remain competitive in a global economy.

    U.S. companies must have the flexibility to remain competitive and acquire the best and brightest workers. Unfortunately, there simply aren't enough qualified high-tech workers to meet the demand and help fuel the growth of the U.S. economy. Skilled worker shortages are a serious problem faced by most employers in all industries and a looming threat to the future competitiveness of the United States.

    There are currently more than 340,000 vacancies in the information technology workforce alone. Furthermore, the Department of Labor estimates that within the next seven years, there will be a demand for 95,000 new computer scientists, analysts and programmers each year. American universities graduate only 25,000 students in these fields each year. Coupled with a 24-year low in unemployment, it's clear that U.S. companies must either find additional qualified workers, or ultimately, be forced to relocate these jobs overseas.

    H–1B visas allow companies to hire highly skilled foreign workers on a temporary basis—jobs that would otherwise go unfilled due to a tight labor market. The current annual ceiling of 65,000 was established in 1990, with little attention paid to actual usage or anticipated growth. The reality is that the current limit of 65,000 H–1B visas simply doesn't meet today's demand. In 1997, the cap was reached one month prior to the end of the fiscal year. This year, nearly 50,000 H–1B visas have already been approved through the month of March. At this rate, the statutory cap will be reached within the next month. Once this happens, companies will be unable to hire new H–1B workers. For both large and small companies, this may mean the difference between meeting a critical human resource need this year for new product development or technological advancement, or falling behind their global competitors while they wait for the new fiscal year to begin.
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    The shortage of high-tech workers underscores the serious need for worker trading and education in the United States. In November of last year, the Grant Thornton consulting firm surveyed 4,500 American manufacturers and found that 60 percent of those responding report that current workers lack basic math skills. More than half find serious deficiencies in workers' basic writing and comprehension skills, and 48 percent believe too many of their workers lack the ability to read and translate drawings, diagrams and flow charts.

    This is troubling news, since technology is the backbone of our economic future. Since 1990, technology industry sales have risen from under $600 billion annually to about $900 billion. High-tech workers earn almost $50,000 annually, making them the second highest paid income group in the group. And advances in technology help make consumer goods more affordable.

    As well-paying high tech jobs go unfilled, many workers eager to work in technology-related industries are unprepared for the jobs they want and the economy needs. Forward-looking companies, with manufacturers helping to lead the way, are spending more than $60 billion a year to educate and train workers. Ninety-six percent of the companies in the Grant Thornton survey currently provide some education and training for their employees, and nearly half of the firms answering the survey said they spent 2 percent or more of payroll to train their workers.

    As we upgrade the quality of our education and training efforts, we need workers who can supply our growing high-tech industries with the expertise needed to keep our country on the leading edge of the global economy. America's workforce will be the decisive factor in maintaining our competitive edge in the 21st century. Immigration, in addition to education and training, is part of the solution. Therefore, the NAM supports eliminating the current cap on H–1B visas. Doing so would help grow our economy as our education and training efforts gear up for the realities of an increasingly technology-driven international marketplace.
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    The NAM appreciates the committee's leadership in bringing serious consideration to the critical issue of immigration and the workforce. We look forward to cooperative efforts aimed at resolving this problem by focusing on the H–1B visa program and eliminating the visa cap.

Appendix 6.—Prepared statement from The American Immigration Lawyers Association

STATEMENT OF THE
AMERICAN IMMIGRATION LAWYERS ASSOCIATION
TO THE
SUBCOMMITTEE ON IMMIGRATION AND CLAIMS
COMMITTEE ON THE JUDICIARY
U.S. HOUSE OF REPRESENTATIVES
ON
THE NEED TO INCREASE THE CAP ON
TEMPORARY H–1B WORKERS

April 21, 1998

    The American Immigration Lawyers Association (AILA) commends the Chairman and the Members of the Subcommittee for their initiative in addressing an issue of urgent concern for businesses nationwide, the imminent expiration of the allotment of available visas for temporary foreign professional workers. AILA is an organization of 5200 attorneys throughout the United States. Our members represent thousands of U.S. employers in all sectors of the economy. The issue of temporary foreign professional workers is of utmost concern to AILA because of the vast array of businesses that utilize the H–1B nonimmigrant program to employ foreign nationals in key positions. These businesses' continued ability to compete would be hurt if they would be unable to continue to employ these individuals.
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I.
H–1B WORKERS ARE USED THROUGHOUT THE U.S. ECONOMY TO CONTRIBUTE NEEDED SKILLS AND TALENT THAT IS UNAVAILABLE IN THE UNITED STATES

    AILA would like to emphasize the importance nationwide of this issue to companies in all sectors of the economy. Our members represent large and small businesses in the manufacturing, services, high-tech, pharmaceutical, biotechnology, and other industries. AILA members also represent colleges, universities, non-profit organizations, institutions and governmental entities. These employers are located throughout the United States, and all of these employers utilize the H–1B category.

