To: H-1B/L-1/offshoring e-newsletter 173
The enclosed article from InformationWeek reports on recent research by
Sunil Mithas and Henry Lucas, two University of Marland business professors.
The following passage in the article sums it up:
# The new research dispels findings of some other studies that assert H-1B
# and other foreign workers are paid less than American IT professionals.
# These other studied often use salary data from Labor Condition
# Applications, or LCAs, said Mithas. However, analysis of pay data from
# LCAs, which employers file with the U.S. Department of Labor, do not
# reflect differences in education, experience levels, and other factors
# among workers, said Mithas.
The underpayment of H-1Bs is firmly established. It has been shown
repeatedly in a number of different ways. This is not just anecdote,
but the result of a number of statistical studies, employer surveys,
etc.
Moreover, there is the fundamental economic principle that the H-1Bs,
with very limited mobility in the labor market, simply cannot get
salaries as high as U.S. citizens and permanent residents, who are free
agents in the job market. Indeed, even the Miths and Lucas study
confirms this, as I will note later.
So, given all of this prior work showing underpayment of the H-1Bs, how
did Maryland findings wound up contrary to the others? This is the main
question I'll address here.
Before I begin, please note that, while Profs. Mithas and Lucas kindly
provided me with a copy of their paper, they asked me not to comment on
its contents until the peer review process is complete. They thus
requested that I instead simply discuss the InformationWeek article. In
response, I asked their permission to at least quote one particular
table in their paper that is especially significant, but again the
authors stated that they do not want me to cite any of the contents of
the paper. I will of course honor their request. By the way, they have
seen a draft of this posting, and will give me a response to post here
in about a week.
Now, as some mathematical riddles sometimes ask, "Where is the missing
dollar?" Why are the findings in the Maryland study so different from
what has been found before? Or, as the author of a book on debugging
("The Art of Debugging," N. Matloff and P. Salzman, NSP, 2008), I might
phrase the question as, "Where is the bug?"
Let's start with the authors' own explanation for the discrepancy
(reproducing the above quote here for convenience):
# The new research dispels findings of some other studies that assert H-1B
# and other foreign workers are paid less than American IT professionals.
# These other studied often use salary data from Labor Condition
# Applications, or LCAs, said Mithas. However, analysis of pay data from
# LCAs, which employers file with the U.S. Department of Labor, do not
# reflect differences in education, experience levels, and other factors
# among workers, said Mithas.
#
# "There's no way to know whether those applications were approved, what
# the education levels were," he said.
One can debate back and forth how reliable the LCAs are, but the key
point is that other than John Miano's work, I am not aware of any other
studies based on them.
For instance, none of my own studies has used the LCAs; I use the census
data and the PERM data. The UCLA study also is based on the census
data. The census and PERM data on for actual workers, not applications.
The NRC and GAO studies rely on employer surveys and the CPS
mini-census. So Mithas and Lucas' explanation for their own results
being different from the earlier ones, due to a supposed reliance on LCA
data, is not correct.
Now, what about the variables cited above, education and years of
experience? The census studies do control for education and experience
levels (the latter proxied by age), and the employer surveys
specifically asked the employers to compare salaries they paid to H-1Bs
with the wages paid to comparable Americans, i.e. those with the same
education, experience and so on. So again, there is no problem here.
Thus Prof. Mithas and Lucas' explanation for the differences in outcomes
between their study and the others is invalid. Instead, the major
culprit seems to be Mithas and Lucas' data source. As noted in the
article, Mithas and Lucas' analyzed survey data on InformationWeek's
readers, which is not representative.
The magazine is mainly aimed at managers and nontechnical people
affiliated with the IT industry. Its self-description states,
"InformationWeek: InformationWeek.com is the industry-leading source of
news, analysis, and perspective, serving business technology executives
at a cross section of companies." Its job postings section currently
lists the following positions:
% D. E. Shaw Research seeking Chief of Staff in New York, NY
% Switch and Data seeking Sr Product Marketing Manager in Tampa, FL
% Kadrmas, Lee and Jackson seeking Network Architect in Bismarck, ND
% Osram Sylvania seeking Benefits Specialist in Danvers, MA
% AccuWeather seeking Business Development Manager in Atlanta, GA
Only one of these, the network architect position, is a technical job.
