How do you define a bad day at work? There was a time when I thought bad days at work were pretty common. That was before the day that I found myself sitting across the desk from the friend who I had just told that he was being let go. It was obvious he was devastated by the news. He had bills to pay, kids in college, and the weight of the world on his shoulders. He asked the predictable questions. Why was he picked? What could he have done to avoid it? I wished in vain for good answers. He did everything I asked of him and more. He did it very well, with a great attitude, and a real team spirit. The business said “cut,” so we cut. They told us who to cut, so we cut them. Within a year the business would say “hire” and I would hire three engineers. Of course there was a moratorium on hiring anyone that had been laid off. Just one more turn of the wheel of corporate life.
Scenarios like the one described above have played out for over a million STEM workers in the United States over the past decade. If we look all the way back to 2000 we can add over a million more. And then there are the over 1.5 million aerospace and defense workers who lost jobs in the late 1980s and early 90s. Each time there was a very real impact on someone’s life, family, dreams, and plans. The more recent episodes have become a routine, well-choreographed, part of life driven not by paradigm shifts in technology or geopolitics, but by a high-tech industry with a laser like focus on maximizing shareholder value. The continual clamor for increasing the number of H-1B visas for the STEM sector is nothing more than one part of a cynical practice driven by quarterly accounting. I have worked in high-tech industries for 25 years. The US STEM worker shortage is an artifice. With the exception of a couple of years during the late 90s tech boom, there has never been a shortage of high-quality STEM workers in the United States. But the effects of that one shortage were profound and long lasting for the entire tech industry.
In the unprecedented demand for new high-tech workers during the tech boom competition for good employees was fierce and turnover was high. I witnessed engineers quitting a job, and becoming contractors for the same company at two times the income, without ever missing a day of work. In Silicon Valley stories of engineers changing employers multiple times a year to drive up salaries were common. Between 1995 and 2000 my salary doubled – at the same employer doing the same job. It was exciting to be in such high demand. Companies started doing some positive things to improve employee retention, but the bottom line was that the dynamics of the labor market were disruptive to business, and expensive. As a result, tech companies became increasingly creative in their efforts to stabilize the labor pool and control wages.
Offshore sites that had traditionally been focused on mass production or regional efforts for global US corporations were expanded into R&D centers, brand new sites were established, there were calls for increased H-1B visa limits to fill positions here in the states, and foreign job-shops stepped up competition against domestic contractors. Then, just when this high-tech human capital producing juggernaut hit full steam, the dot com boom came crashing to a halt. Why that juggernaut has continued charging through down-turn after down-turn and layoff after layoff is a question that demands an answer.
The main reason is probably just because it was there. Business leaders and managers had put substantial effort into creating new systems, processes, and organizations for ensuring the production bandwidth that a sustained technology boom would have required. It would have been unrealistic to assume that they would just scrap the new system and go back to the previous status-quo just because the demand for human capital had dropped off. And, to be fair, all of us had great hopes that the industry would rapidly shake off its slump and blast off again. Hopes that faded as new dynamics began taking shape.
What had been a deep domestic industry became a shallow industry spread across the globe. Tech support, software development, high-tech assembly, and manufacturing were among the first activities to make major moves offshore, but R&D would follow within a few years. As the high tide of the tech boom continued to recede, duplicate foreign and domestic efforts became unnecessary. Organizations that had their development activities divided between domestic and foreign teams found it expedient to grow offshore when growth was necessary and reduce at home when it was time to cut back. Just recently a situation was brought to my attention where a manager was encouraged to replace a departing engineer by growing an offshore team. From an operational perspective it makes more sense to replace the departing worker in the local team, but making that case to senior management can be career limiting.
Is it Cheaper to Hire H-1B Visa Workers?