    This hearing gives us the opportunity to highlight U.S. employers that are using and benefiting from the talents and skills of H–1B workers. For example, a government contractor in Colorado has hired several H–1B engineers with expertise in the decommissioning and decontamination of former nuclear weapons facilities. Their expertise is being used in the clean-up of several Department of Energy facilities that formerly were used in this nation's nuclear weapons complex. A school in California devoted to working with children with cerebral palsy has used the H–1B category to bring in several teachers from Hungary who have been trained in a special technique called ''conductive therapy'' that currently is unavailable in the United States. Parents of U.S. children helped by these teachers call their children's progress ''miraculous.'' Many of this country's leading pharmaceutical and biotechnology research companies and institutions hire H–1B scientists to work on projects ranging from cures for cancer and AIDS to developing safer and more effective drug delivery systems and surgical techniques. H–1B physicians provide critical primary care medical services in some of this nation's most underserved areas, including inner cities and rural communities. Manufacturing companies bring H–1B engineers to this country to introduce and train U.S. workers in technologies and manufacturing techniques currently not yet in use here, including the development of more environmentally-friendly thin-film coating techniques for locking products, and better catalytic converter systems for automobile exhaust, and many other important areas. Of course, H–1B workers also are employed in the computer industry, as well as in many critical computer-related positions in non-high-tech companies. Many of these individuals work on critical projects in the areas of medical databases, solving the infamous Year 2000 problem for local and state governments, and on implementing critical business reengineering software to allow some of America's largest companies to continue to compete globally.
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    Far from taking jobs away from U.S. workers, H–1B professionals actually spur job creation in this country, allowing U.S. companies to expand into new areas, both geographically and in terms of new products and services, and fill critical positions upon which many other jobs depend that are filled by Americans.

II.
THE CONTINUED AVAILABILITY OF H–1B WORKERS IS ESSENTIAL TO THE GROWTH OF THE U.S. ECONOMY

    Thousands of employers, in all sectors of the economy, utilize the H–1B category every day. While we have heard a great deal recently from high-tech companies, the examples previously cited demonstrate that U.S. employers use the H–1B category to hire foreign professionals with rare or unique skills and with the knowledge and/or experience that is needed by these employers to pursue new projects, expand into new markets, update their technology, and/or train their U.S. workers. Of course, the H–1B category also is used to fill positions for which there is a shortage of available U.S. workers. However, whether or not such a shortage exists at any given time in any given industry, there always will be a need for employers to be able to bring into this country specially skilled individuals to fill specific niches in our economy. Furthermore, with the rapid growth of the U.S. economy and the increased expansion of U.S. companies into the global marketplace, the need for these individuals is likely to continue to increase in the near term. Despite all of this country's efforts and preferences, we will continue into the future to need to utilize the H–1B category to hire foreign professionals, given the global nature of our economy and our need to compete on at least a level playing field.

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    As stated above, H–1B professionals are employed in many key positions in the United States. If the current cap of 65,000 is reached before the end of this fiscal year, not only will companies facing worker shortages be affected, it could render serious harm to other U.S. employers. Companies will have to put important research projects on hold and delay product introductions and expansion plans. The inability to hire these foreign professionals could hamper employers' ability to keep a step ahead of foreign competition.

III.
PROPOSED CHANGES TO THE H–1B CATEGORY COULD SERIOUSLY IMPAIR ITS USEFULNESS TO U.S. EMPLOYERS

A. H–1B Processing Should Be Speedy and Efficient

    While much debate to date has focused on the impending exhaustion of the available H–1B visas this fiscal year, and obtaining an increase in the cap so that companies can continue to bring in these urgently needed individuals, AILA also is concerned with maintaining the efficiency and timeliness of the H–1B program. One of the great advantages of the H–1B program is that it allows companies who need key individuals to obtain their services within a relatively quick time frame of several weeks. This speed of processing has allowed employers to take advantage of opportunities as they arise, without having to undergo significant administrative processing delays. The trade-off for this timely adjudication is the already substantial protections built into the program to provide notice to and insulate American workers from adverse consequences. However, various ill-advised proposals have come forth that could seriously jeopardize these crucial aspects of the H–1B program.

