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Go Home There’s No Shortage of Work. There’s a Shortage of...

ECONOMY AUGUST 22, 2011

There’s No Shortage of Work. There’s a Shortage of Workers.

BY FELIX SALMON

This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy'. Click here to read other contributions to the series.

One of the problems with the news cycle is that perennial issues—problems and solutions both—tend to get ignored in favor of things which have changed in the last few hours or days or weeks. As a result, when it comes to the global economic crisis now in its fourth year, one of the key potential solutions has been left all but ignored from the outset: making improvements to labor mobility.

If the issue has gone ignored, that may be because it confronts us with a paradox: We’re suffering from high unemployment, but that’s partly because people can’t get to those jobs that are currently available.

Consider the global economy from a height of 30,000 feet. We see, first off, a lot of wasted resources—in food, in energy, in water, and of course in war. But add them all together and they still don’t come close to the human resources that are wasted every day. In our age of information technology and service-sector value-addition, the two most valuable companies in the world, Apple and Exxon Mobil, both have fewer employees than the average attendance at a baseball game hosted by the struggling Washington Nationals.  

And yet the right people in the right place are worth more now than at any point in history. Silicon Valley entrepreneur Marc Andreessen, writing in the WSJ on Saturday, complains with good reason:

Many people in the U.S. and around the world lack the education and skills required to participate in the great new companies coming out of the software revolution. This is a tragedy since every company I work with is absolutely starved for talent. Qualified software engineers, managers, marketers and salespeople in Silicon Valley can rack up dozens of high-paying, high-upside job offers any time they want, while national unemployment and underemployment is sky high.

It’s clear that there’s a shortage of good software engineers in the world. But it’s important to understand that Silicon Valley is facing an artificial shortage of good software engineers. There are lots of highly-qualified software engineers from India, Russia, and elsewhere—even Canada—who would love to work in Silicon Valley but can’t, for visa reasons. Even if you’ve earned your degree at Stanford University, right in the heart of Silicon Valley, it’s decidedly non-trivial for a foreigner to get a job in Palo Alto or Cupertino upon graduation. You know the companies, you know the people, they know you, they would love to hire you—but the Bureau of Citizenship and Immigration Services often gets in the way, forcing you out of the country instead.

If you’re more ambitious than that, of course, the situation gets even worse. There are at least ways of getting a work visa for the United States; they’re far too onerous, and leave far too much to chance, but it’s possible. If you want to become an entrepreneur, on the other hand, there’s really no point in even trying. Recent graduates are perfectly positioned to build the great companies of the future: They’re bright, they’re hard-working, they’re up to speed on the state of the art, and they generally don’t yet have families which require job security and a steady income. But if they’re not American citizens, it’s almost impossible for them to build the economy of the future in this way.

Still, Silicon Valley has historically been a relatively good place for immigrants—think Intel’s Andy Grove, or Google’s Sergei Brin. And that’s no coincidence. The most vibrant areas of the economy always attracts the highest rates of immigrant workers. Immigrants—especially rich and well-educated immigrants — work hard, create jobs, pay much more in taxes than they take out in benefits, and tend to have overachieving children: They’re a recipe for economic growth and prosperity. But while the Statue of Liberty’s beaconed hand is said to cast a welcoming glow around the world, in practice the United States is no longer a welcoming place for immigrants, especially when compared to its Anglophone competitors like Canada and England. America would have an all but insurmountable competitive advantage in the fight for talented immigrants, were it only to bother competing.

The lack of mobility of the skilled global elite is a microcosm of a much larger problem—namely, the lack of labor mobility more generally, both between and also within countries. Detroit, for instance, has painfully high levels of unemployment just because there aren’t nearly enough jobs in the city, any more, to support its population. The solution should be obvious: People in Detroit should move to where jobs are more plentiful. In fact, our single national currency is premised on the idea that that sort of labor mobility between states will be relatively easy, and that geographic imbalances won’t remain permanent. Of course, one of the reasons people don’t just pick up and move is that changing one’s surroundings is an inherently difficult and painful process, especially for families.

But we should recognize that this is a problem compounded the prevalence in the United States of homeownership. Selling a house is difficult, expensive, and time-consuming—all the more so in today’s depressed market, when millions of homeowners are underwater on their mortgages. In the short term, the government should be doing everything it can to bring liquidity back to the real-estate market—and that means forcing banks to do principal reductions on underwater mortgages. In the long term, it should phase out the mortgage-interest tax deduction, which artificially increases homeownership and decreases labor mobility.