There is frustration on both sides of the H-1B visa debate. That frustration has resulted in some common arguments that don’t hold up well under scrutiny. A frequent motive ascribed to corporate interest in hiring foreign workers is that H-1B visa holders are cheaper to hire. It is certainly true that hiring foreign workers to work in their home country can be much cheaper than hiring Americans to work in the United States. On the other hand, it is not universally true that foreign workers hired to work in the United States are cheaper than their US counterparts. It is definitely not the case among the major US corporations lobbying for increasing the number of STEM visas. The corporation I work for does not use different salary scales for full time US employees based on visa status or national origin. Graduates in the US on student visas are predominantly obtaining advanced degrees and start at a higher rate than US citizens that tend to compete for the same jobs with bachelors degrees. The typical H-1B visa holder is paid on par with his US citizen colleagues.
One of the common arguments against reducing, or not increasing, the visa numbers is that we cut ourselves off from the best and brightest STEM talent the world has to offer. It is an absurd assertion in practice. In an ideal world, where hiring managers applied visa hiring in the spirit of the guidelines, the process might “average up” the quality of the labor pool. The H-1B guidelines stipulate that no suitable citizen be available for a job before it can be offered to a visa holder. But the guideline is not followed. Managers simply lie on the paperwork and nullify any perceived barrier to hiring foreign workers over citizens. It’s a routine practice, and bucking the routine can be another career limiting activity for a low or mid-level manager. The reality is that the industry does hire some excellent foreign STEM workers. We also hire a lot of average and poor H-1B visa holders. The process is simply not tailored to bringing the world’s Einsteins to America.
Is the Demand for More H-1B Workers Legitimate?
So if routine layoffs in recent years demonstrate that there is not a shortage of STEM workers, and foreign visa applicants aren’t cheaper to hire than citizens, and visa applicants don’t offer a qualitative advantage, then what does motivate the big tech companies to consistently expend effort lobbying Congress to increase visa numbers? The answer, again, is not as complicated as some might think. The same basic economics of supply and demand that drove wages up and increased talent competition in the 1990s, is now being applied by tech companies to maintain a permanent oversupply of STEM workers. Increasing the pool of candidates well beyond industry demand depresses the wages of the entire industry, not just the wages of visa holders. The value this approach offers to large corporations should not be understated. Every thousand dollars saved on an engineer’s salary may represent tens of millions of dollars for one of these large corporations. You can hire a good team of lobbyists with that kind of money. But to make the case for increasing the supply, some evidence of demand needs to be demonstrated. The complexities of the situation surround the activities that are necessary to keep the over-supply of labor from appearing completely disconnected with the domestic demand for STEM workers.
One way artificial demand is developed is to create an arbitrary bias for advanced degrees. For most entry level tech jobs an advanced degree offers no benefit over a bachelors degree. Foreign students are over represented in advanced degree programs due to immigration policy details. In my own experience as a hiring manager I have seen requests for bachelors graduates result in resume after resume from masters degree and PhD graduates, all requiring visa sponsorship. When questioned about it, the Staffing department seems baffled that a manager isn’t overjoyed at being offered a PhD graduate for the entry level position. Unfortunately, diversity efforts intended to help traditionally disadvantaged groups have also been corrupted as a way to bias the hiring process toward H-1B visa candidates.
An unfortunate side effect of the oversupply game is the impact on more senior STEM workers. The oversupply of workers is heavily weighted toward the entry level. As a result there is a real motivation to focus hiring practices on less experienced workers, and there is a real incentive to move more expensive senior STEM workers out the door. When the salary difference between established STEM workers and college graduates can exceed fifty thousand dollars, you don’t have to cut many senior folks and replace them with new grads for it to quickly add up. Laying off a thousand engineers can easily add 20 or 30 million dollars to the bottom line, even if a thousand new hires are brought in to replace them. This is essentially the case in the opening scenario of this article. Companies with heavy focus on shareholder value have a clear incentive to engage in this practice – Wall Street consistently rewards the shareholders of companies that do so.
Layoffs are not rare in the tech industry. In the past decade they have been as common as the cries for more H-1B visas. It barely made a news cycle ripple when Microsoft laid-off 18,000 workers, and affected thousands of additional contractors in 2014 after having just joined with other tech giants in writing a letter to Congress calling for visa and green-card increases in 2013. Thankfully I’ve never had to ask a laid off engineer to train his replacement, but I have personally seen examples of the practice. In recent news there have been examples of companies tying severance packages to requirements that the laid off worker train their visa holding replacement before they leave. Middle aged engineers are increasingly unlikely to find employment in their STEM field after a layoff. The willingness to lose these experienced and knowledgeable STEM resources puts the lie to the cries of under supply.
