Why we need H-1B professionals

As the IT recession in America grinds on, some askwhether it's time to scale back the number of foreignIT workers who go to work in the United States. H-1Bis a "fast-track" workauthorization program "used by an alien whowill be employed temporarily in a specialtyoccupation" (including, interestingly enough,fashion models). According to a studyof H-1B candidates compiled in June, 2000 by theU.S. Immigration and Naturalization Service,"computer related occupations accounted for nearly54% of the total H-1B petitions." Notsurprisingly, the list of leading H-1B employers reads like a "Who's Who"of the information technology industry.

Computer jobs pay well (the medianincome is $60,350, according to the U.S.Department of Labor), and as Charles Cooper noted in arecentarticle, American computer professionals arehaving a harder time finding them. The cap for H-1Bvisas is set at 195,000 for 2003, dropping back to65,000 the following year. Wouldn't American ITworkers benefit from reducing the cap now?

I don't think so. I'm not ready to state that thereis no need for labor market barriers. We live in aworld of extreme differences of income, differenceslargely delineated by national borders. Any richcountry that unilaterally removed restrictions on allforeign labor could be overrun by low-income jobseekers. Until we resolve the issue of incomedifferences, right to work restrictions will be afactor in the labor landscape.

However, there are good reasons for continuing thelimited H-1B program as is, if not extending thehigher cap past 2003, particularly in the field ofinformation technology. In summary, such protectionswould do more harm than good for American computer professionals' job prospects, whereas the benefits stretch far beyond the needs of employers in search of IT personnel.

Avoid exaggerating the risks
People too often exaggerate the competitive "threat"posed by imported IT labor. Given that many suchworkers come from lower income nations, the fear isthat they will come to America and charge prices fortheir services that their American counterparts couldnot match.

First, consider that H-1B is a very limited program. Assuming the 2000 statistics are correct, the maximumnumber of new H-1B computer professionals who wouldenter the market is 105,300 (54% of 195,000). Thetotal number of computer professionals in the UnitedStates, according to a 2001Labor Department study, is approximately 2.8million. This means that the percentage increase inthe number of workers available is 3.7%, hardly anincrease that would seriously affect salaries.

Second, most software development is of the customsort, meaning small, ad hoc applications tailored tospecific internal business needs. This requires close interaction with mostly American customers. Americans have a cultural frame of reference that makes them uniquely suited to interact with other Americans. This information simply cannot be transferred. Thisis obviously not an issue in all programming tasks,but it indicates that most American companies willprefer to hire an American, if available, over anon-American.

Third, there are practical and legal limitations tothe effect H-1B candidates have on American salaries. The average income for IT workers in India (whoaccount for 37% of H-1B applicants) is$5,850, according to Aberdeen group, but this isin a country where peoplewho make $10,000 qualify as rich.

This is partly a fluke of exchange rates, and saysnothing about purchasing power of such a salary withinIndia. A programmer there can live very well on$5,850, as he or she is paid far above the averagenational income. That means that Indian programmerswon't come to America to live in poverty. Youcouldn't live on $5,850 a year in Silicon Valley, muchless $10,000 or $20,000. Neither would an Indianprogrammer, who is highly valued in his or her homecountry and can live very well close to family,friends, culture and native language.

Foreign programmers will expect to be paid a salary commensurate with what they would receive at home, from a purchasing power standpoint. Furthermore, this is reinforced in law, as the H-1B program requires hiring companies to pay salaries in line with current market conditions (the minimum salary is $40,000). Therefore, even if Motorola or Oracle could find programmers willing to work for $30,000, if the going rate is closer to $70,000, they wouldn't be able to get H-1B approval.

This analysis is born out in the statistical data. The mediansalary among H-1B computer professionals was$53,000, while the Americanmedian (as noted) is $60,350. Though the basesalary is a bit lower, consider that bringing foreignnationals to America entails relocation costs, suchas airfare and preliminary housing.

I'm not suggesting that foreign workers don't placesome downward pressure on salaries, nor that theyaren't attracted by the prospect of saving more moneyeach year (given exchange rate differentials) thanthey could have earned in an entire year back home. If you increase the supply of anything, you usuallyhave to lower the price a bit to sell that extrasupply. However, the pressure is less pronounced thansimple cross-border salary comparisons would imply.

Fewer well-paid foreign IT workers in America meansmore lower-paid IT workers overseas.
We live in a global economy connected by cheaptransportation and an internationaltelecommunications network. This makes it easy forcompanies to consider outsourcing IT work to theselow-cost environments, if not set up shop in thatmarket altogether. As Mahesh Basappa, joint directorof Software Technology parks of India, noted, "The slowdown in the States means less on-sitework and more offshore development for companiesthere."