Finding lasting solutions to our labor mobility problems won’t be easy. Italy, for instance, has been a unified country with a single language and a single currency for 150 years, but it still has minimal labor mobility from the south to the north. And the lack of labor mobility has long been one of the biggest macroeconomic problems facing the Eurozone; again, the millions of unemployed people in the south of the continent are not moving to fill the jobs in the north. (There’s a bit more mobility from east to west, but not much more.) And globally, discrimination on the basis of one’s country of nationality is the one universally-condoned form of discrimination still in existence: Every country in the world puts up significant barriers to prevent foreign nationals from living and working within its borders.

This is not a problem which can or even should be fixed overnight. But it’s a huge problem all the same, and the world’s policymakers should be working on it rather than ignoring or exacerbating it, as they’re doing at the moment. If we want to maximize long-term growth, eradicate global poverty, and give everybody in the world the opportunity to achieve their potential, then a vast improvement in global labor mobility is top of the list of prescriptions.

Felix Salmon is a blogging editor at Reuters.

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Boy, TNR, if the first two contributions on fixing the economy are any indication, you all are going to have a hell of a time coming up with any useful suggestions beyond what we already know we need, that is, a big fat Keynesian deficit spending package. Felix Salmon's answer to high unemployment IN AMERICA is to make it easier for workers outside America to get in and take up jobs not currently filled by Americans. I mean, WTF? Okay, so if an Indian software engineer moves to California and fills an otherwise vacant position, she'll need to buy/rent a house and buy/lease a car and purchase food, clothing and entertainment, all of which will exert a positive multiplier effect on California's economy. I do get that. But what about the effect of such a free and open labor market on American wages? Essentially what's being advocated here is that we bring globalization home. The jobs are, in effect, still being outsourced for lower pay; it's just that America will retain the opportunity to pump gas and sell hamburgers to the workers who fill those locally "outsourced" positions.

- AaronW

August 22, 2011 at 12:42am

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And if wages are generally depressed--as they inevitably will be if the local American labor market goes global--then American consumer demand will remain largely static and with it the economy. You'll have more positions filled--by workers from India or Mexico or wherever else--but everybody, including all the local workers in similar positions will get paid less and aggregate demand won't go anywhere.

- AaronW

August 22, 2011 at 12:48am

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As someone who has lived and worked in Silicon Valley for fifteen years, I can tell you that some of the author's claims are just plain wrong. If you are a non-US citizen who graduates from Stanford with a degree in Electrical Engineering or Computer Science, you will be able to work in the valley, and stay in the country, pretty much as long as you want to. The company that hires you will fill out forms saying that they could not find a US citizen who is qualified for the position they are looking to fill. The reality may be that they merely could not find a US citizen with a Stanford degree to take the job, and they prefer to hire a non-US ciitizen with a degree from Stanford than a US citizen with a degree from, say, UC Davis or UC Santa Barbara. Anway, they'll get you an H1-B visa, or failing that, get you a more exotic visa, such the visa for "Aliens of Extraordinary Ability". (No kidding; that really exists.)

- NateG

August 22, 2011 at 1:56am

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How many millions of unemployed can Silicon Valley employ? Even if those people were trained, there are not enough jobs in this new economy to employ everyone. An iPad economy naturally bleeds workers to achieve efficiency. Even if it produces net positive gains, it's winner take all, so a few engineers make a lot of money while formerly middle class people no longer have jobs.

- chaitless

August 22, 2011 at 7:43am

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Salmon's idea for labor reminds me of Cohn's idea for the stimulus, which was to drop money from an airplane. Both are actually good ideas, but jeepers.

- rayward

August 22, 2011 at 7:47am

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I agree with this much: We need to tackle the problem of excess homeownership and underwater mortgages. If "labor mobility" is the excuse for doing so, rather than "reducing the debt overhang depressing demand," then fine. And I agree that in the long term, we should absolutely be reducing the restrictions on immigration for skilled workers. That said, it isn't clear to me how reducing immigration restrictions helps with the immediate problem. Silicon Valley is a nice hot spot of economic activity in a cold (metaphorically speaking!) time, but does Mr. Salmon really think the demand from a few extra software engineers will be enough to haul the world's largest economy out of a massive slump? Do we expect immigrants to create start-up companies in large numbers, when Americans aren't? And why is this a better approach than a big old stimulus package? It's not as if it's more politically feasible--if stimulus is a hard sell, good luck trying to sell the proposition that what we need is to bring in more foreigners to take American jobs.

- Dausuul

August 22, 2011 at 7:51am

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(Addendum to previous: I am not taking the position that relaxing immigration restrictions should be seen as bringing in foreigners to take American jobs--I don't think it would be *bad* for the economy, any more than I think it would be a notable good. But that would be the instant response of a whole lot of politicians to any such proposal, and not all on the right.)

