Originally published in 2015, still relevant...
There was a time when I thought that having a bad
day at work was pretty routine. Then I had one. The day I found myself sitting across the desk from the coworkers I had to give the news that they were being let go. Some were friends. Some did their jobs very well, some not so well. They asked the predictable questions. Why was I picked? What could I have done better? The business said “cut”, so we cut. They told us who to cut, so we
cut them. They didn't give us answers to the predictable questions. Within a year the business would say “hire” and I would hire more 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 possible 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.
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 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 bachelor degrees. The typical H-1B visa
holder is paid on par with his US citizen colleagues.
One
of the common arguments against reducing 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 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.
So
if routine layoffs in the past few 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 motivates 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 annual engineering 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 bachelor degree. Foreign students are overrepresented in advanced
degree programs due to immigration policy details. In my own experience as a
hiring manager I have seen requests for bachelor 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. Diversity efforts, ostensibly intended to help traditionally
disadvantaged groups, have also been corrupted as a way to bias the hiring
process toward H-1B visa candidates.
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. In addition to limiting placement opportunities for new American graduates, the impact on more senior STEM workers has been devastating. 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 tragic scenario at the beginning 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 likely to leave the STEM field after a layoff. The
willingness to lose these experienced and knowledgeable STEM resources puts the
lie to the cries of under supply.
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.
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.
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. There are no well-heeled
lobbyists, no unions, and no special interest groups, interceding for the displaced 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.
