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ON THE NEED FOR REFORM OF THE H-1B
NON-IMMIGRANT WORK VISA INCOMPUTER-RELATED OCCUPATIONSNorman Matloff*
The H-1B program authorizes non-immigrant visas under which skilled foreign
workers may be employed in the U.S., typically in computer-related positions. Congress greatly expanded the program in 1998 and then again in 2000, in responseto heavy pressure from industry, which claimed a desperate software labor shortage.
After presenting an overview of the H-1B program in Parts II and III, the Article
will show in Part IV that these shortage claims are not supported by the data. Part
V will then show that the industry’s motivation for hiring H-1Bs is primarily a desire for cheap, compliant labor. The Article then discusses the adverse impacts of the
H-1B program on various segments of the American computer-related labor force inPart VI, and presents proposals for reforms in Part VII.

I. Introduction
A topic of much controversy in legislation on immigrationrelated issues in recent years has been the H-1B visa program.1 Thisvisa category, which was established in the Immigration Act of 1990(“IMMACT90”) to replace the old H-1 category, allows foreign nationals to work in the U.S. for a sponsoring employer for up to six
2years. The law allows dual intent: Though the H-1B is a nonimmigrant visa, the worker may pursue avenues to attain U.S. legal
permanent resident (“LPR”, i.e. “green card”) status while holding
the H-1B visa. Typically this takes the form of employer sponsorship.
The H-1B program quickly became a favorite of employers of information technology (“IT”) workers, particularly computer
programmers. This category of workers soon became the largest in
the program.3*
Professor of Computer Science, University of California, Davis; B.S. 1970, California
State Polytechnic University; Ph.D. (pure mathematics) 1975, University of California, Los
Angeles.
1.
In 2003, a similar controversy arose concerning another work visa program, L-1. See
Katie Hafner & Daniel Preysman, Special Visa’s Use for Tech Workers is Challenged, N.Y. Times,
May 30, 2003, at C1. This issue arose too late to be included in this Article, but the problems
are very similar to those described for H-1B.
2.
Immigration Act of 1990, Pub. L. No. 101-649, 104 Stat. 4978 (1990).
3.
U.S. Immigration & Naturalization Service, Characteristics of Specialty
Occupation Workers (H-1B): Fiscal Year 2001, at 11 (2002).

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Beginning in 1997, the IT industry began to heavily lobby Congress to increase the yearly cap on the H-1B category, then at
465,000 visas per year. The industry lobbyists claimed that the H-1B
workers were needed to cope with a severe high-tech labor shortage.5 Congress approved a temporary increase in the cap, to115,000, and later in 2000, again under intense pressure from the6industry, enacted another temporary increase, to 195,000. The in7
creases are due to sunset in October 2003.
Those who opposed the cap increases contended that the industry’s claim of a desperate labor shortage was invalid and was devised
to hide the industry’s real goal—to use the H-1B program as a8source of cheap labor. This Article will demonstrate that the H-1Bs
are indeed used as cheap labor. However, this statement may engender emotionally and politically laden connotations, such asimages of conspiracy or deliberate manipulation. Thus, it is important to state here at the outset what this means.
There are actually two major types of savings in labor costs which
accrue to employers of H-1Bs. What I will call Type I savings is theone most people mean when they discuss the issue of whether H1Bs are used for cheap labor. It takes the form of paying an H-1B
less than the norm for comparable American workers, i.e. Americans of similar educational background, experience, skill sets andso on.9
Type II savings stems from the perception of older workers as
10
costing more for companies to hire than younger ones. In manycases, when employers exhaust the supply of young American
workers, they turn to hiring younger H-1Bs in lieu of older Americans. In this manner, the H-1B program is providing employers
with cheap labor.
4.
See, Miranda Ewell, Industry to Press for More Skilled Workers, San Jose Mercury
News, Nov. 21, 1997, at 1C.
5.
Information Technology Association of America (ITAA), Help Wanted: The
IT Workforce Gap At the Dawn of a New Century (1997).
6.
Carolyn Lochhead, Bill to Boost Tech Visas Sails Through Congress: Clinton Expected to
Sign Popular Measure, S.F. Chron., Oct. 4, 2000, at A1.
7.
Patrick Thibodeau, A Connecticut Activist Group is Behind Several H-1B and L-1 Visa
Bills in Congress, Computerworld, Aug. 11, 2003, available at http://computerworld.com/
government topics/government/legislation/story/0,10801,83888,00.html.
8.
Robert Pear, New Quota Weighted for Immigrant Technology Workers, N.Y. Times, Feb.
23, 1998, at A13.
9.
Throughout this Article, the term American refers to workers who are either U.S.
citizens (including via naturalization) or LPRs.
10.
Actually, many older programmers would be willing to take a pay cut when theycannot find programming work, but employers assume otherwise. See Margret Steen, Many
Older IT Workers Are Fishing for Jobs Despite Labor Shortage, Inforworld, July 23, 1998, available
at http://www.cnn.com/TECH.computing/9807/23/age.idg/.

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The Type I form of cheap labor is indeed very common, but
Type II is equally common, if not more so. Moreover, the magnitude of cost savings in the Type II case is often greater than forType I.11 Thus, both forms will be examined in this Article.12
The Article will show the need for reform of the program, andpropose remedies. Since historically many IT employers have sponsored their H-1B workers for green cards,13 issues of reform of thisprogram will be discussed as well.
In Part II, the Article will present the history of the H-1B program, including legislation, changing attitudes of the executive
branch of the federal government, and major changes in usage patterns. The emergence of IT fields as the principal users of the
program will be chronicled, and the focus of this Article on thesefields will be defined and explained. In keeping with this Article’s
theme of reform, this Part will also discuss the actions of the various
political players in terms of reform over the history of the program.
In order to show that the primary reason that employers hire
H-1Bs is for cheap labor (whether Type I or Type II), Part IV will
examine the industry’s stated reasons for hiring H-1Bs. It will showthat none of the independent studies in academia and government
have confirmed an IT labor shortage. It will also show that the industry’s various other stated reasons for hiring H-1Bs, such as adesire to hire the world’s “best and brightest” or to hire workers
with a PhD, are also not supported by the data.
Instead, Part V will show that finding a source of cheap, compliant labor serves as the industry’s main motivation for hiring H-1Bs.
Again, academic and government studies will be presented as well
as statements by the industry itself. This Part will also explain how
the H-1B workers are de facto indentured servants; this, together
with gaping loopholes in H-1B regulations, enables employers toattain Type I labor cost savings.
In addition to the issue of cheap labor, some employers euphemistically refer to the “remarkable loyalty” of the H-1B workers.
Since an H-1B is typically in no position to seek other employment,
the employer need not worry that the worker will suddenly leave
the employer in the middle of a pressing project. In addition, theemployer can force the H-1B to work long hours. To many employers, this “loyalty” aspect is the prime motivation for hiring H-1Bs,
whether or not they are saving salary costs in doing so.14
11.
12.
13.
14.

See extensive data analyses infra Parts V and VII.A.
Note that Type II savings can be obtained by employers who do not engage in Type I.
Alexander Nguyen, High Tech Migrant Labor, 11 American Prospect, Dec. 20, 1999.
Laura A. Bischoff, Worldwide Workforce, Dayton Daily News, July 11, 1999.

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This Article will show that these considerations have significantly
impacted American workers adversely. The desire for cheap, compliant labor is so strong that often an employer will not evenconsider hiring Americans. Indeed, a number of major firms havelaid off American workers and replaced them with H-1Bs, often
forcing the laid-off Americans to train their H-1B replacements.
These issues will be detailed in Part VI. Adverse impacts on various
IT worker subgroups will be discussed, including: new graduates;
older workers; and workers with PhD degrees.
Part VII then will show how the current statutes and regulations
are easily circumvented, and will make new proposals that would beworkable and fair to both workers and employers.
II. History and Usage Trends
A. Early History of the H-1B Program
A major component of IMMACT90 concerned the immigrationof foreign engineers and scientists. The National Science Foundation (NSF), predicting a coming shortage of technicalprofessionals, had urged passage of IMMACT90, which increased
the yearly cap on employer-based green cards from 40,000 to
140,000.15 This cap increase was paired with the establishment of
the H-1B program.
Prior to the enactment of IMMACT90, employers made use of
the H-1 visa category, Aliens of Distinguished Merit and Ability.16
Although originally intended as a vehicle for bringing in theworld’s “best and brightest,” in practice the criterion used gradually
devolved to simply require that the worker be in a profession that
required a Bachelor’s degree or higher.
IMMACT90 established a new visa category, H-1B. It was designed to: make conditions for granting the visa more precise; add
some protections for the domestic workforce; and allow dual-intent
status so that employers could simultaneously sponsor the worker
for a green card.17

15.
The prediction turned out to be gravely in error, as will be seen later. See infra note
301.
16.
See, e.g., Constantine Potamianos, The Temporary Admission of Skilled Workers to theUnited States under the H-1B Program: Economic boom or Domestic Work Force Scourge?, 11 Geo.
Immigr. L. J. 789, 796 (1997).
17.
Id. at 798.

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IMMACT90’s provisions for protecting the domestic workforce
were motivated by reports that the H-1 program had been heavily
18
abused by employers. The restrictions consisted of an annual capof 65,000 visas and a requirement that an employer wishing tosponsor a foreign worker must file a Labor Condition Application(LCA), stating that the employer would pay the worker the prevailing wage.
Initially the Department of Labor (“DOL”), then under the Bushadministration, formulated regulations to implement the bill that
employers found to be burdensome. Congress thus amended
IMMACT90 through the Miscellaneous and Technical Immigration
and Naturalization Amendments of 1991. The net effect was to reduce U.S. worker protections.19
In any case, whatever illusions Congress may have had that
IMMACT90 would prevent widespread abuse of H-1/H-1B weresoon dispelled by the DOL, which took an activist position during
Secretary of Labor Robert Reich’s 1993–1997 term of office.
Among those cited by DOL were big firms, including the Digital
Equipment Corporation, then king of the minicomputer business.20
SoftPac, an organization of computer programmers which wasformed to lobby against the H-1B program, ran a “sting” operation
to show how easy it was to secure approval from the DOL for an
obviously-invalid LCA. The DOL approved SoftPac’s application fora visa for a programmer who would be paid only $5.00 per hour.21
Such charges triggered a spate of interest in the H-1B programin the popular press. For example, a widely-viewed television news
report charged abuse by Hewlett-Packard, an industry icon, and the“body shops” to which it subcontracted work.22

18.
H.R. Rep. No. 101-723, at 67 (1990).
19.
H. Rosemary Jeronomides, The H-1B Visa Category: A Tug of War, 7 Geo. Immigr. L.J.
367, 371 (1993).
20.
See, e.g., Labor Dept. Cracking Down on Alleged H-1B LCA Violators, 70 Interp. Rel.
1325, 1326, Oct. 8, 1993. Unfortunately, it is not clear exactly what the DOL found in its
investigation. For example, in the case of Digital Equipment Corporation, the DOL ordered
the firm to pay 42 H-1B programmers back wages of merely $85,035, less than $2,000 per
worker. Was this because the typical worker had been at the firm only a few months? Was it
because even DOL failed to assess the true prevailing-wage levels properly? Or had the DOL
overreached in this case? The citation of the DEC case here is merely to illustrate the factthat concerns of abuse were being raised, rather than to offer this case as solid evidence ofabuse.
21.
L.M. Sixel, Employers Go Abroad/Programmers Claim They’re Displaced by Foreign Workers,
Houston Chron., July 2, 1995, at 1. The actual LCA may be seen in Rob Sanchez, H-1B
Programmers, at $5 an Hour, available at http://www.zazona.com/ShameH1B/Library/Archives/Softpac/5DollarProgrammers.htm.
22.
60 Minutes (CBS television broadcast, Oct. 3, 1993).

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An audit performed by the DOL Inspector General in 1996
again reported that abuse was commonplace. For example, it foundthat 19 percent of the H-1Bs were not being paid even the wage
their employers had promised on the LCAs, a remarkable figure inview of the fact that the LCA wages tended to be low anyway.23
In 1994 Reich, having failed to interest Congress in his proposals
to tighten up the H-1B program, included that program in the international trade treaty, the General Agreement on Trade in
24
Services (“GATS”). The treaty includes conditions on foreign labor:
Specialty occupation aliens and their employers must be incompliance with all labour condition application requirements that are attested to by the established employer. These
requirements are: . . . d) the employer has not laid off or otherwise displaced workers in the subject occupation in theprevious six months and will not lay off or displace any US
worker during the 90-day period following the filing of an application or the 90-day periods preceding and following thefiling of any visa petition supported by the application; e) the
employer has taken and is taking timely and significant steps
to recruit and retain sufficient US workers in the specialty occupation; . . .25
Other than a minor exception added during the ACWIA 98 legislation (the H-1B dependency rule discussed in Part II.B of this
Article), the H-1B program has never been in compliance with26
these requirements.
In 1995–1996 SoftPac, along with some participation by the electrical engineering group IEEE-USA and the American Engineering
Association, convinced the chairs of the Subcommittees on Immigration in both the House and Senate to draft legislation that would
significantly curtail the size and scope of the H-1B program, and reform related employment-based immigration policies. However,23.
U.S. Office of Inspector General (OIG), The Department of Labor’s Foreign
Labor Certification Programs: The System is Broken and Needs to be Fixed, Rep. No.
06-96-002-03-321 (May 22, 1996).
24.
Augustin Fragomen, H-1B Handbook, at 1–17 (1995 ed., West Group). Fragomen refers to the treaty as GATT, but GATS is actually a separate treaty developed in parallelwith GATT.
25.
General Agreement on Trade in Services, Apr. 15, 1994, WTO Agreement, Annex
1B, Schedule of Specific Commitments, at I.(4)(c).
26.
Fragomen, supra note 24. Interestingly, Fragomen describes GATS as merely “permitting” the U.S. to impose such requirements, but this appears to be contrary to the actual
GATS document.

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eventually the proposed legislation was withdrawn under extremely
27
heavy pressure from the industry. The industry lobbyists made it
clear that they would not accept any reform of the program whatsoever, as Senate Immigration Subcommittee Chair Alan Simpson
described: “I was working with the business community . . . to address their concerns, [but] each time we resolved one, they became
more creative, more novel.”28
B. Legislation to Expand/Reform the Program
The legislative reform history of the H-1B program subsequent
to its establishment in IMMACT90 reveals that attempts have been
made to reform the program throughout its history, but have produced rather little, due to a very aggressive/defensive posture on
the part of the industry.
In 1993, as a result of the negative 60 Minutes exposure, HewlettPackard had announced that it would take action to prevent abuseof the H-1B program. A postscript to the broadcast stated, “Afterour encounter with Hewlett-Packard’s CEO, Lewis Platt, the company decided to change its policies, to use fewer foreign
programmers, and when it does, to make the body shops provethey’re really paying the prevailing wage.”29 It would turn out, however, that this would be the first and last positive reaction by a firmin response to charges that it was using H-1Bs as cheap labor.
On the contrary, the industry took the offensive. Apparently
treating the attempted rollback of H-1B in 1995–1996 as a wakeup
call, the Information Technology Association of America (ITAA),
an industry trade group, hired Harris Miller as its president.30
Miller, with his background first as a congressional staffer on immigration issues and later as an immigration lobbyist, had all the rightcontacts.
1. ACWIA 98—In early 1997, the ITAA began a campaign to ac31
tually expand the H-1B program. The key element in their strategy

27.
73 Interp. Rel. 289–90, Mar. 11, 1996.
28.
Rory J. O’Connor, High-Tech Hiring Victory, San Jose Mercury News, Mar. 8, 1996,
at 1C.
29.
60 Minutes, supra note 22.
30.
William Glanz, High-tech Lobbyist Counts Washington Successes, Wash. Times, Oct. 16,
2000, at D5.
31.
Though the campaign was initiated by the ITAA, other industry groups followed
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to get Congress to enact an increase in the annual H-1B visa cap
would be a massive public relations campaign to implant in theAmerican consciousness the notion that the nation was facing a severe IT labor shortage. The ITAA released a report claiming such alabor shortage in early March.32 At the same time, they began theiroffensive in Washington. The DOC then released its own “shortage
33
report,” virtually a carbon copy of the ITAA report. The ITAA got
the DOC to cosponsor a two-day National IT Workforce Convocation in Berkeley during January 12–13, 1998, with Secretary ofCommerce, Bill Daley, as keynote speaker. Press coverage included
a 3,000-word front page article in the New York Times.34
From that point onward, a steady stream of items in the print
and electronic media implanted in the minds of the American
populace the image of a desperate high-tech labor shortage.35 Yet
the careful observer did have access to information that cast serious
doubt on the industry’s “labor shortage” claims. The General
Accounting Office (GAO), Congress’ research arm, released a
study finding “serious analytical and methodological weaknesses” inthe DOC and the ITAA reports, and finding that neither study
supported their claims of a labor shortage.36 An economist with the
Urban Institute, a prominent nonpartisan Washington think tank,testified to the Senate, also concluding that the data was notconsistent with the industry’s claim of a shortage.37 The national
the Silicon Valley. ITAA member firms tended to be in the East Coast states, the South andthe Midwest.
32.
ITAA, supra note 5. The principal researcher of the report, Stuart Anderson, waswith the libertarian Cato Institute. See Robert Bellinger, Engineers’ Organization Rebuts Shortage
Claims, Electrical Engineering Times, Sept. 29, 1997. Anderson has been one of the more
prolific writers in support of the H-1B program, authoring a report for Jack Kemp’s Empower America, several articles for International Educator and so on. Anderson went on
to become a Senate staffer, authoring the 1998 and 2000 legislation that expanded the H-1B
program. See Stuart Anderson, The Global Battle for Talent and People, Immigration Policy Focus, American Immigration Law Foundation, Sept. 2003, available at http://
www.ailf.org/ipc/ipf0903.asp.
33.
U.S. Dep’t of Commerce, America’s New Deficit: The Shortage of Information Technology Workers (Sept. 29, 1997), available at http://www.ta.doc.gov/otpolicy/
reports.htm.
34.
Amy Harmon, Software Jobs Go Begging, Threatening Technology Boom, N.Y. Times, Jan.
13, 1998, at A1.
35.
See, e.g., William Branigan, Hiring More Foreign Workers Gets a Push, Wash. Post, Feb.
26, 1998, at A8.
36.
William Branigan, Lack of Tech Workers Disputed: Flaws Weaken Reports Claiming Shortage, GAO Critique Says, Wash. Post, Mar. 23, 1998, at A2. Note that the article also reported
that in response, DOC greatly downgraded its earlier statement asserting a labor shortage,
now claiming only a “tight labor market.”37.
High-Tech Worker Shortages and Immigration Policy: Hearing Before the Senate Comm. on
the Judiciary, 105th Cong. 78 (Feb. 25, 1998) (statement of Robert I. Lerman, Economist,
Urban Institute).

