(What’s Left of) Our Economy: Will the Tech Competitiveness Bill Shaft American Tech Workers?

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China, competitiveness, Congress, Immigration, labor shortages, Lisa Irving, NumbersUSA, semiconductors, STEM, STEM workers, tariffs, tech workers, technology, Trade, visas, {What's Left of) Our Economy

In case you didn’t already think that the U.S. government has become a dysfunctional mess, the immigration realist group NumbersUSA has just highlighted a recent, thoroughly depressing example. It’s the decision of the Democratic-controlled House of Representatives to turn its version of a bill to boost American technological competitiveness (especially versus China) into a device to advance its Open Borders-friendly immigration agenda ever further – and at the expense in particular of native-born tech workers and tech worker hopefuls.

Not that the story of this competitiveness effort wasn’t a prime example of dysfunction already. As I’ve previously pointed out, both the House bill and its Senate counterpart were originally introduced in mid-2020, and these efforts still haven’t become law – even though concerns about China catching up to the United States technologically, and threatening both American national security and prosperity even more sharply, remain as strong and widespread as ever.

And not that the Democrats are solely responsible: As I’ve also noted, Senate Republicans have strongly supported provisions in their version of the legislation that would both greatly weaken a president’s authority to impose tariffs (including on China to offset the economic damage to U.S. industry from its predatory trade and broader economic practices), and reduce various existing tradei barriers to many imports (including from China).

But the immigration provisions of the House version could be just as damaging, and deserve at least as much attention. As explained by NumbersUSA analyst Lisa Irving, this legislation “allows for an unlimited number of green cards for citizens of foreign countries seeking permanent U.S. residency who hold a U.S. doctorate degree, or its equivalent from a foreign institution, in STEM [Science, Technology, Engineering,and Math fields].”

Adds Irving, “This provision would result in further limiting the job prospects and resources for highly qualified Americans in tech fields.” 

To add insult to injury, as Irving reminds, the measure is based on phony and thoroughly debunked claims, mainly propagated by the U.S. technology industry, that it’s facing a crippling labor and talent shortage. In fact, the tech sector’s prime objective is curbing wage and other compensation gains by opening the flood gates ever wider to foreign-born technologists willing to accept much lower pay.   

The best outcome for the cause of American competitiveness — and for its potential to benefit the existing American population economically — would be for the Congressional conference committee assigned with devising a final compromise version that President Biden can sign into law to strip the Senate version of its trade sections, and the House version of these immigration sections

But don’t expect any progress any time soon. Reuters reports that the committee will hold its first meeting next week – and will contain more than 100 House and Senate lawmakers. In other words, more than 100 cooks for this broth.

As a result, even though China continues massively subsidizing its own tech sector, and even though other countries have already responded with their own incentives aimed at attracting and maintaining their capabilities in semiconductors and other industries, “Congressional aides said it could still take months before a final agreement is reached.” In the ultimate sad commentary on American political dysfunction, given the glaring flaws of both bills, that could be a good thing. 

Glad I Didn’t Say That! Middle Class Meg?

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Democratic National Convention, election 2020, establishment Republicans, Glad I Didn't Say That!, Hewlett-Packard, Jobs, Joe Biden, Meg Whitman, offshoring, STEM workers, tech jobs

“Joe Biden…has a plan that will strengthen our economy for working people and small-business owners. For me, the choice is simple. I’m with Joe.”

– Former Hewlett Packard CEO Meg Whitman, one of four leading Republicans chosen to speak on opening night of the Democratic National Convention, August 17, 2020

“The IT services market has continued to change and put more pressure on HP to reorganise its operations, for instance by increasing the proportion of its services workforce in lower-cost, offshore centres to 60 per cent.”

–Then Hewlett Packard CEO Meg Whitman, September 15, 2015

(Sources: “Former GOP gubernatorial candidate Whitman endorses Biden at DNC,” by Carla Mainucci, Politico, August 17, 2020, https://www.politico.com/states/california/story/2020/08/17/former-gop-gubernatorial-candidate-whitman-endorses-biden-at-dnc-1309809 & “HP to slash up to 30,000 jobs ahead of split,” by Richard Waters, Financial Times, September 15, 2015, https://www.ft.com/content/ff029c82-5bec-11e5-a28b-50226830d644 )

Im-Politic: An Immigration and Racism Link Deserving Much More Attention

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African Americans, Chicago, CNBC, H-1B visa, Hispanics, Im-Politic, Immigration, inequality, Jim Reynolds, minorities, Norman Matloff, race relations, racism, STEM workers, tech jobs, unemployment

“H-1B” and “racial injustice” probably aren’t terms most people would believe have much to do with each other. That’s why a recent CNBC interview with a leading African American financier deserves your attention even if it is two weeks old. Because he shows not only that they’re intimately connected, but that even someone who is focusing on the link needs to think much more about how exactly it works, and what needs to be done about it.

For those who don’t follow immigration issues closely, “H-1B” is the name of the category of visa that the federal government allots business for foreigners they supposedly need to employ because their “specialty” skills can’t be found in the domestic workforce. The skills cover a wide range, but according to this organization (which loves the program) most of the visas requested by U.S. companies are for science and technology occupations, and indeed their prevalence in these fields is responsible for most of the controversy they’ve generated.