To be sure, it must be pointed out that the magazine is indeed available
in the coffee rooms of many major tech firms, and the reader survey data
does include substantial numbers of programmers and software engineers.
But it also includes plenty of marketing people, benefits specialists
and so on. Furthermore, though some of these are H-1Bs too, they are
not programmers and engineers, the core of the H-1B controversy.
The basic problem is that InformationWeek is not something that the
typical software engineer at, say, Apple or Google would read, much less
respond to its survey. And of course this is an absolutely crucial
point. Many of you have probably heard of the famous Literary Digest
election poll fiasco of 1936, in which that magazine's poll "showed"
that Republican presidental candidate Alf Landon would overwhelmingly
defeat Democrat Franklin Roosevelt. In the end, Roosevelt was the
victor, with 62% of the vote.
Why was the Literary Digest poll so far off? The reason was that the
population they polled--their own readers, automobile owners
etc.--tended to be richer than average, and thus more Republican than
average, skewing the results beyond recognition. So, the nature of the
population sampled is of the utmost importance.
Not only is there the issue of the population polled, but also the one
of who responds. Studies based on survey data are always shaky, due to
self-selection biases in the response. There is huge potential for
self-selection problems in the InformationWeek data, as the 2009 survey,
available on the Web, states a response rate of under 4%.
In that context, one concern would be that USCIS (then INS) data show a
wide variation in H-1B salaries by nationality, with workers from the
Third World getting lower salaries. On average the Chinese and Indians
make about $20,000 less than those from the UK in the computer-related
jobs, for example. Based on my experience in the Chinese immigrant
community (which by the way includes my conducting a survey, wearing my
statistics professor hat, for the Chinese-language Sing Tao Daily), the
response rate for the Chinese readers of InformationWeek would be
markedly lower, thus artificially raising H-1B salaries in the survey.
There are a number of other issues. Remember, the industry claims that
the H-1Bs are hired primarily because they have special "hot" skill
sets. These generally command a salary premium of 15-25% (see data in
my University of Michigan Journal of Law Reform article), so even if one
were to take Mithas and Lucas' 5-9% as accurate, that would indicate net
underpayment, not overpayment. (The article below says that the authors
analyzed "skills data," but that is not in the reader survey that was
used. It is simply a reference to education and number of years of
experience.)
There is also the issue of contractors, who generally are the
better-quality people who would be getting higher pay if they drew a
salary. Their exclusion (no salary to compare to) biases the
results too.
Many readers of this e-newsletter will recall that in my studies I
distinguish between Type I and II salary savings accrued by hiring
H-1Bs. Type I savings compare hiring an H-1B to hiring an American of
the same education, experience and so on, which is the issue addressed
by the Maryland study. But Type II savings come from hiring a young
H-1B instead of an older (35+) American. As many readers know, it is
Type II savings that I have always emphasized as being at the core of
the attraction of the H-1B program for employers. The Maryland study
was not designed to deal with this issue, of course, but I wish to point
out that though Type I salary savings is definitely real, my focus has
been on Type II.
To end, let's turn to an aspect in which the Maryland study CONFIRMS the
previous work on underpayment of H-1Bs. Mithas and Lucas found that
green card holders get paid more than H-1Bs of the same education and
experience levels. This jibes completely with the central point of the
H-1B critics, that H-1Bs, as de facto indentured servants, are exploited
in terms of salary.
Norm
http://www.informationweek.com/story/showArticle.jhtml?articleID=217200260
InformationWeek
Foreign IT Pros Working In U.S. Earning More Than Americans
By Marianne Kolbasuk McGee, InformationWeek
April 28, 2009
While opponents of H-1B and L-1 visas have long argued that the
temporary work programs encourage employers to hire cheap foreign
labor, a new study says noncitizen IT professionals earn pay that's on
average 5% to 9% higher than American workers with similar education
The report, "Does High-Skill Immigration Make Everyone Better Off?