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press managed to get over its earlier mesmerization by the industry,and ran numerous print articles and television news segments
38
featuring critics of the shortage claims. Even some publications,which by nature are biased in favor of industry, such as Business39
Week, raised some doubts.
IEEE-USA, a 200,000-member, U.S.-based organization affiliatedwith the international Institute for Electrical and Electronic Engineers (IEEE), made a number of public statements criticizing theindustry’s claims of a labor shortage.40 It also took a number ofsteps to fight the proposed H-1B expansion, including: compilingthe Misfortune 500, a collection of profiles of 500 programmers
and engineers who could not find work in spite of the high-tech
boom; funding an American University study showing difficulties
encountered by older engineers seeking work; and commissioninga Harris Poll on the proposed H-1B expansion, which found that 82
percent of Americans opposed the legislation.41 All of this irked theIEEE parent organization and a “sister” group, the IEEE Computer
Society, both of which are dominated by corporate and academic
factions having vested interests in the H-1B program.42 As will be
discussed in Part II.B.2, IEEE-USA later changed its stance dramatically when a second H-1B expansion was proposed in Congress in
2000.
43
The AFL-CIO also raised limited objections. The union did takea stance opposing the expansion of the H-1B program, but it did
not actively lobby against the bill, and did not devote its massive
resources, such as member letter-writing campaigns, to this issue.
38.
See, e.g., Pear, supra note 8.
39.
Aaron Bernstein & Steve Hamm, Is There Really a Techie Shortage?, Bus. Wk., June 29,
1998, at 93.
40.
High Tech Worker Shortages and Immigration Policy: Hearing Before the Senate Comm. on
the Judiciary, 105th Cong. 93 (Feb. 25, 1998) (statement of John R. Reinert, President, IEEEUSA).
41.
Press Release, The Institute of Electrical and Electronics Engineers, Inc., High-Tech
Layoff, Unemployment Rates Multiply as Congress Votes on H-1B Increase (Oct. 8, 1998)(on file with author).
42.
Much of this occurred behind the scenes, but one can see the main point for instance in T.W. Williams, IEEE-USA and the Issue of Member Choice, IEEE Computer, Feb. 1999,
at 123. Williams was Chief Scientist, Synopsis Corp., and a member of the Board of Governors, IEEE Computer Society.
The Association for Computing Machinery (ACM), with an academic-industrial constituency similar to that the IEEE Computer Society, also felt strongly that computer science
professional organizations should not oppose the H-1B program. See E-mail from Barbara
Simons, ACM President, to several IEEE-USA officials and Norman Matloff, Professor ofComputer Science, University of California, Davis (Aug. 23, 1998) (on file with author).
43.
Immigration and America’s Workforce for the 21st Century: Hearing Before the Subcomm. on
Immigration and Claims of the House Comm. on the Judiciary, 105th Cong. 60 (Apr. 21, 1998)(statement of David A. Smith, Director of Policy, AFL-CIO).

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Furthermore, when the 2000 legislation arose, the AFL-CIO actually considered actively supporting the H-1B expansion.44 Anotherunion, the Communications Workers of America, expressed someconcerns but officially supported both the 1998 and 2000 increases.45
Generally, criticism of the shortage claims was drowned in an
ocean of news items proclaiming a shortage. Moreover, throughout
the latter half of the 1990’s, both major political parties had been
anxious to curry favor with the high-tech industry, which they considered a large untapped source of campaign funding, especially in“soft money,” i.e. donations to parties, which had no legal limit.46
In addition, academia actively supported the industry’s claims ofa shortage, as well as the industry’s demands that Congress expand
the H-1B program.47 The universities had very strong incentives toback industry on the shortage and H-1B issues: Universities receive
large donations from the industry;48 universities hoped to get increased government funding for science and engineering programs
to cope with the labor “shortage”; many university postgraduate
programs are populated largely by foreign students who hope tolater work as H-1Bs in the U.S.; and the universities are major employers of H-1Bs themselves.
Thus, it was easy to sell Congress on expansion of the H-1B program. Selling President Clinton was perhaps a bit harder. In the
ITAA/DOC convocation in January, Commerce Secretary Daley
had stated that the administration would not support expansion of44.
See David Bacon, Labor Fights for Immigrants, The Nation, May 21, 2001, at 15.
45.
It later changed its stance in 2002 when the Bush administration proposed canceling the training programs that had been funded with H-1B user fees. See Lisa Vaas, CWA Calls
for Repeal of H-1B Program, eWeek Magazine, June 28, 2002, available at http://
www.eweek.com/article2/0,4149,3023317,00.asp.
46.
See, e.g., Jason Zengerle, Silicon Smoothies, The New Republic, June 8, 1998, at 24.
47.
See, e.g., The News Hour with Jim Lehrer: High Tech Workers (PBS television broadcast,
Apr. 3, 1998).
48.
The web page of the Computer Science Department at the University of Washington, a leading supporter of industry’s labor shortage claims, showed the following as ofMarch 16, 2000: $1,500,000 from Ford Motor Co. in research funds; “several million dollars”
in equipment from Intel; $500,000 from Boeing for an endowed faculty chair; another$500,000 chair from Microsoft; another chair from Boeing; and finally, $3,000,000 fromthe Bill and Melinda Gates Foundation for two endowed chairs. See http://
www.cs.washingtion.edu/affilates/corporate (last visited Aug. 22, 2003). Department chair
Ed Lazowska, who has been an outspoken supporter of the H-1B program, personally benefits financially from a cozy relationship with industry too. According to his personal web
page, at http://www.lazowska.cs.washington.edu (last visited Aug. 22, 2003), he is “a memberof the Technical Advisory Boards for Microsoft Research, Voyager Capital, Ignition, FrazierTechnology Ventures, Madrona Venture Group, and Impinj, and of the Boards of Directorsof Data I/O Corporation and Lguide.com.”MatloffTYPE11-7-03.DOC

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the H-1B program.49 Yet Clinton eventually agreed, and in October50
he signed ACWIA 98.
As with previous legislation, ACWIA 98 contained provisions thatclaimed to protect U.S. workers. In particular, a notion of “H-1B
dependent” employers was established, defined to be those whose
workforces consisted of at least 15 percent H-1Bs. Previously, the H1B visa did not require an employer to recruit U.S. workers before
filling a position with an H-1B (nor did the old H1 program). Now
ACWIA 98 held H-1B dependent employers to such a requirement.
Yet this provision in the new law was doomed from the outset.
The 15-percent threshold applied to all employees, not just programmers and engineers. Most employers would have enough nontechnical workers (marketing people, secretaries, janitors etc.) thateven if their programming staff were, say, 50 percent H-1B, theywould still not fit the definition of H-1B dependency. In addition,
the industry put heavy pressure on the DOL to implement the law
in a manner that further restricted the scope of the H-1B dependence provisions. It took the DOL two years to issue regulations
regarding the provisions, and in the end only 50 out of 50,000 H-1B
employers were declared to be H-1B dependent.51
Some critics of the industry’s labor shortage claims pointed outthat a number of programmers and engineers over age 40 had difficulty finding work in their fields, despite the apparent jobs
boom.52 Employers responded that they shunned such workers because their technical skills were out of date in this fast-changing
field. The critics retorted that this was just a pretext for hiring thecheaper H-1Bs, but to address the skills issue Congress added another major provision in the new law, insisted on by Clinton andsome leading Democrats. It established H-1B user fees which would
fund retraining programs, with the goal of training American
workers to fill jobs then being filled by H-1Bs.
This provision too was doomed from the outset. In addition to
the allegations made that employers were using the skills issue
merely as a pretext to avoid hiring older workers—in which caseretraining would be useless—the training funds ended up being
used largely to train workers for technician jobs, which are not49.
Miranda Ewell, Clinton Opposes Higher Visa Cap; Focus on “Home-Grown” Talent, Commerce Chief Says, San Jose Mercury News, Jan. 13, 1998, at 1C.
50.
American Competitiveness and Workforce Investment Act of 1998, Pub. L. No. 105277, Title IV (1998).
51.
See Immigration attorney Jose Latour’s electronic newsletter, available at http://
www.usvisanews.com/memo1192.html (last visited Jan. 5, 2001).
52.
Steen, supra note 10.

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normally filled by H-1Bs anyway. Two years into the program, Sun
Microsystems a major Silicon Valley firm that had been at the forefront of lobbying Congress to expand the H-1B program in 1998,
stated that the training programs had not reduced—and, more tellingly, they could not reduce—its dependence on H-1Bs.53 Later, theBush administration also concluded that the program had failed to54
achieve this, its stated goal, and proposed canceling it. Finally,
ACWIA 98 responded to assertions of wage exploitation of the H1Bs and problems of older workers in the industry by directing the
National Research Council (NRC) to study these issues. Their report was released in late 2000.55 The report confirmed the main
allegations which it had been charged with investigating, findingthat H-1B workers indeed tended to be paid less than comparable
Americans, and that older IT workers indeed faced major obstacles
56
in finding work in the field, even during boom times.
2. AC 21—In 2000, the industry lobbyists tried again, asking
Congress to expand the program even further. They succeeded in
October, when Congress enacted another temporary increase in57
the H-1B cap, to 195,000. Some may find this action ironic, given
the collapse of the high-tech job market that began in late 2000. It
appears likely that the industry knew this collapse was coming—the
NASDAQ index had started to plummet in the spring of 2000, andthe major layoffs began at the end of the year. If so, presumably theindustry wanted to push through this second expansion of the H1B program at a time when it still appeared that the high-tech job
market was “hot.” The H-1B cap increase enacted in this legislation
sunsets in October 2003.

53.
See Lisa Vaas, Failing Grades: H-1B Fees Fail to Lessen Reliance on Imported IT Skills,
eWeek, Sept. 18, 2000.
54.
See Trained Out: Money from Temporary Foreign Workers Might Get Redirected, Wall St. J.,
Feb. 19, 2002, at A1. For a somewhat more positive, though certainly mixed, view of the training funds, see U.S. General Accounting Office, High Skill Training: Grants from H-1B
Visa Fees Meet Specific Workforce Needs, but at Varying Skill Levels, GAO-02-881(2002).
55.
National Research Council (NRC), Building a Workforce for the Information Economy (2001). The latter date refers to actual publication; summaries of the reportwere released in October of 2000, available at http://books.nap.edu.html.building_workforce/.
56.
See Parts V.C.7. and VI.B.2, infra (detailed analysis of the NRC findings). It is remarkable that the NRC commission was willing to make such statements, as the commission’s
makeup was highly biased in favor of industry; its chair was a university president who was amember of several high-tech boards, it had members from Intel and Microsoft etc. There wasa small minority of pro-labor members, but they were overwhelmed by the pro-industry majority which, in addition to its numerical superiority, had tremendous resources to draw
upon.
57.
American Competitiveness in the Twenty-first Century Act of 2000, Pub. L. No. 106313 § 102, 114 Stat. 1251 (2000).

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In spite of the fall of NASDAQ, the industry had an even easiertime getting the legislation passed than it had had in 1998. IEEEUSA’s opposition was very much muted, due to heavy pressure fromthe IEEE parent group.58 Instead of objecting on the grounds thatthe influx of H-1Bs adversely impacted wages and job opportunities
for Americans as in 1998, the organization now said that the foreign workers should be welcomed, and given expedited green
59
cards. Proponents of the H-1B expansion derided this turnaroundas insincere.60
The AFL-CIO, which had done only lukewarm lobbying against
the H-1B increase in 1998, now in 2000 even toyed with the idea ofactively supporting the increase, in exchange for industry’s supporting the AFL-CIO’s request that Congress grant amnesty to illegal
aliens.61
The votes in favor of the measure were overwhelming, 96–1 in
the Senate and a unanimous voice vote in the House.62 Prominent
members of Congress openly admitted that this was due to the industry’s monetary clout. Sen. Robert Bennett (R-Utah) remarked,“Once it’s clear [the visa bill] is going to get through, everybody
signs up so nobody can be in the position of being accused of being
against high tech. There were, in fact, a whole lot of folks against it,
but because they are tapping the high-tech community for campaign contributions, they don’t want to admit that in public.”63 A
major supporter of pending legislation which would increase the H1B quota, Rep. Tom Davis (R-Va.), said, “This is not a popular billwith the public. It’s popular with the CEOs . . . This is a very important issue for the high-tech executives who give the money.”64 Rep.

58.
John Judis, Our Guest Worker Problem, The New Republic, June 19, 2000, at 21.
59.
The rationale for IEEE-USA’s proposal was that, since the exploitation of H-1Bs
stems from the de facto indentured servant status they have while a green card is pending,they should be given immediate green cards. Though their point was correct, it ignores
other issues, which will be discussed in Part VII. See Judis, supra note 58, at 21, for details on
IEEE-USA’s development of its green card proposal. The article notes that IEEE-USA
brought in an outside consultant to help “wean the organization from outright opposition to
immigration.” Id. Meanwhile, the organization dismantled its Misfortune 500 web page,
which is discussed in Part II.B.1.
60.
Lakshmi Chaudhry, Foreign Worker Debate Heats Up, Wired News, May 15, 2000,
available at http://www.wired.com/news/print/0,1294,36234,00.html.
61.
David Bacon, Inn Trouble: Unions Shape New Immigrant Strategy, L.A. Weekly, Jan. 16,
2001.
62.
See Congress Clears H-1B Legislation in Surprise Move: President Clinton Expected to Sign,
77 Interp. Rel. 1437, Oct. 9, 2000.
63.
Lochhead, supra note 6.
64.
Committee To Address Bill Eliminating H-1B Cap, Nat’l J. Tech. Daily, May 5, 2000;
Lars-Erik Nelson, Pols Are Going Overboard On Visa Program, N.Y. Daily News, May 3, 2000.

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Davis was chair of the Republican Congressional Campaign
Committee.
The “unanimous” vote in the House also occurred under conditions of impropriety. It was announced in the afternoon that nofurther votes would be held that day, yet a vote on the H-1B bill washeld that evening, with only 40 of the 435 members of the House
present, with ordinary voting rules bypassed.65
About a month before the vote on AC 21, the GAO released a66report which was highly critical of the H-1B program. Yet the entire 19,000-word discussion of the bill in the Senate consisted ofpraise for the bill; the GAO report was not mentioned even once.67
It is important to note one more interest group involved in this68
legislation—the H-1Bs themselves. Throughout the 1990s, a hightech employer of an H-1B would typically also sponsor him/her fora green card. As of the late 1990s, processing for LPR status was taking five or six years for most high-tech H-1Bs, leading to worries
that the six-year H-1B visa period would lapse before the green card
was approved. A group of H-1Bs founded an organization, the Immigrants Support Network (ISN), to lobby Congress for relief,
noting that, “[t]here was high-tech industry on one side lobbying
for higher numbers of temporary work visas, and unions arguingthat H1-B’s were taking jobs from US workers. We had no one representing us.”69 Eventually ISN retained Capitol Hill immigration
insider Rick Swartz to lobby on their behalf, at a total estimated70
cost of $100,000.
Swartz’s efforts brought some results. AC 21 did improve conditions to some extent. For H-1Bs who are being sponsored for green
cards, the old per-country limits, which had caused long waits for
H-1Bs from India and China, were now essentially abolished. However, overall the green card process still takes about three to four
years, according to immigration lawyers.
3. Post-AC 21—The job market had already begun to deteriorateby the time AC 21 was enacted in October 2000, and the downhill
71
slide greatly accelerated in the succeeding months. Nevertheless,employers used the H-1B with relish, apparently feeling that during
65.
146 Cong. Rec. H8706 (daily ed. Oct. 3, 2000); 77 Interp. Rel. 1437.
66.
U.S. General Accounting Office (GAO), H-1B Foreign Workers: Better Controls Needed to Help Employers and Protect Workers, GAO/HEHS-00-157 (2000).
67.
146 Cong. Rec. S9643 (daily ed. Oct. 3, 2000).
68.
Though much less so after 2000.
69.
Raj Jayadev, Look Who’s Organizing—High-Level Tech Workers Form New Labor Group,
Pac. News Service, Aug. 15, 2001.
70.
Broadcast e-mail from ISN (Oct. 21, 1999) (on file with author).
71.
Laura Kurtzmann, High-End Rent Rates Cool Down in Bay Area, San Jose Mercury
News, Jan. 22, 2001.