    One proposal would require employers to attest that they have not laid-off any U.S. workers before they can hire an H–1B foreign national. This proposal is a reaction to allegations that employers are laying-off U.S. workers to hire ''cheaper'' foreign workers as replacements. However, the current H–1B program requires employers to pay H–1B workers the higher of the salary it pays to its U.S. workers in the same occupation and with similar credentials or the average of the salaries paid by area competitors to similar workers. Therefore, if these employers are paying their H–1B workers less than is required under the current program, they are breaking the law and should be punished. However, the vast majority of employers are not breaking the law and are paying foreign workers the salary required by law.
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    While a layoff attestation may appear reasonable, we oppose this attestation because it would hamper U.S. employers' ability to react to changing market conditions. Some proposals in this area would have prohibited employers who laid off any workers in any part of the country from hiring H–1B professionals at all. This might mean that a company who laid off mechanical engineers in its defense division could not hire an H1B electrical engineer needed in its components division in another area of the country. Such a broad provision would be unworkable. Even if such a provision is not included we still oppose a layoff attestation because, the Department of Labor, which most likely would be entrusted to enforce this provision, has not shown itself capable of making job classification distinctions fine enough to determine whether layoffs even occurred in the same occupations or skill sets. In fact, the DOL recently has developed even broader occupational classifications in its administration of the prevailing wage program, thereby leading to job comparisons of apples with oranges. Specifically, it is as if an apple can be equal to an orange because they're both fruit.

B. Recruitment Attestations Would Be Onerous and Would Affect the Ability of U.S. Employers to Hire the Cream of Foreign Talent

    Another proposal would require employers to attest that they have attempted to recruit U.S. workers before hiring an H–1B worker in a position. Again, while this proposal may sound reasonable on its face, particularly given the current high-tech worker shortage, it would be unworkable in practice for several reasons. Perhaps most importantly is the Department of Labor's history in administering the recruitment requirements in the permanent labor certification context, the closest comparison to the H–1B program available. Because this process can take two to three years to complete in some areas of the country, employers reasonably believe that any recruitment procedure that the Department would oversee in the H–1B program would create such an administrative burden as to render the program effectively useless. One of the main reasons employers can utilize the H–1B program is because the process is relatively efficient in bringing in needed professionals. Adding a time-consuming recruitment requirement would eliminate this efficiency and cause jobs to go unfilled.
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    Secondly, not all H–1B workers are hired to fill occupations where there is a shortage of U.S. workers. Multinational companies use the H–1B program to bring in experts in global markets to train and be trained in the United States. Other companies wishing to bring in experts in technologies or processes that are not currently in use in the United States also use the program as well as to bring in individuals with rare or unique skills, knowledge or experience unavailable in the U.S. Since the skills brought by these individuals are unavailable in the United States, requiring companies to recruit in the United States before hiring these individuals would be pointless.

IV.
CONCLUSION

    These and other new administrative burdens would render the H–1B program useless to U.S. employers, effectively preventing them from utilizing the services of badly-needed foreign professionals. In addition, AILA also would strongly oppose attaching other provisions unrelated to the H–1B program and business immigration to legislation that would raise the current cap on H–1B workers. Provisions such as reprioritizing family immigration have no merit in themselves, change the rules in the middle of the game, violate America's tradition of family immigration where the primary goal is to reunite families, and fly in the face of future labor market needs. Finally, any such provisions would slow down, if not defeat, any legislative initiative addressing H–1Bs.

    In summary, AILA urges this Subcommittee to quickly introduce and mark-up ''clean'' legislation that will raise the cap on H–1B admissions, without the addition of administrative or legislative provisions that would burden the program or are unrelated to business immigration and would stall, if not defeat, this urgently needed effort.
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    The American Immigration Lawyers Association (''AILA'') is the national bar association of over 5,000 attorneys and law professors practicing and teaching in the field of immigration law.

