To: H-1B/L-1/offshoring e-newsletter 171

Michael Krazny, an English professor at San Francisco State University,
has been the host for many years of Forum, a talk show on KQED-FM in San
Francisco.  Past Monday, his topic was H-1B.  You can listen to the
archived show at http://www.kqed.org/epArchive/R904130900 

I was one of the guests, as were Robert Hoffman, a prominent industry
lobbyist, venture capitalist and former tech entrepreneu Vish Mishra,
and San Francisco Chronicle reporter Tom Abate.  Hoffman made the usual
industry claims, and Mishra, a pleasant man without an apparent axe to
grind, didn't say much.  I was quite surprised, though, to see Abate
make a number of statements, in a very authoritative tone, that were
quite counter to the facts.  I will devote the majority of my commentary
here to this point.

Abate is an asture veteran journalist.  He covered H-1B for a while
around 1998, but except for one piece in 2007, to my knowledge he has
not been writing about the subject in recent years.  Thus I was
quite surprised that by his comments.

He made two main assertions:

1.  He claimed that abuse of the H-1B program consists mainly of fraud
by the Indian bodyshops, with the large mainstream firms using the
program legitimately.

2.  He also asserted that the large mainstream firms are legitimately
rejecting older American applicants, as they lack crucial new skills.

Both of these statements are false.

Though the large mainstream firms in some cases hire a higher class of
worker, i.e. Masters vs. Bachelors (PhDs are much less numerous in the
computer industry) compared to the bodyshops, the mainstream firms
are quite culpable in abusing both H-1B and employer-sponsored green
cards.  For example:

   * Until 2000, it was permissible to pay 5% below prevailing wage.
     Note that the prevailing wage itself is well below market wage, so
     that 5% is nickel-and-dime savings, but Intel LCAs of the late
     1990s show that Intel was aware of this loophole and did use it.

   * Last year Cisco was running "U.S. citizen/permanent resident" job
     ads--but routing them to its immigration lawyer.  It should be clear
     to anyone that Cisco was doing this to circumvent the green card
     requirement that U.S. applicants be given priority over foreign
     workers.  The law has tons of loopholes to enable this; recall that
     Joel Stewart, one of the most prominent immigration attorneys in
     the U.S., has stated that "An employer who wants to hire a foreign
     national has an arsenal of legal means to reject any U.S.
     applicant.

   * The infamous YouTube videos, shot by an immigration law firm, show
     various loopholes the firm uses to reduce prevailing wage, by
     attorney Jennifer Pack's own words, "$10,000 to $15,000" below
     the market.  This is again a prominent law firm, with very
     mainstream clients, e.g. Marconi and Westinghouse.

As I've said before, no one would be shocked to hear that Intel, for
instance, aggressively takes advantage of loopholes in the tax code.
So no one should be shocked by the mainstream firms' exploiting
loopholes in the H-1B and green card code. 

Ironically, Mishra brought up the analogy to loopholes in the tax code
himself, but as a way to dismiss the whole issue.  Yes, there are
loopholes in H-1B, he said (possibly because he had used them himself
in his CEO days), but there are also loopholes in the tax code and even
in the motor vehicle code.  Thus, he said, pursuing this argument would
be "going down a rathole."

Krazny seemed rather interested in the loopholes issue, but ironically
did not notice it when it arose.  A listener from an immigration law
firm sent him an e-mail message during the show, saying that the system
includes strong guarantees that the legal prevailing wage is paid.
Krazny commented, "Well, maybe so, but it doesn't seem to work that way
in practice."  He missed the point that the legal prevailing wage itself
is full of loopholes that render that wage to be well below real market
wage, so the "guarantees" are worthless.

Abate's second claim is incorrect too.  This is a very complex issue,
which I've analyzed in depth in my University of Michigan Journal of Law
Reform article (http://heather.cs.ucdavis.edu/MichJLawReform.pdf), but
to give you a quick sound bite, I will cite the fact that a number of
firms (again, in the mainstream) have laid off U.S.  citizens and
permanent residents, replaced them by H-1Bs or L-1s, and then forced the
American workers to train their foreign replacements.  That the
Americans were training the imported workers shows that it was the
foreigners who lacked the skills, not the Americans.  There are plenty
of older (age 35+) Americans who could fill the jobs taken by H-1Bs, but
HR screens them out.  And again, that's why hiring managers may never
see the CVs of the older workers, leading the managers to mistakenly
believe no one out there is qualified.

And for those older workers who do lack current skills, training in new
ones does not help.  Why hire a 40-year-old programmer who has learned
XYZ technology on his own or via a course, when one can hire a
22-year-old who has learned XYZ technology on his own or via a course?
Yes, experience should count, but HR and upper management see
programmers and engineers as commodities.

Abate also stated that the retraining program associated with the H-1B
user fees is "inadequately funded."  Again, this is way off the mark.
The program was established by the 1998 legislation that raised the H-1B
cap.  I pointed out at the time that the retraining funds would not
reduce the usage of H-1Bs one whit, and sure enough, this is what
happened.  A Dept. of Commerce study confirmed this, and most
importantly, Sun Microsystems publicly admitted that they had never
expected retraining to reduce H-1B usage in the first place.  (See
"Failing Grades: H-1B Fees Fail to Lessen Reliance on Imported IT
Skills," eWeek, September 18, 2000.)

Sun said that it was impossible to retrain older programmers and
engineers for these jobs, and that the H-1B retraining funds were never
intended for such usage.  But of course Congress did have that
intention, especially since Sun had stated in its 1998 testimony to the
Senate, "H-1B workers [are a] stop-gap measure to help carry Sun through
an interim period while we work to educate and train U.S. workers so
they can fill needed positions."

A few years ago, the California Labor and Employment Report, a
publication of the California State Bar Association, asked me to write
about the connection between H-1B and the age issue.  See
http://heather.cs.ucdavis.edu/CLER.pdf  I went into the skills issue in
more depth there, but here is an especially relevant excerpt:

#  In fact, the industry's claim that the older workers' problems were due
#  to skills deficits can be seen to be disingenuous in other ways.
#  Consider a report by the Information Technology Association of America,
#  one of the leading organizations lobbying for H-1B increases.9 The
#  report complained that, while older program- mers and engineers could be
#  retrained, this made them flight risks:
# 
#  "You take a $45,000 asset, spend some time and money training him, and
#  suddenly he's turned into an $80,000 asset," says Mary Kay Cosmetics CIO
#  Trey Bradley...[the problem being that the retrained workers] become
#  highly mar- ketable individuals . . . attractive to other employers.
# 
#  It is clear that Bradley was not willing to pay the salaries paid by
#  other firms.  The real issue was money, not skills.

That last point sums it up:  The real issue was money, not skills. 

Norm