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a recession there was an even greater need to reduce labor costs. In
spite of the recession, the number of visa applications increased by72
14 percent in 2001.
The number of visas granted dropped substantially in 2002.73
However, this was not a sign of employer restraint, but rather areflection of the dramatic drop in the number of new job openings,
the worst high-tech job market in 30 years according to one
74
university career-center director. A number of major employers
were accused, sometimes in court, of laying off Americans and thenreplacing them by H-1Bs and other foreign workers in the samejobs. These firms included Sun Microsystems, one of the mostactive lobbyists for ACWIA 98 and AC 21,75 Siemens,76 the Bank ofAmerica/Exult,77 Netscape,78 and Dun & Bradstreet.79 . In several ofthese cases, the laid-off American workers were forced (as acondition for receiving severance pay) to train their H-1B
replacements.
C. Trends in Usage of the H-1B Visa
Employers latched on to the H-1B program immediately after it
was implemented. Even though this was a period of recession andthe tech industry was engaged in massive layoffs, the number ofsoftware H-1Bs grew ten times faster than the growth rate in jobs:
The number of H-1B work visas requested by industry for computer
programmers increased by 352 percent from 1990–1995, during
which time the number of programming jobs increased by only 35

72.
Rachel Konrad, H-1B Visas Jump in 2001, CNET News, Jan. 22, 2002, available at
http://news.com.com/2100-1017-820302.html.
73.
See Eryn Brown & David Kirkpatrick, The Reverse Brain Drain, Fortune Mag., Nov.
11, 2002, at 39.
74.
Margaret Quan, EE Grads Face Grim Job Market, Electronic Engineering Times,
Feb. 7, 2002, available at http://www.theworkcircuit.com/story/OEG20020206s0059.
75.
Jennifer Bjorhus, U.S. Workers Taking H-1B Issues to Court, San Jose Mercury News,
Sept. 26, 2002, at 1A.
76.
See Lisa Vaas, L1s Slip Past H-1B Curbs, eWeek, Jan. 6, 2003, available at http://
www.eweek.com/article2/0,3959,809079,00.asp.
77.
Compare Sarah Lunday & Rick Rothacker, BofA to Send Tech Jobs Overseas, Charlotte
NC Observer, Mar. 6, 2002, at A1, with the Programmers Guild web site, available at http://
www.programmersguild.org/Guild/h1b/howtounderpay.htm, which shows that many of the
newly-hired workers were H-1Bs, rather than workers in India as reported by the Observer.
78.
Bjorhus, supra note 75.
79.
Douglass Krouse, Dun Workers Fear Layoffs, [Bergen, NJ] Daily Record, June 3,
2000.

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percent.80 Again, this was in a period in which no one claimed ashortage of workers, so the dramatic growth in H-1Bs would seemat odds with the notion that the H-1B program is supposed to be aremedy for shortages. Yet employers, apparently felt a need to saveon labor costs during a recession, and thus found the H-1Bs attractive.
In recent years, the largest job category in which H-1Bs are employed is the Systems Analysis and Programming category.81 Among
all H-1B visas issued for fiscal year 2001, for instance, 52.1 percent
82
were in that category. Contrary to the impression readers sometimes got from press coverage of the H-1B issue, comparatively few
83
of the H-1Bs are engineers. The next-largest occupation category,
Electrical/Electronics Engineering Occupations, comprised only
4.7 percent.84
Industry lobbyists make claims along the lines of “Only 5 percent
of our workers are H-1Bs,” but this is highly misleading. First of all,they mean the word “workers” to include non-technical staff such as
secretaries, marketers, janitors and so on. Second, they are notcounting all the H-1B workers at their firms who are subcontracted
by agencies.
In fact, the Department of Commerce found in 2000 that H-1Bs
accounted for 28 percent of all IT hires requiring at least a Bachelor’s degree;85 the percentage has grown much larger since then.
Even more importantly the industry lobbyists fail to disclose thatmany more of their technical staff originally started as H-1Bs butlater obtained green cards via employer sponsorship. About onethird of Silicon Valley programmers and engineers were foreignborn as of 1990; the proportion grew to 54 percent by the year
2000.86 The reasons for the increase include the 352 percent
increase in H-1B visas during 1990–1995, and the Chinese Student
80.
National Software Alliance, Software Workers for the New Millennium(1998).
81.
This was probably the case in the earlier years as well, but data are not available forthat period.
82.
INS, supra note 3, at 11.
83.
The situation is confused by the fact that a common modern title for computer
programmers is Software Engineer. But it is just a title, and does not connote engineering
work in the usual sense. See Part III, infra below for elaboration on this point.
84.
INS, supra note 3.
85.
U.S. Dep’t of Commerce (DOC), Digital Economy 2000, at 51 (2000).
86.
This is from my analysis of the Public Use Microdata Sets (PUMS), 1990 and 2000
censuses, respectively, for workers who had titles of Programmer, Computer Scientist or Electrical Engineer (and in 2000, Software Engineer, a new title added to the census that year),
and who lived in Santa Clara, Alameda and San Mateo Counties. Based on my observations,the vast majority of those in the 1990 census, and most of the ones in 2000, gained U.S. residency via employer sponsorship.

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Protection Act (CSPA) of 1992, which gave green cards to an
estimated 100,000 Chinese nationals; many of the recipients werein technology areas and would have been sponsored for H-1B andgreen card status if not for the CSPA.
Ethnic Chinese comprised 76 percent of the immigrant programmers and engineers in Silicon Valley in the 1990 census.
However, during the 1990s, the dominant H-1B country of origin
nationwide became India. In 1999, 48 percent of the H-1Bs werefrom India, with China coming in a distant second at 9 percent.87
For the computer-related H-1Bs, the dominance of India is evenmore pronounced, with the Indians outnumbering the Chinese by
88
more than an 8-to-1 ratio.
Table 1
Percentage of Computer-Related
H-1Bs, by Nationality
India
China
Philippines
CanadaPakistan
United Kingdom
RussiaTaiwan

64.8%
8.2%
2.3%
2.0%
1.9%
1.8%
1.7%
1.4%

III. Primary Focus on Computer Programmers
The dominant job category for H-1Bs consists of computerrelated occupations. However, our focus is narrower than this.
Since by law H-1Bs must be in jobs which are normally performed
by workers having at least a Bachelor’s degree in a relevant field,
H-1Bs should not be in jobs such as data entry clerks, network
technicians, and so on. Instead, the vast majority of H-1Bs in hightech positions are computer programmers, and hence our focus
will be in this type of job.
87.
GAO, supra note 66.
88.
Letter from Michael Hoefer, U.S. Immigration & Naturalization Service, to Norman
Matloff, Professor of Computer Science, University of California, Davis (July 9, 2001) (on filewith author).

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It important to note that among employers that are in the software or hardware vending business, programmers typically have thetitle Software Engineer rather than Programmer. The title Software
Engineer originally arose when hardware vendors found themselves
assigning many engineers to software development jobs. In otherwords, they were engineers who were employed in software projects, hence the title.89 However, they were typically not doing“engineering” in the usual connotation of the word, i.e. work in90
volving the use of mathematics, physics and so on. Later, thesoftware vendors took to using the title as well. And it is not just a
matter of job titles. One almost never hears the title Programmer in
Silicon Valley, for example; they are simply referred to as engineers.
Today many, probably most, workers with a Software Engineer title
do not have degrees in engineering.91
And as mentioned above, almost all workers with a Software Engineer title, regardless of educational background, are not doing“engineering” work. The titles Software Engineer and Programmer
should thus be considered synonymous, with the only difference
being custom within a given firm. Banks, insurance companies andthe like still tend to use the title Programmer or System Analyst,
while the software and hardware vendors use Software Engineer.92
Workers who do “real” engineering, for instance electrical engineering, comprise only a small percentage of H-1Bs. This iscontrary to public impression, which stemmed largely from lobbying for H-1B expansion by the American Electronics Association.93

89.
Similarly, engineers working in the sales area are often called Sales Engineers.
90.
Jesse Liberty, The Complete Idiot’s Guide to a Career in Computer Programming 9 (1999), notes that although today’s breed of programmers call themselves
software engineers, “I can’t quite bring myself to use that term. Engineers build bridges andpower plants. We’re just writing code. But, I’m showing my age.” Id. Even the title Computer
Engineer, which sounds like the job involves design of hardware, is often held by workers
whose sole function is to write software.
91.
Nor do they necessarily have degrees in computer science either, as will be discussed later. Lerman, supra note 37, found that only 31 percent of programmers had degrees
in computer science, and only 10 percent in engineering.
92.
See, e.g., Liberty, supra note 90, at 7. Jesse Liberty, a consultant and author, warns
readers not to read anything into job title in the software development field: “Some companies distinguish between programmers, analysts, architects. . . . Others call all these people
software engineers.” Id.
When the title Software Engineer first came into common usage, it was felt that this title
implied a greater degree of responsibility, under which the programmer did not only thecoding of the software but also the design. In earlier times, a System Analyst might work on
the “big picture” design of the software, and then hand this design to a Programmer for theactual coding. However, today most programmers, regardless of title, do both design andcoding.
93.
Immigration and America’s Workforce for the 21st Century: Hearing Before the Subcommittee
on Immigration and Claims of the House Comm. on the Judiciary, 105th Cong. 163 (Apr. 21, 1998)

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However, when considering expansion of the H-1B program, Congress seemed to understand that the issue was really computer
programming, not engineering. For example, as part of the 1998
legislation to increase the H-1B cap, Congress commissioned a
study to assess claims of age discrimination (caused largely by the
influx of H-1Bs) and focused the study on IT.94
This Note will use the word industry to mean all employers ofsoftware developers, not just those in the high-tech field. This includes not only software vendors, such as Microsoft, but also
employers such as banks, who develop software only for their own
internal use. Similarly, this analysis is for the nation as a whole, notjust Silicon Valley.
IV. The Industry’s Claims to Need H-1B Workers
The industry has claimed a need to hire H-1B workers on several
grounds. This Note examines those grounds in turn, concludingthat none of them explain the mass hiring of H-1Bs. It then argues
instead in Part V that the central issue is money, i.e. that employers
hire H-1Bs primarily to attain either Type I or Type II reductions inlabor costs.
A. General Investigations of a Possible Worker Shortage

1. The ITAA Reports—The main evidence that the industry has offered for its shortage claim has consisted of the Information
Technology Association of America (ITAA) employer surveys concerning numbers of unfilled positions.95 The critics of the H-1B
program counter that the employers have contrived this “shortage”
in order to maneuver Congress into providing the industry withcheap labor in the form of H-1Bs, and thus employer surveys alone
cannot be taken as impartial evidence of a shortage. Moreover, the(prepared statement of Michaela D. Platzer, Vice President, Research and Policy Analysis,
AEA), available at http://www.govtech.net/magazine/gt/2000/dec/34.phtml.
94.
See NRC, supra note 55.
95.
See, e.g., ITAA, supra note 5.

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GAO later released a report strongly criticizing the ITAA’s researchmethodology.96
The GAO cited a number of flaws in the ITAA study. For example, the ITAA/VPI survey counts a position as “open” even if it iscurrently filled by outside consultants.97 The fact that many programmers now prefer to work as consultants (“contractors”) insteadof as salaried employees does not mean there is have a shortage ofprogrammers.
Interestingly, even the ITAA survey’s director, Linda Leffel of theVirginia Polytechnic Institute and State University, noted in a side
comment in the study that “even if 346,000 qualified applicants[ITAA’s estimate of the number of unfilled positions at the time]. . . appeared today, in all probability immediate positions would
not be available . . . to translate this number to an absolute would
be misleading.”98 For example, many jobs are open just to “test thewaters”. There may be, say, four job ads placed when the firm
intends only to hire two workers. The four jobs may be under four
different managers, who are “competing” with each other for two
job slots.99 Subsequent ITAA surveys suffered from similar
problems.
No analysis, other than those sponsored by industry, has confirmed a shortage. Following is an overview of the findings of the
major studies, in chronological order.
2. The Lerman Analyses and Similar Studies—In 1998, economist
Robert Lerman presented Senate testimony in which he argued
that available data did not indicate a shortage, but in fact, counterindicated it.100
96.
U.S. General Accounting Office, Information Technology: Assessment of
the Department of Commerce’s Report on Workforce Demand and Supply,
GAO/HEHS-98-106R (1998).
97.
Id.
98.
ITAA, supra note 5.
99.
See, e.g., Margaret Steen, Thinking Globally, Infoworld, Nov. 2, 1998, available at
http://inforworld.com/cgi-bin/displayArchive.pl?/98/44/e06-44.73.htm:
Logic suggests that if a company has posted a want ad, it wants to fill that position.
That is not always the case. Some companies use ads as a kind of public relations stunt
to showcase themselves as up-and-coming. One company even placed a want ad during a hiring freeze just to generate publicity. Some larger companies have an ongoingneed for employees and use the ads to generate resumes for unspecified future positions.
Id.
100. Lerman, supra note 37. See also Burt Barnow et al., Urban Institute, Final Report to the Office of the Assistant Secretary for Policy, U.S. Dept. of Labor (1998);
Clair Brown et al., Dep’t of Economics, U.C. Berkeley, The Perceived Shortage ofHigh-Tech Workers (1998); Thomas Espenshade, High-End Immigrants and theMatloffTYPE11-7-03.DOC

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Lerman, Professor of Economics at American University andDirector of the Human Policy Resource Policy Center of the Urban
Institute, began by pointing out various methodological problems
with the ITAA report.101 He then discussed which effects should be
visible in the data if there were a shortage, and noted that the effects were largely absent. He also pointed out that the ITAA’s
employment and wage figures were inconsistent with most government and private data. Lerman’s main argument was that wages in
the IT field were not rising as quickly as they would if there were ashortage.102 He stated that, except for the period 1996–1997, bothgovernment and private data showed that “real wages have been
103
essentially flat since 1988.”
Concerning the ITAA’s claim that the yearly number of computer science graduates was insufficient for the industry’s needs,
Lerman noted that only a minority of programmers have computerscience degrees anyway.104 Citing PhD shortages which had been
projected in the late 1980s but then failed to materialize, hewarned that incorrect projections can lead to unemployment anddisincentives for students to pursue the given fields of study.105
3. The Veneri Paper—A paper by Bureau of Labor Statistics researcher Carolyn Veneri also stated that the data does not support
the industry’s claim of a labor shortage.106 Her analysis is again similar to that of Lerman, but another point she brought up was quite
important. The ITAA lobbying group has often cited low unemployment rates among IT workers as indicative of an IT labor
shortage. But Veneri notes:
A major drawback in using . . . unemployment rates in analysesof shortages is that the unemployment rate is calculated based
Shortage of Skilled Labor (Office of Population Research, Working Paper No. 99-5, June1999).
101. Lerman, supra note 37.
102. Wages for IT workers were rising at generally single-digit annual percentage rates,
which were typical for most professions at the time. Some professions had rates of approximately double those of IT. For example, surveyors and dieticians saw their salaries increase
far more than programmers in 1997, beating inflation by 20 percent and 17 percent, respectively; See Bernstein & Hamm, supra note 39.
103. He postulates that the exceptional period may be due to short-term hiring in 1997
for the upcoming “Year 2000 Problem,” in which old software written to assume that the year
field in a date would begin with “19” might fail to operate in the year 2000. Lerman, supranote 37.
104. Lerman, supra note 37.
105. Id.
106. Carol Veneri, Can Occupational Labor Shortages Be Identified Using Available Data?,
Monthly Lab. Rev., Mar. 1999, at 15.

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on a person’s last job, rather than the longest job held or occupation in which he or she trained and is actually looking forwork. This means an individual with experience as a computer
programmer who is seeking a programming job, but who lastworked as a cashier, is classified as an unemployed cashier, notan unemployed programmer . . .
. . . the labor market conditions for this period [1992–1997]
indicate that neither the occupational group consisting ofcomputer systems analysts, engineers, and scientists nor thecomputer programmer occupation has exhibited both higher
than average employment growth and higher than average
107
growth in wages.
4. The DOC Reverses its Position—In 1999 the DOC reversed its
earlier position and stated that, “due to the limitations of available
data, there is no way to establish conclusively whether there is, or isnot, an overall IT worker shortage.”108 The DOC reached this conclusion after analyses of wage-growth data. These analyses werequite extensive, and apparently formed the foundation of the NRC
study, to be discussed below.
5. The Computing Research Association’s View—The Computing
Research Association (CRA), a consortium of university computerscience departments and industrial leaders, released a report in
109
1999. One contribution of this study was to show some additional
problems with analyses of unemployment rates. The authors makethe following observations in Chapter 4:
The IT unemployment rates are about three times as low as
overall unemployment rates in the United States suggesting ashortage/tightness. However, to properly interpret thesenumbers they should be seen in comparison with some otherstatistics. First, the IT unemployment rates have been consistently low, in both absolute terms and in relationship tonational unemployment rates, since 1988; however, the claims
for an IT worker shortage have only been made in the past107. Id. at 18–19. Or better yet, if the programmer is currently employed as a cashier,he/she is counted as an employed cashier rather than as an unemployed programmer. This
type of stark transition is quite common. The author knows of former programmers who
worked as box packers, security guards, school bus drivers, and the like.
108. Carol Ann Meares & John F. Sargent, U.S. Dep’t of Commerce, The Digital
Workforce: Building Infotech Skills at the Speed of Innovation vii (1999), available at
http://www.ta.doc.gov/reports/itsw/execsumm.htm.
109. Peter Freeman et al., Computing Research Association, The Supply of Information Technology Workers in the United States (1999).

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several years. Why were they not made in the late 1980s or
early or mid-1990s? Second, it may be unfair to compare IT
unemployment rates with national unemployment rates, inthat professional unemployment rates are almost always significantly lower. The overall unemployment rate for all
specialty professions is only slightly above two percent not thatmuch different from the IT worker unemployment rates. But
it is hardly credible that there is a shortage of all professional
workers. Thus, while unemployment rates may suggest ashortage/tightness in the IT labor market, as an indicator they
are not entirely unproblematic.110
As with other studies, the CRA authors also found that available
data did not support the industry’s claims of a shortage. However,they went further than did the other studies in speculating that ashortage may have existed:
The report evaluates the question of whether there is a shortage of IT workers in the United States. The study group
determined that the data are inadequate to ascertain what
mismatch there is, if any, between national supply and demand. Therefore the report makes use of a variety of otherquantitative and qualitative kinds of evidence . . . The preponderance of evidence suggests that there is a shortage of IT
workers, or at least a tight labor market. None of this evidence
has the certainty of a direct count of supply and demand, andwithout this kind of direct count it is impossible to distinguishan actual shortage from a mere tightness in the labor market.
Moreover, there are credible reasons for questioning the evidentiary value of virtually any piece of evidence that is
111
available.
6. The IT Workforce Data Project—The IT Workforce Data Project,a four-part series on the IT labor force, included an analysis of theindustry’s shortage claims.112 They too found that one could notconclude from the data that there was a shortage:
In summary, none of the possible signs of an inadequate supply of IT workers provides unambiguous evidence that there
110. Id. at 58.
111. Id. at 10.
112. Richard Ellis & B. Lindsay Lowell, Assessing the Demand for Information Technology
Workers, IT Workforce Data Project, Nov. 1999, at Part IV.

