As the IT recession in America grinds on, some ask
whether it's time to scale back the number of foreign
IT workers who go to work in the United States. H-1B
is a "fast-track" work
authorization program "used by an alien who
will be employed temporarily in a specialty
occupation" (including, interestingly enough,
fashion models). According to a study
of H-1B candidates compiled in June, 2000 by the
U.S. Immigration and Naturalization Service,
"computer related occupations accounted for nearly
54% of the total H-1B petitions." Not
surprisingly, the list of leading H-1B employers reads like a "Who's Who"
of the information technology industry.
Computer jobs pay well (the median income is $60,350, according to the U.S. Department of Labor), and as Charles Cooper noted in a recent article, American computer professionals are having a harder time finding them. The cap for H-1B visas is set at 195,000 for 2003, dropping back to 65,000 the following year. Wouldn't American IT workers benefit from reducing the cap now?
I don't think so. I'm not ready to state that there is no need for labor market barriers. We live in a world of extreme differences of income, differences largely delineated by national borders. Any rich country that unilaterally removed restrictions on all foreign labor could be overrun by low-income job seekers. Until we resolve the issue of income differences, right to work restrictions will be a factor in the labor landscape.
However, there are good reasons for continuing the limited H-1B program as is, if not extending the higher cap past 2003, particularly in the field of information technology. In summary, such protections would do more harm than good for American computer professionals' job prospects, whereas the benefits stretch far beyond the needs of employers in search of IT personnel.
Avoid exaggerating the risks
People too often exaggerate the competitive "threat"
posed by imported IT labor. Given that many such
workers come from lower income nations, the fear is
that they will come to America and charge prices for
their services that their American counterparts could
not match.
First, consider that H-1B is a very limited program. Assuming the 2000 statistics are correct, the maximum number of new H-1B computer professionals who would enter the market is 105,300 (54% of 195,000). The total number of computer professionals in the United States, according to a 2001 Labor Department study, is approximately 2.8 million. This means that the percentage increase in the number of workers available is 3.7%, hardly an increase that would seriously affect salaries.
Second, most software development is of the custom sort, meaning small, ad hoc applications tailored to specific internal business needs. This requires close interaction with mostly American customers. Americans have a cultural frame of reference that makes them uniquely suited to interact with other Americans. This information simply cannot be transferred. This is obviously not an issue in all programming tasks, but it indicates that most American companies will prefer to hire an American, if available, over a non-American.
Third, there are practical and legal limitations to the effect H-1B candidates have on American salaries. The average income for IT workers in India (who account for 37% of H-1B applicants) is $5,850, according to Aberdeen group, but this is in a country where people who make $10,000 qualify as rich.
This is partly a fluke of exchange rates, and says nothing about purchasing power of such a salary within India. A programmer there can live very well on $5,850, as he or she is paid far above the average national income. That means that Indian programmers won't come to America to live in poverty. You couldn't live on $5,850 a year in Silicon Valley, much less $10,000 or $20,000. Neither would an Indian programmer, who is highly valued in his or her home country and can live very well close to family, friends, culture and native language.
Foreign programmers will expect to be paid a salary commensurate with what they would receive at home, from a purchasing power standpoint. Furthermore, this is reinforced in law, as the H-1B program requires hiring companies to pay salaries in line with current market conditions (the minimum salary is $40,000). Therefore, even if Motorola or Oracle could find programmers willing to work for $30,000, if the going rate is closer to $70,000, they wouldn't be able to get H-1B approval.
This analysis is born out in the statistical data. The median salary among H-1B computer professionals was $53,000, while the American median (as noted) is $60,350. Though the base salary is a bit lower, consider that bringing foreign nationals to America entails relocation costs, such as airfare and preliminary housing.
I'm not suggesting that foreign workers don't place some downward pressure on salaries, nor that they aren't attracted by the prospect of saving more money each year (given exchange rate differentials) than they could have earned in an entire year back home. If you increase the supply of anything, you usually have to lower the price a bit to sell that extra supply. However, the pressure is less pronounced than simple cross-border salary comparisons would imply.
Fewer well-paid foreign IT workers in America means
more lower-paid IT workers overseas.
We live in a global economy connected by cheap
transportation and an international
telecommunications network. This makes it easy for
companies to consider outsourcing IT work to these
low-cost environments, if not set up shop in that
market altogether. As Mahesh Basappa, joint director
of Software Technology parks of India, noted,
"The slowdown in the States means less on-site
work and more offshore development for companies
there."