Though it might seem paradoxical, refusing to allowcompanies to bring IT workers to America might makemoving wholesale to a foreign market even moreappealing. H-1B workers are alreadyreturning home as a result of being laid off fromAmerican companies. This enriches foreign IT centers,making them even more attractive as outsourcingtargets. As things stand, several billion potentialcustomers serve as a strong incentive to set up shopin Asia. Narrowing the H-1B window would provide yetanother reason to do so.

H-1B brings the best and brightest of the world to America.
Where are you most likely to find the largest shark in the world, in the Irish sea, or in the Atlantic ocean? You MIGHT find the largest shark in the Irish sea, if you're lucky, but statistically you are more likely to find it if you spread your net as wide as possible.

The same applies to labor markets. America doesn'thave a monopoly on bright programmers. Granted, wecertainly have the largest pool from which to draw,something built on an advanced, technology-literateand wealthy population. However, other nations havebright technologists who can add a great deal to theAmerican economy. It is worthwhile to allow Americancompanies to find these innovators, irrespective of nationality.

In addition, H-1B computer professionals arehighly-skilled and highly-educated. 56%of H-1B candidates, of whom over half are in thecomputer profession, have a bachelors degree, farabove the national average in the United States (theydon't break out education by profession in theDepartment of Labor study, but if they did, I bet the percentage would be even higher for programmers).

It's worth noting that one of the unique things aboutAmerica in the 1800s was its ability to attracthighly-skilled and educated immigrants. As DavidLandes noted in "The Wealth and Poverty ofNations" (speaking of the character of USimmigration during that period as compared to LatinAmerica): More of them were literate; many weretrained craftsmen (classified as "skilled")." They were attracted by high wages, which were theresult of "quasi-free land and scarce labor."

The fact that America can still attract suchhigh-skill migrants is a testament to the dynamism ofthe American economy. These immigrants, even iftemporary (which most are) enrich the Americaneconomy, and are the sort of people America should beworking hardest to attract.

Advancing cultural understanding
Geographic distance tends to interfere with mutual understanding. The only contact most of the world has with America is through the products we export, and in particular, our media culture. This tends to create a rather distorted view about what being an American is all about.

I have a number of European friends who are living andworking in America. What is most interesting is tolisten to them discuss their opinion of Americansociety today in contrast to their opinions beforethey left. They have a greater understanding andrespect for the American way of life, something noamount of federally-funded PR could ever manage.

This does not mean that they suddenly agree with everypolicy put forward by the American government. Theyare just less likely to see selfish motives behindAmerican actions, and don't subscribe to nastystereotypes popular among some "enlightened"Europeans.

There is no better way to change minds than to workside by side with the object of your misperception. The exchange is bi-directional. Just as foreignerscan learn from encountering Americans on their hometurf, Americans can gain from more regular contactwith foreigners.

As noted, I happen to believe that there is somejustification for labor restrictions. However, thisquote from Friedrich Hayek is worth reflecting upon. However justified we might think labor marketprotections might be, there is a penalty which must be taken into account.

"If international economic relations, instead ofbeing relations between individuals, becomeincreasingly relations between whole nations organizedas trading bodies, they inevitably become the sourceof friction and envy between whole nations. It is oneof the most fatal illusions that by substitutingnegotiations between states or organized groups forcompetition for markets or for raw materials,international friction would be reduced. (TheRoad to Serfdom)"

Conclusion
In an ideal world, any citizen of any nation wouldhave the right to work wherever they wished. Thiswould immeasurably benefit the global economy, ascompanies would have a global pool of labor from whichto draw, thus increasing their chance of finding thebiggest "shark" in the labor sea. Labor shortages inone area could more easily be satisfied by surplusesin another, much as occurs in the global market formaterial goods.

Even more important, such a world would be more fair. Humanity would have made a great social leap forwardif people could truly compete on skill, and not onskill combined with the accident of birth location.

Unfortunately, we don't live in that ideal world, andcan't so long as income differentials between nationsare as large as they are. That doesn't mean thatlimited programs such as H-1B do not provide some ofthe same benefits of a global free labor market. Perhaps, in some small way, this limited program mighthelp to hasten the arrival of a more open system, aslaborers from poorer countries use the knowledgethey've acquired back home (where most return, whichshouldn't be surprising when one considers howwrenching a move to a foreign country truly is).

Whatever the case, there are simple benefits which theAmerican people receive from streamlined access toforeign workers. H-1B generosity is beneficial evenfrom the standpoint of naked self-interest. Thatmerits maintaining the H-1B cap in 2003, and extendingit beyond.

John Carroll is a software engineer living in Ireland. He specializes in the design and development of distributed systems using Java and .Net. He is also the founder of Turtleneck Software.