To: H-1B/L-1/offshoring e-newsletter 185

I reviewed the Mithas/Lucas study, discussed in the enclosed CIO
Magazine article, about a week ago, archived in
http://heather.cs.ucdavis.edu/Archive/MithasLucasPublished.txt
I have some further remarks to make, and the enclosed article
brings up some a new issue to be addressed.

The study is both (a) fatally flawed, due to its use of an invalid data
set, and (b) disturbingly lacking in evenhandedness.  Here is a summary
of my previous posting, with some updated points:

1.  Mithas and Lucas' data set is irrelevant to the issue of H-1B wages
in the IT field.

   The data consists of a reader survey for a magazine whose audience is
   largely NOT in the IT field.  The magazine is mainly aimed at
   managers and nontechnical people.  Its self-description states,
   "InformationWeek.com is the industry-leading source of news...
   serving business technology executives..." 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 jobs is in IT.  This is NOT the type of magazine
   read by engineers at Google or Apple.

   That qualitative point can be seen in the data.  The respondents
   in the ML data have much lengthier job experience than government
   data show for computer-related H-1Bs.  Moreover, wages in the ML data
   are much higher than the official data show for H-1Bs in the computer
   field, as Prof. Hira points out in the enclosed article.

   In short, the data set relied upon by Mithas and Lucas is simply
   irrelevant to the issue of H-1Bs in the computer area.

2.  Mithas and Lucas AGREE that H-1Bs are underpaid, relative to
    Americans of comparable background and skills.

    Let me repeat:  Mithas and Lucas AGREE that H-1Bs are underpaid,
    relative to Americans of comparable background and skills.  That
    means they agree with me, with Ron Hira, with John Miano, with Rob
    Sanchez, with Kim Berry, and for that matter, with Vivek Wadhwa,
    who had admitted that he himself underpaid H-1Bs when he was a tech
    CEO.

    As I have been saying for years, you can tell that H-1Bs are
    underpaid relative to comparable Americans with a simple "thought
    experiment," i.e. without looking at any data.  H-1Bs have very
    limited mobility, and thus cannot swing as good a deal as Americans.
    The latter can move to another employer if they get a better offer
    elsewhere; this is very difficult for an H-1Bs and essentially out
    of the question if the H-1B is being sponsored for a green card.
    The 2001 National Research Council study, commissioned by Congress,
    also discussed this point in detail.

    Well, Mithas and Lucas AGREE with this.  Their paper points out:

       Possession of a green card provides GREATER BARGAINING POWER and
       job security for an IT professional compared to someone with a[n
       H-1B] work visa because (1) employers typically hold work visas,
       which makes it difficult for an IT professional to easily change
       his or her employer and (2) work visas are of a limited duration...

   In other words, although there are many aspects of H-1B which can be
   discussed, there is one aspect in which everyone agrees, INCLUDING
   Mithas and Lucas:  H-1Bs are on average underpaid relative to
   comparable Americans.

3.  The Mithas/Lucas study is disturbingly lacking in evenhandedness.

   Again, I went into great detail on this in my previous posting, but
   let me cite two examples, the second of which is illustrated in the
   enclosed article.

   First, Mithas and Lucas dismiss the studies they cite that indicate
   that H-1Bs are underpaid (though, remember, M/L actually agree with
   this), in a rather nitpicky manner, and omit many of the most
   important studies on H-1Bs as cheap labor altogether--yet they give a
   free ride to, making no criticism at all of, the studies that are
   viewed as pro-industry regarding H-1B. 
  
   For instance, M/L complain that the studies showing underpayment of
   H-1Bs often do not report statistical significance values.  Well,
   this is silly in that with the large samples used in most studies,
   including M/L's, almost anything will be statistically significant
   (this does NOT mean important).  But much more to the point, Mithas
   and Lucas do not complain that the studies they cite in support of
   their findings, e.g. NFAP and Wadhwa, don't report statistical
   significance values either.  This is a double standard, pure and
   simple.