The problem is made less visible by moving the burden to established workers. We don’t hear news stories about large numbers of unemployed college graduates for a couple of different reasons. One reason is that the economy has been bad enough for the past several years that stories about people having trouble finding a job are not newsworthy. Another reason is that companies put considerable effort into making room for younger workers at the expense of older, more expensive, experienced employees. One of the side effects of moving from traditional pension plans to 401k based retirement plans is retirement mobility. Pension plans tend to accumulate very little benefit in the early years and ramp steeply toward the end of one’s career. Employees have a strong incentive to stay with a company long term under a pension plan. That incentive is reduced significantly where a 401k plan is substituted for the pension, but that dynamic works both ways. It is easier for companies to rationalize laying off older workers when they get to take their retirement savings with them. The missing part of the picture is the number of older laid-off STEM workers that take significant pay cuts to stay in their field, or finish their working years making substantially less in a completely different field. The older engineer that is working at Home Depot, teaching high-school math, or fixing cell-phones in the mall, has a different opinion about the visa system than the board members of America’s large tech corporations, and the lobbyists they hire. This is where the downside of increasing H-1B visa numbers is most strongly felt.
Is STEM Still a Good Career Choice?
A real demand for foreign STEM workers may yet materialize. A 2007 EDN survey revealed that roughly 1 in 3 Electrical Engineers would advise their children to avoid the field. I found myself among that group. In inflation adjusted dollars I have not seen a salary increase in 15 years. Other forms of compensation do help some senior STEM workers, but I know too many good engineers that have literally seen their inflation adjusted wages decrease since 2000. This may be one of the reasons for the increase in promotion of the STEM field by academia, corporations, and government. Of course the promotion may simply be another lever for oversupplying the labor market. I’ve had the privilege to work with some amazingly talented young engineers in recent years, but the system is simply not set up for things to work out well for them long term.
A 2014 US census survey summed up the situation pretty well – 74% of American workers with STEM degrees are not employed in a STEM field. There are a lot of reasons why people might decide not to work in the field they studied for, but 74% is an enormous number. These degrees are among the most difficult to attain, and those that pursue them frequently have a passion for the work. Many among this 74% would love to work in their field, but the laid off engineer that gets shut out for a year or two in an economic downturn, or the young parent that takes time off to nurture a pre-school child finds re-entry into their chosen field extremely difficult. In many cases there is no downside, no compromise, in hiring these experienced workers – the oversupply pipeline is just biased towards someone else. There is simply no shortage of American STEM workers, and there is no compromise of quality in hiring them.
‘Crony Capitalism’ is Making Things Worse
There is some evidence that the “side effects” of the H-1B system were intentionally “baked in” at its origin. The system was established in 1990, in the midst of a widespread culling of Aerospace and Defense industry workers. There was clearly no shortage of STEM workers at the time. In the chorus of voices chiming in on immigration reform and visa issues, the voice of the American STEM worker is too easily lost in the din – if not altogether absent. There are no well-heeled lobbyists, no unions, and no special interest groups, interceding for the American STEM worker.
US corporations certainly have legitimate responsibilities to their shareholders, and legitimate self-interest in maximizing profits. It is not reasonable for them to pursue those goals by lobbying government for immigration policies based on the false premise of a STEM worker shortage. Arguments could be made that the government may have a role to play in ensuring the competitiveness of US industry in the face of real shortages, but in the absence of those shortages, capitulating to calls for expanded visa quotas is just one more example of crony capitalism. Complicity in a system that arbitrarily throws the lives of American STEM workers into turmoil, or exiles the more experienced from their chosen profession is not a legitimate role of government. It’s time for the interests of technology companies and the STEM workers they employ to be equally represented in Washington.