Yinzers Cut Pittsburgh Wages By 6%

Mike Madison makes the case for more H-1B visas. The numbers he presents do suggest that Pittsburgh benefits significantly from this niche labor pool of foreign-born workers. However, recent research concludes that some workers are hurt by the H-1B visa program:

"In this paper, we simply sought to dispel the myth that globalization generates no losers," wrote Prasanna Tambe, an assistant professor of information, operations and management sciences at the Stern School and Lorin Hitt, a professor of operations and information management at Wharton. The authors said that it's important that policy makers understand the wage impact of the H-1B visa program..

The study is unique, the authors said, because of its study of all the resumes. That combined with other public sources of data, gave them a sample number of IT workers in each firm, which they coupled with the number of H-1B workers these firms reported hiring. In total, the study was based on information the researchers compiled on 156,000 IT workers employed at nearly 7,500 publicly-held U.S. firms.

"The relationship I'm investigating here is how compensation looked for domestic workers, depending on whether or not their employers are using offshore and H-1B employment," said Tambe.

What they found is that H-1B admissions at current levels are associated with a 5% to 6% drop in wages for computer programmers, systems analysts and software engineer categories.

A reading of the white paper reveals that the increase in talent supply decreases wages for incoming IT workers. Here is a provocative passage:

Although the prevailing wage may not be an accurate reflection of the amount H-1B workers are paid by employers, the average wage listed in the H-1B application appears to be substantially less than the average wage paid to the American IT worker. This comparison does not control for job classification, education, or experience, and therefore provides little evidence about whether H-1B workers are paid less than their American counterparts, or whether H-1B admissions depress wages for American workers. Comparing the two distributions, however, indicates that unless employers are generally paying significantly more than the prevailing wage for H-1B workers, H-1B employees are either 1) primarily hired to fill positions towards the bottom of the IT wage distribution, or 2) are paid less than their domestic counterparts for the same positions.

The implication is that H-1B workers help to staff the IT sweatshop, reducing costs of the rank-and-file. I can't shake the fact that the H-1B visa program represents a captive labor pool. There's no getting around that these are temporary contracts and labor mobility is limited. Fast track Green Cards would be better for all concerned, save the big corporations who submit the lion's share of H-1B applications.

I'm reminded of the Pittsburgh labor market, which suffers from oversupply and reduced geographic mobility. (Hence the title of this post.) This depresses entry level wages. Furthermore, advancement opportunities are in shorter supply. If more people relocated in order to advance their careers, then the local work environment would improve.