- Dausuul

August 22, 2011 at 8:35am

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My god, labor immobility is a serious problem but has to do with the level of frictional or the so-called "full-employment" employment level, and with wage levels, more mobility, higher wages. Immigration and its relationship to jobs is a serious issue and the correct approach is far from obvious. The idea that we have a shortage of workers at the moment is ludicrous. Last time I saw a statistic, we had six unemployed for every job opening. If we could match them instantly, that would surely be a boost to the economy as those newly employed would add to demand, but that is not going to employ the other five any time soon. That is to say, even magical, perfect labor mobility will not by itself dig us out of recession. I attended a lecture last year by a visiting Berkeley labor economist who specializes in, of all things, the economics of the labor market for engineers, particularly labor engineers. She supports much more liberal issuance of H1-B1 visas based on the claim that employers cannot meet their needs domestically. But it turns out that, as ever with capital, that this means they cannot meet their needs at the salaries they would like to pay. With a supply of foreign engineers who, given their limited other opportunities, are happy to take those jobs, they can avoid having to pay more. As well, in certain fields it appears that the salary differential between entry level and more advanced engineers is insufficient to justify the cost of the education. Again, foreign engineers are filling the gap, but also making it unnecessary for employers to pay a sufficient salary differential to justify an individual paying for the required education. If the externalities of having these high-level workers here are so great, then what we ought to be doing is subsidizing the advanced education for domestic workers, or entering into public private partnerships in which private firms can obtain a subsidy with which to pay for advanced education. The firm won't kick in unless it has a job to fill and the shared cost assures that there is a job to fill.

- roidubouloi

August 22, 2011 at 8:39am

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Ugh. Not labor engineers, software engineers. I don't know why we cannot type an exact preview of what we will see when published rather than in this little box with type and spacing that is often unreadable, at least for me.

- roidubouloi

August 22, 2011 at 8:42am

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Mr Salmon, Why does US industry believe it is the government's job to lower barriers to find people industry wants to hire? If there are not enough US workers trained to a high enough level to fill the jobs high tech companies have, how would the govt be better at figuring out what skills the high tech companies need and prospective employees need? The not very hidden bias in the article is that the high tech industry want highly trained and willing to accept lower wages prospects. How about this approach instead: develop in-house training of slightly lower-skilled but smart and teachable available immediately US young people. The biggest benefit of such an approach is that it ensures you will get workers who know what you want them to know, and they have exactly the skills you are looking for. You have outsourced entry level training to universities, secondary schools, and governments (foreign and US), and all you do is complain that you have trouble getting to the folks trained inefficiently by the institutions you in industry outsourced the entry level training function to. Then, as masters of your domain and entrepreneurial problem silvers, stop cherry-picking low wage foreigners, and saddle up and foot the bill for hiring your best American prospects and train them to do exactly what you want Stanford to train them to do. Our industry managers always want to free ride--reap all the benefits of the investment others make in themselves--but not pay for it. The US Government does owe you access to the "right workers". It's industry's job to train and build the workers they want with the skill sets they want. Your solutions seem to come back to thinly-disguised corporate welfare. Excuse us if we don't feel like playing sucker again.

- mdoyle

August 22, 2011 at 8:55am

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mdoyle said it much better and more comprehensively than I did. Thanks.

- roidubouloi

August 22, 2011 at 8:59am

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I assume Felix Salmon was not responsible for the moronic, provocative and simply untrue headline "There's No Shortage of Work. There's s Shortage of Workers." Nothing in his piece suggests that there isn't a "shortage of work"; Salmon just offers the thought that immigration of the highly skilled and an effort to bring liquidity into the housing market would help the situation. Shape up. If I want to encounter silly, provocative, oddly condescending headlines that are incompetently slapped onto articles that did nothing to deserve such false and dumb labeling I can just go to Slate.

- mtinora@me.com

August 22, 2011 at 9:25am

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Ummm... no. It's true that there are segments with a shortage of workers, and a simple expansion of H1B and/or permanent resident numbers could have some positive effectsin the economy at large. But it's a pretty silly headline. This is probably a minor beneift. I'd support it, but it's not the main problem with the US economy.

- miceelf

August 22, 2011 at 10:02am

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There's no shortage of skilled workers, including software engineers, in the United States. Our Benedict Arnold corporations simply prefer younger, cheaper, more docile foreign workers who would have few rights on the job. I have seen this in my work. Also, a lot of job skills are job-specific and can only be maintained by constant use. It's hard to practice these things at home when you're unemployed. So the longer educated/trainable American unemployed are excluded from employment in specialized businesses the less employable they become. So business's plaint becomes a self-fulfilling prophecy.

- amidut

August 22, 2011 at 10:28am

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We have several defense and defense support contractors in the area. They are constantly complaining about the lack of available engineering and software engineers available. However, if you read the trades, you'll find out what everyone knows, places like this post job descriptions that are so narrow, only two or three people in the world have the relevant combination of training and experience. So 'retrain them' you say? That's the point, these employers want Day One ready employees, not someone that takes six or more months to get up to speed on the relevant software design and database backend programming tools. Loads of these jobs go unfilled as a result.