    AILA member attorneys represent thousands of U.S. businesses and industries that sponsor highly skilled foreign workers seeking to enter the United States on a temporary or—after having proven the unavailability of U.S. workers—permanent basis. AILA members also represent many U.S. families who have applied for permanent residence for their spouses, children and other close relatives to lawfully enter and reside in the United States, reuniting the family. AILA members also represent foreign students, entertainers, athletes and asylum seekers, often on a pro bono basis.

    Founded in 1946, AILA is a nonpartisan, nonprofit organization that provides its members with continuing legal education, information, professional services, and expertise, through its 35 chapters and over 50 national committees. AILA is an Affiliated Organization of the American Bar Association and is represented in the ABA House of Delegates.

Appendix 7.—Prepared statement from The National Technical Services Association

STATEMENT OF THE
NATIONAL TECHNICAL SERVICES ASSOCIATION

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SUBMITTED TO THE
U.S. HOUSE OF REPRESENTATIVES
JUDICIARY SUBCOMMITTEE ON
IMMIGRATION AND CLAIMS
REGARDING
''IMMIGRATION AND THE AMERICAN
WORKFORCE FOR THE 21ST CENTURY''
APRIL 21, 1998

I.
INTRODUCTION

    Mr. Chairman and members of the U.S. House of Representatives Judiciary Subcommittee on Immigration and Claims, thank you for this opportunity to comment on the above-referenced issue and pertinent legislation being considered by you and your colleagues. The National Technical Services Association's 300-plus corporate members operate over 1,800 technical services offices nationwide and employ more than 300,000 technical personnel who possess the training and experience required to meet America's rapidly changing technical requirements. This year, member firms will generate between $6 and $9 billion in sales of technical staffing and other support services.

    NTSA's comments are designed to assist you in crafting and passing legislation which will increase the current 65,000 cap on the number of H–1B visas that can be issued in any one year. NTSA is a proud member of the American Business for Legal Immigration (ABLI) coalition. As you study this issue, please consider the following:
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II.
NTSA MEMBER CONCERNS

    Members rely on the H–1B program as a source of temporary employees for professional positions. Members are concerned that the 65,000 H–1B cap that was arbitrarily assigned several years ago is not an accurate reflection of the current market for information technology (I.T.) professionals. This view is supported by the fact that the 65,000 cap was nearly reached two years ago, and reached almost one month early last year. The projected exhaustion of the 65,000 visas this year is mid-May, four months before the end of the Immigration and Naturalization Services' fiscal year.

    Many NTSA member firms agree that the shortage of high-skilled American workers, especially in the information technology (IT) field, serves as a major barrier to growth. In the NTSA 1997 Industry Profile and Company Norms Report, 78% of the firms surveyed identified the shortage of skilled personnel as ''critically important'' to their company's success over the next two years.

    NTSA members are company owners who would not routinely go through the expense and effort of hiring H–1B workers if there were sufficient U.S. workers readily available to meet the demand for certain skill sets. To fill the demand of their customers, many NTSA members incur attorneys fees and costs of over $2,000 per H–1B application and then must wait anywhere from 4–12 weeks to actually obtain H–1B work authorization and have the employee begin work. These are not desirable economic goals for NTSA members, their customers, or the U.S.
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    If the H–1B cap is reached as early as it is projected these jobs (that would otherwise support U.S. businesses) will in all likelihood be lost to employment in other countries. This will further jeopardize legitimate U.S. businesses who will be left unable to meet crushing I.T. demands. This point is especially important in light of the tremendous current I.T. demand to meet the Year 2000 conversion problem.

III.
POLICY RECOMMENDATIONS:

    NTSA recommends that this committee support S. 1723, The American Competitiveness Act, introduced by Senator Spencer Abraham of Michigan. S. 1723 responds to the business community's very real concerns by proposing to increase the H–1B annual cap to 95,000 in fiscal year 1998, then back to 85,000 in subsequent years. The bill would allow an additional 20,000 slots if that many are left over from the H2–B program from the previous year. S. 1723 also establishes a new H2–C category that will allow for the annual issuance of 10,000 visas for foreign health care professionals who currently are eligible to work in the U.S. under the H1–B program.