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are not enough people in the field, and several indicators—
rising numbers of experienced unemployed workers, the “flat”
compensation results reported by Computerworld, increasing enrollments in computer science—suggest that if
anything, pressures of demand on the available supply may
have eased during the past year.113
The authors also noted that two ITAA employer surveys, in 1997
and 1998, had each found a 10 percent vacancy rate, which the
ITAA had taken to be evidence of a shortage. After recalling that
previous analyses had questioned this interpretation of the vacancy
rate, the authors also point out that for a field which is growing at a
10 percent annual rate, a vacancy rate of 10 percent merely
indicates a lag time of one year for the marketplace to adjust:“Since 1995, the number of core IT jobs (which precisely match thepositions defined by ITAA) has grown 10 percent a year—that is,exactly at the level that industry vacancy figures suggest should be
met. Where then is the problem [claimed by ITAA]?”114
Another important point made by the authors concerns stock
options. After the work of Lerman and others pointed out that themodest rates of wage growth in IT salaries did not indicate a shortage, industry lobbyists claimed that this was due to compensation
growth in the form of stock options.115 The authors give a rather
thorough analysis of stock options held by IEEE members, andconclude that the overall effect on compensation, while dramatic insome individual cases, is minor overall.116 Among those who heldstock options, the median value went from $7,000 in 1996 to$10,000 in 1998. Given an average salary of $67,400 for IEEE members in 1997,117 that would mean that stock options added only
about 2 percent to yearly growth in total compensation. In otherwords, the growth rates of wages, which had been found to bearound 7 or 8 percent in the studies reported here, might correspond to growth rates in total compensation of 9 or 10 percent, still
not high enough to indicate a shortage.
7. The Congressionally Commissioned NRC Report—The National
Research Council study commissioned by Congress in ACWIA 98
113. Id. at 4.
114. Id. at 3.
115. Immigration and America’s Workforce for the 21st Century: Hearing Before the Subcomm. on
Immigration and Claims of the House Judiciary Comm., 105 Cong. 64 (Apr. 21, 1998) (testimonyof Harris N. Miller, President, ITAA).
116. Ellis & Lowell, supra note 112, at 2.
117. Robert Bellinger, Engineering Salaries Take a Significant Hike—Finally, ElectricalEngineering Times, Sept. 1998, at 38.

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was released in October 2000, just after AC 21 was enacted. As with
the CRA report, the NRC commission had a very strongly
pro-industry composition. And similarly to the CRA case, the
NRC commission came closer to—though stopped far shortof—concluding that a shortage existed:118
The committee believes that today’s IT labor market is tightand likely to remain so for the immediate future, barring
dramatic change . . . the committee has chosen the term“tightness” rather than “shortage” for several reasons. First,
there is no universally accepted definition of “shortage.”
Second, the use of the term “shortage” can imply a binary
condition—either there is or is not a shortage. But the term“tightness” can encompass “shortage” as its limiting case—thecondition in which employers find it impossible to findqualified workers no matter what they pay or how long they
wait–and still account for the continuum nature of thephenomenon. Third, the committee feels that “tightness” is abroader and more encompassing term that does better justiceto the complexity of the issue.
8. The Wharton School Analysis—A University of Pennsylvania
study consisted of a critical analysis of the research done to date on
the claimed IT labor shortage.119Study author Peter Cappelli, a professor at the Wharton School of Management, expressed generalpuzzlement at the lack of good indicators in the data of a shortage.
He critically reviewed several of the studies mentioned here, andnoted that none of them confirmed the industry’s claim of a shortage. As he stated in a companion article,
Dozens of studies have analyzed the state of the labor market
for IT workers, and the results are easy to summarize. Researchers who study labor markets and representatives of IT
employers disagree almost completely as to whether there is a
shortage of IT workers. The researchers uniformly believe that
there isn’t a shortage while the representatives vociferously be120
lieve that there is.

118. NRC, supra note 55, at 109.
119. Peter Cappelli, Is There a Shortage of Information Technology Workers?, Report to
McKinsey and Company, June 2000.
120. Peter Cappelli, The War of Words About The IT Labor Market, Purple Squirrel, Sept.
2000, available at http://purplesquirrel.com/articles/sept.cappelli.shtml.

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However, he assumed that the industry’s claim is made in goodfaith, and attempted to resolve the apparent contradiction:
Finally, market adjustments may be interpreted differently by
individual employers than by the market as a whole. For example, an employer may find that it cannot hire the workers it
needs because it cannot afford to pay the new, higher wages
that scarcity has produced. From the perspective of an individual employer, this situation looks like a shortage: It can nolonger find workers at the wages they have been paying. It isalso a crisis for them. From the perspective of the economist
and perhaps even of the industry, there is no shortage, justhigher wages.121
In the companion article, Cappelli gave an analogy: “There is no
shortage of diamonds, for example, because even though they are122very expensive, you can buy all you want at the going price.” Cappelli was also quite critical of what he regarded to be rampant
mismanagement on the part of the employers, ascribing much of
the employers’ perception of a shortage to mistakes made by theemployers.123
9. Issues of Potential Bias—Since the shortage and H-1B issues arehighly political and because the industry leveraged its requests toCongress for higher H-1B caps by asserting a labor shortage—thisArticle comments on potential biases of the studies cited, due to124
vested interests of the authors.
Lerman, Brown and Espenshade, who did not find a labor shortage, have no apparent vested interests in such a finding. The same
holds for Veneri.125
The DOC generally considers industry to comprise its major clientele, and it had produced its 1997 report in very close
cooperation with the ITAA industry trade group. It had concludedin that report that there was a labor shortage. So, for the DOC torecant that view and state in 1999 that the data did not confirm ashortage would seem to indicate that the DOC’s vested interests in

121. Id.
122. Id.
123. Id.
124. The phrase vested interests is key here. I am only listing potential sources of bias due
to financial or employment attributes of the authors.
125. Veneri works for the DOL, which under Secretary Reich had had a history of criticism of the H-1B program. But this was not the case under Secretary Alexis Herman, whoheaded the department when Veneri conducted this research.

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maintaining close ties to business did not affect its 1999 conclusions.
Ellis and Lowell also concluded that the data did not support industry’s claims of a shortage. Ellis is an engineer who had previously
been critical of the H-1B program, and thus had incentives to be
skeptical of the industry’s shortage claims. However, his co-author,
Lowell of the Institute for the Study of International Migration at
Georgetown University, is regarded as neutral among immigration
analysts.126 Moreover, Lowell is the author with background in statistical analyses. Thus presumably Lowell’s participation limited thepotential for bias.
The case of the CRA is quite different. The 21-member study
group that produced the CRA report included members from Intel,
Microsoft, IBM, and Sun Microsystems, all of which have heavily lobbied Congress for increased H-1B caps. Another member, MarkRegets, had also written articles supporting the H-1B and other foreign-worker programs, and was from the National Science
Foundation, an organization which played a major role in establishing the H-1B program.127 The remaining members of the CRA groupwere mostly academics. As mentioned in note 48, academia has actively supported the industry’s claims of a labor shortage and aneed for more H-1Bs. To illustrate how beholden academics tend
to be to industry, Ed Lazowska, the academic cited in note 48, was
Chair of the CRA at the time the study was conducted. Thus themembership of the committee was overwhelmingly pro-industry.
The case of the National Research Council commission was similar. The commission included many industry members, including
representatives from Intel and Microsoft.128 The commission’s
Chair, Alan Merten, is president of George Mason University. Not
only did that give him strong incentives to toe the industry line, but
he also sits on the boards of several high-tech firms.129 At least one
126. In an appearance on the NPR radio show Talk of the Nation (Sept. 26, 2000) on
the shortage and H-1B issues, Lowell was the “middle ground” guest, sandwiched between
Harris Miller of the ITAA and John Miano of the Programmers Guild, a group highly criticalof the H-1B program.
127. One of the study’s principal authors, Freeman, later went on to become an Associate Director in the NSF. Regets, in his NSF capacity, had previously done statistical analyses
for pro-H-1B writer Stuart Anderson (See Anderson, supra note 32; Anderson, infra note 204),and was the NSF liaison to the NRC commission. Regets appointed the commission chair,
Alan Merten.
128. Moreover, both of these members, one an HR executive and the other a lawyer, hadbeen involved in the lobbying process during the congressional debate on ACWIA 98.
129. See, e.g., Who’s On First, Wash. Tech., Aug. 29, 1996, available at http://
www.washingtiontechnology.com/news/18_6/itcrowd/20992-1.html. See also BTG press
release, Feb. 2, 1998, available at http://www.btg.com/investor/news/9804.htm.

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12/12/2003 9:54 AM[Vol. 36:4of those filed a Labor Condition Application to hire H-1Bs at below-market rates.130 Though the commission did have two or threemembers with a background less favorable to industry, they were
not only vastly outnumbered but also outgunned—they had notime or resources to devote to the project, unlike the situation with131
the industry representatives.
Thus, both the CRA and NRC groups had strong incentives tocome up with conclusions favorable to industry. Thus the fact thatneither of them was able to conclude there is a labor shortage issignificant. They did, however, take more liberties in interpretation
than did the sponsors of the other studies. For example, Lazowska,
the CRA Chair, later cited both the CRA and NRC reports as confirming a shortage.132 CRA’s Executive Summary stated that though
the data could not confirm a shortage, “the preponderance of evidence suggests that there is a shortage of IT workers”—phrasingthat does not appear in the body of the report.133 Similarly, thephrasing in the Executive Summary of the NRC report, while cautious, leaves enough room for the reader to conclude there is a
shortage, especially since the report concludes that the H-1B program was necessary for growth, a finding which would not makemuch sense in the absence of a shortage. Yet none of the data in
NRC’s Chapter 3, which assesses the industry’s shortage claim, justifies the more favorable pro-industry “spin”; that chapter merely
notes that the wage-growth data do not indicate a shortage, while
offering speculation as to why the data might be misleading.
Finally, there is the Cappelli analysis, which is not favorable to industry. Not only does he basically side with Lerman and the others
who concluded that the data do not indicate a shortage, Cappelli
also blames the employers themselves for poor management practices which he says led to a perception on their part of a shortage.
Given that he too is closely tied to business—his main paper wascommissioned by a private consulting firm—arguably these strong
statements are of even more significance than the DOC reversal
130. A Freedom of Information Act request revealed that BTG had submitted an LCA
for a Computer Engineer at a salary of only $30,000, Project Engineers at $37,000, and Programmer Analysts at $43,000, all far below the median salaries for these professions. See
Robert Sanchez, LCA database, available at http://www.zazona.com for the BTG entry.
131. Personal statement made to me by an NRC Commission member at the NRC public
hearing, Santa Clara, California, Sept. 23, 1999. It should also be noted that the NRC is funded
by industry. The NRC unit responsible for this study, the Computer Science and Telecommunications Board, lists as its sponsors Cisco Systems, Sun Microsystems, Hewlett-Packard, Intel,
Microsoft, Texas Instruments, and Time-Warner Cable. With the exception of Time-Warner, allof these firms have been in the forefront of lobbying for increases in the H-1B program.
132. Brandon Stahl, Hey Buddy, Can You Spare a Job Offer?, Graduating Engineer, Sept.
2001, available at http://www.graduatingengineer.com/articles/feature/09-04-01a.html.
133. Freeman et al., supra note 109.

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mentioned in Part IV.A.4. Thus, a fairly broad consensus exists thatthe data do not confirm a labor shortage. Moreover, Cappelli
makes a key point when he flatly states that the perceived “shortage” may largely reflect a shortage of cheap labor. This point isoften made in articles in the press, such as the following quote ofPete Georgiadis, founder and CEO of eBlast Ventures: “If you’re
willing to pay market rate, you can find people. The issue is if
you’re budget-constrained, you can’t get the people you want.”134
This then also goes to the age issue. As the IT director at a large law
firm put it, “I’d love to have somebody with 20 years of experience,but unfortunately I’m only paying for three or four.”135This point
made by Cappelli is of signal importance and this Article will refer
to it as the Cappelli Principle.
10. The Matloff Analyses—Further evidence against the industry
claims of a labor shortage is seen in the employers’ very low hiringand interview rates. The employers claim a “desperate” labor shortage, but in fact their extreme pickiness in hiring shows they are notdesperate at all. They are flooded with resume’s but hire only asmall percentage of the applicants.
The situation is typified by the fussy John Otroba of American
Management Systems, who. . . has no shortage of incoming re’sume’s. When he logs onto his
office computer every day, he has at least 50 in his electronic
mailbox . . . But only about one in 12 resume’s leads him topick up the telephone to call the job seeker. Some don’t passthat screening step. Of those who come in for an interview,
fewer than a quarter are offered jobs.136
Table 2 shows typical hiring rates, as percentages of the number
137
of applicants:
134. Francine Knowles & Shu Shin Luh, So Many IT Jobs, So Few Takers, Chi. Sun-Times,
Sept. 28, 2000, at 54.
135. Steen, supra note 10.
136. Rajiv Chandrasekaran, A Seller’s Market for Tech Workers, Wash. Post, Nov. 30, 1997,
at A1 (emphasis added). See generally, Barb Cole-Gomolski, Stream of Applicants Belies Labor
Shortage, Computerworld, Mar. 22, 1999, at 36; Thomas York, Why Are Employers So Picky?,Infoworld, Nov. 22, 1999, at 77.
137. Most of these data are from my interviews of HR staffers and hiring managers, but a
few are from the press, as follows. Microsoft: unsigned Associated Press article, Tacoma
News Trib., May 13, 1997; American Management Systems: Chandrasekaran, supra note 136;
Qualcomm: Marcus Stern, Some Can’t Find Work Despite Computer Skills: Yet Industry Says It Must
Hire Foreigners, San Diego Union-Trib., Mar. 7, 1998; Red Hat: Dean Foust, The Linux
Missionary Who’s Taking on Microsoft, Business Week, June 30, 1999; Raab: Christine Willard,
For Credit-Card Services Company, Going It Alone Meant Filling Key IT Positions—Fast,MATLOFFTYPE11-7-03.DOC

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Table 2
Percent of Software Applicants Hired
American Management Systems
Broderbund Software
Cisco
Cohesive
DatascanDeltanet
Ecbridges
Flashpoint Technology
R.D. Raab
H.L. Yoh
InktomiMicrosoft
Net Perceptions
New England firm
Qualcomm
Radiant Systems
Red Hat Linux
Tangis

2%
1%
5%
2%
5%
4%
2%
2 to 5%1%
4%less than 5%
2%
2%
1%
4.5%
under 1%
under 1%
under 1%

Some industry lobbyists have attempted to interpret these low
rates as indicating other phenomena, not employer pickiness. They
have postulated that the rates are low because an applicant gets multiple offers but can only accept one, or that many resumes arecasually submitted via e-mail by programmers who may not really bein the job market but are merely “testing the waters.”138
But this argument is refuted by examining offer rates, meaning
the proportion of those made offers among those who areinterviewed (in person, not just on the telephone). Table 3 showsoffer rates.139 The data here again show that employers are very picky,
rejecting most of even the applicants they invite for in-houseinterviews. This refutes, for instance, the industry lobbyists’argument that the low hiring rates do not show pickiness but rather
reflect the fact that a worker may receive multiple offers. The
lobbyists’ argument that the low hiring rates reflect workers “testingComputerworld, Dec. 6, 1999, at 46; Cisco: Carrie Kirby, No Shortage of Experience: Some
Seasoned Technology Workers Say They’ve Been Unfairly Passed over by Silicon Valley Companies
Looking to Fill Jobs, S.F. Chron., May 19, 2000, at B1. It should be emphasized that the rates
given to me in interviews are for programming and engineering jobs, not for, say, marketing.
138. See, e.g., NRC, supra note 55, at 99.
139. See supra note 137 regarding most of these. See also Aspect: Miranda Ewell, Aspect
Telecommunications Is on the Hiring Line, San Jose Mercury News, July 19, 1998; Tim Mensch,
letter to the editor, Tech Week, July 12, 1999.

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the waters,” rather than employer pickiness, is refuted for the same
reason.
Moreover, the lobbyists’ dismissal of the hire/offer rates as evidence of employer pickiness are refuted by the employers
themselves. Indeed, when asked about my citing of a low 2 percent
hiring rate, Microsoft admitted that it is “very, very selective.”140
Table 3
Percent of Interviewees Made Offers
American Management Systems
Aspect Technologies
Broderbund
City of San Jose (civil service)
Cohesive
DataScanDeltanet
ECbridges
ESP
Flashpoint Technology
High-Tech Job Fairs
InktomiMadison, WI recruiter
Mensch, Tim
Microsoft
Net Perceptions
New England firm
QuintetRadiant Systems

under 25%
20%
30%
10%
20%
12%
possibly as much as 40%
20%
10%
25 to 30%
as few as 6%
50%
20%
5%
25%
50%
25 to 30%
under 5%under 15%

B. Claims of a Skills Shortage

1. Applicant Screening on Skill Sets—When the industry lobbyists
started their first push for expansion of the H-1B program in 1997,
they attributed the claimed labor shortage to an insufficient141
number of students in college computer science curricula. Yet
when confronted with evidence such as we saw earlier that there is
no shortage of programmers and engineers, i.e. no shortage of140. Aaron Zitner, More Visas for Workers are Sought; U.S. Firms Say Foreigners Needed to Fill
Jobs, Boston Globe, Mar. 8, 1998, at A1.
141. ITAA, supra note 32.

