To: H-1B/L-1/offshoring e-newsletter 188

Enclosed below are two items on Mithas/Lucas paper: (a) Don Tennant's
blog, and (b) and eWeek interview of me.

I like Tennant's summary:

   Lucas and Mithas got a lot of press as a result of their
   controversial report. That may be good for their careers in academia,
   where the pressure to maintain a high research profile is intense.
   But it's as if they went on a hunt for data to back a pre-ordained
   conclusion, and they settled for the best they could find. Their
   report is a disservice to the H-1B discussion.

But his opening sentence is a bit odd:

   The contention of H-1B haters that the visa program is a conspiracy
   by government interests, big business and liberal media to import
   cheap labor is ignorant, distracting and tiresome.

Tennant must be getting some bizarre e-mail. :-)  The word "conspiracy"
is not one I would use.

But I must say, the ingredients are there.  Big business certainly does
act in concert--"conspire," if you will--to lobby Congress on the H-1B
issue.  Just look at

http://www.competeamerica.org/whoweare/coalition/index.html

for instance to see that.

Granted, that's out in the open, and thus should not count as
"conspiracy."  But there's a whole lot going on that's not in the open.
An excellent example is the topic at hand, academic studies. 

For instance, Austin Fragomen is one of the most prominent immigration
attorneys in the U.S.  His firm is the largest immigration law firm in
the nation; he writes standard-setting books on immigration law
practice, most notably on H-1B., and most importantly, he has been a
major player in immigration politics.

It is most illuminating, then, to see what Fragomen told Workforce
Magazine in March 1996 (emphasis added):  "The business community
mobilized [in response to congressional proposals to cut back on H-1B],
forming American Business for Legal Immigration (ABLI), a Washington,
D.C.-based lobbying group that represents a number of associations and
employers, and COMMISSIONS ACADEMIC STUDIES TO SUPPORT ITS POSITION."

The professors who run such a study then shop it to the press (the
"shopping" is done by their universities in many cases), the press
publicizes the study, the industry lobbyists show Congress the press
coverage, etc.  The gullible press trusts academia and reports on the
study.  The innocent readers (and the putably innocent members of
Congress) see a study coming out of a university, and have no idea that
it had a hidden agenda. 

Please note that I am NOT saying that this is the case for Mithas and
Lucas.  Instead, I'm using this as an example for Don Tennant as to why
the word "conspiracy" is not so far off base after all.

Or consider the case of Dan Siciliano, a lecturer at the Stanford Law
School.  Here's what I reported last year, after the Wall Street Journal
quoted him lavishly extolling the virtues of increasing the yearly H-1B
cap:

   So, what is Siciliano's background for making such strong claims
   about the innovative quality of the H-1Bs?  Has he done research on
   H-1Bs, innovation and so on?  Well, no.  Here are his
   "qualifications":

   Siciliano was previously an immigration lawyer with Bacon and Dear,
   one of the most prominent immigration law firms in the nation
   (www.sinoedu.com/stanford-cg05.htm).  Siciliano also is CEO of
   LawLogix, a firm that develops software systems for immigration
   lawyers.  To top it off, Siciliano is on the Board of Trustees of,
   and is a research fellow at, the American Immigration Law Foundation,
   the research arm of the American Immigration Lawyers Association... 
  
   So Siciliano has a vested interest in H-1B, to put it mildly.
   Unfortunately, he doesn't seem to mention these things when he talks
   to the press.  In the above WSJ article, for instance, he was
   described as "a Stanford economist." When he was on CNBC on March 6,
   he was asked his views "as an educator," and though his affiliation
   with the Immigration Policy Center was mentioned, there was no
   mention of IPC's connection to AILA/AILF, so IPC seemed neutral to
   viewers.

As one more example, consider the Association for Computing Machinery,
the main professional organization for computer science, run largely by
academics.  The ACM was alarmed at the decline in computer science
enrollment in U.S. universities, a huge problem for them, since numbers
are power in academia.  They attributed the decline to student fear of
offshoring, so they set up a large study with the express goal of
assuring students that offshoring is not a problem.  So, the outcome was
a forgone conclusion.  Here's what I reported at the time the "study"
came out:

   One member of the ACM study team, Rob Ramer (whom I'm quoting with
   permission here) even contacted me, saying that the atmosphere was
   such that anyone dissenting from the pro-outsourcing line was gently
   marginalized.  This member said, "Our sub-committee was often seen as
   alternatively right-wing or anti-business extremists...because we
   kept raising dissenting voices about the pro-offshoring mantra.  It
   was a pretty much a consensus among the rest of the committees that
   we were the 'spoil-sports,' even though we repeatedly stated that few
   to none of us were 'anti-outsourcing' in all situations, all we were
   calling for was an examination of the problems as well as the glowing
   success stories.  Of course, factual examination is 'spoiling the
   sport' of spin."