    Furthermore, NTSA recommends that this committee address separately from S. 1723, any immigration reform legislation which includes categories other than business-related visa categories (e.g., family-based visa categories). Since the goals of the two groups and their respective issues are so different, the likelihood of passing broad legislation, particularly in the time frame needed before the current H1–B cap is reached, is slim-to-none. The intent to increase the 65,000 H–1B cap is soundly based in the desire to support U.S. businesses and related U.S. jobs and to expand the U.S. economy. This goal cannot be jeopardized by tying its outcome to a substantial revision in family-immigration laws. Business-related and family-related immigration reform proposals can and should be bifurcated and addressed separately on their own merits.
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IV.
ABOUT NTSA

    The National Technical Services Association (NTSA) is a non-profit 501(c)(6) organization which exists to promote the legal, legislative, regulatory, strategic business development, and continuous process improvement interests of member firms. Member firms supply a wide range of design, drafting, engineering, project management, computer programming, systems analysis, staff augmentation, and technical publication services, for profit, to industry and government clients.

    Member Firms now number among their clients most major American corporations, thousands of small industrial companies, government agencies, and colleges and universities across the United States. Central to the interests of each NTSA member is the ability to anticipate rapidly changing client needs. Of equal importance is the ability to recruit, hire, and maximize the short- and long-term employment objectives of skilled personnel.

Respectfully submitted,
ROBERT G. DRUMMER, ESQ.
Director, Government and Public Relations

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(Footnote 1 return)
Mr. Borjas is the Pforzheimer Professor of Public Policy at the John F. Kennedy School of Government, Harvard University, and a Research Associate at the National Bureau of Economic Research.


(Footnote 2 return)
George J. Borjas, Richard B. Freeman, and Lawrence F. Katz, ''How Much Do Immigrant and Trade Affect Labor Market Outcomes?'' Brookings Papers on Economic Activity, 1997.


(Footnote 3 return)
The views and recommendations presented in this testimony are solely those of the author and do not necessarily represent those of RAND or any of its research sponsors.


(Footnote 4 return)
McCarthy, Kevin F. and Georges Vernez (1997). Immigration in a Changing Economy: California's Experience, MR–854–OSD/CBR/FF/WFHF/IF/AMF, Santa Monica, Calif.: RAND.


(Footnote 5 return)
By comparison, in the rest of the nation, the number of jobs filled by workers with less than 12 years of education declined even more dramatically—by 50 percent.


(Footnote 6 return)
National Research Council (1997). The New Americans: Economic, Demographic, and Fiscal Effects of Immigration, Washington, DC: National Academy Press.


(Footnote 7 return)
Washington, D.C.: Department of Commerce, Office of Technology Policy.


(Footnote 8 return)
Information Technology: Assessment of the Department of Commerce's Report on Workforce Demand and Supply (GAO/HEHS–98–106, Mar. 20, 1998).


(Footnote 9 return)
Arlington, VA.: ITAA.


(Footnote 10 return)
This information was cited in a January 1998 update report by the Commerce Department.


(Footnote 11 return)
Feb. 1997.


(Footnote 12 return)
GAO, Developing and Using Questionnaires (Oct. 1993).


(Footnote 13 return)
By effective response rate, we mean the percentage of people who return the questionnaire and answer the variable in question. Small to moderate differences between the respondent and nonrespondent populations will usually have little or no bias effect on the results. High or disproportionate nonresponse rates can threaten the credibility and generalizability of the findings. The reason some nonrespondents do not complete a survey may be related to important differences between them and the responding group; for example, respondents may be motivated to complete the questionnaire because they have particular experience with the survey issue.


(Footnote 14 return)
Since it published Help Wanted: The IT Workforce Gap at the Dawn of a New Century, ITAA has released preliminary findings from a second study on the shortage of IT workers. This report, Help Wanted: A Call for Collaborative Action for the New Millennium, was done in collaboration with Virginia Polytechnic Institute and State University and estimates 346,000 claimed vacancies for IT positions. This survey involved a random sampling of 1,500 IT and non-IT companies with 100 or more employees, and the response rate was 36 percent (of 1,493 telephone interviews, 532 were successfully completed).


(Footnote 15 return)
Many analyses of the software labor market place far too much emphasis on job titles among software developers. The fact is that the various titles are typically ''distinctions without a difference.'' For example, someone writing code for an automatic teller machine might have a Programmer title if he/she works for a bank, but if the bank outsources the same work, the same worker doing the same work might be called a Software Engineer or Computer Engineer. In our Computer Science Department at UC Davis, the support staff with Programmer titles would, for doing the same work, be called System Administrators by many other employers, and so on.