- jet

August 22, 2011 at 11:02am

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As an engineer for 20+ years in the IC business (design), this article is full of tripe from a typical know-nothing 'journalist' spewing corporatist propaganda. There is zero shortage of workers. I see it all the time, industry doesn't want to pay American engineers and that is the problem. Several writers here, like Jet, Amidut and Mdoyle have described the real situation. As example of the real world and not the garbage from the consultants: in my own office two months ago an entire staff of IC layout designers was let go with no warning but 24 hrs. later job postings were put up for the same work in China. The people let go were 20+ year veterans that were spectacular at their jobs but that doesn't matter. I've seen more than one time a fantastic American candidate rejected by managers since his pay was too high at his previous job. They'd end up hiring an H1-B or some lower-end worker just because he was cheaper (forget he/she didn't fit the requirement). But hey, they're cheaper. Why do these supposed journalists assume that the H1-B has some mystical skill not available in the US? I never, ever see that as the case. And the bit about "labor mobility". Sure, it makes some sense but if one area (Detroit) has a surplus of workers, do they abandon all they own (house)? And what happens to that area? You can't take the house with you. If anything, this article is arguing for a more mobile population, with zero stake in a local community. Don't buy a house is what you're being told, you don't know if next week your employer will ax you and you need to move to that new 'hot area' to stay employed. Yeah, that's exactly what we need as a country; less community, more itinerant labor. That's such a great prescription for social cohesion and community. TNR keep up the good work of choosing your columnists. Next time my subscription comes up for renewal I should just outsource my cash to a publication that's cheaper since all of the writers are Indian or Chinese.

- tmmats

August 22, 2011 at 11:26am

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I can give a cursory example of that domestic downward slide The architecture profession as it stands right now, is a perfect snap-shot example, showing the negative results of the kinds of downward wage pressure during a recession. When I graduated in 1996, the construction industry was just creeping out of a recession. The wages of recent grads were just barely above minimum wage. It took me 2 years after my first job to make more than $9.00/hr. The downward pressure by clients & developers was to find architects that would low-ball fees to such a degree that you were breaking even (at best). This meant hiring young architects for the lowest possible salary because you were competing against older architects for the same job. Mind you as a fresh grad I had little-to-no building experience but I saved the firm money right? By the time I moved to DC metro corridor in 2001, just in time for another recession following 9/11, I was barely clearing $45K/year. Mind you I was clocking about 50+/hrs a week, minimal health insurance, and my own IRA. Round that out and I was making $17/hr. As I gained more experience and saw more of my colleagues either not go into architecture or get out all together, the pool of experienced project architects shrunk. Salaries for those with several years experience only went up when you quit and went to another firm. In 2007 the firm I worked for was at 140 people. We were so busy as to hire 2-5 people a week sometimes. The number of mid-rise, mixed-use towers in DC exploded. At the end of 2008, nearly 80% of the projects stopped dead in their tracks - either on the drawing board or a hole in the ground. Stopped. The firm went from 140 to 30 in two months. While the firm cut jobs vertically throughout, many of the younger grads and those with 3-5 years of experience and several with H1-B visas were kept on. It's cheaper if you just need production people and not necessarily critical thinking when putting together contract documents. When I say the construction industry tanked in 2008/2009/2010. I mean it tanked. Cities like Chicago saw unemployment rates for architects & some engineering disciplines reach 50%. Denver saw a 40% reduction across the entire construction sector. In the DC metro area, it literally stopped cold and is just now barely thawing out. But the result is a severe depression in wages that flatlined in 2008. With a huge glut of unemployed or underemployed design professionals, salaries are literally bid down. You have people with 15+ years of experience going after entry-level positions that pay a 25-30% less than what they might have made pre-recession. I relocated to New Orleans in 2009 because it was the only city that any infrastructure or construction work was going on. The rebuilding slowed in 2010 and firms laid people off, cut salaries & hours back and only in the last 2 months has the market started to slowly return to normal again. Firms have started hiring again and the demand for design services has suddenly gone up in the last two months. Hours and salaries are being restored to full time but you won't see much leverage among job-seekers being able negotiate higher salaries or get a bump-up by moving to another firm. Right now, you won't see many H1-B visa hires either except in the engineering firms and even that is somewhat limited here. Architecture firms still lack project architects with 15+ years of experience because that range of PAs were pushed out in the mid-90s and early 00s. So you find a lot of under-payed, overworked young grads with little experience running multi-million dollar projects because firms either can't find the PAs they need (because they left the industry & it's low pay) or they won't pay the PAs what they are really worth.