Yet, once again, when this study was reported on in the press, the
innocent readers knew none of this.  They didn't know that the outcome
was a forgone conclusion, that dissenting voices had been suppressed,
etc.  Here was an august mainstream organization, with a largely
academic leadership (the then-president was at UC Berkeley), solemnly
telling the public that, don't worry, there are tons of jobs in the
field, offshoring is nothing to fear, etc., and the poor readers
probably took the report at face value. 

One more academic example (there are many):  The Wall Street Journal's
"Numbers Guy," Carl Bialik, ran a good analysis of the claim by NFAP
that the hiring of each H-1B creates five new jobs.  Bialik got much
more into the statistical methodology aspects than usual, and raised
good questions about the validity of the NFAP claim.  Here's what I
reported at the time:

   Now this one really intrigued me:
  
   #   Some researchers find the general premise of the study
   #   persuasive, even if the study didn't prove it. Duke University
   #   statistician David Banks said correlation can't prove causation,
   #   but he did think the study "corroborates the idea that H-1B visas
   #   support job creation." It does so, he says, by contradicting the
   #   theory that companies seek foreign workers to replace domestic
   #   ones.
  
   In reading this, I wondered, "Who is this guy Banks, and why was he
   interviewed by Bialik, out of the literally thousands of statistics
   professors in the nation?  What in the world does he have to do with
   H-1B?"  Well, it turns out that he works with outspoken immigration
   attorney Bruce Hake!  In fact, Banks has coauthored chapters with
   Hake in AILA publications.  So Banks is certainly not the impartial
   observer ("finds the study persuasive"!) that Bialik apparently
   thought him to be.

If even the astute Bialik can be fooled, certainly the vast majority of
readers were too.

Concerning Congress, in spite of the fact that most of the populace know
that money talks in DC, most people don't realize the huge impact money
has on H-1B politics.  In 2000, for instance, the Senate voted 96-1 to
raise the H-1B cap, in spite of the fact that the GAO had just issued a
report criticizing the program.  The GAO study was not mentioned even
once during the floor "debate" on the Bill.  Afterward, Sen. Robert
Bennett (R-Utah) remarked, "Once it's clear (the visa bill) is going to
get through, everybody signs up so nobody can be in the position of
being accused of being against high tech.  There were, in fact, a whole
lot of folks against it, but because they are tapping the high-tech
community for campaign contributions, they don't want to admit that in
public." Rep. Tom Davis (R-Va.), chair of the Republican Congressional
Campaign Committee.  said, "This is not a popular bill with the public.
It's popular with the CEOs...This is a very important issue for the
high-tech executives who give the money."  Again, though these
statements were public, the vast majority of voters didn't hear them.
Meanwhile members of Congress tell the populace that they support an
H-1B increase because they are convinced that there's a tech labor
shortage, with H-1B the short-run solution but long-term being--a
favorite excuse--improvements to the educational system.  How about
supporting improvements to the political system?

So yes, there is a concerted effort on the part of industry and Congress
to expand H-1B, and no, it's not in the open.  Many people WOULD
consider this a conspiracy.

The Tennant blog and the eWeek interview of me follow below.

Norm

http://www.itbusinessedge.com/cm/blogs/tennant/h-1bs-earn-more-than-us-counterparts-not-so-fast/?cs=41343

H-1Bs Earn More Than U.S. Counterparts? Not So Fast

Posted by Don Tennant May 24, 2010 12:54:33 PM

The contention of H-1B haters that the visa program is a conspiracy by
government interests, big business and liberal media to import cheap
labor is ignorant, distracting and tiresome. But a new report arguing
that H-1B visa holders earn more than their U.S counterparts is equally
distracting, and almost as ignorant.

The report, prepared by two professors at the University of Maryland's
Robert H. Smith School of Business, challenges the commonly held
understanding that if anything, H-1B visa holders tend to be paid
below-market wages in violation of U.S. law. A May 21 article on eWEEK
quoted this from the report:

  "IT professionals without U.S. citizenship earn approximately 8.1%
  more than those with U.S. citizenship; IT professionals on an H-1B
  or other work visa earn approximately 7.9% more than those with U.S.
  citizenship; and IT professionals with a green card earn
  approximately 13.6% more than those with U.S. citizenship or work
  visa holders."

