Do Immigrant Engineers Depress Engineer Wages?

There's a large body of work from economists in this area. My impression is that the answer seems to be that the effect on high-skill workers is positive, and the debate is over the magnitude of the positive effect. But, even putting that aside, it seems to me that it's hard to make either a practical or a moral case for restricting immigration of engineers more tightly than we do now.

First, the practical case: when I was in college (2000-2003), none of the Indian or Chinese people wanted to get a job back home. And, they were some of the best people in school: the more advanced the class, the smaller the proportion of native born Americans; graduate level classes were mostly full of foreign-born students, and most of the top of the class consisted of foreign-born students. The U.S. didn't let most of them stay in the country, forcing them to go back home. If you take a bunch of smart people, and force them to live in their home country, they aren't going to go dig ditches; they're going to start industries. Those industries have done so well that many of my classmates (and others) who have spent time working in the U.S., and have a legal right to work here, want to go back home. They, naturally, want to be near their families. A decade ago, there wasn't enough industry to find a job that was both interesting and well paid. By forcing the people who wanted to stay here to go back home, we've forced them to create good companies, and hence, good jobs.

And then there's the moral case. This is less relevant for high-skilled workers now, due to what's happened above, but it still applies for many countries and most industries [1]. If we reduce the wages of engineers in the U.S., we're reducing the wages of a relatively well off group in one of the richest countries in the world. We're talking about reducing the wages of someone who is, on a worldwide scale, in the 99th percentile. If we let someone in from a poor country, we're increasing the income of someone who might be below the 50th percentile into the 99th percentile. It's awfully hard to make a case that we should be enriching the richest people in the world at the cost of the poorest.

[1] Total factor productivity [2] in the U.S. is so high that unskilled Mexican laborers become three times more productive when they cross the border, and, globally, Mexico is one of the richer countries in the world.

[2] http://en.wikipedia.org/wiki/Total_factor_productivity

This really is a no brainer, if you have the best and brightest coming here to work, then its only going to make everybody in the industry better as everybody has to raise their game to compete, as long as these workers don't flood the market (which the h1-b quota does a good job of keeping in check)

The problem is with some of the foibles of the h1-b visa. H1-b workers cannot compete in the job market the way an American worker can, because to get the h1-b the hiring company has to fork over almost $5k to the govt, to transfer to a new job, the hiring company has to pay $3k (I think), every 3 years the hiring company has to pay another $1k to renew the visa, and at the end of 6 years the hiring company has to start a green card application which costs a lot of time, money and resources IN ADDITION to the renewal fee (again).

Because of that, the hiring company wields extra-ordinary power over the h1-b worker which means that h1-b workers can be used to artificially depress wages.

The fix for this isn't all that complex. keep the h1-b as it is (complete with the yearly quota, which should be adjusted according to demand), and give a green card to the worker AUTOMATICALLY after 2 years, so that they're free do as they please in the market and see what happens.

Engineers know what they should be making and if anyone tries to underpay their workers, they'll have to contend with the fact that they'll be gone in 2 years, at which point they have to seriously ponder if it wouldn't be cheaper to actually train/hire an American to do the job. This would stem the problem of bodyshops bringing in immigrants and underpaying them for donkey years while profitting richly off their labor, and companies who'd apply for h1-b workers would actually need them and pay them fairly.

Immigrant engineer here. Do immigrant engineers depress wages? Of course. Trivial supply and demand (and I'm surprised to see a supposed economics blog make unintuitive assertions without providing any evidence). You can already see wages rising rapidly as a result of the already low supply of engineers. Kids coming out of Stanford are getting 6-figure offers at Google. If there were less engineers, lots of companies wouldn't be able to hire at all, leading to no option but to increase their offers to attract talent.

But the thing this article got wrong (which is the same mistake made by anti-H1B articles) is asking the wrong question (though it touched on it at the end). Is it better overall with immigrant engineers? Is the economy better? Are companies able to do better (therefore providing more taxes) as a result, or able to build better things (such as the google car or glasses)?

Finally, I'll note that moving to the Bay Area does not necessarily result in 5x salary, but even when it does, it doesn't result in 5x standard of living. If I had stayed in Dublin, I'd be on a similar salary (maybe 20% lower), but I'd be earning over 3x the average salary and so be able to have a much higher relative standard of living. The downside of living in SF with a good salary is that everybody has a good salary.

If foreign-produced flaxseed oil costs 20% of US-produced flaxseed oil, and is imported in quantity, "What happens to the market clearing price of US-produced flaxseed oil?" is not a very difficult question. We do not need to adopt the counterfactual "Consider what would happen to flaxseed oil prices in an American city which banned foreign flaxseed oil. Why, they'd be a laughingstock! Flaxseed oil consumers would flee to other jurisdictions!"

