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Why Tech Companies May Really Want All Those Extra Visas

The shortage of workers in the IT industry may be overblown, a new study claims.
April 25, 2013

Internet and software executives are heavily lobbying for immigration reform legislation that would increase the pool of high-skilled foreign citizens who can work in the U.S., many receiving what are known as H-1B visas. They argue that a U.S. skills shortage is slowing growth in the industry. For example, Facebook CEO Mark Zuckerberg, in a recent a Washington Post editorial, says that each H-1B employee creates “two or three more American jobs in return.” 

But job creation accounting is always fuzzy, and now a new study questions whether in fact the broader IT field is facing the hiring shortages being claimed. The Economic Policy Institute, a non-partisan think tank in Washington, instead posits a different reason for the guestworker visa push: increasing labor competition in order to pay lower salaries in the IT sector.

Their study is worth a closer read. In general, it finds that guestworkers are filling as many as half of all new IT jobs every year, and that IT worker wages are the same as 14 years ago. Programmers, specifically, are paid the same inflation-adjusted wages on average as they were in 2001—a red flag that a shortage of candidates is not the main problem. For example, during the tech boom of the 1990s and bust in the 2000s, salaries and U.S. unemployment in IT exhibited the expected classic supply and demand relationship. Salaries rose when unemployment in the field was low. But since 2004, with an influx of temporary foreign workers, salaries have stopped changing in relation to U.S. unemployment levels in the field. 

Of course, the IT industry is much larger than Internet and software companies alone. The findings also go against my own intuition, since I know that companies in Silicon Valley pay their top software engineers and programmers extremely well (at least from this journalist’s perch).

But that may be just the point. Other research has shown that only limited categories of jobs can be outsourced without hampering a firm’s ability to innovate. So, according to the study’s findings, the more high-skilled employment visas supplied, the more the IT industry can uniquely tap a global labor market. That allows companies to cost-effectively hire the top talent possible, rather than resorting to wooing employees from companies down the road with crazy perks and salaries, and perhaps the freedom to pay “average” workers less. 

The Wall Street Journal spoke with the study’s author, who said employers should be less picky in hiring from the U.S. workforce and invest more in job training as needed. As it is today, U.S. colleges graduate 50 percent more students in computer science and engineering than are hired into those fields each year. Unfortuantely, the study notes, supplying more visas will discourage U.S. students from pursuing these fields. 

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