- singlspeed

August 22, 2011 at 12:53pm

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Italy, for instance, has been a unified country with a single language and a single currency for 150 years Um...not true, Italy does not have a single language, it has something like 40 living language, it has one National language but the attitudes of people from different regions are very different. Sicilians are sicilians very much so and are viewed that way everywhere. Living in Sicily for a non Sicilian is simply not like moving from Colorado to California so the author really doesn't have a clue. I think the author chose a wrong field to highlight, for example the vast majority of Petroleum engineers are hired at high salaries right off the bat. There is a huge shortage of qualified workers in this field and to state that hey, lets train everyone here is ridiculous in itself as anyone who is qualified to teach the field can make a shitload more in the field.

- blackton

August 22, 2011 at 12:54pm

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On hiring foreign engineers using the H-1B work visa, see for example http://www.cs.ucdavis.edu/~matloff/h1b.html . H-1B is used to find engineers who will work for less. Let's be clear about the argument here: is it better for the country to increase the number of immigrant engineers while depressing wages and displacing American engineers? On workers in Detroit finding it difficult to move to locations where "jobs are more plentiful". If jobs were really that much more plentiful elsewhere, you'd see a large movement of people. But unemployment is high everywhere (except North Dakota, it seems). The high cost of moving -- especially moving a family -- makes it impossible to justify a move without some assurance of finding a job. Moving from a place where there are 8 unemployed workers for every job to a place where there are 5 unemployed people for every job is not worth the trouble. And this assumes that you even have the means to afford to move in the first place (employers only pay for relocation at the high end of the socioeconomic scale). If you've been unemployed for a while and have used up all of your savings, that could be a large hurdle. Salmon is right, albeit not the first, to note that a bad housing market makes it harder for homeowners to relocate. I'll give him a 1 for 3 score here. Not a good score for an essay in TNR.

- mrheckman

August 22, 2011 at 1:26pm

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I am wondering if Salmon is getting confused between "Green Cards" and "being able to work in the US". You don't need the former to legally perform the latter. If your plan to work in the US is to win in the "Green Card" lottery, then life is very tough. If however you get an H1-B or Ex or some other exotic VISA, which is a very pedestrian process with any mid-size or larger employer, life is very easy (assuming you don't want to change employers). And once you have an H1-B, you simply apply for a "Green Card", and it will be renewed for as long as your application is pending (years and years). Running your own startup is more difficult, but I don't think I've seen too many (serious) ads for "start your own tech company" adding to the "too few workers" side of the ledger.

- Nari224

August 22, 2011 at 1:29pm

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mrheckman is dead-on. Allowing more skilled foreign workers isn't going to do anything but help drive down the pay rates on the IT jobs which pay the best. They've been doing this for over a decade in IT, and I haven't seen one improvement in a company that uses them, except on their profit margins. And even then, that's only because the employees that have to work overtime to fix everything they break are salaried and so cost the same no matter if they're working 40 hrs per week or 80.

- GSpinks

August 22, 2011 at 1:43pm

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I agree with a lot of the criticisms of Salmon's post, especially the practical likelihood (zero) of getting political leaders on board with reforms to ease qualified immigration at this time. Nevertheless, there is clearly a misconception out there that H1B employees are cheaper in some way. The law is very clear on the employer declaring that there will be no salary cut to employ the foreign worker, and the Labor Dept can be pretty dogged about the going rate being maintained. If this kind of wage depression is happening, then the company is bending if not breaking the law. Salary cuts may of course be completely unconnected to the presence of non-U.S. staff. If a company simply outsources work to another country, then that stricture falls away. But that is, in some ways, a separate issue. One indirect way the H1B workers can be regarded as cheaper is simply in the macro sense that the resources spent on their basic schooling was spent by someone else, not the U.S. taxpayer. Mostly, they come to the U.S. for grad school, having completed high school and college abroad, and often can bring certain talents and approaches with them that American students don't have (but have others).

- ironyroad

August 22, 2011 at 2:24pm

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SayNo Sorry for being late to the party, but I was wanting to clarify something you wrote much earlier, e.g. "The latest interpretation of the CRA did indeed force the bankers to abolish redlining and start giving away the loans to people, who could not possibly make any payments on them. If you know any bankers, ask them what a NINJA loan was" Couple of questions 1. What percentage (roughly) of CRA forced loans went into default? And of the loans in default that caused the crash, how many were CRA loans? 2. What does the CRA have to do with No Income, No Asset (or variations thereof) loans? 3. You mention "the latest interpretation of the CRA", but then mention prohibiting redlining which was one of the primary purposes of the act in its original form in the 70s. What changed that "made" the banks give out bad loans?

