the wrong kind of equality
I nearly choked this morning on my way to work when I heard on Marketplace radio Cato’s Will Wilkenson arguing that we should allow more visas for skilled workers in order to reduce wage inequality. His claim is that wage inequality is largely driven by the increased demand for skilled workers relative to unskilled workers, and so by increasing the supply of skilled workers, we’d reduce inequality. Let me count the things that are wrong with this:
- Since when does Cato care about inequality?
- I believe that relative wealth and relative poverty matter, but even I’m not brutal enough to suggest that the appropriate solution is to push the wages of middle-class workers down. I’d be happy to impose higher marginal tax rates at the top, but that’s not what this proposal would do.
- The biggest driver of the growth of inequality in recent years is not the gap between the average college graduate and the average high school graduate — it’s the gap between the highest paid college grads and the average college graduates. Only the top 10 percent of the income distribution has experienced gains that have kept up with productivity.
- Even if increasing the number of H1B [corrected — I wrote HB2 before] visas reduced wage inequality, it would probably increase overall inequality in the US, by shifting money from skilled labor to capital.
July 18th, 2008 at 1:15 am
Wow, I don’t think you understood Will’s argument at all. His claim was that increasing immigration would decrease world-wide inequality. As he writes on his blog post (http://www.willwilkinson.net/flybottle/2008/07/16/oh-you-didnt-want-to-decrease-inequality-that-way/) on the topic:
“These days, almost everybody but their beneficiaries think agricultural subsidies are a lousy idea. They benefit a few already relatively wealthy American farmers and agribusiness firms to the detriment of poor farmers around the world. But H-1B visa restrictions are subsidies that benefit relatively rich domestic workers over their poorer foreign peers, and so it turns out many of us liberal-minded college grads are enjoying our own protectionist boost.”
The point is to allow only educated workers – the H-1B visa is only available to high-skilled workers – who will not be competing with low-income American workers, but Americans with college educations.
Then there’s your bullet points. First off, Will Wilkenson != Cato. He works there, but it certainly doesn’t mean that he must agree with any particular position of the institute. In fact, if you look at your link in bullet point 1, you’ll notice that it was Will that was pushing the inequality conference. If you take a look at his blog in any detail, you’ll note that he regularly deals with the question of inequality in society. Maybe its because he has a masters in philosophy, and has studied political philosophy in depth?
Second, I don’t see how its so “brutal” to let Americans compete with workers from other nations. Sure, maybe we white-collar Americans won’t be able to afford a big house in the ‘burbs – but that H1-B worker could be supporting half the village back home. And let’s not forget that H1-B workers are responsible for a significant amount of innovation in the US economy. My husband’s brother, for instance, entered on an H1-B, and eventually created a company that was later sold for over 20 million dollars.
Third, while it’s true that wages have not kept up with productivity growth, wages are not the only form of compensation that employees get. Health care costs have risen, and many white-collar companies now offer other perks: at my job, for instance, we get most meals paid for by the company (so that we keep working through lunch, of course), work hours are extremely flexible, there’s a gym on site, etc, etc. The powerpoint you link to doesn’t mention any of this. Actually, there’s a massive pile of literature on the wages and productivity that your powerpoint doesn’t mention. Perhaps the paper its drawing from does – link to that next time if you want to show rigorous evidence for your position.
Fourth, there’s no such thing as an H2-B visa, at least in the US. There is an H2-B visa – but that’s for seasonal/temporary jobs, like ski instructors. No skilled labor required. Clearly, you haven’t studied immigration issues particularly closely. To address the main point – the type of industries (computers, mostly) that H1-B workers are hired in are very entrepreneurial in nature. If you have good ideas that’s far more valuable than just some capital. Do you have any evidence for your idea that increased high-skilled immigration would lead to greater inequality because of a shift of returns to capital?
July 18th, 2008 at 9:48 am
I continue to be suspicious of both sides of the H1-B argument. On the one hand, as a person who at times searched 8 months to hire the right programmer, it’s clear that our economy is going to have trouble if we don’t find the right workers. In that sense the very existence of the H1-B visa masks the extreme deficiencies in the US educational system. (This, in my opinion, is the most damaging effect.) I also know that the existence of H1-B workers greatly empowers the employer. These people know their status relies upon them staying in the job they have, and staying in their boss’s good graces. They do not rock the boat; much the opposite. And often they have left their families at home, which means they work very long hours. They set up an artificial expectation for hours worked that cannot be sustained, and it impacts everyone around them.