United States' Visa Policies And Compensation Of Information Technology
Professionals," by two researchers at the University of Maryland,
analyzed skills and pay data on more than 50,000 IT professionals who
participated in InformationWeek salary surveys from 2000 to 2005.
The researchers -- Sunil Mithas, an assistant professor, and Henry
Lucas, chair of the department of decision, operations, and information
technologies at the Robert H. Smith School of Business, University of
Maryland, College Park -- found that foreign IT professionals,
including those with H-1B visas, L-1 visas, or green cards, reported
pay that ranged between 5% and 9% higher than pay received by U.S.
citizens with similar attributes, including educational degrees and IT
experience.
"There was no downward pressure on the pay of U.S. citizens," said
Mithas. The new research dispels findings of some other studies that
assert H-1B and other foreign workers are paid less than American IT
professionals. These other studied often use salary data from Labor
Condition Applications, or LCAs, said Mithas. However, analysis of pay
data from LCAs, which employers file with the U.S. Department of Labor,
do not reflect differences in education, experience levels, and other
factors among workers, said Mithas.
"There's no way to know whether those applications were approved, what
the education levels were," he said.
For noncitizens, the biggest driver for pay premiums appears to be IT
experience, while employers tend to reward U.S. citizens with pay
premiums based on education level, said Lucas.
"Employers pay a premium not for education of non-U.S. citizens, but
for their IT skills as reflected in their IT experience," Lucas said.
Mithas said it's likely that noncitizen IT professionals are paid
premiums because of "intangible" attributes that employers seek that
aren't as easily found among U.S. citizens, including exposure to
various global and cultural experiences. "By hiring these people, it
helps a company to deliver products and services for a global market,
to make connections to those global markets," he said.
The research also found that among noncitizen IT professionals in the
United States, those with permanent U.S. residency, or green cards,
earn the highest premiums. Green card holders earn about 6.1% more than
noncitizen IT professionals with H-1B or other work visas.
The pay premiums for IT professionals on work visas fluctuate in
response to "supply shocks" created by the annual U.S. government caps
on H-1B visas, said Mithas.
In general, lower and fully utilized caps result in higher pay
premiums. For instance, the average salary premium for IT workers on
work visas was 8.4% in 2000 when the H-1B cap was 115,000. However, the
premium fell to 3.3% in 2001 when the H-1B cap went up to 195,000.
A similar pattern was observed for green card holders and noncitizens.
The pay premium for noncitizens rose significantly to 17.5% in 2004
when the H-1B visa cap went down to 65,000, from a cap of 195,000 in
2003. The current cap for H-1B visas is 85,000, including 65,000
"general" H-1B visas, and 20,000 exemptions for foreign individuals who
receive advanced degrees from U.S. universities.
U.S. Citizenship and Immigration Services on April 1 began accepting
from employers H-1B visa petitions to hire foreign workers for fiscal
2010, which starts Oct. 1.
But to date, the agency has received approximately 45,000 petitions
toward the 65,000 general cap and approximately 20,000 petitions for
the advanced-degree category. USCIS is continuing to accept petitions
for both categories, since not all of the applications received so far
will end up being approved for actual visas.
The recession is being blamed for the relative weak demand for H-1B
visas this year. In recent years, the USCIS stopped taking new H-1B
visa applications within days of accepting the petitions for the next
fiscal year.
Supporters of the H-1B visa program, including technology companies,
have been lobbying Congress for years to raise the H-1B visa cap back
to at least 115,000, the level in 2000.
However, opponents to H-1B visas argue that abuse and fraud, including
allegations of employers hiring foreign workers at cheap wages, mar the
program.
While the research by University of Maryland suggests that pay is
actually higher on average for noncitizen IT professionals, others
believe new legislation is needed to reform the H-1B and L-1 programs.
In fact, late last week, Sens. Chuck Grassley, R-Iowa, and Richard
Durbin, D-Ill., introduced a bill aimed at eliminating alleged H-1B and
L-1 visa fraud and abuse. The proposed legislation is similar to a
bipartisan bill the two senators introduced in 2007 when Congress was
weighing a more comprehensive overhaul of U.S. immigration policy.