- Nari224

August 22, 2011 at 2:28pm

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Three suggestions on labor mobility within the US: 1)Universal health care, preferably with a single payer solution for the billing and funding part of it. Eliminating this issue as an impediment to moving or finding an acceptable job would go far towards reducing the cost and uncertainty of moving for new and better employment. 2) provide a federal option for selling your house, or subletting your rented domicile to the government. Corporations that move people often buy the house based on fair market value assessment, allowing someone to move from one locale to another. If the Feds did this then the second major impediment to labor mobility would be reduced, and 3) A 2 or 3 year commitment to unemployment insurance, allowing workers to take the time to find the best job for them. In other words if someone could leave their job, sell their house, and retain medical benefits, we would have a high degree of labor mobility. And what would we ask of our workers if they had this as an employment foundation? Reduction or elimination of job security features (tenure, seniority, restrictions on firing based on performance); reduction in job training programs specific to locales where industry has left or changed; and elimination of the mortgage deduction. and, by the way, for the well-to-do workers, full participation in Social Security (no cap on earnings subject to payroll tax), and the elimination of separate tax rates for capital gains and other deferred earnings loop holes.

- jessekrosen

August 22, 2011 at 2:48pm

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Dowt! wrong thread.

- Nari224

August 22, 2011 at 2:50pm

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irony, increasing the pool lowers the price. If H1B visas were not available, the price of such talent would rise and more people would be drawn into the field. In particular, the price would have to make it worthwhile to get the necessary education, or firms might discover that they need to spend money on education and training. The H1B visa therefore is a cause of the shortage, to the extent there is a shortage, not the solution.

- roidubouloi

August 22, 2011 at 3:01pm

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Wow. These TNR posts belong in the National Review. Further evidence that few if any at THR both understand and consistently advocate Keynesian economics.

- drofnats1

August 22, 2011 at 3:03pm

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Honestly, where does this guy get this stuff? Why is this in TNR?

- waroberts

August 22, 2011 at 3:29pm

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H1B people are not ten-feet tall. They require just as much job-specific training as everybody else, sometime more, such as writing intelligible English memos and cultural awareness.

- amidut

August 22, 2011 at 3:32pm

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I don't think I fully understand your point, roid. In theory, any kind of expansion of an available pool can depress wages if vacancies remain static or decline, but that would apply also to greater numbers of qualified (American) students graduating from university, more retraining of workers from other fields, unemployment of similarly qualified people due to layoffs, and other possibilities. The relatively few H1B workers aren't a big factor, especially as -- see above -- they should be paid the going rate anyhow. That said, however, there is hardly a modern economy anywhere in the world that doesn't have a certain percentage of foreign employees in qualified sectors. Again, I'm not arguing for an aggressive deployment of H1B visas at the moment, I'm just saying that it's a canard that they are some kind of secret weapon depressing salaries.

- ironyroad

August 22, 2011 at 4:17pm

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Irony, you assert that H1B workers are supposed to be paid the going rate, leading to the conclusion that they have a small effect on wages. See http://www.american.com/archive/2008/july-august-magazine-contents/america2019s-other-immigration-crisis: "H-1Bs are cheaper than domestic hires. Technically, these workers are supposed to be paid a 'prevailing wage,' but this mechanism is riddled with loopholes." Or https://www.computerworld.com/s/article/9215405/H_1B_pay_and_its_impact_on_U.S._workers_is_aired_by_Congress: "Lofgren said that the average wage for computer systems analysts in her district is $92,000, but the U.S. government prevailing wage rate for H-1B workers in the same job currently stands at $52,000, or $40,000 less."

- mrheckman

August 22, 2011 at 5:25pm

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irony, the point is not that the current fairly limited pool if H1B workers depresses wages, it's that if that pool were dramatically expanded, as Salmon appears to advocate, that global free trade in labor would depress wages.

- AaronW

August 22, 2011 at 5:25pm

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Gaah, I hate TNR commenting. The preview has no relation to the result. And when the "view full comment" occurs within a link, all you can see is the link and you can't get to the rest of the comment. The links in my post above are http://www.american.com/archive/2008/july-august-magazine-contents/america2019s-other-immigration-crisis and http://www.computerworld.com/s/article/9215405/H_1B_pay_and_its_impact_on_U.S._workers_is_aired_by_Congress The first is by a CEO who explicitly says he hired H1B visa holders because it was cheaper; the second says that average salaries for H1B holders in a particular job class are much, much lower than average.

- mrheckman

August 22, 2011 at 5:30pm

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I usually agree with you Irony but on H1-Bs you're dead wrong. The program depresses wages. I've watched how the system actually works in more than one company. Companies get around the restrictions all the time, laws be damned. I've seen more than one excellent American candidate shot down since the company could find an H1-B that worked for way less. The companies will play all kinds of borderline illegal (at a minimum immoral) games to keep the H1-Bs as indentured servants.