(Footnote 16 return)
Sources for all statistics cited in this Executive Summary are available in the body of this paper.


(Footnote 17 return)
It should be noted that this is not an issue of xenophobia. Immigrant computer programmers encounter the same age discrimination when they reach age 35 or 40 that natives do. As pointed out by Shankar Lakhavani, chairman of the workforce committee for the IEEE and a Pakistani immigrant, ''There are many immigrants like me who are American citizens, and they would like a crack at these jobs [which are going to H–1Bs].'' In my own case, I am married to a Chinese immigrant, am fluent in Chinese, and have been active in the Chinese immigrant community for more than 20 years, hardly the activities of a xenophobe.


(Footnote 18 return)
Just how many openings exist is a subject of controversy. This will be discussed later


(Footnote 19 return)
Microsoft: Associated Press (Tacoma News Tribune), May 13, 1997; Deltanet: Patrick Schmidt, interview by the author, November 5, 1997; ECbridges: Raymond Lim, interview with the author, November 7, 1997; Flashpoint, Francine Beanan, interview with the author, October 31, 1997; Broderbund: Mary Bjornstad, interview with the author, October 31, 1997; American Management Systems: Washington Post, November 30, 1997; Inktomi: Amy Hanlon, interview with the author, February 26, 1998; Qualcomm: San Diego Union Tribune, March 7, 1998.


(Footnote 20 return)
Boston Globe, March 8, 1998.


(Footnote 21 return)
Microsoft: Microsoft recruiting head David Pritchard, ABC Nightline, January 1, 1998; Deltanet: Patrick Schmidt, interview with the author, February 26, 1998; Flashpoint: Francine Beanan, interview with the author, February 26, 1998; AMS and job fairs: Washington Post, November 30, 1997; Inktomi: Amy Hamlin, interview with the author, February 26, 1998; Quintet: Ali Moussi, interview with the author, February 26, 1998; Broderbund: Jennifer Ranghiasci, interview with the author, February 26, 1998; City of San Jose: Debi McIntyre, interview with the author, March 5, 1998; ECbridges: Raymond Lim, interview with the author, March 5, 1998.


(Footnote 22 return)
Washington Post, March 23, 1998. The ITAA reacted by saying that it is obvious from the many pages of job ads in Sunday newspapers that there are large numbers of openings in the IT field. Yet even this claim does not jibe with reality, at least in Silicon Valley. Here are the numbers of pages of ads in the ''Computer,'' ''Engineer'' and ''Programmer'' sections of the San Jose Mercury News on various dates: September 11, 1983: 37; September 18, 1988: 14; September 12, 1993: 14; April 12, 1998: 6. (The first three numbers are from the author's testimony to the California State Assembly, October 12, 1993). True, these days jobs are often filled through other sources such as the Internet, so that the numbers of ads can be misleading, but certainly the numbers above show that ITAA's ''Just look how many pages of job ads there are'' argument does not work.


(Footnote 23 return)
Dr. Lerman's testimony is available at http://www.urban.org/TESTIMON/lerman2–25–98.html


(Footnote 24 return)
Interview with the author, March 5, 1998.


(Footnote 25 return)
The new graduates may know Java, for instance, but not TCP/IP, SAP or any of the literally hundreds of software technologies in use today. There is no way a college curriculum can teach them all.


(Footnote 26 return)
Bay TV, San Francisco, March 3, 1998.


(Footnote 27 return)
As of March 14, 1998.


(Footnote 28 return)
As of March 14, 1998.


(Footnote 29 return)
KQED–FM, San Francisco, March 6, 1998.


(Footnote 30 return)
Interview with the author, July 1, 1996.


(Footnote 31 return)
Interview with the author, June 26, 1996.


(Footnote 32 return)
Interview with the author, June 26, 1996.


(Footnote 33 return)
March 28, 1997.


(Footnote 34 return)
Forman is also quoted in a similar comment in Computerworld, January 19, 1998.


(Footnote 35 return)
Computerworld, January 12, 1998). This was questioned by reporter Miranda Ewell, San Jose Mercury News, April 5, 1998, who said that such information is not available, and who gave other statistics which, though not exactly measuring the same quantity as in the Computerworld article, seemed to be at odds with it. However, I have checked with the author of the Computerworld article, Laura DiDio, who explained that she doggedly went through call after call to the BLS to get the exact information she wanted, and she finally did find someone who was able to provide it.