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“bodies,” the industry changed their story. They have replied that it
is not a shortage of such workers in general, but rather a shortageof workers with very specific skill sets. During the debate on ACWIA
98, for instance, the “skill de jour” was Java, a new programming
language, and it was claimed that even though there may be lots ofprogrammers in the U.S., there was a shortage of Java
programmers. Other skills often cited by the industry as being inshort supply were the SAP database language, the UNIX operating
system, and various others.
So, is there really an IT skills shortage, if not an IT worker shortage? This article will demonstrate that although the skills issue isindeed central to the shortage/H-1B debate in a certain sense, it is
not in the sense the industry means. Instead, it will be shown thatthe employers, and especially their lobbyists, tend to use the skills
issue as a pretext for shunning older workers and/or hiring H-1Bs.
The skills issue is central in the following sense. The reason that
employers cite to rejecting the vast majority of their applicants for
programming positions, without even a phone interview, is lack ofwork experience in a specific programming language or other skill.
This was stated by all of the HR staffers interviewed for Tables 2 and3, and has been acknowledged publicly as well.142 But the reasonsfor performing this stringent screening for specific skills are notwhat they might seem to be at first glance, and the evidence showsthat the real issue is money, not a skill shortage.
2. The Cappelli Principle Again—Employer pickiness extends far
beyond merely requiring certain skill sets. Table 3 shows the percentage of interviewees to whom a job offer is extended. Bear inmind that this table shows the percentages of offers extended tothose applicants who do have the specified skills, because those whoare interviewed have already been prescreened according to skills
criteria, i.e. the employer will have chosen the applicant’s resume
because of specific skills listed. Moreover, before inviting the applicant for an in-house interview, the hiring manager will havetypically performed a mini-interview with the applicant by telephone, in order to verify that the person does indeed have theskills. Yet we see that even among those applicants who pass thesescreening procedures, employers still extend job offers to only afraction of them. In other words, contrary to the employers’ claimthat it is really a skills shortage, rather than a worker shortage—aclaim added only later in the debate—the data in Table 3 show that142. See, e.g., The High-Tech Worker Shortage and U.S. Immigration Policy: Hearing Before the
Senate Comm. on the Judiciary, 105th Cong. 49, 51 (Feb. 25, 1998) (statement of Kenneth M.
Alvarez, Vice President, Human Resources, Sun Microsystems).

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there seem to be plenty of workers available who meet the employers’ stated criteria.
This brings us back to the Cappelli Principle. Workers are available, but not always at a price employers are willing to pay. This isespecially important relative to the skills issue, since employers haveto pay a premium for the hot skills. Ironically, by insisting on specific skills, the employers drive up prices of those skills, eventhough they are trying to save on labor costs. Table 4 shows thepremiums they were paying for some of the hotter skills during thetime of the first push for expanding the H-1B program.143
Table 4
Salary Premiums for Specific Software Skills
Oracle DBMS tool
SAP
HP UNIX
Visual C++
Java

24%
24%
20%
20%
16%

This is illustrated in another interesting way, in the case in which
workers lack the given skills. The employers could hire programmers who lack the given skill and allow them to learn it quickly on
the job (more on this below), but they do not want to pay the premium salary associated with programmers who have the skill. Ifthey train a programmer in the skill, then the newly-enfranchised
programmer may demand a higher salary, threatening to leave foranother employer if the demand is not granted. Thus the employers claim a “shortage,” when in fact it is once again simply a matterof a shortage of cheap workers.
Consider the following discussion in an employer-oriented
magazine:
The problem companies face with training [in a new skill] isthat as soon as old technology programmers are trained inparticularly popular software, they become very valuable andbecome the targets of headhunters. Companies either prolong
their agony by refusing to train—thus continuing the143. Skills Survey: Part 2, Computerworld, Nov. 16, 1998, available at http://www.
computerworld.com/news/1998/story/0,11280,44949,00.html.

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shortage—or they train and watch some of their newly trained
employees leave.144
The key point in that passage is that those employers are not willingto match the salaries paid by those competing employers. In otherwords, the real issue is money, not a problem of a lack of workers
with given skills. The workers could easily acquire the skills, but thisoften prices them beyond what the employers are willing to pay.
Most tellingly, even the ITAA report, the main foundation for
Congress’ expansion of the H-1B program, included a similarcomment about training having a backfire effect from the employer’s point of view:
Training employees in IT would seem to be a win-win for both
worker and employer. And often that is the case. However, extensive training creates other issues. “You take a $45,000 asset,
spend some time and money training him, and suddenly he’s
turned into an $80,000 asset,” says Mary Kay Cosmetics CIO
Trey Bradley. That can lead to another problem. New graduates trained in cutting edge technologies become highlymarketable individuals and, therefore, are attractive to other
employers.145
Again, it is clear that Bradley is not willing to pay the salaries
paid by other firms. The main issue is money, not skills.
3. An Incentive/Pretext to Hire H-1Bs—Moreover, employers insuch a situation then often turn to hiring H-1Bs who, due to theirde facto indentured servant situation, cannot “jump ship” after acquiring a hot skill. Or, often the H-1B has the skill at the time of thehire, in which case the employer can avoid the salary premium forthe skill via Type I savings. The following is an example, notable inthat the CEO of the firm involved testified to Congress in supportof the H-1B program.
John Harrison, CEO of Ecutel of Alexandria, VA, issued a press
release, discussing his testimony to the House Science Committee.146 He expressed the usual claims made by the industry lobbyists
concerning inability to find American workers:

144. John Wentworth, Stop-gap Measures for the IT Staffing Crunch, Workforce Mag., May
1999, at 58.
145. ITAA, supra note 32.
146. PRNewsire, Mar. 17, 1999. The testimony is available at http://www.house.gov/
science/harrison_031799.htm.

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Something is wrong when you put an ad in the Washington
Post for a software engineer and the only qualified applicants
you receive are from non-U.S. Citizens,” said John Harrison,
CEO and co-founder of Ecutel, one of the nation’s most promising high-tech companies.
In testimony before the House Science Committee today, Harrison told of the extraordinary cost and difficulty he has
experienced trying to keep his company staffed with engineers. Harrison asked our nation’s lawmakers to proceed on a
two-pronged approach—dramatically stepped up math andscience education for today’s students, and for the short-term,
147
eased immigration laws . . .
Ecutel’s Web site said that the firm was seeking people with thefollowing skills:
Intermediate and Senior Engineer Positions Looking for several energetic and self-motivated Software Engineers with atleast 5 years of experience or familiarity in 2 or more of thefollowing: C/C++, TCP/IP, Mobile IP, IPSec, Device Driver,Internet RFC, Mobile Computing, GUI, RDBMS, Networking,
Security, Web Development, Microsoft/Unix OSes, general
Internet communication protocols.
However, Bill Halchin had ten or more years of work experiencein six of the skills this ad expressed interest in, considerably morethan the threshold of two stated by the ad itself. Yet he was not evencalled for an interview when he applied to the firm, even after two
148
follow-up e-mail messages to Harrison. A subsequent inquiry under the Freedom of Information Act (FOIA) showed that Harrison
was paying many of his H-1B programmers only $35,000 per year,149
far below the market rate.
4. Upping the Ante—Skill sets specified by employers change extremely rapidly. Cappelli noted, for instance, that “SAP
programmers were in first place in the salary rankings of IT professionals in 1998 but fell to sixth place 18 months later as demand for
150
their skills fell relative to others.” In other words, any shortages in147. Id.
148. Letter from Bill Halchin to Norman Matloff, Professor of Computer Science,
University of California, Davis (Mar. 29, 1999) (on file with author).
149. Robert Sanchez, LCA database, available at http://www.zazona.com, supra note 130.
150. Cappelli, supra note 120.

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specific skills are rapidly addressed by marketplace response.151 Yet
the employers keep “upping the ante,” demanding that applicantsmatch longer and longer lists of requirements. For example, an
employer who required experience in the Java language in 1998
might insist on Java and XML in 2000, and then in 2002 demandJava and XML and experience in real estate applications. Or,
whereas SAP had been sufficient in 1998 to handsomely reward
those few programmers with work experience in this software, by
1999 employers had added some other qualifications to the requirements, noted an executive of an IT compensation consulting
company:It’s one thing to say that you have a year of SAP [experience],
and it’s another thing to say that you have a year of SAP [experience] working with one company on one project, and you
actually saw the project through to completion,” Foote says.
“For many candidates, there’s an experience factor that’s missing.152
Note also that for any given technical skill, the employer will insist that an applicant have work experience in that skill, as opposed
to mere coursework or self-study.153 The only good strategy a worker
can use to keep up with changes in technology is to hope his employer allows him to work on some projects using newer skills, thus
acquiring work experience in those skills. Some employers willagree to this, while others will not. We saw earlier, for instance, that
employers fear that “enfranchising” their programmers with new
skills would make them either too costly or a flight risk.
5. A Self-Perpetuating Process—As noted earlier, this obsessive
skills screening by employers is often a pretext to shun older
American workers while hiring H-1Bs. It also is a mechanism usedby HR to cope with the mountain of resumes they receive. Basically,
they need some way to cut the mountain down to manageable size.
In any case, it sets in motion a self-perpetuating process: As more
and more programmers gain work experience in a given skill set,
the employers demand even longer lists of requirements, and shout151. The industry also claimed that it could not wait months for the marketplace to adjust, due to extremely short product cycles. But this is absurd in light of the time taken tohire a programmer with the given skill sets. An industry-sponsored study in Silicon Valley
found the mean time to fill a job was 3.7 months. See Joint Venture’s Workforce Study, 6–7(1999) (on file with author).
152. York, supra note 136.
153. Again, this was stated by all of the HR staffers interviewed for Table 2. See also Steen,supra note 135.

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even louder that there is a “labor shortage.” In other words,
whether sincerely or not, the employers have defined the term
shortage in such a manner that a shortage is guaranteed to occur.
6. Talent, Not Skill Sets, Is What Counts—The industry’s highly
stringent screening on skill sets is not in their own best interests.
What counts is general programming talent—hiring smart programmers—not experience with specific software technologies.
Studies show a dramatic 10-to-1 variation favoring talent in programmer productivity, by virtually any criterion: time to finish a154
product, number of errors, and so on.
Table 5Programming Productivity Factors
Personnel/Team Capability
Product Complexity
Modern Programming Practices
Required Reliability
Requirements Volatility
Timing Constraint
Software Tools
Applications Experience
Storage Constraint
Virtual Machine Volatility
Turnaround Time
Virtual Machine Experience
Data Base
Schedule Constraint
Language Experience

4.18
2.36
1.92
1.87
1.78
1.66
1.65
1.57
1.56
1.49
1.47
1.34
1.23
1.23
1.20

In other words, raw analytical talent, not paper credentials, iswhat really counts. Another study155 found that the factor Personnel
Capability, i.e. general talent and energy of the programmers,
counted for a score of 4.18 in a productivity prediction equation.
This was by far the largest factor; the next largest was ProductComplexity, with a score of only 2.36. The factor (Programming)
154. See Tom DeMarco & Timothy Lister, Peopleware: Productive Projects andTeams 44 (1987). Some studies have found even more dramatic variations, such as the 20-to1 figure found in P. Lutz, Comparing Java vs. C/C++ Efficiency Differences to Interpersonal Differences, Communications of the ACM, Oct. 1999, at 109.
155. Barry Boehm & Philip Papaccio, Understanding and Controlling Software Costs, 14IEEE Transactions on Software Engineering 1462 (1988).

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Language Experience, i.e. experience with a specific software skill,
had the smallest score among the 15 factors studied, with a score of
156
only 1.20, as seen in Table 5. Another analyst comments, “Therelatively small impact of language knowledge is an important factwhich is not intuitively obvious. Judging by the advertisements for
programmers it would seem that data processing managers tend tooveremphasize specific language experience . . .”Bill Gates has described Microsoft hiring criteria as follows:“We’re not looking for any specific knowledge because thingschange so fast, and it’s easy to learn stuff. You’ve got to have an excitement about software, a certain intelligence . . . It’s not the
specific knowledge that counts.”157 Jim McCarthy, one of Gates’software development managers at Microsoft, points out,
The biggest mistake I see managers make as they hire people
for software development teams is that they overvalue a particular technical skill. To verify this tendency, all you have to
do is look at the want ads: ‘Wanted: foobar programmers. Experience with whatsit required.’ Obviously, conversance with agiven technology is a wonderful attribute in a candidate, but
in the final analysis it’s an extra, not mandatory. After all, mostsoftware development technologies have a half-life of about158
one year.
Moreover, as the McCarthy quote above points out, any competent programmer can become productive in a new programming
language quickly. Even recruiters have complained that this fact is
159
ignored by HR people. Experimental data also supports “conventional wisdom” in this regard. Table 6 shows percentages of fullproductivity in a given programming language as a function oftime.160

156. David T. Fisher, Myths and Methods: A Guide to Software Productivity 5(1991).
157. Interview with Bill Gates, CEO, Microsoft, in Hal Lancaster, Managing Your Career,
Wall St. J., Nov. 8, 1994, at B1.
158. Jim McCarthy, Dynamics of Software Development 168 (1995). Ironically, Microsoft has grown so large that Gates’ and McCarthy’s philosophies don’t reach down to theshop floor, and Microsoft managers are now just as obsessed with skills as the rest of the industry. See, e.g., Microsoft’s employment web page, at http://www.microsoft.com/careers/
default.asp (last visited Sept. 15, 2003).
159. See, e.g., James Lardner, Too Old to Write Code?, U.S. News & World Rep., Mar. 16,
1998, at 39–40. Silicon Valley employment agent Andrew Gaynor stated that shortsighted
employers who are insisting on a given skill will let a job go unfilled for months, when in fact
an experienced programmer without the skill could easily come up to speed in a few weeks.
160. NRC, supra note 55, at 59.

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Table 6Percentage Productivity vs. Lengthof Experience in Language
1 month
4 months
1 year

83%
88%
100%

C. Claims of a Shortage of Bachelor’s Degree
Holders in Computer Science

1. University CS Enrollment Figures—The ITAA industry lobbyinggroup claimed throughout 1997 that computer science enrollments
in universities were declining and called on the federal government
to fund programs to attract more college students to the field. This,
they said, caused the claimed IT labor shortage and the industry’s
need to hire H-1Bs.
Specifically, the ITAA report listed declining numbers of computer science Bachelor’s degrees from the late 1980s to 1994. But
new computer science enrollment reversed its declining trend in
1995, increasing by 5 percent in 1995–1996, and by a whopping 40
percent nationwide in 1996–1997, and then by another 39 percent
in 1997–1998, as seen in Figure 1.161

161. Computing Research News, Mar. 1997 and Mar. 1998. Actually, the ITAA had
been given the information on the large 1996–1997 increase by a CRA official when ITAA
distributed a preliminary draft of their report at a roundtable discussion organized by the
Stanford Computer Industry Project on February 19, 1997. Though ITAA stated at the timethat they were soliciting comments and suggestions for improving their report, they withheld
this information about the sharp increase in computer science enrollment in the final version of their report.

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University of Michigan Journal of Law Reform

Figure 1
New CS Enrollment
18000

CS Enrollment

16000
14000
12000
10000
8000
6000
1995

1996

1997

1998

Year

Contrary to the industry lobbyists’ claims, enrollments in computer science have risen and fallen in almost exact correlation withthe job market in the field. Enrollments soared in the mid-1980s
and late 1990s, the boom times. They fell in the early 90s during
162
the tech slowdown, and began to fall again around 2001 or 2002.
Eventually, even the ITAA began to concede that the poor techjob market was the main factor underlying the decline in computerscience enrollment during the early 1990s. ITAA president Harris
Miller remarked:
The cutbacks in aerospace and defense sent a signal to the job
market that engineers and math and science degrees were notgoing to be as much in demand in the 1990s as they were, infact, going to be . . . . Students were seeing the end of the Cold
War, corporate restructuring, and layoffs. To tell them thatthey should focus on a computer science degree rather than a163business or law school degree was not an easy sell.
Also in the same article was the following:
Nate Viall, an IT market researcher at Nate Viall and Associates, in Des Moines, Iowa, says the late-1980s recession beganwith big layoffs in 1989 at Digital Equipment, followed by cuts
162. See Sean Cavanagh, Computer Science Attracting Fewer Applicants, Educ. Wk., May 1,
2002, at 5; Ellen McCarthy, Tech’s Major Decline: College Students Turning Away From Bits andBytes, Wash. Post, Aug. 27, 2002, at E1.
163. Steve Alexander, Origins of a Shortfall, Infoworld, Feb. 8, 1999, at 93.

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at IBM. That was followed by the corporate ‘merger mania’ ofthe early 1990s, which also resulted in thousands of IT workers
losing their jobs, he says.
‘All through the 1990s to about 1995, there were few months
when there was not some news headline about IT layoffs,’ Viall
164
says.
Therefore, contrary to ITAA’s assertion that students do not want
to study computers due to claimed “nerd” images of the field, orlack the proper background, computer science enrollment has responded quite well to labor markets demands, rising and fallingwith the demand.
2. Slow Growth in CS Starting Salaries—As discussed in Part IV.A,
the independent studies which investigated the industry’s claim of alabor shortage did extensive analyses of salaries. One can take a similar approach to the assertions of the industry lobbyists that newcomputer science (CS) graduates are in short supply. It turns outthat during the boom years, starting salaries for CS graduates were
not rising any faster than those of graduates in fields wherein no labor shortage was claimed. On the contrary, salary growth was higher165
in fields such as business, as seen in Table 7. The only fields withslower wage growth than CS were teaching and chemistry.
Table 7
Increase in Starting Salaries, 1995–1999, by Major
Business Administration
Accounting
Math/Statistics
Sales/Marketing
Computer Science

30%
25%
24%
23%
20%

Indeed, the Economic Policy Institute (EPI) also found thatwages offered to new CS graduates correlated well with those of166
new business graduates, again despite no claimed shortage ofbusiness majors .167

164.
165.
166.
167.

Id.
Barbara Kantrowitz & Pat Wingert, Teachers Wanted, Newsweek, Oct. 2, 2000, at 37.
Lawrence Mishel et al., The State of Working America, 2000–2001 (2001).
See Figure 2.