That's an interesting speculative conclusion to a hypothetical policy that is not on the table nor will ever be considered in the United States. Back to the question: what happens when you import cheap flaxseed oil? Market prices go down, with very high confidence. Claims to the contrary would generally require fairly persuasive proof since they invert our understanding of how the world works.

(n.b. I don't particularly think my political opinions are relevant, in much the same way a physicist doesn't feel the need to mumble "Sorry to be a gravitationist" prior to suggesting that a banana pushed off a table will tend to accelerate towards the ground rather than hovering in midair, but to the extent I have them they're "Let the flaxseed oil flow" and to the extent I have economic interests in US-produced flaxseed oil I'd prefer it to be as cheap as possible since I'm a buyer more than I'm a seller.)

While I was hired under H-1b visa I was definitely underpaid, but the moment I got greencard my options exploded. Now I work at startup for 1.5x of prevailing wage in here. And in a year or so I plan to get next bump in salary or finally do a successful launch of my own project.

So... Do not want to slump domestic engineer wages? Remove stupid restrictions and procedures to do transfers once employee got a job in USA so these foreign employees could pick for whom they want to work as easy as this could do domestic employees.

The column does not directly mention H1B, but it is clear that H1B is the subtext.

Here are a couple of points not mentioned.

The top 10 H1B employers account for about half of the visas issued in recent years. All 10 are contract houses that specialize in out-sourcing. They bring people in, train them up and then send them back to work on the same programs remotely at local rates. These actions are totally against the stated principles of increasing the number of technically skilled workers in the US.

http://www.npr.org/blogs/alltechconsidered/2013/04/03/176134...

H1B people are supposed to be paid a prevailing wage. There are two big problems with that - there is absolutely no money at all allocated for enforcing that requirement, and due to technicalities (or loopholes) in the legislation, companies are legally able to pay rates for the lowest skilled categories rather than ones commensurate with their skills and jobs.

http://www.cringely.com/2012/10/23/what-americans-dont-know-...

FWIW, I am totally willing to go with the concept of a network effect, that skilled engineering job market is not a zero-sum game. But the H1B program is practically the worst possible implementation to take advantage of any network effect in the labor market. To me, it looks like it is designed to wreck it.

I'd rather H1B be treated like a fast-track immigration visa - if you qualify for an H1B visa you are guaranteed a green card in 2 years or less. I think that would remove much of the ability for H1B employers to use them in ways contrary to the rhetoric that sells H1B to the uninformed.

Very basic economics says that a greater supply of people willing to work at a lower wage (as many H1Bs) will reduce the market wage.

"Somewhere along the line, the H-1B program got side-tracked. The program was never meant to replace qualified American workers, but it was instead intended as a means to fill gaps in highly specialized areas of employment. When times are tough, like they are now, it's especially important that Americans get every consideration before an employer looks to hire from abroad" - Sen. Chuck Grassley

I think there are two worlds here. For folks in the Valley, in NYC, or in companies working at the bleeding edge, you want to fund the best, most qualified people, period. That makes sense, and in the best interests of the country.

But, in terms of numbers, the real money is the more banal "staff augmentation" programmers that you see in "compliance advertisements" in industry trade rags. There is a shortage of qualified COBOL programmers, but you don't hear about training programs for COBOL (back in the 70's clerical staff were trained to do write that stuff, not compsci types). But you do see government contracts paying $30/hour to "body shop" vendors, who in turn are paying Indians $12-17/hr. similar story for people doing business rules in some J2EE thing.

That's a problem, because many of the few million un- or under-employed workers in the US could be trained to do this type of work quickly.

Well there are two answers here.

First, coming from a less developed country doesn't mean you'll be less skilled. On the contrary, it's a strong incentive. Being raised and schooled in a developed country is only a luxury, it won't make you a better engineer.

Secondly, those engineers will "depress" wages for several reasons. First, it's supply and demand. They have much stronger wishes to work in a developed country compared to native engineers. Secondly, companies might also hire native engineers because of various reasons, like language barriers, relationships between personel, the culture of the company, etc.

If it depress wages, it might be because there might be a lack skill and innovation somewhere. Lower wages isn't always a bad thing actually.

>Suppose the city of San Francisco deported 10 percent of its computer programmers tomorrow and adopted a law saying that in the future no engineers born in other counties were allowed to move here. Would that lead to skyrocketing earnings for the remaining engineers? I seriously doubt it. I think it would destroy the San Francisco tech industry with some unfortunate knock-on effects a bit south in Silicon Valley.

I wonder if there is a name for this fallacy, because I see it all the time. A common example is "Well imagine what would happen to the economy if everyone became a vegan tomorrow!"

As a malicious device for derailing a discussion, it's pretty clever. It pivots the argument from "how would the world be different if Y instead of X?" to "how would the world be different if we instantly tried to switch from X to Y?"

