Homegrown Talent and the H-1B Visa Program

Recently, I have had the good fortune of receiving a few ideas for blog posts from readers. Today's draw takes me to Robert Cringely's thoughts on IBM's rumored downsizing here in the States. Mr. Cringely suggests that new free agents will find the current job market tough going thanks, at least in part, to the H-1B visa program:

So IBM is getting rid of tens of thousands of U.S. jobs yet escapes public attention. Since most of these are experienced IT workers, one would assume they can get good jobs. WRONG! Thanks to the H1B visa program they can't. Or if they can, it is with terrible pay. The USA has more than enough IT workers for its needs. H1B shuts them out of those jobs.

I have a friend in the Midwest who runs a small job placement service specializing in programmers. He has an engineering degree and is good at spotting talent. A few years ago the people he placed made about $70,000 a year, but no more. Last year he placed someone at a big firm. This person had 20 years of programming experience and was really good. The job paid $21,000. Then the employer laid this worker off during his first week on the job, bringing in an H1B replacement. That employer was MasterCard.

That management is using cheaper foreign labor to undermine the leverage of domestic workers is an old charge. Increasing the supply of talent should depress wages, but the H-1B visa program is not likely the only culprit for the above anecdote. Shedding tenured employees for entry-level or even temporary workers is a common method for reducing labor costs. Cutting the total number of employees and increasing the workload for those remaining is also part of corporate restructuring occurring in the wake of an economic boom gone bust. Is there no evidence for slack in the demand for talent, particularly for people with more experience?

Regardless, Mr. Cringely claims that there is no domestic shortage of IT workers. That is in stark contrast to reports of a talent crisis in a number of US States. Basic demographics reveal an aging workforce on the verge of retirement. The shrinking number of young adults is fueling the concern about the future viability of Social Security.

What the H-1B issue boils down to is the relationship between the supply of talent and job creation. If the demand for labor stays the same or even shrinks, then the H-1B visa program is most certainly a bad deal for current employees. But do we see depressed wages in areas with a relatively high concentration of foreign-born labor? Does the "Midwest" meet those criteria? Is unemployment among IT workers rising dramatically? Mr. Cringely is guilty of the same kind of baseless fear mongering that anti-immigrant groups use to fuel populism. The arguments lack substance and often do greater harm (stifling job creation) than good (raising wages).