Though it might seem paradoxical, refusing to allow companies to bring IT workers to America might make moving wholesale to a foreign market even more appealing. H-1B workers are already returning home as a result of being laid off from American companies. This enriches foreign IT centers, making them even more attractive as outsourcing targets. As things stand, several billion potential customers serve as a strong incentive to set up shop in Asia. Narrowing the H-1B window would provide yet another reason to do so.
H-1B brings the best and brightest of the world to America.
Where are you most likely to find the largest shark in the world, in the Irish sea, or in the Atlantic ocean? You MIGHT find the largest shark in the Irish sea, if you're lucky, but statistically you are more likely to find it if you spread your net as wide as possible.
The same applies to labor markets. America doesn't have a monopoly on bright programmers. Granted, we certainly have the largest pool from which to draw, something built on an advanced, technology-literate and wealthy population. However, other nations have bright technologists who can add a great deal to the American economy. It is worthwhile to allow American companies to find these innovators, irrespective of nationality.
In addition, H-1B computer professionals are highly-skilled and highly-educated. 56% of H-1B candidates, of whom over half are in the computer profession, have a bachelors degree, far above the national average in the United States (they don't break out education by profession in the Department of Labor study, but if they did, I bet the percentage would be even higher for programmers).
It's worth noting that one of the unique things about America in the 1800s was its ability to attract highly-skilled and educated immigrants. As David Landes noted in "The Wealth and Poverty of Nations" (speaking of the character of US immigration during that period as compared to Latin America): More of them were literate; many were trained craftsmen (classified as "skilled")." They were attracted by high wages, which were the result of "quasi-free land and scarce labor."
The fact that America can still attract such high-skill migrants is a testament to the dynamism of the American economy. These immigrants, even if temporary (which most are) enrich the American economy, and are the sort of people America should be working hardest to attract.
Advancing cultural understanding
Geographic distance tends to interfere with mutual understanding. The only contact most of the world has with America is through the products we export, and in particular, our media culture. This tends to create a rather distorted view about what being an American is all about.
I have a number of European friends who are living and working in America. What is most interesting is to listen to them discuss their opinion of American society today in contrast to their opinions before they left. They have a greater understanding and respect for the American way of life, something no amount of federally-funded PR could ever manage.
This does not mean that they suddenly agree with every policy put forward by the American government. They are just less likely to see selfish motives behind American actions, and don't subscribe to nasty stereotypes popular among some "enlightened" Europeans.
There is no better way to change minds than to work side by side with the object of your misperception. The exchange is bi-directional. Just as foreigners can learn from encountering Americans on their home turf, Americans can gain from more regular contact with foreigners.
As noted, I happen to believe that there is some justification for labor restrictions. However, this quote from Friedrich Hayek is worth reflecting upon. However justified we might think labor market protections might be, there is a penalty which must be taken into account.
"If international economic relations, instead of being relations between individuals, become increasingly relations between whole nations organized as trading bodies, they inevitably become the source of friction and envy between whole nations. It is one of the most fatal illusions that by substituting negotiations between states or organized groups for competition for markets or for raw materials, international friction would be reduced. (The Road to Serfdom)"
Conclusion
In an ideal world, any citizen of any nation would
have the right to work wherever they wished. This
would immeasurably benefit the global economy, as
companies would have a global pool of labor from which
to draw, thus increasing their chance of finding the
biggest "shark" in the labor sea. Labor shortages in
one area could more easily be satisfied by surpluses
in another, much as occurs in the global market for
material goods.
Even more important, such a world would be more fair. Humanity would have made a great social leap forward if people could truly compete on skill, and not on skill combined with the accident of birth location.
Unfortunately, we don't live in that ideal world, and can't so long as income differentials between nations are as large as they are. That doesn't mean that limited programs such as H-1B do not provide some of the same benefits of a global free labor market. Perhaps, in some small way, this limited program might help to hasten the arrival of a more open system, as laborers from poorer countries use the knowledge they've acquired back home (where most return, which shouldn't be surprising when one considers how wrenching a move to a foreign country truly is).
Whatever the case, there are simple benefits which the American people receive from streamlined access to foreign workers. H-1B generosity is beneficial even from the standpoint of naked self-interest. That merits maintaining the H-1B cap in 2003, and extending it beyond.
John Carroll is a software engineer living in Ireland. He specializes in the design and development of distributed systems using Java and .Net. He is also the founder of Turtleneck Software.
| 11/26/03
