Arguments continue over the alleged “skills shortage” in the United States and the resulting situation which may, or may not, indicate and justify the need for H-1B visas and the importing of guestworkers from other nations, but as one Rutgers professor testified before a U.S. Senate Judiciary Committee “it is likely that the extra supply of foreign-born workers does bring downward pressure on the wages of incumbent workers, as research suggests.”
Speaking before the United States Senate Judicary Committee, Professor Hal Salzman stated the problem. “Markets are supposed to reflect demand through the price mechanism of markets,” testified Professor Hal Salzman, Ph.D. of the E.J. Bloustein School of Planning & Public Policy J.J. Heldrich Center for Workforce Development at Rutgers University earlier this year.
“In the case of labor, the ‘price’ is wages,” Salzman stated. “How can it be, then, that if the IT industry is experiencing labor shortages, wage levels in this highly profitable industry are no higher than they were in the last millennium? How can an industry expect to attract the best workers without raising wages? Is there what economists call a ‘market failure’ here? As the evidence presented suggests, STEM labor markets do work as expected. In the case of petroleum engineers, shortages led to wage increases which, in turn, led to near tripling of graduates.”
Worker swap out
Professor Salzman zeroed in on the swapping out of American workers for the guestworkers. “There is no plausible explanation for the observed IT labor market trends and outcomes other than, quite simply, large supplies of guestworkers that allow many firms to swap out higher-paid, high-skill domestic workers for lower-paid guestworkers, as found by many researcher including a Brookings Institution study.” In that study’s conclusion, Salzman testified, “it is likely that the extra supply of foreign-born workers does bring downward pressure on the wages of incumbent workers, as research suggests.”
STEM is an acronym for Science, Technology, Engineering, and Mathematics. According to David North, who has studied STEM, immigration and U.S. labor markets, “[i]t has become quite clear that America has more high-tech college graduates than needed to fill high-tech jobs now and, importantly, the nation will keep producing many more such graduates than job openings in the future — so why the shrill calls from the industry that there is a shortage?”
As American workers have been asked to train their foreign replacements, Paul Krugman, a Nobel Prize-winning economist, ponders the alleged skills issue. Krugman stated in one opinion column, which can be found on the NYTimes website last year, that the idea of a skills gap is something “that should have been killed by the evidence, but refuses to die.”
Explaining away high unemployment
Krugman believes that, in an ever-changing economy “… there are always some positions unfilled even while some workers are unemployed ….” In 2014, the ratio of vacancies to unemployed workers was “far below normal.” Krugman adds this point: “Meanwhile, multiple careful studies have found no support for claims that inadequate worker skills explain high unemployment.”
Asking how we “know” about skills and jobs, Krugman answers “[w]e don’t.” He adds that while it is true that “workers with a lot of formal education have lower unemployment than those with less, ” that is always true, whether in good times or bad. “The crucial point is that unemployment remains much higher among workers at all education levels than it was before the financial crisis. The same is true across occupations: workers in every major category are doing worse than they were in 2007.”
Blaming workers is wrong, Krugman believes, but it sure does shift some attention away from twhat he refers to as the “spectacle of soaring profits and bonuses even as employment and wages stagnate.” And being out of work “makes employers unwilling even to look at” a potential employee’s qualifications, Krugman writes.
Supply and demand
Professor Salzman, in his testimony earlier this year before the U.S. Senate Judicary panel, testified that “[a]ll the evidence suggests the IT labor market is still bound by the usual dynamics of supply and demand. When we look at the trends of the past 20 years, we see that when wages increase, the number of computer science graduates increases. When wages fall, the number of graduates falls. When the supply of guestworkers increases, wages stay flat, and too many domestic students must find employment in other fields.”
While some folks believe that “this last result is good for the economy,” Salzman continued, and also that “science and engineering skills are now being used in millions of non-STEM jobs,” there is an alternative viewpoint which presents itself. Salzman explained it further to the Senators.
“But an alternative view is that far too many domestic STEM graduates are in jobs that do not fully use their education, which represents a loss of our greatest source of innovators. Moreover, students observing these trends pursue careers outside of STEM fields, putting their talents to work in industries such as finance and law but not contributing to the innovation that drives the long-term and sustainable strength of the nation.”
Salzman concluded his testimony before the congressional panel. “Currently, U.S. colleges graduate far more scientists and engineers than find employment in those fields every year — about 200,000 more — while the IT industry fills about two-thirds of its entry-level positions with guest workers. At the same time, IT wages have stagnated for over a decade. We cannot expect to build a strong STEM workforce and encourage domestic innovation by developing policies that undermine the quality of STEM jobs. Before asking government to intervene in labor markets by handing out more guestworker visas and green cards to STEM graduates, we should ask for audits of shortage claims and workforce impacts as a first step toward developing evidence-based policy on this issue, an issue critical to the nation’s future.”
Stagnant wages, unstable career track
It seems that “[t]hose on the front lines of IT,” stated Professor Salzman, “now tell students that given the industry’s stagnant wages and unstable career tracks, better students should seek jobs elsewhere.” While the “overall supply is strong,” he added, it appears that “fewer of the highest performing students were going into STEM jobs. Meanwhile studies by Peter Cappelli of the Wharton School and by Burt Barnow of George Washington University find a decrease in the intensity of firms’ recruitment efforts since the recession and an increase in pickiness about whom they are willing to hire. Again, the inference seems obvious: the supply of potential workers is already plentiful relative to employer demand. This should be the evidence that guides current legislation rather than anecdotal accounts and thin claims about the need for guestworkers and the U.S. falling behind in the global high-tech talent search.”
H-1B guestworkers are “concentrated in computer programmer and system analyst jobs; in fact, they fill 85 percent of them,” Salzman said. “But most of these are commodity-like production jobs in IT services, doing back office programming for companies. A disproportionate number of H-1Bs provide onshore customer management for offshore programming teams. Ironically, without the visas, much of the programming work couldn’t have been offshored in the first place.”
High stakes lottery
The Economic Policy Institute’s Ron Hira found “that few of the largest H-1B employers could be considered technology innovators, with most generating very low levels of patents. So an often-heard
argument for a massive increase in guestworkers — that we’ll gain a few key innovators for America — is in reality a high stakes lottery with few winners but, like most lotteries, many losers. Large increases in the number of guestworkers will not ensure that we admit, among the tens of thousands of guestworkers, the few geniuses who could make a decisive contribution relative to American workers.”
Salzman questioned policy makers and their strategies. “Asking domestic graduates, both native-born and immigrant, to compete with guest workers on wages is not a winning strategy for strengthening U.S. science, technology and innovation,” Salzman said in concluding his remarks.