   Just as troubling is the fact that in their statements to the press,
   M/L highlight the numbers from their coarser analysis, which sound
   more impressive, while not mentioning that their more refined
   analysis resulted in much milder, less impressive statistics.  For
   instance, though their initial analysis found that H-1Bs get a 6.8%
   salary premium over Americans, their more refined analysis that
   controlled for location and job title produced a number only about a
   third as high, 2.6%.  Yet in their comments to the press, both in the
   article enclosed below and in interviews with other publications, the
   authors cite the 6.8% figure, not the 2.6%.  And this is in spite of
   their stressing, correctly, that as many variables as possible must
   be controlled for.

Now let's turn to another issue brought up in the enclosed article.

There is the opinion, expressed by several of those quoted in the
article, that there are "two kinds" of H-1B employers, a Good Kind and a
Bad Kind, the latter hiring H-1Bs as cheap labor and the former doing so
to acquire genuine talent and skills unavailable in the U.S.  This is
currently a popular view in some government and academic circles, and is
implicitly behind the proposals to give fast-track green cards to
foreign workers with U.S. graduate degrees. 

Yet it is totally at odds with reality.  The big mainstream firms like
Intel and the Bank of America are just as culpable as the Indian
bodyshops such as Tata Consultancy Services.  (Mithas, by the way,
worked for Tata for 10 years, though apparently not for the TCS branch
of the firm.)  Intel and the BofA tend to hire people with Master's
degrees while TCS does not, but both are using the H-1B program for
cheap labor, as I've explained before.  It's interesting, for instance,
that the enclosed article says,

   Jacob Funk Kirkegaard, a research fellow at the Peterson Institute
   for International Economics, examined the Department of Labor's
   database of labor condition applications (LCAs) and surmised that
   many large U.S.  corporations and educational institutions frequently
   offer their H-1B recipients salaries substantially above the
   prevailing U.S. wage.  However, he says, "offshoring/outsourcing type
   IT services providers" aggressively pursue all legally available
   paths to cut labor costs, including paying foreign workers only the
   legally mandated 95% of the prevailing wage.

Well, guess what--Intel does the same thing!  When that 95% rule was in
effect (it was removed a few years ago), Intel took advantage of it too.
You can see it in the government data.  Intel had a lot of prevailing
wage figures with an overabundance of nonzero digits, say $59,850, which
when divided by 0.95 became much rounder, in this case $63,000.

In the infamous Cohen & Grigsby immigration law firm video series, which
the C&G law firm put on YouTube to their later regret, you see many
examples of LARGE, MAINSTREAM FIRMS taking advantage of that 95% rule. 
(Note:  The prevailing wage policies apply both to H-1B and green
cards, though C&G was referring mainly to the latter.)

Of course that 5% saving is just peanuts, and the video explained the
real savings are much larger (see below), but again my point is that
Kirkegaard's implying that the large mainstream corporations did not
take advantage of that 95% rule is demonstrably false.

Again, the major point is that in video 12 the law firm talked about how
to get a prevailing wage that can be, in the Cohen & Grigsby attorney
Jennifer Pack's own words, "$10,000 to $15,000" below the market.  That
is a key point--the legal prevailing wage laws and regulations are
riddled with huge loopholes, so the legal prevailing wage is NOT the
market wage.  C&G explains this in their video And C&G is a LARGE,
PROMINENT MAINSTREAM law firm with LARGE, PROMINENT MAINSTREAM clients.
It is NOT true that the big mainstream firms are the Good Kind, while
the Indian ones (talk about scapegoating!) are the Bad Kind.  See

http://heather.cs.ucdavis.edu/Archive/CohenAndGrigsbyPrevailingWage.txt

for details.

The article follows below.