Suppose you propose going to the grocery store. I say, no that's a terrible idea. Imagine if, in the next second, you were suddenly whisked away to the grocery store — the acceleration forces would liquify you! Obviously that would be a dumb thing to say, but you still see these "what if X overnight‽" arguments all over the place.

First off you have supply and demand, which is enough to say that new workers would depress wages. You can go deeper into the micro-economics view point and look at the utility curves of the American Engineer vs. an Immigrant Engineer, and see that they are very different. A immigrant engineer, is facing possible deportation to a country with lower wages, whereas an American Engineer is more willing to hold out for a higher wage, knowing the state of the labor market and that they do not have as pressing of a need for a job immediately. To an immigrant worker, turning down the job could lead to a much worse outcome, so their logical choice is to take the initial pay offered.

Furthermore, the business is aware of both their cost of the H1NB and of the immigrants situation, which gives them a negotiating advantage. They can use the H1NB cost as a negotiation tactic, and pay the worker a lower wage, without fear of being turned down.

So if someone wants some actual data on this, here's one thing that we could look at:

Openness to immigration (admittedly not the easiest statistic, but we should be able to find something that works) compared to local wages, corrected for GDP.

That should give us a way to compare relatively open countries with relatively closed countries, and see which ones have higher wages.

Who should we believe, the "columnist who doesn't think it's obvious" that pulling in piles of low-paid immigrants depress local wages, or the capitalists who do think it's obvious? What possible reason would there be for hiring foreign workers if they WEREN'T depressing local wages?

And indeed, the studies confirm our intuition:

http://hothardware.com/News/Study-H1B-Visas-Lower-US-Program...

What I don't get is that the law allows hiring foreign workers only if a qualified American worker could not be found, but I have never seen any evidence of this. Has anyone heard of a company being forced to prove this, or experienced an interview process where they prioritize American workers?

One word economics! It can provide real answers to the questions poised by the author. The author treats this subject like a black science creating hypothetical scenarios. What a joke.

A piece on immigration as it relates to skilled labour with no mention of H-1B? If you aren't investigating the primary manner by which skilled foreign labour finds itself in the states, then you're never going to get a good answer to the question: "Do immigrant engineers depress [native] engineer wages?"

Of course, an H-1B visa is technically a non-immigrant visa, which goes a long way in investigating the question by itself. It's somewhat misleading to even call them "immigrant engineers" if most them are on a temporary visa that ties them to a sponsoring company and requires them to leave once time is up. This clouds the issue of supply and demand, as the labour pools are really quite different: foreign nationals who are tied to a specific company and are only permitted to reside for X years, versus natives who are free to work for any company and can live here indefinitely. It _is_ obvious that the native is going to be able to command a far higher salary than an H-1B that is stuck with his "sponsor."

Now, whether companies are pushing for more H1-B's because of this wage suppressing factor, or because there is an unresolvable shortage of native talent, is the million dollar question. And it's a question that, in my mind, is readily answered. Convert the H1-B into a full-on green card, wherein the skilled foreign labour is granted all of the rights and privileges of a native. If the shortage really is unresolvable --for whatever reason-- then companies still have all the skilled foreign labour they would need; the companies' staffing concerns are still addressed. And since the foreign national is permitted to live and work wherever he pleases (he is essentially identical to a native applicant at this point), the argument of wage suppression is significantly weakened, since the main argument is that there really _are_ natives willing and able to do the jobs but they're getting priced out of the market because they can't compete with locked-in H-1B holders.

The skilled immigrants win. The companies still get their skilled labour and win. If there really are natives ready and willing to do the jobs, then they too will win.

I won't even say that they do, as it is obvious on the face of it.

There's really no debate about this issue, like scientists debating some aspect of quantum mechanics seeking to get to the truth. This is a fight over how the pie gets divided up, and the billionaires and their commissars like Yglesias are trying to grab more of the pie. We're still at a historic unemployment high from the 2008 crash, current unemployment was not at its high current level from 1984 to 2008 other than a two month period in 1992.

As I said, this is not a debate like physicists arguing to get to the truth. This is a struggle of people trying to get their pockets filled, and lies and nonsense are par for the course. Every statement in a thread like this boils down to either "I am on the side of the IT workers who create the wealth in the US" or "I am on the side of the heirs and billionaires who extract profit from the labor of those who work".

So glad Yglesias is looking out for us common programmers...Yglesias's bio says he went to Dalton. Do you know how much first grade costs at Dalton? Over $40,000. The heirs, the billionaires and their agents got together to push for more H1-B slaves in the midst of this historic unemployment, and now the propaganda push happens. Arguing with their agents does nothing - get together with other engineers organizing against this type of nonsense and get going. There is no type of honest debate possible as they are just greedy people who will tell any lie to pile some more money on their billions. Your alternatives are join with those organizing against these types of things or do nothing. Yglesias and those who agree with them are liars who will say anything to rip you off, so talking to them is pointless.