Alternatively I am sick to death of crappy American-born programmers complaining ad nauseum about how they can’t find any work because of all the foreign-borns. Puh-lease! Look in the mirror buddy! No one wants to hire you because you refuse to learn anything new; you can’t survive a tough meeting; you don’t understand how the business even functions.
July 20th, 2008 at 12:08 am
Jen, you bring up a good point about the hours, but I want to add the salary issue. These jobs tend not to be union so foreign workers can take a lower salary over American workers. I think your last comments are a bit harsh on American workers. There definately is a disconnect within American education, but even if colleges were graduating thousands of Americans for these jobs, foreigners will still be a great hire for companies based on lower salary and longer hours.
It seems like corporations want to start lowering the salary of college educated Americans, which goes against the high cost of college.
July 21st, 2008 at 12:50 pm
Well, anyone who takes a lower salary is always going to have that going for them, although that does not necessarily make them the wiser fiscal hire. I personally have not seen that American companies have been trying to drive down salaries for programmers via using H1-B holders. The legal expenses and paperwork of getting an H1-B resource are usually pretty prohibitive; employers really only go this direction if they can’t find anybody else. If anything companies use offshored project support to drive down wages; that’s where the real issue is, IMHO.
So I don’t believe companies are dismissing their best American staffers so they can bring in H1-Bs. I believe many companies are giving up completely on software endeavors because they can’t reliably find good staff; they outsource it to a company with greater global reach so they can reduce their own risk. Next thing you know all the middling programmers, the ones who never quite moved away from the DOS prompt or who “don’t enjoy QA” and thus skip it, the ones whose work their previous employers never really felt like they could trust? Those people are underemployed and spending lots of time complaining.
I listen to these people and I think, are you not embarrassed? Did you just listen to yourself recount how you’ve been laid off FOUR TIMES? And you, your skills, your personality had nothing to do with that? It’s all about the H1-Bs? Really?
July 21st, 2008 at 3:09 pm
Jen, I am missing something here. If these people are underskilled and they are hired, why don’t the companies train them? There was a time when companies actually trained their employees and there were alot of benefits to that method. I work and teach computer graphics and one thing that really irritates me is that employers expect people to know every single software out there from print to interactive to animation and web. With the rate of upgrading it is nearly impossible to be proficient at everything. My personal issue with this is that employers don’t want to train and they don’t want hire enough employees – hire one to the job of two or three people. This may not apply for programming, but I am interested in your thoughts on this topic.
July 21st, 2008 at 3:58 pm
Hey Christine — my sense would be that your issue is within the computer graphics field specifically. Computer graphics unfortunately falls in the realm of “video-game-esque” or “somewhat like the movies”. A.k.a. every kid wants to do this. And because there are so many people straight out of school vying for these types of jobs, they are willing to take low wages and bad work environments. The various “creative” departments that I’ve interacted with have been typefied by micromanagement, long hours, unreasonable expectations of perfection, lack of training. (Although their equipment is usually good, because otherwise they can’t load the software.)
Case in point: I recently hired a young woman over from the “creative” department within my company. She is leaving behind the “creative” parts of her old job (having to do with creating images for print publications) and is instead managing processes and configurations on our web site platform. As part of her transfer I reviewed her title and compensation package. To bring her into line with salaries in the IT department she needed a 35% raise!!! My boss’s secretary was making more than her! She had always put up with it because, as a creative, she thought she had no choice. It was absolutely criminal.
July 21st, 2008 at 9:21 pm
If Wilkenson is really concerned about global inequality, it doesn’t make sense to focus only on the skilled workers who could get H1-B visas — you could similarly raise up the incomes of lots of impoverished unskilled workers by letting them into more developed countries. I’m not convinced that fighting inequality is his goal — at best, it’s a positive byproduct of a policy that he supports for other reasons.
I’m not opposed to the idea of giving immigration preference to people with in-demand skills. But if we’re going to do it, it doesn’t make sense to make them essentially well-paid indentured servants, who can only stay at their employers’ discretion.
