High-Tech Work Migrating Overseas

U.S. Policy Encourages Loss of Jobs to Foreigners

by Lawrence Richards, Executive Director, SoftPac

The following is an abridged version of the article originally published in the Winter 1996 issue of Working People.

In 1988, as word of an impending shortage of scientists and engineers spread, I was feeling very upbeat about my career prospects. It seemed my skills in computer science would be in demand and my wages would surely rise in the coming years. Now, seven years later, I have been living off my savings for the last year as I work full time trying to organize programmers in an effort to save those very jobs that were supposed to be in such demand.

As with most prophets, those at the National Science Foundation proved to be false. Instead of their predicted shortage, between 1990 and 1993 the U.S. saw the number of engineering jobs decline by 146,000 while engineering unemployment doubled to a record high. At the same time, Richard Ellis of the American Association of Engineering Societies says that compensation levels for engineers have been falling for the last five years. And far from a shortage, U.S. universities were graduating twice as many bachelors in engineering as there were job openings created through replacement.

There are multiple reasons for this decline. What I would like to do here is focus on the two factors which I believe are at the root of the problems we now face and to show how they have interacted to produce the current crisis. One factor is the victory of capitalism over communism, the other is our immigration policies.

One obvious result of the end of the Cold War has been the massive downsizing of America's defense industry which had employed so many engineers. Another result of our battle with communism was the massive deficits incurred to fund the Cold War. As the deficits grew, concern about their size eventually resulted in a determination to put our budget back in balance. This is now resulting in cut backs in federal funding of all kinds of research projects that employ engineers. However, the decline in the defense sector and cuts in federal research funds should be viewed as more of a cyclical change than structural, comparable to the similar downsizing that occurred after the end of the Vietnam War and the Apollo moon missions in the early 70's.

The victory over communism, however, has also resulted in some fundamental changes which we have not faced before. One result of the world wide embrace of capitalism is the lessened fear by corporations that their overseas operations will be nationalized by revolutionary governments. This has resulted in the evolution of multinational entities, without an allegiance to any particular nation's interests and prepared to go anywhere for markets and labor pools. And gone they have. Where once a third of the world's labor force had been shut off from the global economy, vast pools of cheap labor are now readily available to be exploited.

The fact that much of this labor is highly skilled needs to be of special concern to America's engineers. To quote from a March 17, 1993 article in the Wall Street Journal, "The availability of low-paid professionals in Malaysia, Hungary, China, India and elsewhere calls into question the idea, popular in the Clinton administration, that U.S. workers can raise their own wages or job prospects by acquiring more skills."

Indeed, according to Craig Barrett, Chief Operating Officer of Intel, "Just as with the move of manufacturing overseas, you're going to see an increasing flux of technical jobs out of the U.S." I can think of no better illustration of this than a recent announcement that AT&T will move part of its Bell Labs to China. Almost every major American computer company is opening facilities in Bangalore, India, where computer programmers earn $800 a month.

This is where our immigration policies have interacted with these other trends to produce a crisis. The fact that companies can now send our jobs overseas is due in part to our immigration policies. One factor is the easy immigration possibilities afforded foreign professionals by industrialized countries. The direct result of eased immigration has been a vast increase in the number of people in less developed countries who study technical subjects, far greater than their domestic labor markets could possibly support. For instance, according to a January 10, 1995 article in the Financial Times, 60 percent of the computer science graduates from the Indian Institutes of Technology emigrate soon after graduation.

Another factor is the use of temporary visas by American companies. They are bringing foreign professionals into the United States to train them in the company's operations, and then sending them home to staff the company's foreign subsidiary. A Tandem Computers memo states that the major factor influencing their decision to open a development center in India was their experience with working with Indian developers here. The same companies they use to staff their Indian operations are also some of the largest users of temporary work visas in the U.S. The memo goes on to say that the expeditious processing of visas by the INS has been vital to the success of their Indian venture.

Besides the role our immigration policies have played in building up our foreign competitors, their more immediate impact has been right here at home. In 1990, in response to the National Science Foundation's prediction of a shortage, Congress nearly tripled the number of employment-based immigrants admitted each year from 54,000 to 140,000. As a result, between 1990 and 1993, while the engineering job market was entering its worst period in history, this country admitted over 50,000 computer scientists and engineers as immigrants, and over 100,000 were admitted on temporary work visas.

The fact that employment-based immigrants are damaging U.S. wages has been confirmed by research done by the Urban Institute. In a 1992 report examining the impact of family-based, employment-based and illegal immigrants on native wages, the authors found that the only types that have a significantly negative impact are employment-based immigrants.

This should not be surprising if you realize that the Department of Labor has been completely unable to distinguish between immigrants with truly unique skills and those that are merely run of the mill. Demetrius Papademetriou, former director of immigration policy at the Labor Department, has said of the program that it "never has worked and it never will." Indeed, in 1993, more than 94 percent of engineers and 98 percent of computer scientists seeking to immigrate were certified by the Department as filling jobs for which no American could be found. The Labor Certification process is little more than a rubber stamp; one that costs taxpayers $60 million a year to administer.

As for workers here on temporary visas, they are "highly-coveted because, . . . they are basically indentured to the company(s) sponsoring their employment tenure," according to one employment agency's sales pitch. These visas are easily secured with no oversight on how they are used. As an example, this past July, I submitted an application to the Department of Labor asking for permission to hire 40 foreign programmers at a rate of $4.50 an hour. This application was approved in just nine days.

No one is checking whether foreigners hired on temporary visas are being paid what an American would be paid, or whether Americans are available to do this work. In fact, it is perfectly legal to fire Americans and replace them with "guest workers" earning far less. For instance, last November, one company laid off its entire MIS department of 250 computer programmers and replaced them with foreign programmers working here on temporary visas.

On December 10, 1995, CNN aired a story about 350 programmers who worked for Sealand Services in New Jersey who lost their jobs to a combination of Filipino programmers here on H-1B visas and outsourcing of the company's data processing operations to the Philippines. In this one incident, we see the nexus of the two trends I have been talking about.

Sealand has called its move part of its efforts at "global integration." This is the new global labor market we as engineers are facing and it is not a pretty picture. Unless we act to change government policies now, we are looking at the leveling of the U.S. wage structure with that of India, were programmers earn $800 a month. It is just not conceivable that with all of the surplus labor available in the world today that third world wages will rise fast enough to ameliorate this threat.

The U.S. needs to face up to these facts now. As a short term measure, we should change our immigration laws to cut the number of computer scientists and engineers allowed to enter the U.S. The current oversupply in these professions is only being further exacerbated by our generous immigration policies. Longer term, we need to start rethinking our trade and tax policies to discourage companies from sending jobs offshore.

Most importantly, we must expunge the debilitating hubris that has overcome American engineers. It is time to stop thinking that it is only other people who's jobs are at stake. And it is time to stop thinking that we have any special talents in this country that do not exist elsewhere or can't be easily learned. What we must do is wake up to the fact we are in the same boat with the millions of other Americans who have seen their jobs sent abroad and start acting together to stop this trend before it is too late.