1979

1981

1983

1985

1987

1989

Computer Science

Business

All

1991

1993

1995

1997

1999
(July)

University of Michigan Journal of Law Reform$25,000$27,000$29,000$31,000$33,000$35,000$37,000$39,000$41,000

42

Annual Salary ($1998)$43,000

Figure 2
Wage Offers to New College Graduates by Major, 1979–1999

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The industry correctly points out that computer science enrollment, though increasing very sharply in the late 1990s, still did notmatch the 1980s peak. However, even the levels of the late 1990s
were too high, in the sense that industry was hiring fewer than halfof computer science graduates into programming jobs, shunting
the rest into semitechnical/nontechnical positions such as customer support.
3. Non-CS Majors—Notably, the numbers of computer science
graduates are only of limited usefulness in assessing the labormarket supply of programmers, since most programmers do nothave CS degrees. Dr. Robert Lerman of American University andthe Urban Institute found that
Data from a National Science Foundation study reveals that of
the 1.2 million college graduates employed in 1993 in several
information technology fields (computer sciences and operations researchers, computer programmers, computer science
professors, software engineers, and hardware engineers), only
about 31% had degrees in computer science. The largest
other majors were business degrees (19%), engineering degrees (10%), math (9%), and a variety of social science
degrees (8%).168
Even the ITAA survey found than less that 20 percent of the IT
hiring managers mentioned a college degree as being an important169
qualification. Furthermore, large numbers of non-computer science majors take at least mid-level courses in computer science.170
D. Claims of a Shortage of PhD and Master’s Degree Holders
The industry lobbyists often imply that a large fraction of their
H-1B workers are hired from U.S. universities where the workers
had been studying for PhDs. For example, Daryl Hatano of the
Semiconductor Industry Association testified to Congress, “NonU.S. citizens now represent over half of the Ph.D.s graduating from
168. Lerman, supra note 37.
169. See NRC, supra note 55, at 231, though it should be noted that the NRC disagreed
with the managers’ belief that a CS degree was not important, citing the opinion of a computer science academic.
170. Clifford Adelman, U.S. Dep’t of Education, Leading, Concurrent or Lagging: the Knowledge Content of Computer Science in Higher Education and theLabor Market (1997).

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U.S. universities in semiconductor fields . . . To have access to theforeign talent graduating from America’s universities, U.S. companies must apply for H-1B visas for their foreign professional
workers.”171 The American Electronics Association argued that“nearly half of all Ph.D.’s graduating from American universities inthe technical fields of computer engineering and electrical andelectronic engineering are awarded to foreign nationals. Given thisheavy investment in education, supported by U.S. dollars, it is in
the national interest to retain this talent [using the H-1B program].”172 Jenny Verderi, Intel’s Manager of Education andWorkforce Policy, said,173 “We are not able to find enough qualified
U.S. workers in certain disciplines year after year, particularly in thescience and engineering areas . . . there has been a shortage in theareas that we hire at for quite some time—and that’s primarily Master’s and Ph.D. design engineers.”
The lobbyists’ figures about percentages of foreign students in
U.S. postgraduate programs are indeed correct.174 But the
implication that the lobbyists are making for H-1Bs is not correct.
On the contrary, the overall proportion of H-1B’s who transitioned
from U.S. universities is only about 20 percent.175
About 7.6 percent of workers in the general H-1B population
176
have a PhD. That figure is already much smaller than the implications made by the industry lobbyists, but in fact for computer177
related H-1Bs the figure is even smaller. This is due largely to thefact that most of the PhD H-1Bs are in non-computer areas, working as university postdoctoral research assistants in biology,
171. Immigration and America’s Workforce for the 21st Century: Hearing Before the Subcomm. on
Immigration and Claims of the House Comm. on the Judiciary, 105th Cong. 99, 101–102 (1998)(prepared statement of Daryl Hatano, Vice President for International Trade & Government
Affairs, Semiconductor Industry Association).
172. Michael Platzer, America’s High-Tech Workforce (American Electronics Association, updated June 1998). See also Platzer’s testimony before the House Subcommittee
on Immigration, supra note 93.
173. Jim McKay, The H-1B Visa Debate, Gov. Tech. Mag., Dec. 2000.
174. Some newspaper reports have erroneously stated that large numbers of U.S.
undergraduates in computer science are foreign students. This is incorrect; only 6 percent of
the computer science Bachelor’s degrees nationwide are awarded to foreign students. See
Computing Research News, Mar. 1998, published by the Computing Research Association.
The CRA data are only for major universities. However, see also the testimony by pro-H-1B
Alison Cleveland of the U.S. Chamber of Commerce before the House Committee on
Judiciary, on August 5, 1999. Cleveland cited a figure of 2,165 “aliens” out of 24,098
Bachelor’s degrees granted in computer science, and 4,756 aliens out of 62,114 Bachelor’s
degrees in engineering. Note that even these numbers are higher than the true figures, since
they include all aliens, including green card holders, not just foreign students.
175. The Education Connection, Regional Review, Quarter 4 2000/Quarter 1 2001,
available at http://www.bos.frb.org/economic/nerr/rr2001/q1/educonn.htm.
176. INS, supra note 82.
177. Note the qualifier computer-related here.

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chemistry and physics. For example, in the year 2000, there were178
14,778 science “postdocs” on temporary visas. The number ofyearly H-1B visas granted around that time was 115,000,179 and 7.6
percent of this is 8,740. Even accounting for the fact that many foreign postdocs hold J-1 visas rather than H-1B, it is clear that the vast
majority of PhD H-1Bs are university researchers in the physicaland biological sciences, not computer scientists or engineers working in industry.
In order to find the PhD rate among computer-related H-1Bs,
this author consulted Michael Hoefer of the INS. His data showthat only 1.6 percent of the computer-related H-1Bs in 1999/2000
had a PhD.180 The situation with Master’s degrees is more complicated. Back in the 1980s,181 the typical foreign-national programmer
or engineer was indeed hired off of an American university cam182
pus, with a Master’s, particularly in the computer science area. In
those days students were mainly from Taiwan and China. They weretypically from non-computer related fields such as economics, andwould get a quick Master’s in computer science at a U.S. school.
Afterwards, they were hired by U.S. employers. As a result, as of1990, 56.4 percent of recent-immigrant programmers and engineers in California had Master’s degrees.183
However, the situation changed radically during in the 1990s.
The dominant ethnicity of the computer-related H-1Bs changed
during that time from Chinese to Indian.184 This was a result of aggressive marketing campaigns by Indian firms such as Tata
Consultancy Services. This change was accompanied by a change ineducation level; the Indian firms were hiring directly from India,
rather than from the U.S. university graduate programs.

178. National Science Foundation, Graduate Students and Postdoctorates inScience and Engineering: Fall 2000 (2002).
179. Carrie Johnson, 117,000 Visas Issued in Expanded H1-B Plan, Wash. Post, June 8,
2001, at E10.
180. Hoefer, supra note 88. This 1.6% figure includes those with PhDs in other fields. My
own analysis, along the lines for Master’s degrees below, yields a figure of 0.6%, i.e. fewer
than 1% of computer-related H-1Bs have PhDs in computer science. This number is moremeaningful; See infra note 188.
181. During which time the author served as faculty Graduate Admissions Coordinatorin the UC Davis Computer Science Department.
182. This, and the counter trend in recent years, are discussed in Harold Salzman,
The Information Technology Industries and Workforces 37ff (Center for Industrial
Competitiveness, Univ. of Mass., Lowell, 2000).
183. See PUMS, supra note 86. The term recent here means those who immigrated eightor fewer years earlier.
184. Hoefer, supra note 88.

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As a result, the percentage of Master’s degrees in the computerrelated population plummeted. In 1997 there were 10,098 Master’s
185
degrees in computer science awarded in the U.S. About 45 percent of Master’s degrees are awarded to foreign students, so about
4,500 such degrees were earned by foreign students.186 Presumably
the number would be similar in 1998. In that year, approximately
187
76,000 H-1B visas were issued for computer-related occupations.
Accounting for the fact that the INS figures are for 14 months
rather than a year, we have a figure of about 65,000 visas issued tocomputer-related H-1Bs per year. Putting all this together, we get arough estimate that about 7 percent of computer-related H-1Bs
188
have Master’s degrees in computer science from U.S. schools.
Intel’s claim quoted above, that most of its H-1B workers are design engineers with Master’s and PhD degrees, does not seem tojibe with the data either. The Labor Condition Applications(“LCAs”) do not show education level, but even assuming all of thedesign engineers have a postgraduate degree and giving a generous
interpretation of job titles in LCAs submitted by Intel,189 the data
show that only 73 of the 218 LCAs Intel submitted in the year 2000
were for design engineers.190
Furthermore, the vast majority covered by that minority of 73
LCAs would have only a Master’s degree, not a PhD, according towhat I was told by Intel recruiters. On October 13, 1999, a team ofIntel engineers recruiting for new graduates visiting my department
at UC Davis. I mentioned that I had a couple of PhDs in electricalengineering I could refer to them, one a new graduate and theother a 1992 graduate. One of the recruiters replied, “No, Intel is
not very interested in PhDs.” The other added that a PhD would
not have enough to challenge him or her at Intel, except in therare case of very highly specialized research areas. Even at the firm
185. Frank B. Morgan, Degrees and Other Awards Conferred by Title VI at Eligible Degree Granting Institutions: 1996–97, Educ. Stat. Q., Spring 2000, at 110.
186. Freeman, supra note 109.
187. U.S. Immigration & Naturalization Service, Characteristics of Specialty
Occupation Workers (H-1B): May 1998 to July 1999, at 2 (2000).
188. Hoefer’s data, supra note 88, shows that 29.8 percent of the computer-related H-1Bs
have a Master’s degree. However, this includes Master’s in all fields, not just computer science. Just as most programmers have a Bachelor’s degree in non-CS fields (discussed in Part
IV.C.3), the same is true to a large extent at the Master’s level. However, since the claim
made by the industry lobbyists is that the H-1Bs have advanced training due to postgraduate
work, Master’s degrees from another field should not be counted here.
189. U.S. Dep’t of Labor, LCA Database, available at http://edc.dws.state.ut.us/casesearch.asp (last visited Dec. 23, 2002). The data here are for the year 2000; a similar
pattern was observed for the year 1998. See Sanchez, supra note 149.
190. Note that each LCA can be submitted for multiple positions in the given job category.

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which first developed the Internet, Bolt Beranek and Newman Inc.,
191
only 4 percent of the staff have a PhD. In other words, the computer industry’s claim that their hiring of H-1Bs is mainly at the
PhD level is simply false, and the data do not support such a claim
at the Master’s level either.
It should be noted that the industry’s implied claim that the H1Bs who do have postgraduate degrees are somehow of higher ability is also incorrect, particularly for software. There is very little
correlation between having a PhD or a Master’s and doing outstanding work in the field. Even lack of a Bachelor’s degree is no
obstacle. None of Bill Gates, Larry Ellison and Steve Jobs, foundersof Microsoft, Oracle and Apple, respectively, even has a Bachelor’s
degree.192 Linus Torvalds developed the Linux operating system
193
while he was an undergraduate. Marc Andreessen developed
MOSAIC, which he later refined into the Netscape Web browser,
when he was an undergraduate as well. Tim Berners-Lee, the inventor of the Web, has only a Bachelor’s degree, and it is not incomputer science.194
E. Claims That H-1Bs Are “the Best and the Brightest”
Clearly, the nation benefits by bringing in “the best and thebrightest” high-tech workers worldwide.195 However, contrary to theclaims of industry lobbyists that the H-1Bs tend to be “the best andthe brightest,” workers of extraordinary talent comprise only asmall fraction of the overall population of H-1B workers in computer-related fields.
One can see this directly by considering H-1B salaries, say for
1999–2000.196 The INS gives data separately for two H-1B
191. BBN web page, available at http://www.20minutesfromhome.com/twminpages/
BOLTBERANEK.html (last visited Dec. 23, 2002).
192. See College Dropout Alumni Association web page, available at http://www.
geocities.com/CollegePark/7734/cdoaa.html.
193. Charles Mann, Living with Linux, Atlantic Monthly, Aug. 1999, at 80.
194. BBC, Oxford Features, Tim Berners-Lee, The Future of the Web, available at http://
www.bbc.co.uk/oxford.features/2002/07/berners_lee.html (on file with author).
195. The author has been active in helping a number of extremely bright foreign students find jobs with Silicon Valley employers, and has strongly supported making offers to
many outstanding foreign applicants for faculty positions in our Computer Science Department at UC Davis.
196. U.S. Immigration & Naturalization Service, Characteristics of Specialty
Occupation Workers (H-1B): Fiscal Year 2000, at 3 (2002). Note that these figures giveactual salaries, not prevailing wage levels.

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subgroups, those who are first-time recipients and those who are
renewing their visa. The latter group is paid more, so let us give theindustry the benefit of the doubt here by using this group as ourbasis. The 25th, 50th and 75th percentile salary levels for computerrelated H-1Bs were $44,000, $50,000 and $57,000, respectively.197
Fitting a normal distribution to this, we find that 99 percent ofcomputer-related H-1Bs made less than about $79,400. This is far
below the $100,000 or more that “genius” workers in the computerfield make; even the 90th percentile, arguably not “genius” level,for salaries for software applications engineers in 2001 was$109,170.198
The industry lobbyists say that the H-1Bs are needed to retain
the industry’s technological edge, but the fact is that the vast majority of technological advances in the computer field have been madeby U.S. natives. This can be seen in rough form, for example, in theawards given by the Association for Computing Machinery (ACM).
Of 54 recipients of the ACM System Software Award through 2001
(this is the award most closely associated with innovation in practice), only two have been foreign-born.199
As already noted, only about 1 percent of computer-related H1Bs have a PhD, but some comments on the quality of this small H1B category are of interest. Given the fact that so many PhD students in computer science are foreign students, it is not surprisingthat immigrants have fared much better in another ACM award
category, the Doctoral Dissertation Award. Here 20 of 51 recipientsof the award have been foreign students.200 This is a rate comparable to (though somewhat lower than) the foreign students’representation in the PhD student population, thus again countering the industry lobbyists’ claim that the H-1B are especiallytalented.
Moreover, the industry’s citing of the high proportions of foreign
students in U.S. PhD programs ignores the fact that the distribution is not uniform. The foreign students are disproportionately

197. Id.
198. Bureau of Labor Statistics, 2001 National Occupational Employment andWage Estimates, available at http://www.bls.gov/oes/2001/oes151031.htm (last visited Dec.
24, 2002).
199. ACM, available at http://www.acm.org./awards.ssaward.html.
200. Of the 20 foreign recipients, nine have been from India, commensurate with thelarge number of international students from India. The remainder consists of four from
Israel, and one each from China (another large source of international students in CS),
Germany, Greece, Hong Kong, Norway, Spain and Sweden.

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enrolled in the academically weaker universities, as seen in
201
Table 9.
Table 9Foreign-Student Enrollments in
Ph.D. Engineering Programs
Department Quality% Foreign-Born

Highest Quarter
Second Quarter
Third Quarter
Lowest Quarter

37.2%
44.5%
47.5%
50.6%

Contrary to the “best and brightest” image, the U.S. State Department has found a considerable amount of fraud in terms of the
H-1Bs’ credentials. Officials found a 21 percent fraud rate in anaudit in 2000, and stated that they believed the actual rate wasmuch higher.202
F. Conclusions
The industry has offered a number of reasons for their mass hiring of H-1Bs. Yet none of these reasons withstands close scrutiny.
No major study, other than those associated with the industry,has confirmed a labor shortage, even during the boom years of thelate 1990s. Even the two studies (CRA and NRC) performed bystrongly pro-industry commissions suggested only a tight labormarket. The study by business professor Peter Cappelli, prepared as
private advice for a business client and thus arguably the most accurate, found that the employers’ perceived “shortage” was a
shortage of cheap labor, not a shortage of workers.
The industry’s claims that H-1Bs are needed because “Johnny
can’t do computer science” or “Johnny doesn’t want a PhD” areflatly contradicted by the data, as are the claims that “Johnny” simply isn’t very good at programming even if he does study computerscience.

201. See David S. North, Soothing the Establishment: The Impact of ForeignBorn Scientists and Engineers on America 48 (1995).
202. David Lazarus, A Question of Fraud, S.F. Chron., Sept. 21, 2000, at A1.

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The issue of skills—i.e. the employers’ occasional claim that theyhire H-1Bs simply because American programmers do not have thelatest software skills—is somewhat more difficult for “non-techies”
to evaluate. Many non-technical people perceive computer work as
being extremely difficult and arcane, and thus might find the industry’s claim here regarding skills as more plausible. Yet thequotes from Microsoft’s Gates and McCarthy above show clearly
that good generic programming ability, not skills in particular programming languages, is what counts. Moreover, my examples of the
major advances in the industry made by people who had little or noformal training in computer science at the time they made theseadvances (the Netscape Web browser, the Linux operating system,
entire firms such as Microsoft, Oracle and Apple, etc.) again shows
clearly that what matters most is general programming talent, notspecific skill sets. Furthermore, as was shown, employers reject eventhe applicants who do have the desired skill sets, simply because theemployers do not want to pay the market price for those skills.
In other words, it really is a matter of money, after all, not shortage of workers. Employers want cheap labor, and as Part V will
demonstrate, that desire is fulfilled by the H-1B program.
V. H-1Bs As a Source of Cheap Labor
As shown in Part IV, the industry’s stated reasons for hiring somany H-1B workers are not supported by the data. Instead, the central attraction of H-1Bs for employers is as a means of reducing
labor costs.
To show the cheap-labor nature of H-1B hiring, it is firstimportant to lay the foundation by citing the source of the H-1Bs’
exploitability. Part V.A will explain why most H-1Bs are de facto
indentured servants. It will then present a variety of quantitative
looks at the use of H-1Bs as cheap labor, and then turn tocomments from the industry itself. Finally, Part V.E will show how
Type I savings may be demonstrated without any data at all, simply
by appealing to fundamental economic principles.
A. De Facto Indentured Servitude of the H-1Bs
The industry lobbyists have argued that the H-1Bs are not exploited, on the grounds that if an H-1B worker were paid less thanMatloffTYPE11-7-03.DOC

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comparable Americans, he/she would simply move to another employer. For example, Stuart Anderson, the author of the ITAA
report and later the architect of the H-1B expansion bills in 1998
and 2000,203 quoted an employer as saying, “You cannot pay foreignborn engineers less. These are smart people; if you try to fool with
204
them, they will go someplace else.” The harsh reality, though, isthat the H-1Bs typically cannot “go someplace else,” and are forced
to stick with their exploitative employers.
Most H-1Bs hope to be sponsored by their employers for permanent residence, i.e. green cards.205 This is a multi-year process.
Toward the end of the 1990s, the processing time for the two largest H-1B nationalities, Indian and Chinese, was approaching six
years.206 During the time an H-1B’s green card application is being
processed, he/she is essentially immobile; switching employers during this time would necessitate starting the green card process allover again, an unthinkable prospect for most.207
This situation renders the affected H-1Bs de facto indentured ser208
vants. Thus, they are highly exploitable. As an Australian who had
worked as an H-1B in the U.S. put it, “[b]e wary of H1-B visas in the
USA—you basically get shackled to a company . . . Being a nonAmerican in the USA is almost like being a second-class citizen.”209
Murali Devarakonda, a member of the Board of Directors of the
Immigrant Support Network, an H-1B organization, said, “This islegal human rights violation in America . . . You [as an H-1B] are
an indentured servant, a modern-day slave . . .”210
This de facto indentured servant nature of the H-1Bs has been
openly pitched to employers, euphemistically referred to as “loyalty.” One immigration attorney described it well:203. See supra note 32.
204. Stuart Anderson, They Don’t Work Cheap; They Don’t Steal Jobs, Int’l Educator, Fall
1996, at 27.
205. See, e.g., the comment by Stephen Yale-Loehr, an immigration lawyer and adjunctprofessor at Cornell Law School, in Nguyen, supra note 13, at 3.
206. Hanna Rosin, A Worn-Out Welcome Mat, Wash. Post, Sept. 16, 2000, at A1.
207. Sara Robinson, High-Tech Workers are Trapped in Limbo by I.N.S., N.Y. Times, Feb. 29,
2000, at A12.
208. In some cases, the indentured servitude has been contractual. In a landmark courtcase in 2001, a court held that the onerous contracts which many H-1Bs are forced to sign
amounted to illegal indentured servitude. See Ronald White, U.S. Slowdown Leaves ImmigrantWorkers in Lurch, L.A. Times, July 1, 2001, at W1. However, this Article will concentrate on de
facto forms of indentured servitude.
209. Nathan Cochrane, Fairfax IT: Fame, Fortune, and a Bit of Nirvana, Fairfax IT,
available at http://linuxtoday.com/infrastructure/1999071300209PS (last visited July 13,1999).
210. Straight Talk (Santa Clara County Democratic Club weekly television broadcast, June
10, 2000).