(Footnote 36 return)
Computing Research News, March 1997 and March 1998; see their Web page, www.cra.org.


(Footnote 37 return)
San Francisco Chronicle, January 8, 1998.


(Footnote 38 return)
Leading, Concurrent or Lagging: the Knowledge Content of Computer Science in Higher Education and the Labor Market, Clifford Adelman, U.S. Dept. of Education, May 1997.


(Footnote 39 return)
Interview by the author with the Computer Science Department Chair, Dr. Geral Eisman, June 1996.


(Footnote 40 return)
Meeting with Intel college-relations staff, January 1998; see also Coeta Chambers, Intel lobbyist, Take Issue, Bay TV, San Francisco, March 3, 1998.


(Footnote 41 return)
Discussion with the department chair, 1997. Microsoft recruits at many more schools than do most firms, but still misses most of them. The firm did not add my university, UC Davis and another UC campus at Irvine, to its list until late 1995, according to Beth Award of Microsoft College Recruiting.


(Footnote 42 return)
Senate Judiciary Committee hearings, February 25, 1998.


(Footnote 43 return)
February 9, 1998.


(Footnote 44 return)
The reader can verify this by picking up any book on, say, Java programming at a local book store.


(Footnote 45 return)
Rodgers also stated he had to include a new car as a signing bonus for one Stanford Ph.D. he hired recently, but that is not news. This is for a Ph.D., not a Bachelor's degree, and it is Stanford—the top Stanford Ph.D.s, MBA, doctors and lawyers have always tended to be prima donnas in negotiating compensation.


(Footnote 46 return)
Software Workers for the New Millennium, National Software Alliance, Arlington, VA, January 1998.


(Footnote 47 return)
San Diego Union-Tribune, March 7, 1998.


(Footnote 48 return)
Letter to the editor to the San Francisco Chronicle, April 4, 1998, by Professor Randy Katz, chair of the UCB CS Dept.


(Footnote 49 return)
Computerworld, March 30, 1998; San Diego Union-Tribune, March 7, 1998; Forum, KQED–FM, San Francisco, March 6, 1998; TJ Rodgers, Cypress Semiconductor, Reuters, February 25, 1998.


(Footnote 50 return)
Interview with the author, March 24, 1998.


(Footnote 51 return)
Interview with the author, August 24, 1995.


(Footnote 52 return)
Interview with the author, June 26, 1996.


(Footnote 53 return)
Interview with the author, June 26, 1996.


(Footnote 54 return)
Interview with the author, July 1, 1996.


(Footnote 55 return)
Wall Street Journal, December 1, 1997.


(Footnote 56 return)
See for example testimony by Bill Bold of Qualcomm to the California state legislature, March 25, 1998. Even the Massachusetts Software Council, widely viewed as the best of the software retraining programs, only places 20% of its participants in software development positions.


(Footnote 57 return)
Qualcomm then claimed in the same newspaper on March 26 that it had just called him to hire him when he got the technician job. However, Finlan told me that just the opposite was the case; Qualcomm did indeed call him, but only to tell him that they had reviewed his re'sume' again, and that they believe that they had made the correct decision in NOT interviewing him.


(Footnote 58 return)
Industry lobbyists make claims along the lines of ''Only 5% of our programmers are H–1Bs,'' but this is misleading, since many more of their staff originally started as H–1Bs but then were sponsored by their employers for green cards.


(Footnote 59 return)
Software Workers for the New Millenium, National Software Alliance, Arlington, VA, January 1998.


(Footnote 60 return)
The Department of Labor's Foreign Labor Certification Programs: The System is Broken and Needs to be Fixed, Final Report No. 06–96–002–03–321, Joseph Fisch, Assistant Inspector General for Audit.


(Footnote 61 return)
Kansas City Star, July 16, 1995.


(Footnote 62 return)
Interview with the author, March 5, 1998.


(Footnote 63 return)
Fujioka did counter that by complaining that the new DOL regulation implemented in 1998 sets up two only categories for prevailing wage, Entry Level and Experienced, asserting that this was unfair since the worker with five years of experience will be measured against a prevailing wage calculated on a group that includes people with 25 years of experience. But as seen in my ''short-lived career'' data above, almost no one lasts 25 years in this field, or even close to it, so the point is moot. Moreover, the salary curve is steepest in the first few years of experience.