For evidence abounds that, contrary to their claims, the tech companies that seek these foreign workers so ardently aren’t using them because they’re geniuses, but because they’re cheap – and because they need to remain tied to the company that sponsored them if they have any hope of getting permanent legal residence in the United States. (My go-to source on this issue is University of California-Davis computer scientist and immigration authority Norman Matloff, whose work can be found at this terrific blog.)

As a result, H-1B opponents argue that their use undercuts American pay levels in science and technology fields, and severely undercuts the argument that gaining these skills is one of the best guarantees available to young Americans of prospering in the turbulent economy of recent decades. But the program damages the economy in a way less often noted by opponents: It guts the incentives American business might develop to invest in American workers’ skills generally, or to press government to get the country’s education act together so as to make sure that the skills they need are available domestically.

And this is where the racial injustice and related economic inequality issues come into play – along with that CNBC interview. The subject, Jim Reynolds, is an inspiring African American success story who’s long been active in civic affairs in a city with one of the nation’s biggest African American populations – his native Chicago. (See this profile.) CNBC brought him on the air on July 2 to talk about racial diversity on Wall Street.

The conversation proceeded along these lines till it was about two thirds of the way through, when Reynolds made this totally unprompted and stunning pivot. Its worth quoting in full, and came in response to a question on whether he thinks Wall Street is genuinely committed to hiring more minorities in the wake of the George Floyd killing and ensuing tsunami of nationwide calls to end racism and related economic injustices.  (I also need to present it because this point didn’t make it into the CNBC news story accompanying the interview video that’s linked above.)   

“You ask if I think this is real…. I was at an Economics Club dinner a couple of years ago…and one of the top CEOs in the city [Chicago], actually, one of the top CEOS in the country – a Fortune 100 company – spoke to the group, and what he said to the group that one of his most frustrating experiences is working with H-1B programs, and why they won’t let his company recruit more of the talent that they need in the tech space….[H]e said that in the middle of downtown Chicago, where we have African American and Hispanic youth in the city, ten minutes from where he was standing, that have…let’s call it 40, 50, 60 percent unemployment, that go to schools that don’t really…teach them this sort of thing, and I wondered why he didn’t even think about this. Sure, you can go to China, and you can go to India, and recruit that talent. And that talent – and I’ve spent a lot of time in China – that talent started getting developed in middle school When they come here, and they go to the quants on Wall Street and the quants in Silicon Valley – and they do dominate that space – they started studying this stuff like when they were eight years old, nine years old. And I’ve started thinking about and talking about and I’m working with our wonderful Mayor Lori Lightfoot about, let’s get these corporations thinking about – and this time is great – investing in these black and Hispanic schools. Now. Let’s grab our young black and Hispanic kids in middle school. Let’s have a Facebook program in the school, Microsoft program, Alphabet program, Apple program in these schools. I think that’s an opportunity.”

I couldn’t have done a better job of making the H-1B-racial injustice connection. But as I suggested above, Reynold is still missing a piece of the puzzle: The CEO he mentions, and others like him, simply aren’t going to make those investments because they don’t have to. And they don’t have to precisely because they have a cheaper alternative – and one that doesn’t require them to deal with the kinds of workforce training challenges they’ve never faced: the H-1B program.

So if Reynolds really wants to expand opportunity for disadvantaged minority youth (and other young Americans) all over the country, he’ll start pressing for the elimination of the H-1B program, and for broader immigration policies that deny businesses in all sectors the easy option of hiring low-cost foreigners – and in the process, creating even more power over workers and thereby intensifying the downward pressure they can keep exerting on their wages and benefits.

Reynolds, moreover, is in a particularly good position to lobby for these changes effectively because, as made clear in the profile linked above, his close friends include a fellow named Barack Obama – who has more than a little influence on the liberals and progressives who have emerged (along with Corporate America) as among the stubbornest opponents of immigration policies that put American workers – including of course minority workers – first.

(What’s Left of) Our Economy: Amazon’s Fishy HQ Decision

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Alexandria, Amazon, D.C., education, Long Island City, New York City, STEM workers, tech, The Partnership for New York City, Washington, {What's Left of) Our Economy

Everyone who’s followed Amazon’s highly publicized search for a second headquarters site (which wound up choosing second and third headquarters sites) knows that New York City and the Washington, D.C. suburb of Arlington, Virginia were selected because of their abundant supply of world-class tech workers. Or at least that’s what the on-line retail behemoth said.

Except a leading business group from New York – which has applauded the city’s win – has just come out with some projections completely belying this claim.

According to The Partnership for New York City, “Amazon is the first tech mega-company headquarters to locate in New York City, a breakthrough that will solidify the city’s future as a leader in the world’s fastest-growing industry.”

But in its latest quarterly Dashboard NYC, which tracks leading indicators of the city’s economic performance, The Partnership also forecast that, of the 25,000 net new jobs likely to be created directly by the new Amazon facilities in Long Island City, Queens, and the nearly 90,000 increase in the region’s payrolls that will be generated indirectly, 68 percent won’t require a high school education. In fact, 18 percent won’t even require any formal schooling. And another ten percent will be fill-able by folks with only some post-high school education.