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[Attorney Sherry] Neal said foreign nationals may appear to
be more loyal workers because they aren’t as mobile as otherin-demand tech workers. The Immigration and Naturalization
Service must give approval before foreign nationals change
jobs—a process that can take six weeks. “Some of the U.S.
workers, they get a job offer and they are gone in a week,” shesaid.211
Similarly, Workforce Magazine, a publication for HR executives,
pointed out that from the employer point of view,[T]here are two good things about H-1Bs. First, they allow you
to travel the globe while you identify technical professionals
who want to work in the United States. Second, the H-1B isvalid only for the employer who arranges it. If you bring atechnical professional into the country and he or she decides
to jump ship, its likely that the ship he or she will have to jump
on is the one thats going back to the home country. If the person wants to come back, he or she has to start the immigration
process all over again. As a result, most H-1B visa holders
212
demonstrate remarkable loyalty.
It should be noted that the indentured servitude of the H-1Bs is
attractive to all employers, including the major firms. As former
Sun Microsystems manager Robert Smith put it:
Sun used to cover costs, as well as the administration, of theconversion of H-1B visa holders to green card holders in
exchange for an approximate 4–5 year commitment from the
H-1B visa holder . . . For that period of time, Sun has an
employee who will not, and in some cases cannot, jump toanother company . . . This situation provides companies likeSun with a relatively stable workforce at a fairly consistent pay
level that doesn’t need to keep pace with inflation, so to speak,as the local developers who had freedom of motion move on
213
to their next job.
Immigration attorney Jose Latour also recognized this problemof “indentured servitude” in describing for prospective foreignnational clients the advantages of the National Interest Waivers
211. Bischoff, supra note 14.
212. Wentworth, supra note 144.
213. E-mail from Robert Smith to Norman Matloff, Professor of Computer Science,
University of California, Davis (Jan. 3, 2003) (on file with author).

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53(“NIW”), a “fast track” to a green card, in which a foreign nationalof truly exceptional ability may apply on his/her own, rather thanthe employer applying on his/her behalf. Latour cites the benefits
of NIW as opposed to the ordinary green card route:
The applicant sponsors himself/herself based upon his/herabilities, education, and experience. This means that present
employment is not required, and if the applicant is employed,
the employer does not have to get involved in the process.
Why is this important? FREEDOM! The applicant does nothave to stay with the employer for a certain number of years
while the process is undertaken. Second, permanent residency
is taken away from the employer as a bargaining chip in theemployer/employee relationship.214
Only applicants of truly outstanding ability qualify for NIW, so it
is not an option for most H-1Bs, but Latour’s comments certainly
illustrate the dilemma faced by the workers.
Even the pro-industry National Research Council report recognized the problem: “Foreign nationals dislike [labor certification,
one of the stages in obtaining a green card] because the process is
so lengthy (often 3 years or longer in some areas of the country)
and prevents them (on pain of having to begin the process all overagain) from changing employers . . .”215
Because of this, many H-1B workers change employers soon after
obtaining their green cards. The DOL audit data associated withare shown in Table 10.216
Table 10Attrition After Obtaining Green Card
Time After Green Card

% Leaving Employer

0 months
6 months
12 months

11 %
17 %
33 %

The 2000 H-1B legislation made some useful technical corrections by essentially removing the per-country quotas on green cards
214. Latour & Lleras, P.A. web site, available at http://www.usvisanews.com/
fasttrack.html (last visited Dec. 24, 2002) (emphasis in the original).
215. NRC, supra note 55, at 171.
216. OIG, supra note 23.

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and by allowing the worker to switch employers without jeopardizing the green card application in the very last stage of the process.
Nevertheless, the process still takes several years, during which the
H-1B still remains “loyal” to the employer.
Indeed, immediately after that legislation was enacted, immigration attorney Latour hastened to assure nervous employers thatbusiness would continue as usual in terms of indentured servitude.
An employer had asked him, “Won’t this [new bill] mean that H-1B
employees will start jumping from job to job more often?” Latour
answered that there may be some reduction in green card time, but
assured the employers that “the labor cert[ification] process . . .
[still] requires a trusting relationship between employer and employee . . . the need for stable employment for the realization of
permanent residency remains unchanged,” i.e. H-1Bs will continue
to need to stick with their employers for the several years while thegreen card is pending.217
In the years of economic slowdown beginning in 2001, a new variety of de facto indentured servitude began to appear: Many
employers stopped offering their H-1Bs green cards as part of theoffer package.218 There were so many excess foreign workers available that employers who wished to hire foreigners (again, for their“loyalty”) could afford to not offer green cards. Jobs were in short
supply for Americans too, but for the H-1Bs loss of job would mean
loss of visa status. Thus the H-1Bs were just as beholden to theiremployers as before.
The H-1Bs who had been laid off, and the new workers who
hoped to get H-1B visas, were so desperate that the Adea Group, amajor employer of H-1Bs, openly sought them for their status ofdesperation, stating in a press release, “We are currently focusing
on professionals with H-1B visas because they most likely have thelevel of experience we need for mission-critical projects and a senseof urgency in securing new employment if they have been recently
laid off.”219
The de facto indentured servitude of the H-1Bs is key to their being exploited as cheap, compliant labor. This is a major driving
force underlying employer preference for H-1Bs over American
217. Available at http://www.usvisanews.com/edit80.html (last visited Dec. 24, 2002).
218. Interview with Kim Fanning, immigration attorney at Cooley Goddard L.L.P. (Apr.
2, 2001).
219. Adea Group Launches Recruiting Campaign for Technical Professionals on H-1B Visas in
Dallas, Austin, Atlanta and Tampa, BusinessWire, May 3, 2001. The Programmers Guild filed
a complaint with the Office of the Special Counsel of the Dept. of Justice. DOJ found that
Adea’s actions were illegal, and Adea agreed not to engage in such actions in the future. See
The Guild Wins Legal Settlement in Discrimination Case, The Official Publication of theProgrammers Guild, Mar. 1, 2000.

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workers. It is quite important to note in addition that another major driving force in this regard is the “loyalty” itself, i.e. theindentured servitude. Employers do not want their programmers
jumping to other firms, leaving the old employers in the lurch inthe midst of big projects.220 For many employers, this factor alone
makes H-1Bs the worker type of choice, even if the employers are
giving the H-1Bs salary parity with comparable Americans.
B. Methodological Issues
Before getting into the details of wage exploitation of H-1Bs, it isimportant to emphasize that one must be extremely careful withsalary studies, because if the proper variables are not adjusted for,salary differences can be masked.
For example, it is important to note that salary exploitation occurs primarily in the early years of the foreign national’s time in the
U.S. A typical H-1B will, as seen earlier, have de facto indentured
servant status for several years while waiting for his/her green card.
After finally obtaining the green card, the worker begins on a roadto salary parity with comparable U.S. workers. Full parity may not
be achieved immediately, since HR staff tends to require that salaries of new hires have some basis on their previous salaries, but asalary-conscious worker can generally achieve wages equal to thoseof his/her American peers within a few years after obtaining agreen card.221
The implication of this is that salary studies which lump together
all immigrant workers, both newly-arrived and long-established,
may not reveal the exploitation of the H-1Bs. Even worse, if a study
merely looks at foreign-born status, it will pick up those who
immigrated to the U.S. as children under family reunification laws;
these people had green card or citizen status when they entered
the workforce and thus were not exploitable by employers.
In statistical methodology, a variable which is related to anothervariable under study is called a covariate. In the example given
above, for instance, the variable under study might be salary, andone of the important covariates might be length of time in the U.S.,
and another might be the type of immigrant status. Failure toinclude important covariates in an analysis renders the results ofvery limited usefulness. If direct data on a certain covariate is
220.
221.

Wentworth, supra note 144.
Whether they be natives or long-time immigrants.

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unavailable, the analyst should at least make an attempt to include
proxy variables, i.e. reasonable substitutes for the given covariate, inorder to produce meaningful results.
On the other hand, the preceding discussion is implicitly concerned with what I have called Type I salary savings accrued in
hiring H-1Bs, i.e. savings obtained through paying the H-1Bs lessthan comparable Americans. However, I have also defined what I
call Type II savings, i.e. hiring young H-1Bs when the supply ofyoung Americans is exhausted, in order to avoid hiring the more
expensive older Americans. To assess Type II savings, it is necessary
to remove the age covariate (even though it is still important to retain other covariates).
C. Quantitative Evidence
The following section presents the major quantitative evidence
concerning the issue of whether the H-1Bs are hired as cheap labor.
Again, keep in mind that this could be either Type I or Type II salary savings (or both). Since the various studies are structured
differently, some of them directly address the Type I issue, whileothers can only show that H-1Bs are cheaper than Americans without revealing whether the savings is of Type I or II. I will present
the studies roughly in chronological order, in terms of the dates
during which the data was collected.
1. Work by Papademetriou and Yale-Loehr—Let us first consider
some work by Papademetriou and Yale-Loehr.222 One interesting
aspect of this study is that the authors come from different sides ofthe H-1B issue: Papademetriou is a former DOL researcher while
Yale-Loehr is an immigration attorney who actively lobbies Congress on immigration issues.223 Their data involved labor
certification applications for employer-sponsored green cards during 1988–1990. The authors tabulated job and INS jurisdiction
combinations for which the mean actual wage paid to the foreign
national is lower than the 45th percentile for the given job market.
For computer-related occupations, they found significant discrepancies in hourly wages, as shown in Table 11.
The gaps here are sizable, ranging from 10.4 percent to 29.6
percent. It would have been more meaningful if other covariates
222. Demetrios G. Papademetriou & Stephen Yale-Loehr, Balancing Interests:
Rethinking U.S. Selection of Skilled Immigrants 66–67 (1996).
223. Yale-Loehr also is co-editor of Interpreter Releases and holds an adjunct faculty
position at the Cornell University Law School.

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On the Need for Reform of the H-1B

had been accounted for, notably education, and we cannot tellwhether this is a Type I or Type II situation, but in either case it isclear that the H-1Bs are generally cheaper than Americans.
Table 11
Foreign-National vs. Labor Market Salaries
Job
Comp. Sys.
Analystsand Scientists
Comp. Sys.
Analystsand Scientists
Comp.
Programmers
Comp.
Programmers

State

Mean ForeignNational Wage

Mean Market
Wage

NJ

$15.24$21.64NY$16.28$20.57

NJ$15.65$19.74TX$14.12$15.76

2. The UCLA Study—Next, consider a UCLA study of engineers,
based on the 1990 census.224 The authors focused on immigrant engineers who had been in the U.S. for five years or less because, as I
explained earlier, a foreign worker is exploitable mainly during theperiod of de facto indentured servitude. Also, to avoid racial issues,
the authors compared Asian-immigrant workers with native AsianAmerican workers. The study controlled for a wide variety of covariates, including education level, geographical region of work,and level of English proficiency.
The UCLA study found that recent Asian-immigrant engineers
make 33 percent less than their native Asian-American counterparts. This is an indication of substantial Type I savings due tohiring foreign nationals.225
Stuart Anderson, an active proponent of the H-1B program,226
contended that the UCLA study did not show wage exploitation of

224. Paul Ong & Evelyn Blumenthal, Scientists and Engineers, in New American Destinies: A Reader in Contemporary Asian and Latino Immigration 163 (Darrell
Hamamoto & Rodolfo Torres eds., 1997). Ong, a professor of Asian-American studies andurban planning, has been a proponent of high-tech worker immigration. See, e.g., Bellinger,
infra note 229.
225. Id.
226. See supra note 32.

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the immigrant engineers.227 He noted that another study conductedby the UCLA authors found that having an American educationaccounts for a nearly 10 percent higher salary, and he asserted thatthe 33 percent pay gap found in the other study merely reflects lackof an American education. Yet clearly, this 10 percent figure is well228
short of the 33 percent overall gap the UCLA authors found.
Moreover, as discussed in Part IV.D, during the era covered by the
UCLA study, recent immigrant programmers and engineers typically did have an American education. Finally, the 10 percent figure
itself is inflated, as it includes people who had immigrated as children with their families, and thus who already had green cards orcitizenship by the time they entered the labor market and were notexploitable by employers.
In any case, the UCLA authors’ comments as to the meaning of
the 33 percent wage gap were quite clear. They cited earlier findings that the foreign engineers may be “willing to accept lower
salaries in order to obtain full-time employment in the U.S., a prerequisite for permanent residency,” and the senior author, Ong,
noted that “Companies took advantage of immigrants.”229
3. The Matloff Study—This author also analyzed the 1990 census
230
data, although concentrating on Silicon Valley. An individual was
excluded if he/she worked less than 48 weeks in 1989, or had lessthan a Bachelor’s degree. In all, the data set consisted of 1,551 individuals. The predictor variables were Age (a proxy for years ofexperience), Foreign-Born status (1 if foreign-born, 0 if native),and Education (1 for Bachelor’s, 2 for Master’s, 3 for Ph.D.). Thisauthor only included immigrants who entered the U.S. in the five
years prior to the date of the census.
The resulting regression equation was:
Salary = 657 Age - 6744 Foreign Born + 6135 Education + 19187
In other words, if one fixes years of experience and level of education, the immigrant engineers were on the average paid nearly$7,000 less in salary than the natives. This differential is nearly 15%of the $50,000 average salary found in the data set. Again, thiswould indicate Type I salary savings.
227. Anderson, supra note 204.
228. Anderson speculated that if the second study had been restricted to very recent
immigrants, American education would have had a much larger effect.
229. Robert Bellinger, Study Warns of Backlash, Resentment, Electronic Engineering
Times, July 18, 1994, at 89.
230. See PUMS, supra note 86.

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On the Need for Reform of the H-1B

Regression models comprise the standard tool for analysis of salary data, but to get additional perspective this author subsequently
ran another analysis on this same data set, in this case using a direct
tabulation rather than applying a regression model. This tabulation
was again limited to the Silicon Valley, but this time this author
added the further constraints that the worker has a Master’s degree(and does not have a PhD), and that the worker is at most 32 years
old. For the foreign-born, the worker was included if his entry to
the U.S. had been no more than eight years earlier. This author
then simply computed mean salaries for all native and all foreignborn. The results were as shown in Table 12. Again, this indicatesType I savings, of about 17 percent.
Table 12Native vs. Recent-Immigrant Wages
Nativity
NativeImmigrant

Mean Wage 1990

Mean wage 2000

$51,480$42,845

68,81658,176

A simple but very meaningful data set that should be mentioned
here is the age distribution of the H-1Bs. In the H-1B age
distribution in general, that 61 percent are younger than age 30.231
Among the computer-related H-1Bs, the concentration in theunder-30 age group is even more pronounced: The computerrelated H-1Bs have a median age of 27.4, compared to 30.2 for the
non-computer-related H-1Bs.232 This compares to a mean age of233
37.2 for all programmers and engineers. This illustrates Type II
savings. The corresponding data from the 2000 census is displayedin the third column of the table. Here the pay of recent immigrants
is about 15 percent below that of the natives.234
This author also broke down median wage data for computerrelated H-1Bs by nationality, and another interesting pattern

231. INS, supra note 3, at 4.
232. See GAO, supra note 66, at 15.
233. PUMS, supra note 86. This statistic is for all of California, not just Silicon Valley as
in note 86.
234. As mentioned, this data is for California as a whole, but the figures for Silicon
Valley are similar.