- tmmats

August 22, 2011 at 5:51pm

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Well, irony, let's just say that the only type free-market types such as Salmon can't understand how a market works is when labor stands to benefit. The rest of the time, it is all clear as a bell. There either is a shortage of necessary workers, as business claims, or there isn't. If there isn't, why are we bringing in foreign workers? That is going to idle some domestic worker. If there is a shortage, then, according to all of the apostles of the free market, what is supposed to happen is that the price rises above its long-term equilibrium level. This signals (big market word there) to the market that there is not enough supply. The attractive wages then induce more people to go into this line of work until the shortage is relieved. We end up with higher domestic employment. If, however, we prevent salaries for these positions by relieving the shortage with foreign workers, the price never rises and, once again, domestic labor ends up reduced. But there is the real possibility of a more pernicious effect, and I am willing to bet that it operates here. If there is a large pool of available workers just outside the market willing to come in, the existence of that pool alone is sufficient reduces salaries, because the total supply available, together with domestic workers, is well in excess of the number of jobs. Thus, even if firms pay foreign workers "the going rate," there is a distinct possibility that the going rate is lower than it would be otherwise. It need not take many job losses or changes at the margin to affect the market-clearing rate. Add on top of that various forms of bad behavior by companies, such as described by tmmats, and there can be a real problem. This is reminiscent of the argument that illegal immigrant labor only does jobs Americans don't want to do. But then, the wages might have to rise to induce Americans to do them. This is just what employers don't want. They love cheap, docile labor more than mothers' milk. Also, it has been pointed out that there are many communities in the country without an immigrant population where, miraculously, Americans do jobs that Americans are supposed to be unwilling to do. In short, capitalists have a perfect understanding of supply and demand except when labor may be in short supply. Then a great blankness creeps over them and, suddenly, the idea that price is supposed to change in response to shortage is something they have never heard before.

- roidubouloi

August 22, 2011 at 6:51pm

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speaking as an expat working abroad, I can't really criticize people going to America. I just wish people would stop viewing other humans as being burdens and not assets, a Chinese engineer working in the US is going to work somewhere, if he can add value to our society greater than that which he detracts I have no problem with him, but that is me, I don't view Furrners as being subhuman thiefs out to steal "our" jobs.

- blackton

August 22, 2011 at 6:56pm

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One need not be xenophobe or spell "furrner" funny, or think that people from other countries are subhuman or thieves, in order to understand supply and demand. And there is some economic justice in satisfying our labor needs by first fully employing our own population. There is a reason why most every country in the world restricts foreign labor. It is not hatred. Your hypothetical Chinese engineer may add value if one considers him in isolation. If an American worker would otherwise be trained to do the same job and add just as much value, what is the benefit to our society of the imported labor?

- roidubouloi

August 22, 2011 at 8:22pm

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what is the benefit to our society of the imported labor? you assume that an American can do the same job and add just as much value for the same price, but they can't. If they could companies would hire them. This ain't the 1960's anymore, lets stop pretending it is.

- blackton

August 23, 2011 at 6:23pm

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Yes, I am certain that an American can do the same job and add just as much value. Of course, imported labor is willing to work for less given the alternatives at home. That's just the point, that the purpose of imported labor is to suppress wages by idling domestic workers, or by so threatening them that they are unable to make any sort of wage demands and are docile. Docile, low-wage labor is the Holy Grail of capitalism, more dear to capitalists than profit itself. And imported labor is one of the latest weapons that capital wields in its perpetual war on labor.

- roidubouloi

August 23, 2011 at 7:54pm

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So, work force mobility is too low. Sure, but WHY? Why not ask who's in the way? You can't. The monster that's in the way will get angry. The monster is not the INS, or ICE. The monster has been inflating the wages in America for decades. The monster is telling Boeing not to hire in America. The monster pushed mass production out of the US. The monster is called the Department of Labor (plus, of course, NLRB), but you can't write articles about it in a free country. What does a business have to do to bring in a foreign worker? If you don't know, here's the answer - ask the Labor Department for a permission. ANd they'll say sure, you can ifffff.... you pay him this thing called PREVAILING WAGE, which, according to the monster, is often higher, than what the business owner pays himself. Wow, says the owner, I thought we have a market economy in America. Central committee planning is for someone backward, like North Korea. Well then, says the owner, if my workers can't come to me, then I'll go where the workers are. And all the Central Committee media hell breaks loose - "Benedict Arnold compnies", "Greed", "Workers rights". Ever checked union greed? Government greed? Government failures?That thing the greedy call prevailing wage (along with the minimum wage) has murdered the job market flexibility. Floors, ceiling, walls, even roofs, but no door. Can't find the equilibrium here, they'll find it elsewhere.

- SayNo2TAM

August 24, 2011 at 12:03am

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What a load of paranoid crap. It is not the solution to our problems to have American workers earn the wages of Indonesian peasants. All this railing against the Department of Labor is more of the same nonsense that demands that American workers be reduced to subsistence. The real monster is free-market (including free-trade) absolutism and the supply-side wacko government deficits that encourage other countries not to use what they earn by selling here to buy things from us, but to buy government securities instead.