Norm

http://www.computerworld.com/s/article/print/9177045/H_1B_visa_holders_earn_more_than_U.S._born_IT_pros_study_says_?taxonomyName=Careers&taxonomyId=10

H-1B visa holders earn more than U.S.-born IT pros, study says

Stephanie Overby

May 20, 2010 (CIO)

One of the biggest complaints about the federal government's H-1B and
L-1 visa programs is that they could be used by corporations to hire
skilled workers born outside the U.S. at wages lower than the U.S.
market rate. Indeed, anti-H-1B visa activists say the program depresses
American IT workers' salaries and robs them of jobs.

But new research from the University of Maryland seems to contradict
anti-H-1B visa activists' claims about the immigration program's impact
on U.S. wages. The research suggests that foreign-born IT professionals
with temporary skilled worker visas actually earn more than their
American counterparts, not less.

Hank Lucas, professor of information systems at the University of
Maryland's Robert H. Smith School of Business, and assistant professor
Sunil Mithas examined the effect of immigration policies on IT salaries
using data from online salary surveys conducted from 2000 to 2005 by
InformationWeek and management consultancy Hewitt Associates.

After adjusting for educational qualifications, work experience, and
other individual characteristics, Lucas and Mithas found that IT
professionals without U.S. citizenship earned 8.9% more than U.S.
citizens. Tech workers on temporary visas, such as the H-1B and L-1,
were paid 6.8% more than those with U.S. citizenship, and green card
holders took home 12.9% more than their American-born counterparts,
according to Lucas' and Mithas' research, published this month by the
Institute for Operations Research and the Management Sciences.

The professors say restrictive visa policies resulted in even higher
salary premiums. In years when applications exceeded the annual caps
for H-1B visas, salaries for all non-U.S. citizen IT workers--that is,
visa or green card recipients--rose relative to the salaries of
American-born IT professionals, say Lucas and Mithas.

Mithas says the study was driven by the lack of compelling data around
claims that foreign-born IT professionals are taking away jobs from
American workers.

"Much of the immigration debate in this country ignores skill levels,"
says Lucas, adding that the influx of non-U.S. citizens has a much
different impact on job availability and wages for unskilled labor than
it does for skilled workers. U.S.-born citizens and foreign workers can
potentially benefit from an influx of skilled workers, Lucas says.

B salary survey ignites controversy

The Lucas-Mithas research deviates from the findings of other studies
investigating the effect of temporary visa programs on the salaries of
U.S. IT professionals. According to Lucas and Mithas, H-1B visa holders
earned an average of $75,358 from 2000 to 2003, compared with the
average U.S. citizen's salary of $66,836. (The InformationWeek survey
did not ask about visa status in 2004 and 2005). But according to the
U.S. Citizenship and Immigration Service (USCIS), the median salary for
H-1B visa holders in computing professions during the 2000 to 2003
period was just over $50,000.

"It [seems] strange to me that the authors would depend on sampled data
when we have the whole census of new H-1B recipients' salaries reported
[by] the USCIS, at least in aggregate terms," says Ron Hira, associate
professor of public policy at the Rochester Institute of Technology.

"For computing occupations, those data show low wages relative to
Bureau of Labor Statistics wages for Americans. The median salary for
new H-1Bs is comparable to the entry-level wages for freshly minted
bachelors in computer science, as reported by the National Association
of Colleges & Employers. So half the new H-1Bs are being paid at- or
below entry-level wages."

Lucas and Mithas say the USCIS and BLS numbers aren't granular enough
to make meaningful comparisons.

"You don't get a good sense of who these people are, what is their
educational background, how long have they been in IT, what industry
are they working in," Mithas says. "If you don't have data at an
individual level, you don't know if you're comparing apples to apples."

Hira suggests there may be a self-selection bias at play when using a
sample population. The data Lucas and Mithas used comes from 50,000 IT
professionals, including 809 temporary visa holders, who opted to
participate in an online salary survey. The researchers say the overall
sample and sample of non-U.S. citizen foreign-born IT professionals in
their study is reasonably representative of the U.S. population.