  "The salary premiums for non-U.S. citizens and for those on work
  visas fluctuate in response to supply shocks created by the annual
  caps on new H-1B visas. Setting lower and fully utilized annual caps
  results in higher salary premiums for non-U.S. citizens and those
  with work visas."

The eWEEK article included a short Q&A with the report's authors,
Professors Hank Lucas and Sunil Mithas, but didn't question their
findings or provide a counter view. Fortunately, a May 20 article on
CIO.com did.

According to the CIO.com piece, the University of Maryland report was
based on data collected from online salary surveys conducted by
InformationWeek and Hewitt Associates from 2000 to 2005. Check this
out:

  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."

Moreover, the CIO.com article pointed out that the report's findings
were potentially flawed because of the self-selective nature of the
data:

  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."

The professors are sticking to their guns, but come on. When you
publish research that turns conventional wisdom on its head, you need
to do a much better job of validating your data.

Lucas and Mithas got a lot of press as a result of their controversial
report. That may be good for their careers in academia, where the
pressure to maintain a high research profile is intense. But it's as if
they went on a hunt for data to back a pre-ordained conclusion, and
they settled for the best they could find. Their report is a disservice
to the H-1B discussion.

http://www.eweek.com/c/a/IT-Management/Professor-Blasts-Research-on-H1B-Visa-Workers-Earning-Higher-Wages-266591/

Don E. Sears
eWeek
May 27, 2010

Professor Blasts Research on H-1B Visa Workers Earning Higher Wages

A University of California professor refutes claims made in a recent
University of Maryland study that H-1B visa holders make more money
than U.S. technology workers. Professor Norman Matloff dissects the
wage numbers used, finds what he claims are critical omissions and
discusses his own studies and others which found the majority of H-1B
visa holders earn 15 to 20 percent less than U.S. workers.

In response to a recently published University of Maryland study, eWEEK
interviewed Norman Matloff of the University of California, Davis, to
get his perspective on the findings. The Maryland findings claim H-1B
visa holders typically earn more in wages in the U.S. when you control
for education level and several other factors. eWEEK interviewed the
Maryland study's authors, Assistant Professor Sunil Mithas and
Professor Henry Lucas, last week. Why are H-1B visa holders earning
more than U.S. workers? According to the Maryland study, "because of
their intangible human capital, rigorous screening and selection
processes and willingness to work across borders, [foreign visa
workers] are likely to earn higher wages than U.S. citizen IT
professionals."

Matloff believes after evaluating the Maryland research that there is a
substantial conflict in the findings with other academic research.
Matloff sat down with eWEEK to discuss the plethora of problems he
calls "disturbing" in the Maryland study. The following is the
question-and-answer interview with Matloff that occurred on May 26 over
e-mail.

eWEEK: What are your main problems with the University of Maryland
study that found H-1B visa holders are being paid more than U.S.
citizens?

The study is fatally flawed, because its data source is grossly
unrepresentative of H-1Bs in the computer field. The readership
of InformationWeek [a good portion of the University of Maryland's
research is based on a 2006 study done by Information Week and the
staffing firm Hewlitt Associates] tends to be much more managerial and
less technical, so the survey is not picking up the typical H-1B
computer professionals.

The Maryland study's own data shows this. In years of experience, for
instance, the H-1B respondents in the study are much more experienced
than the government H-1B data show. Not surprisingly, then, the H-1B
wages in the Maryland study don't match those of the government H-1B
data either, with the InformationWeek respondents earning much higher
wages. The median for H-1Bs in computer-related occupations was about
$60,000 (in 2003, the middle of the authors' data period), according to
the U.S. Citizen and Immigration Services (the former INS).  This is
far short of the Maryland authors' mean of $79,087. Even the 75th
percentile in USCIS was only $72,815. The data do vary from year to
year, but all of the years of USCIS show that the authors' claimed wage
figures simply do not jibe with those of the USCIS. Again, this shows
that the InformationWeek sample involves the wrong population.
In addition, as an academic I'm very disturbed at the appalling lack of
even-handedness on the part of the Maryland authors. Their statements
to the press do not jibe with their own findings, and their coverage of
previous research is severely one-sided. I'll cite three (of many)
examples:

First, the Maryland authors have failed to tell the press that they
correctly recognize the basic economic principle that the H-1Bs, due to
mobility limitations, will be paid less than comparable Americans. A
U.S. citizen or permanent resident can move to another employer if
offered more money, whereas an H-1B faces major obstacles. Mithas and
Lucas do say this in their paper, noting that this is the reason why
they found green card holder wages to be higher than H-1Bs. In other
words, the authors agree with those of us whose research has found that
H-1Bs are paid less than comparable (key word) Americans, Yet the
authors' statements to the press don't mention this, nor do they even
mention it in their paper's Abstract and Conclusions section.