As a result, fewer than one-third of these jobs (some 32,000) will require a bachelor’s degree of some kind. It’s true that a relevant college or graduate degree isn’t needed for success in technology (as most dramatically demonstrated by the founding of Microsoft by Harvard dropout Bill Gates, and the creation of Apple by Reed College dropout Steve Jobs). Indeed, a recent analysis of Census Bureau data reports that fully 35 percent of the country’s science, technology, engineering, and math (STEM) workforce lacks a bachelor’s degree, and that 80 percent of this subgroup have had only some college courses.

But it’s also true that far from all of the 32,000 total Amazon-created jobs that will require completing an undergraduate college education will be science and tech positions. For instance, many will certainly come in managerial or administrative positions at Amazon itself, and in all non-Amazon companies that add new hires because of Amazon, or that are created because of Amazon, that won’t require a special tech background.

I’m certainly not qualified to second-guess Amazon’s decisions. And maybe the situation in the Washington, D.C. area is significantly different (though this article indicates that it’s not – albeit not in the way you may think). What does seem clear, though, is that the company hasn’t been leveling with the rest of the country (or the world) about its new headquarters decision. And when the dissembler is the world’s second largest U.S.-based publicly traded non-government employer (behind WalMart), that should raise a question or two.

(What’s Left of) Our Economy: Manufacturing Should Indeed be a US “Obsession”

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Binyamin Appelbaum, Donald Trump, Federal Reserve, innovation, manufacturing, manufacturing production, manufacturing wages, multi-factor productivity, multiplier, productivity, research and development, STEM workers, The New York Times, Trade, Trade Deficits, {What's Left of) Our Economy

You have to give New York Times economic correspondent Binyamin Appelbaum credit. He decided to go the flood of recent media attacks on trade policy critics one better by not only charging that Republican presidential candidate Donald Trump and others are economic know-nothings, but belittling them for an ignorantly nostalgic focus on American manufacturing. Less admirable – Appelbaum’s decision to broach the subject before learning anything important about it, or much of the broader economy.

In an October 4 Times Magazine article, Appelbaum repeated standard claims that American politicians’ “obsession” with manufacturing misses the mark because the sector is doing better than ever, and because its only major problem is actually a sign of progress – its falling payrolls reflect higher productivity, and thus outstanding technological progress. His new wrinkle: a contention that U.S. leaders should spend less time trying to revive manufacturing employment (and wages, which have lagged badly, too?), and more on turning the low-wage service sector jobs into family wage jobs.

But Appelbaum’s own assessment of manufacturing badly misses the mark. His claim of record output, for example, is belied by Federal Reserve data clearly showing that industry’s output is down 4.45 percent in real terms since the Great Recession started – more than eight years ago. Nor does Appelbaum seem familiar with the productivity figures. They show manufacturing’s performance stagnating recently by the broadest measure (multi-factor productivity).

Industry’s record in international trade is another flag that’s at least deep orange. Manufacturing keeps racking up record annual trade deficits, and yesterday’s U.S. government figures revealed that August saw the latest in a string of monthly record shortfalls. These trade balances matter because standard trade theory teaches that one of international commerce’s main virtues is fostering the best possible international division of labor. By its logic, America’s failure to produce anywhere near as many manufactures as it consumes – including in numerous high-value industries like semiconductors, advanced telecommunications gear, pharmaceuticals, construction equipment, machine tools, and ball bearings – unmistakably signals that such activity has a grim future in the United States.

And if such pessimism is warranted, the entire American economic picture will look grim as well. For no other sector appears poised to replace manufacturing as the nation’s productivity growth champ. And it’s hard to identify major new employment prospects for science and technology workers if manufacturing continues stagnating (at best). After all, the sector conducts 70 percent of the private sector’s research and development, and its STEM workers comprise 60 percent of the national total.

Moreover, this funding and these workers seem to be doing an awfully good job on the innovation front, as they generate nine out of every ten U.S. patents.

But perhaps strangest of all is Appelbaum’s call for downplaying efforts to foster manufacturing employment and dramatically raising the wages and improving the living standards of America’s fast-food workers, home healthcare aides and the like via government fiat. At least he recognizes that such steps will have nothing to do with the free market principles so widely used to justify laissez-faire approaches to manufacturing’s woes. But why does he evidently suppose that productivity improvements and especially technological innovation won’t displace many of these jobs, too, especially if employment costs get high enough? And what kind of formula for boosting national competitiveness – and therefore hopes for longer term, sustainable prosperity – would this be?

Ironically, promoting domestic manufacturing looks like the best, most market-friendly way to help these low-wage workers, too. For the sector boasts the economy’s greatest multiplier effect for overall economic activity (which by definition creates new jobs) and one of the largest for employment itself. In other words, manufacturing punches far above its weight in generating new jobs throughout the rest of the economy (e.g., in transportation, construction, retail, and wholesale). Even better, most of these sectors already pay considerably more than those singled out by Appelbaum – and without new government props.