While those numbers may line up, it's unlikely that H-1B or L-1
grantees who depend on their employers for their visas and who earn
lower than average wages would participate in such a survey, says Hira.
"The [Lucas-Mithas] report may be able to control for some additional
factors that affect wages, but there is no doubting the USCIS
characteristics data," says Hira. "It is a census, not a sample."

Lucas admits that selection bias could be a factor in any survey, but
he remains confident in his data.

"In situations like this, there's always the possibility for the sample
not to be truly random," he says. "But I feel more comfortable with
this survey with 50,000 respondents than I would if we did a random
sample of a couple hundred IT professionals on our own."

corporations pay more for H-1Bs

Lucas and Mithas say their research proves that corporations use
foreign-born IT professionals as a complement to, not as a cheaper
substitute for, their American workforce. But the data does not provide
any explanations for why employers would pay non-citizen IT workers
more.

Lucas and Mithas have their own theories. For one, they think companies
recruit foreign IT professionals for skills or expertise that they
can't get from American workers, whether it's a stronger work ethic,
multi-cultural experience, or willingness to travel.

"We were searching for an explanation, and it wasn't education or
anything we could measure. So it had to be something intangible, like
how aggressive you are or how much of a risk taker," says Lucas. "I'd
have to say it's motivation. You have to be motivated to break out of
the rut you're in, get out of the city you were born in, go to another
country and work in IT."

Hira is not buying it. "There's no doubt in my mind that, in general,
H-1B workers are underpaid. That's why the offshore outsourcing majors
rely almost exclusively on H-1Bs rather than hiring Americans," he
says. "Plus they are beholden to their employer, making it more
difficult for them to protest against poorer [wages and] working
conditions."

Hira notes that it's possible the compensation among IT workers on
temporary visas falls into two camps: "lots of low wage workers and a
good portion of high wage workers."

B. Lindsay Lowell, director of policy studies for Georgetown
University's Institute for the Study of International Migration, has
been analyzing the salaries of H-1B visa holders in science and
technology using data from the National Science Foundation's National
Survey of College Graduates. He has found that H-1Bs are paid lower
average wages during the first three years of their permitted stay, but
once they reapply for another three years or change employers, they may
earn more than comparable U.S. citizens.

"The NSCG is an odd survey itself, but it's the largest random survey
of graduates in the United States," says Lowell. "The reason we think
there's an increase in wages is due to a change in bargaining power on
the part of the H-1B. Of course, the first three years still reflects a
savings to the employer."

Jacob Funk Kirkegaard, a research fellow at the Peterson Institute for
International Economics, examined the Department of Labor's database of
labor condition applications (LCAs) and surmised that many large U.S.
corporations and educational institutions frequently offer their H-1B
recipients salaries substantially above the prevailing U.S. wage.
However, he says, "offshoring/outsourcing type IT services providers"
aggressively pursue all legally available paths to cut labor costs,
including paying foreign workers only the legally mandated 95% of the
prevailing wage.

"That suggests another point I've long argued, and which is supported
in my and others' research," says Lowell, "which is that the H-1B labor
market is softly segmented with different types of employers who pay
less than the mainstream to the H-1Bs in their employ."

Lucas and Mithas consider the LCA data unreliable because it does not
provide actual salary data, and many approved LCAs don't result in the
granting of an actual visa.

"There are an awful lot of anecdotes of this or that company bringing
in foreign workers and paying them less than the going wage, but you
can't take that and generalize it to thousands of people," says Lucas.
"We'd love to get inside of Infosys and Accenture and get detailed
individual information, but privacy concerns enter into this, and they
wouldn't want to give us the information anyway. They're afraid, no
matter which way the research comes out, they'll be criticized."

e research into H-1B wages needed

There are as many as 700,000 temporary high-skill foreign professionals
in the U.S. on visas today (approximately 500,000 in the H-1B category
alone), and 60% of them work in IT, according to some estimates. More
detailed data from USCIS or some other source would go a long way
toward settling the debate over whether these visa programs depress the
wages of IT professionals.

"This may be a good thing for the DHS or GAO to do," says Hira.