A second example concerns controlling for relevant variables. The
authors correctly state that this must be done, and indeed in one small
section of their paper they do control for job location and job title,
two crucial variables. They find that the claimed wage premiums for
H-1Bs are greatly reduced once these variables are accounted for: Their
calculated premium is 6.8 percent without factoring in these variables,
but it shrinks down to 2.3 percent with these controls included. The
former figure is almost three times as large as the latter, yet they've
cited only the larger figure in the press interviews I've seen. Again,
given the emphasis they place, correctly, on controlling for relevant
variables, it is irresponsible to cite the larger number and not the
smaller--but more accurate--one.

Third, a central component of academic research is proper reporting of
prior research. The Maryland authors' paper is sorely lacking in this
regard. They give detailed criticism of previous work that finds
problems with the H-1B program, while never offering any criticism at
all of the work they cite that portrays the program in a positive
light. For instance, they fault some research showing wage problems for
H-1Bs for not reporting the results of statistical significance tests,
while not mentioning that many of the papers they highlight as
supporting H-1B don't present those test results either.

Moreover, the authors do not mention at all the fact that two
Congressional-commissioned employer surveys have found that H-1Bs are
indeed often paid less than comparable Americans. These surveys are far
more relevant than regression analysis (the tool used by the authors,
myself and others), as regression can only attempt an indirect,
approximate answer to the questions at hand. Employer surveys address
this question directly, and thus are very important. It was
unconscionable for the Maryland authors to omit discussion of these
official employer surveys.

In short, this paper was not the evenhanded treatment that is expected
in academia.

eWEEK: What data have you looked at to compare the findings in the
University of Maryland study?

I have my own studies, published in the University of Michigan Journal
of Law Reform, in which I found a 15-20 percent underpayment for H-1Bs.
Other studies, such as the one done at UCLA, have found underpayment of
as much as 33 percent. Mithas and Lucas do cite that article of mine,
but incorrectly give readers the impression that I only analyze studies
done by others, and they don't cite the UCLA study at all.
There are also the two government employer surveys I cited above, the
Miano studies (cited but incorrectly analyzed).

eWEEK: The University of Maryland study uses data compiled by
technology-publisher Information Week and Hewlitt Associates (a
staffing firm) with data from 2000 to 2005. Does this data hold up to
statistical scrutiny? Why or why not?

As I stated above, this is simply the wrong population for the question
at hand.

eWEEK: In a recent Q&A with the University of Maryland professors,
eWEEK asked their opinion on the current visa cap in 2010 on H1-B
holders. They responded that `The current quota of 85,000 may be too
low because it is almost always fully utilized. We argue in the paper
that setting the quota too low may be more harmful than setting it too
high because if the economy does not need workers, the quote will go
unfilled as has happened before.' Do you have thoughts on this?

Of course the quota is filled during years where there is substantial
hiring.  If someone sells new Ferraris at $10,000 each, with a quota of
1,000 cars, of course that quota will be fully utilized! That would be
a bargain for Ferraris, and H-1Bs are a bargain for employers too.

One very important point is that employers save money by hiring H-1Bs
in two ways, what I call Type I and Type II. Type I is the one always
mentioned, in which employers pay H-1Bs less than comparable Americans.
But in Type II, the employers save money by hiring younger (thus
cheaper) H-1Bs in lieu of older (thus more expensive) Americans. In my
writings, I've emphasized that Type II is just as important as Type I.

eWEEK: What is your view of the H-1B visa program in 2010? Is there
value in having skilled technical professionals brought in on visas
from other countries to help U.S. companies?

I have always strongly supported bringing in "the best and the
brightest" from around the world, and facilitating their work visas and
green cards. But the vast majority of H-1Bs are not in that league;
they are ordinary people, doing ordinary work--and doing so more
cheaply than Americans. It is absurd that there are so many H-1B hires
when qualified Americans cannot find IT work and must change
professions.