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Displaced American STEM workers spur Senate hearing

The plight of the shrinking middle class has been a resonant theme in the 2016 presidential campaign. The issue of job loss for American science, technology, engineering, and mathematics (STEM) workers has now also entered the enduring national debate over high-skill guest workers, as illustrated last week at a hearing of the Senate Judiciary Committee’s Subcommittee on Immigration and the National Interest.

At the hearing, titled “The Impact of High-Skilled Immigration on U.S. Workers,” subcommittee chair Senator Jeff Sessions (R-AL) kept the discussion focused on the moves by a number of U.S. companies to replace long-serving American workers with workers on H-1B skilled guest worker visas and to force the laid-off Americans to train their replacements. As Senator Dick Durbin (D-IL) explained, “Congress intended the H-1B program to allow an employer to hire a skilled foreign worker in a specialized occupation when the employer could not find an American worker with needed skills and abilities,” and for many years the debate has focused on employers’ claims of a STEM skills shortage. But, Sessions said, “the sad reality is that not only is there not a shortage of exceptionally qualified U.S. workers, but across the country thousands of U.S. workers are being replaced by foreign labor.” As H-1B expert Ron Hira of Howard University in Washington, D.C., testified, “over the past year, in addition to the Southern California Edison case, a number of other cases—including Disney, Northeast Utilities, the Fossil Group, Catalina Marketing, New York Life, Hertz, Toys R Us, and I could keep going on—were highlighted by the press. But these were only the proverbial tip of the iceberg. There are many more cases out there.” Testimony by labor force expert Hal Salzman of Rutgers University, New Brunswick, in New Jersey added that “all evidence and events suggest [that] the substitution of guest workers for U.S. workers is accelerating.”

Testimony by economist Chad Sparber of Colgate University in Hamilton, New York, who co-authored a report published by the Partnership for a New American Economy, a group whose co-chairs include Disney CEO and President Bob Iger and former Microsoft CEO Steve Ballmer, presented a contrary view. “Immigrants and native-born Americans do not directly compete with each other for jobs in the same way that a lot of people might imagine, and … when foreign-born STEM workers enter the U.S. labor force, it creates an opportunity for native-born Americans to respond by doing other types of work, including managerial occupations, that often, though not always, pay higher wages,” he stated. Sessions noted, however, that people who come to the United States to take a specific job under a time-limited guest worker visa are not immigrants.

The hearing’s emotional high point came in the testimony of Leo Perrero, an information technology (IT) worker with 20 years of experience, more than 10 of them at Disney. In a voice choked with emotion, he told of being invited to a meeting with a company executive in 2014. Because of his previous excellent evaluations, Perrero said, he went in expecting a bonus or promotion. Instead, he abruptly learned that his job would end in 90 days and that, to receive severance pay, he would have to spend his remaining time with the company training his replacement. “[M]y team, along with hundreds of others, were displaced by a less-skilled foreign work force imported into our country using the H-1B visa program,” Perrero said. “The former Disney employees, with far superior skills and knowledge, were the trainers, and the guest workers just entering the technology field were the trainees.” During the months of training, he said, he and his colleagues “all felt extremely humiliated.” Sessions asked Perrero whether he or any of his laid-off colleagues had found higher paying work, managerial or otherwise; Perrero responded that none had. 

“What happened at Disney is not an accident; it was clear statutory design,” testified attorney and former computer programmer John Miano, co-author of a recent book about the H-1B visa. “In 1998, Congress made it explicitly legal to replace Americans with H-1B workers,” he said. Then, “in 2004, Congress changed the H-1B prevailing wage system to allow employers to pay these workers extremely low wages. Normally, the prevailing wage is the median wage, the 50th percentile,” but for the H-1B program, “the normal prevailing wage is the 17th percentile.” In normal-wage areas, this creates a wage differential with domestic workers of about $20,000 per worker, and in high-wage areas like Silicon Valley, it creates a differential of about $40,000, with “predictable result[s],” he said. The law, he added, is “needlessly complicated … and this complexity seriously hinders enforcement.”

When 10 senators sent a letter to the U.S. Department of Labor in 2015 wanting to know if Southern California Edison’s replacement of American workers with H-1B workers who were $40,000 a year cheaper was legal, the department responded that it could not investigate because it had received no complaints from workers, Hira said. The reason for that lack, he continued, was company gag orders that workers are forced to accept, which prevent them from speaking about their experience. These gag orders, Durbin said, are “hurting us dramatically” in gaining information about the situation. (Perrero stated he could testify because he had abandoned his career in the IT industry.) Nonetheless, “in the face of the intimidation from gag orders and the threat of being blackballed from the industry, some brave workers stepped forward to file complaints, and the Department began investigating,” Hira continued. Ultimately, the “labor department … affirmed [that] American workers can legally be replaced by … H-1B worker[s],” who “can legally be paid much less than American workers,” he said. 

Although employers often claim in public statements that shortages of domestic talent prevent them from finding workers, they tell a different story in filings to the U.S. Securities and Exchange Commission (SEC), Salzman noted. “Accenture states that restrictions on guest worker supply would result in ‘new or higher minimum salary requirements and increased costs.’ Another firm says they would have to ‘replace existing offshore resources with local resources, namely U.S. workers, at higher wages.’ That is, without the congressional discount for guest workers, the highly profitable IT industry would have to hire more U.S. workers and pay them more than guest workers.”

In practice, Salzman said, the “primary function of the H-1B”—as well as other temporary worker programs including L visas and the Optional Practical Training program—“is to support offshoring low-cost labor.” He questioned the premise that “searching the globe for the best talent leads to finding only one specific demographic group of very young workers”—primarily recent graduates from India. The claims of a worker shortage come “from an industry that keeps average wages at levels from the last century, fires more people in a year than H-1B guest workers it hires, … is allowed to discriminate in hiring at levels unprecedented in half a century [, and is] one of the most profitable industries on the planet,” he continued. “Meanwhile, the tech industry spends $15 million a month in Washington. Perhaps this is the level of lobbying necessary to drive the wedge separating policy from evidence.”

“The fight for changes in the laws that serve the interests of American people has begun in the Senate,” Sessions said. A number of senators have introduced bills S.2266, S.2394, and S.2365, which would protect American workers’ jobs against replacement by workers on visa, he added. Whether any will become law, however, remains to be seen.

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