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GroupThink, Not Facts, Responsible for Tech Industry Labor Shortage Myth


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The current Immigration Bill before the Senate would nearly double the number of H-1B visas that American companies could use to bring in temporary foreign workers in industries experiencing a “skills shortage.”  However, new research shows that the shortage of qualified applicants is a myth and that foreign workers are not necessary in the U.S. given high unemployment.  

To many who oppose expansion of the H-1B visa program, hiring of temporary foreign workers is nothing more than a way to drive down the cost of labor (read: wages).  But Steve Goodman, chief executive of Bright, the company which did the latest research on the issue, believes that some of the dependency on H-1B workers may be caused by group think:

“We’re Silicon Valley people, we just assumed the shortage was true,” Mr. Goodman said. “It turns out there is a little Silicon Valley group think going on about this, though it’s not comfortable to say that.”

This problem is not specific to America. Canadian workers have been dealing with a similar scenario and quality data to support the aversion to temporary foreign workers has been the result.  As unemployment peaked North of the border, the Canadian government allowed Canadian companies to double the number of temporary foreign workers being used, according to CBC News:

In 2006, there were 150,000 temporary foreign workers employed in Canada. By December 2012, that number had more than doubled to 340,000.

The growth in the number of foreign workers continued throughout the 2009 recession, when the unemployment rate peaked at 8.6 per cent. In June of this year, unemployment stood at 7.1 per cent, though joblessness among young workers was stuck around 14.1 per cent.

In order to combat the negative overall effect of imported labor on wages, the Canadian government recently made reforms to help correct the situation:

One of the key changes that Ottawa announced in April is a new fee that will be imposed on employers when they apply to the government for a labour market opinion (LMO). A positive labour market opinion must be obtained in order for employers to bring foreign workers to Canada. It takes a number of factors into consideration including what potential benefits hiring the foreign workers would have on the labour market and what efforts were made to hire Canadian workers for the positions.

The government also got rid of a rule that allowed employers to pay foreign workers up to 15 per cent less than the prevailing wage for a classification of job.

Yet in America, where the same effects are being felt from the same cause, we are increasing our H-1B visas.  Lawrence Katz, an economist at Harvard, notes in the aforementioned NYT piece that “while the tech industry’s claims of a labor shortage may be overblown, the argument over expanding temporary work visas should not be made on the basis of whether there are shortages at one point in time.”  Katz argues that specific job categories, such as computer systems analysts, may have mismatches in openings-to-applicant ratios but that does not mean we should assume the same is the case in the entire technology sector:

“They don’t help us determine whether the U.S. economy would benefit from an expansion of the H1-B visa program or what the impact would be on U.S. workers in these occupations,” he said. “The case for and against expanding the H1-B visa program should be done on an overall assessment of the impact on the U.S. economy (workers, consumers, investors, students/future workers) and not only on whether there are short-run ‘shortages’ in any specific occupation.”

What remains the most convincing argument regarding the labor shortage myth, ironically, is wages themselves. If worker supply is low and position demand is high, wages would have risen mightily. And, well, we all know that’s not happening…


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