(Footnote 64 return)
The State of Asian Pacific America, Paul Ong (ed.), LEAP Asian Pacific American Public Policy Institute and UCLA Asian American Studies Center, 1994, p.179–180. The article is reprinted in New American Destinies, D. Hamamoto and R. Torres (ed.), Routledge, 1997.


(Footnote 65 return)
Electronic Engineering Times, July 18, 1994.


(Footnote 66 return)
He does believe they catch up within five years, rather than the 20 years found for engineers by Ong. However, since programming careers only last about 10 years anyway, even a five-year period of low pay would indicate very substantial salary savings for employers.


(Footnote 67 return)
Los Angeles Times (November 15, 1993, and also July 15, 1996.


(Footnote 68 return)
January 8, 1998


(Footnote 69 return)
This is based on conversations with various lawyers. Here are some examples. An employer in Washington DC told the author in December 1997, ''Most attorneys around the U.S. charge $1,000 to $1,500 for an H–1B petition.'' An attorney in the San Francisco Bay Area put the typical figure at $1,200 to $1,500 in a discussion with the author on March 5, 1998. Robert Baizer, a San Francisco immigration attorney, in an interview with the author on March 5, 1998, gave $1,500 to $2,000, and also is the source of the $700 figure. See also David North, Soothing the Establishment: the Impact of Foreign-Born Scientists and Engineers on America, (University Press of America, 1995, p.52.


(Footnote 70 return)
The latter figure is fairly accurate in the case of employer-sponsored green cards, but not for H–1Bs; this is yet another ITAA obfuscation.


(Footnote 71 return)
San Jose Mercury News, March 9, 1997


(Footnote 72 return)
Some newspaper reports have erroneously stated that large numbers of U.S. undergraduates in computer science are foreign students. This is incorrect; only 6% of the undergrads nationwide are foreign students. (Computing Research News, March 1998.)


(Footnote 73 return)
Stanford Institute for Higher Education Research, Stanford University, July 1995.


(Footnote 74 return)
See much more detail on Ph.D. overproduction in the author's report on foreign nationals in the computer industry, available at the Web site stated earlier.


(Footnote 75 return)
One might ask, ''How can the hiring policies of the industry be 'wrong,' in view of the great success the industry has enjoyed?'' The answer is that since most employers use the same hiring policies, a poor policy does not give any of them a competitive disadvantage. Moreover, the industry is not good at management, such as in assessing employee talent. Studies have shown that programmers who are twice as productive are paid only 10% more. (Peopleware: Productive Projects and Teams, by Tom DeMarco and Timothy Lister (Dorset House Publishing Co., 1987.)


(Footnote 76 return)
''Update: America's New Deficit,'' Office of Technology Policy, Department of Commerce, January 1998.


(Footnote 77 return)
''Evidence strongly suggests that job growth in information technology fields now exceeds the production of talent, creating a shortage of skilled workers that is especially severe in the computer and software-related professions.'' ''Staffing-Up [Sic] for the Information Age,'' U.S. Department of Commerce, Spring 1997.


(Footnote 78 return)
Quote from Anthony Carnevale, ETS vice president for public leadership, and former chair of the National Commission on Employment Policy.


(Footnote 79 return)
''Even High Tech Faces Problems with Pricing,'' Wall Street Journal, April 13, 1998, p. 1


(Footnote 80 return)
''Higher Quota Urged for Immigrant Technology Workers,'' New York Times, Feb. 23, 1998.


(Footnote 81 return)
''Non-Immigration Issues,'' Hearing before Subcommittee on Immigration, Committee on Judiciary, U.S. Senate, 104th Congress, 1st Sess., Sept. 28, 1995.


(Footnote 82 return)
''The Worker Shortage Debate, Parts 1–5,'' San Francisco Chronicle, April 19, 1998.


(Footnote 83 return)
''Visa Vertigo,'' Pittsburgh Business Times, April 6, 1998.


(Footnote 84 return)
Source: U.S. Census Bureau


(Footnote 85 return)
CIO Communications Press Release, Feb. 4, 1998


(Footnote 86 return)
Rocky Mountain News, April 15, 1996


(Footnote 87 return)
The Washington Post, Feb. 10, 1998