July 21st, 2008 at 11:30 pm
I work in the technology consulting field, and some of our best employees are here on an H1-B visa. I agree with Jen – most companies are NOT, in my experience, trying to find cheaper labor when going this route. It’s all about finding people with specific skills. India and China are producing people with skills not easily found in the US. Jen’s experience of looking for 8 months for a specific skill set in an employee is not unusual.
I have not seen this turn into well-paid indentured servitude. At my company, the policies are the policies and are equally applied to all. I don’t think the turnover rate is any different among those on Visas as those not on Visas. We have an HR department that makes sure salaries are reasonably equitable no matter who you are, so I don’t think companies are getting the cost savings you imagine.
Personally, I really enjoy working with people from different countries. I feel it makes my company stronger to have a global workforce. I think it is a win-win situation.
July 22nd, 2008 at 10:20 am
“I listen to these people and I think, are you not embarrassed? Did you just listen to yourself recount how you’ve been laid off FOUR TIMES? And you, your skills, your personality had nothing to do with that? It’s all about the H1-Bs? Really?”
I don’t know how things are nowadays, but right after the tech bubble, wouldn’t four lay-offs have been par for the course?
July 22nd, 2008 at 11:52 am
During that bubble period of 2001 – 2003, lots of people got laid off once, maybe twice. But time has not stood still since then. When I hear about multiple layoffs over long periods of time, it’s fishy.
Other things also set off bells. What about the dreaded “I stayed at the same company for 8 years and never got promoted”? Or “I was there as a contractor for a year but they didn’t renew me”. Hmm.
Anyone with any skill at all should have recovered very nicely indeed from the internet bubble. The years from 2005 through early this year were very, very kind indeed to technology folks. Things have gotten tougher in the past few months, but if you know a tech person and they were not flourishing last year, something’s up.
July 22nd, 2008 at 12:36 pm
Jen, one last question. If a person is let go 4 times and are without some skills for new hire, where do they go to get new skills if the educational system in the US is not producing these much needed workers?
July 22nd, 2008 at 12:59 pm
If a person is let go four times, that means they got in the door (and thus had the skills on paper) but did not last. In that case odds are it’s an interpersonal thing: they are angry, they refuse to take direction, they lied about their skills. It’s pretty hard to learn your way out of these problems! In that case I would say they’re probably burned out or in the wrong field to begin with: they need to consider changing industries, finding a new line of work.
But I don’t think that’s what you’re asking, Christine. I think you’re asking where you go to get the skills once you’ve fallen behind? Most technical people I know use the bootstrap approach: they buy a new machine or install a new piece of software, buy some books, and give it a try. They teach themselves enough to get by, then maybe take a certification exam to make it official even though it’s not within their work experience. Some take a few classes at a community college or DeVry. In extreme cases I’ve seen these people footing their own bill at Microsoft corporate training events, etc., although those are pretty cost-prohibitive.
Once you’ve got some skills built up, it’s time to find a way to get some actual experience under your belt. You start lobbying for using the new technology at work, perhaps, or you do some pro bono work to get some samples up and running. Many times I have hired web folks who have done no for-pay web work in the past but have impressive portfolios for things like their band or their kids’ school.
If you’re interested in talking about this offline I’d be happy to chat, Christine. Just LMK where I can reach you.
July 25th, 2008 at 10:53 am
As a person who started out on H1-B, I have to agree with Jen and K on the salary issue. Companies are not getting any cost benefits by hiring H-1s. The visa sponsorship is expensive and a lot of hassle. So if they can find someone who doesn’t need one, they would give preference to that person. In fact visa sponsorship is the last resort these days.
After working in a company that was very diverse (we had people from over 50 countries), I moved to a company that is not diverse at all. I miss the perspectives offered by the diverse group of people and also think it puts the company at a disadvantage in the increasingly globalized marketplace.
July 26th, 2008 at 10:39 pm
This weekend there is an article in the NY Times about how seasonal businesses on the east end of Long Island, New York are getting creative with employment since the government reduced the HB-2 (I think this is how it spelled) visas for seasonal workers. They are using J something visas (I think guest workers) and recruiting students from colleges majoring in Hotel and Restaurant Management with paid internships for credit. I understand programming staff are differently skilled than waitstaff, but why can’t these highly intelligent and educated people be as creative as tourism? It would make sense to me to start with colleges to have young people with skills and then train them additionally; tmporary workers can translate into permanent workers.