- roidubouloi

August 24, 2011 at 10:11am

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Poverty is the answer to all our problems.

- roidubouloi

August 24, 2011 at 10:11am

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@roidubouloi "same nonsense that demands that American workers be reduced to subsistence. " Who's making those demands? That's really paranoid crap. No one has ever made such demands. All demands are always coming from labor, so... Selebrate your great vicotry. All those ugly production lines are thrown out of this beautiful country. Capitalists are soundly defeated by the glorious proletariat - no new business activity in the whole country.

- SayNo2TAM

August 24, 2011 at 2:59pm

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You are an incoherent babbler, SayNo. To no surprise of mine, you don't even understand the implications of the things you yourself say, which is that American wages should not be allowed to be higher than those in other countries that sell to us -- what you consider the unconscionable demands of labor not to be treated as serfs. Babble away.

- roidubouloi

August 24, 2011 at 3:48pm

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@roidubouloi "You are an incoherent babbler" The usual. Very profound. Learn from someone familiar with reality. Wages should go up or down depending on the market conditions.Forcing them go up and up only just kills the market, which will never tolerate that violence. Ypu can now perform your ritualistic dance on the corpse of the dead enemy. You are so very smart.

- SayNo2TAM

August 24, 2011 at 9:35pm

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"SayNo2TAM" sounds like some smug libertarian rentier who's never had to support a family with a real job.

- amidut

August 25, 2011 at 8:06am

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Are we to understand that you, SayNo, are "familiar with reality?" On which planet? Kills the labor market? Is that your incoherent point? Are we to understand that we are now in a recession because wage rates were too high? Well, now companies are making record profits. Since we are not in a boom, producing at a rate above equilibrium capacity, the only possible explanation for this is that the wage share of output is low. Yet, the labor market is not reviving. How can that be if you are correct? It is because the labor market is not at all like the market for, say, shoes. The labor market has an immediate feedback affect on the goods market because -- this just in from the real world -- it is human beings who buy products! Thus, what happens in the labor market affects not only the willingness to supply goods -- the point you think you are making -- but demand for goods. Perhaps on your planet, it is products that buy human beings. Not here on earth.

- roidubouloi

August 25, 2011 at 5:24pm

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Oh, I love this part, SayNo, where we get to compare CVs. Yours consists of reading the Cliff's notes version of Atlas Shrugged, or perhaps watching the cartoon? Here's what I've been doing: I began my career as a commercial banking lawyer on Wall Street, representing some of the world's largest banks at one of the world's premier law firms. Worked on a couple of billion of financings in the late 70s and early 80s and was an expert on the Uniform Commercial Code and, of all things, Iranian assets control regulations. Go figger. Then went to business school, both NYU and Columbia, and joined a leverage buyout firm, ultimately becoming a principal. Spent 10 years buying and selling businesses, serving as the de facto CFO of a number, and even as the interim CEO of one. Handled a couple of difficult work-outs. Then I started my own securities trading firm. Still doing that. More recently, I have been working on a doctorate in economics, 2/3 of the way through now, and doing quite well thank you. Now, persuade me that you have reason to know something, anything, one little thing about the actual discipline of economics, not the cartoonish tripe you pick up in right-wing screeds.

- roidubouloi

August 25, 2011 at 8:31pm

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Oops, posted this last one on the wrong thread. Sorry for that. Over to the Jared Bernstein thread.

- roidubouloi

August 25, 2011 at 8:33pm

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What a load of you know what! The US has more than enough engineers to do the job. The industries prefer to ship jobs out of the USA and when they can't they import workers taking the place of US workers at a lower rate. There is another horrible side to this picture that no one seem to notice. But I do because I know a bit of history. Two examples: 1) Mustard, you know the yellow stuff you put on your hot dog. At one time the city of Dijon in France thought of it as so important to it's economy that the recipe for Dijon mustard is still kept in the city's coffers. 2) Crystal you know the fine glass they used to keep fine wine in beautiful crystal bottles in. The secret of making crystal was regarded as so important that every city in Europe making the stuff had a law going up to even the death penalty for anyone divulging the secrets of making crystal. What is the USA doing? American companies export jobs and in the process the very knowledge that sometimes exist thanks to tax Dollars in grants for research that lead to the production now exported abroad. The next thing I want you to notice. Chinese products up to very recently were known for cheap shoddy products. Lately I bought things made in China (almost everything in the stores is made in China today). Together with finding made in China I found the product to be made perfectly and able to compete with the same made in the west. We are the idiot in the story seating on a branch while cutting it next to the trunk.

- Poupic

August 26, 2011 at 7:33pm

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