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emerged, as seen in Table 13.235 This data set is not conclusive byitself, since it does not account for important covariates like education and skills, and the pattern is arguably not perfect.
Nevertheless, it certainly suggests that the H-1Bs from Third World
countries are more exploitable, due to the fact that the American
standard of living is so much higher than in their home countries.
Table 13
Median-Wage of Computer-Related H-1Bs, by Nationality
Australia
United Kingdom
CanadaFranceGermanySouth Africa
BrazilHong Kong
China
TaiwanMexicoIndia
Philippines
Korea
RussiaPakistan
UkraineMalaysia
Indonesia$75,000$74,000$70,000$64,000$70,000$70,000$59,000$55,000$55,000$54,000$54,000$52,000$52,000$51,000$50,000$50,000$48,000$48,000$47,000

4. The NSF Study—Another analysis of the 1990 census data236
was conducted by Mark Regets of the NSF, at the request of Stuart
Anderson, who was then an analyst with the Cato Institute.237 This
analysis appears to show that foreign-born scientists and engineers
who have a postgraduate degree actually make slightly more (typically around 2 percent) than do natives. However, there are very
serious problems with this study.

235. Hoefer, supra note 88. The countries listed are the ones which had provided at least
175 computer-related H-1B workers. Median values have been rounded off to the nearest$1,000.
236. Supplemented in 1993 under the National Science Foundation’s SEASTAT project.
237. See supra note 32 for related information.

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The first problem arises in the definition of foreign-born. As explained earlier, an immigrant worker is exploitable only during thetime—if any—when he/she is a de facto indentured servant. A
worker who was originally sponsored for immigration by an employer but who has long had permanent-resident or naturalizedcitizen status is not exploitable. A worker who came to the U.S. via
family immigration statutes has never had a period of exploitability.
Yet this analysis includes all such workers under the rubric of “foreign-born.” Since the vulnerable workers comprise only a small
portion of the analysis’ foreign-born sample, any exploitation effects would be largely masked.
Second, the analysis conflates the science and engineering populations.238 The H-1Bs tend to be much more concentrated in
239
engineering (including computer science) than in the sciences.
Since engineering salaries tend to be much higher than those in
the sciences, the analysis is in essence comparing immigrant engineer wages to native science wages, a comparison that falsely raises
the immigrant wages relative to the natives.
Third, the analysis does not account for geography. Immigrants
settle disproportionately in urban areas, where wages are higher
than for similar jobs in non-urban settings. This again falsely raises
the immigrant wages relative to the natives.
Even with these biases the analysis’ results still only showed approximate parity between immigrants and natives. This in itself
shows that if those biases had been addressed, the H-1B wages
would have been found to be substantially lower than those of natives, again indicating Type I savings.240 Note by the way that the
UCLA study, which did show such savings, adjusted for all three ofthese covariates (timing of immigration, field of work and geography) that the NSF study failed to incorporate.
5. The DOL Audit—Recall that the DOL audit found that 19
percent of the H-1Bs were not being paid even the wage their employers had promised on the Labor Condition Applications,241 as
well as a myriad of other problems. They summarized,
238. An exception is the analysis’ data on salaries in academia, where the data show natives being paid slightly more than non-natives in engineering while the immigrants have aslight edge over natives in the sciences. However, given that academic salaries—and evenmore importantly, titles—are less subject to negotiation than in industry, the academic data
do not tell us much.
239. For the year 1993, there were 25,523 H-1B engineers and computer/mathematicalscientists but only 3,841 H-1Bs in the natural sciences. See North, supra note 201, at 64.
240. The NSF study did include at least one important covariate besides education,
namely time since the last degree (a proxy for years of experience).
241. OIG, supra note 23.

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In our opinion, while [DOL] is doing all it can within its
authority, the [green card labor certification] and LCA
programs do not protect U.S. workers’ jobs or wages and,
therefore, neither program meets its legislative intent. DOL’s
role amounts to little more than a paper shuffle for the PLC
program and a “rubber stamping” for LCA programapplications. As a result, annual expenditures of approximately$50 million for DOL’s foreign labor certification programs dolittle to “add value” to the process of protecting American jobs
and wages.242
6. INS/BLS Data—Next, this Section looks at a side-by-side com243
parison of the INS and the BLS data, in Table 14. The table shows
75th percentile wages for H-1Bs in Computer-Related Occupations
and the 50th percentile figures for all U.S. Software Applications
Engineers. The table shows that the vast majority of H-1B programmers make considerably lower wages than do American
programmers, indicating Type I and/or Type II wage savings by
employers.
Table 14Programmer Wage Comparison, H-1Bs vs. All U.S.

Year

75% H-1Bs

50% U.S.

1999
2000
2001

$57,000$61,500$62,200$66,230$70,300$72,370

An issue which arises in this study is that different job titles wereused in the two data sets. However, both titles essentially refer toprogrammers. As discussed in Part III, the vast majority of the computer-related H-1Bs are programmers, and the modern job title forprogrammers is Software Engineer, rather than Programmer. This
comparison uses the Software Applications Engineer category in
BLS, since it is more “mainstream” than the somewhat higher-paid
Software Systems Programmer.
7. The NRC Study—Finally, the National Research Council(“NRC”) subcontracted Hal Salzman of the University of
Massachusetts to study the question of cheap labor and other
242.
243.

Id.
See supra notes 82, 187, 196, and 198.

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issues.244 The NRC states that, “. . . based on interviews with some H1B employers, Salzman reported that H-1B workers in jobs
requiring lower levels of IT skill received lower wages, less senior
job titles, smaller signing bonuses, and smaller pay andcompensation increases than would be typical for the work they245
actually did.”This is Type I salary savings. However, the NRC downplayed thefindings of their own commissioned report. In addition to using
the qualifier “lower levels,” the NRC cautioned, “However, it is unclear whether these employers are representative of all IT
employers.” Let us consider these points.
Salzman’s report does not state how many employers he interviewed, nor how he selected them. He does make it clear, though,that “lower levels” means work normally performed by workers
holding only a Bachelor’s degree,246 as opposed to research positions requiring a postgraduate degree. This is important, since asshown earlier, the vast majority of computer-related H-1Bs do have247
only a Bachelor’s degree. Indeed, Salzman and Biswas found that,“The top tier skill pool is a limited number . . . The increase in H1B visas, at least for Indian workers who comprise the largest single
group of H-1B workers, does not appear to be an expansion driven
by a quest for the highest level of talent.” So, at least in that sense,
Salzman’s employer sample is mainstream.
The NRC report goes on to say,That said, it is the judgment of the committee that direct
employers of H-1B visa holders—especially large ones—areprobably less likely than others to violate the laws andregulations that govern the H-1B program. The reason is thatlarge employers are likely to have the internal humanresources expertise to directly manage H-1B workers in theircompanies in a manner consistent with their corporate values
248
and with the law.

244. The NRC cites Hal Salzman & Radha Roy Biswas, The Indian IT Industry andWorkforce: Perspectives from the U.S. (Center for Industrial Competitiveness, Univ. ofMass., Lowell, Apr. 25, 2000). However, the NRC reference actually appears to be Harold
Salzman, The Information Technology Industries and Workforces (Center for Industrial Competitiveness, Univ. of Mass., Lowell, Nov. 2000).
245. NRC, supra note 55, at 175.
246. In Salzman, supra note 244, at 53, for example, Salzman says “the elite foreign talent has entered the U.S. workforce by way of U.S. graduate programs.” See also pages 37ff.
247. Salzman, supra note 244.
248. NRC, supra note 55, at 176.

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Yet this contradicts a point made by Salzman:
An important qualification to these findings is that we did notinterview employment contractors [i.e. “non-direct employers”
in the language of NRC above]; these are the firms most often
cited in reports of hiring H-1B workers at below-market rates
249
and offering unfavorable employment conditions.
The fact is that Salzman found that direct employers did indeed
250
underpay their H-1B workers. The pay discrepancy would havebeen even worse if he had included non-direct employers in his
sample.
8. Issues of Firm Size—It is also quite important to note the NRC’s
phrasing above, that large firms “are probably less likely than others
to violate the laws and regulations that govern the H-1B program.”
But as will be seen in Part VII, those laws and regulations are so
riddled with loopholes that employers can attain excellent Type I
savings while being in full compliance with those requirements. Indeed, in essence the large firms wrote those laws and regulations,through their lobbying of the legislative and executive branches ofthe federal government. Moreover, there is no law at all against
Type II salary savings.
Indeed, the large firms are very much interested in H-1Bs as asource of cheap, de facto indentured servant labor. Consider for instance Sun Microsystems, one of the foremost lobbyists for the H1B expansions in 1998 and 2000. Robert Smith, a former Sun Development Manager at the Broomfield, Colorado site has describedhiring in his group between August 2000 and November 2001:251
Most of the candidates that we saw or talked to were H-1B visa
holders . . . I asked [two managers], at different times, why we
couldn’t get better qualified candidates, and that was when
they told me that local candidates with the qualifications wewere looking for wanted too much money . . . At that time,
experienced Java developers were changing jobs for about

249. Salzman, supra note 244, at 43.
250. Which, unfortunately, Salzman did not quantify.
251. Smith, supra note 213. See also Complainant’s Prehearing Statement, Santiglia v. Sun
Microsystems, U.S. Dept. of Labor, Office of Administrative Law Judges, Case No.: No. 2003LCA-2, and Smith’s comments cited earlier, in the text associated with supra note 213.

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$100K, or more in some cases . . . We did hire an H-1B . . . at252
$80,000 per year.
A manager at another major firm, Intel, stated that Intel gives
such hiring preference to H-1Bs that he had to resort to recruiting253
on his own to get a good domestic applicant. Similar situations
exist at many large firms, such as this one alleged for Netscape:“Betrayal is the word that would come to mind,” said Allan
Masri, a 52-year-old San Jose engineer who was laid off from
his quality assurance engineering job at Netscape a year ago.
His colleague, an H-1B worker with the same job title, stayedon. Masri said he spent weeks training him on things such as
the XML programming language. Masri said he feels he was
replaced; Netscape said he was not.254
Masri later stated that when his manager informed him he wasbeing laid off, “She kept on saying I was making too muchmoney.”255
And it is not just the large computer software/hardware vendors
who find hiring H-1Bs so appealing. It is also the computer-usingfirms. Take the Bank of America, for example. In 1997, the following report came out:
Bank of America’s technology center is in the early stages ofan unsettling cost-cutting experiment. The San Franciscobased bank is asking its computer engineers in Concord toundermine their own job security by helping to train potential
replacement workers imported from India before shipping an
untold number of positions overseas . . .
The bank also maintains none of its Concord employees will
be dropped from the payroll if the pilot program with the256
India workers proves to be a success.
252. Smith also mentioned that this H-1B’s salary, though lower than market rates, washigher than those of several somewhat lesser-qualified members of the group who had been
hired in earlier times. The latter group was subject to a wage freeze Sun had imposed on
existing employees.
253. Straight Talk, supra note 210.
254. Bjorhus, supra note 75.
255. E-mail from Allan Masri to Norman Matloff, Professor of Computer Science,
University of California, Davis (Jan. 16, 2003) (on file with author).
256. Michael Liedtke, BofA Tech Workers Fear Jobs Heading off to India, Contra Costa
Times (East San Francisco Bay Area), Apr. 27, 1997.

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That latter statement by the bank proved to be false. After completion of the outsourcing program, the bank did indeed lay off its IT
workers in Concord and elsewhere in 2002:
Spreading some pre-holiday cheer, Bank of America this week
announced that it is cutting 900 tech positions—with the twist
that some layoff victims have to help train replacements if theywant to get severance pay . . .
The job cuts, 232 of them in the Bay Area, come as BofA is
outsourcing an increasing amount of tech work abroad, particularly to India. That has earned the Charlotte, N.C.-based
institution the nickname of Bank of India among disgruntled
soon-to-be-ex-employees.
Sure enough, dozens of Indian tech workers have been visiting
BofA’s major tech centers in Concord, Jacksonville, Fla., andother cities around the country recently. They’re getting training on work they’ll do back at home for about half what
departing employees are paid. The bank confirms that somelaid-off workers are being required to help train new ones
(and not speak to the media) as a condition of receiving sev257
erance.
The outsourcing involved a mixture of H-1B workers in the U.S.
and counterparts in India. Pay for the H-1Bs was quite low, asshown in detail in Part VII below.
D. Other Issues
The following section discusses several miscellaneous aspects regarding the issue of H-1Bs as cheap labor.
1. Long Work Hours for H-1Bs—First, one of the implications of
the de facto indentured servitude of the H-1Bs is that they cannot
refuse their managers’ demands to work long hours. A variation ofType I savings involves working the H-1Bs long hours. Whereas
American workers must be cajoled into occasional overtime work,
H-1Bs can be forced. This amounts to indirect Type I salary savings,
since most programmers are exempt from overtime laws. And in
the case of contractors, the savings is direct:
257. Jim Gardner, Bank Job: You’re Fired, Now Go Train Your Replacement, S.F. Bus. Times,
Nov. 22, 2002.

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Raj Subbaram, a manager at HCL Perot and himself an immigrant from India with permanent resident status, often
hires H-1B tech workers to fill the staffing needs of clientssuch as Cisco, eBay, and Sun. Among other reasons, he says
foreign workers’ willingness to work long hours adds to theirappeal. ‘The H-1B guy is ready to put in a lot of hours, up to
14 hours a day, and they don’t charge for the extra hours,’
Subbaram says.258
2. Even the Industry Admits H-1Bs are Used to Reduce Labor Costs—
The industry has admitted that it desires to control labor costs andthat H-1Bs provide a means to do so. The ITAA report, for instance,says,
At a certain level, in a global market, U.S. companies risk theirprofitability if they must pay individuals premiums beyond thatwhich customers are willing to pay for the product or service
those employees produce . . . The lack of mobility of laboracross international borders, whether through practical or legal restrictions, means that a current inability to hire skilled
people in America pushes U.S. companies to outsource
abroad or relocate facilities internationally to obtain labor at acompetitive price.259
Similarly, consider these statements from top officers at Gemini,the first from 1998 and the second from 2002:
Robert Walley, executive vice president of Gemini, says thatunless his company and others are able to find a new source ofworkers, “it would increase the prices of the resource pool.
The people out there looking for jobs, they’re demanding260
premium salaries now, and it will just drive that higher.”Global outsourcing is a growing business, said Bob Pryor, avice president of Cap Gemini Ernst & Young and head of thefirm’s outsourcing practice in the Americas. In the past, hesaid, US companies relied on foreign workers with H-1B visas

258. Diane Khirallah, Where Does H-1B Fit?, InformationWeek, Feb. 4, 2002, available at
http://informationweek.com/story.IWK20020201s0021.
259. ITAA, supra note 32.
260. Fred Katayama, CNN, Feb. 9, 1998, available at http://www.cnn.com/TECH/
computing/9802/09/high.tech.visas/.

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to reduce costs. “Now they are focusing on offshoring,” orsending the work overseas.261
Sun Microsystems, one of the firms which has most vigorously lobbied for expansion of the H-1B program, made the following
complaints about the labor market for UNIX system administrators:
Costs continue to rise . . . . At Sun we clearly feel the hiring
pinch. Qualified SA professionals have thinned out in the Silicon Valley over the years. This smaller pool of candidates has
driven salary expectations even higher than they are in otherparts of the country. . . . Contractors continue to inflate local
salary expectations.262
In other words, Sun does not want to pay the market rate, suggesting that they use H-1Bs for either Type I or Type II savings.263
3. The Alternative of Shipping Software Work Abroad—Another aspect of the use of H-1Bs as cheap labor concerns the alternative ofshipping software development work abroad, where labor is evencheaper. The industry lobbyists frequently threaten, “If U.S. firms
cannot bring H-1Bs from India to the U.S., they will have to ship
the work to India.” Salzman nevertheless dismisses this as a motivating factor for hiring H-1Bs on the employers’ part, claiming that if
employers really were focused on cheap labor they would simply
outsource overseas: “[Any] cost savings obtained by paying H-1B
workers below market rates is . . . paltry compared to the cost sav264
ings obtained through offshore IT work.” However, this analysis isincorrect, because it assumes that software development work caneasily be performed abroad, which is not the case.
Software development needs to be done in a face-to-face, integrated manner. If that were not the case, employers would not
bother with bringing the H-1Bs to the U.S. in the first place; theywould simply ship all the work abroad.
As Microsoft’s Bill Gates has put it,
For a company like Microsoft, it’s worth a real premium for us
to have very strong collaboration. We have found projects that261. Diane E. Lewis, Shift of Tech Jobs Abroad Speeding Up, Report Says, Boston Globe, Dec.
25, 2002, at E1. The offshoring issue is discussed below.
262. Available at http://www.mission-online.org/sun/hist.html (last visited Dec. 2,2002).
263. See supra notes 213 and 251. Sun has long used foreign labor for cost saving overseas. For example, it boasted of hiring programmers in Russia “at bargain prices” in 1993. See
Leslie Helm, Creating High-Tech Sweatshops, L.A. Times, Nov. 15, 1993, at 1.
264. Salzman, supra note 244, at 43, 47.

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make sense to do other places, in Israel, in Tokyo for example.
But it makes sense for the bulk of our operations to be in one
location and for the foreseeable future we’re going to stickwith that. We will spend what is necessary to have most of ourdevelopment groups at our headquarters and have them meeting face-to-face every day.265
Tom Furlong, former manager of Digital Equipment Corporation’s
workstation group in Palo Alto, has pointed out:
Physical proximity is important to just about everything we do. . . The level of communication is much higher when you cansee each other regularly. You never work on the same level if
you do it by telephone and airplane . . . An engineering teamsimply cannot work with another engineering team that isthree thousand miles away, unless the task is incredibly explicit
266
and well defined—which they rarely are.
A good account of the disincentives against overseas outsourcing is267
given in the NRC report.
In fact, very little software development work is shipped abroad.
According to a Merrill Lynch survey of 50 CIO’s from major IT userorganizations in the US, both commercial (Fortune 500) and government, “only 25 percent of the CIO’s outsource to India andeven those who do currently outsource only about 6 percent of
their software/services budget offshore.”268 Moreover, all indications are that in that phrase software/services above, the emphasis ison services, e.g. staffing of call centers, not software.269 Thus, it isclear that only a minuscule percentage of U.S. software development work is shipped abroad.
It should be noted, however, that in those cases in which overseas
outsourcing actually is used, H-1Bs are often used as “bridges” be270
tween offshore and U.S.-based portions of a project. In otherwords, even in the offshoring case, the H-1B program plays a major
265. Interview with Bill Gates, San Jose Mercury News, Mar. 9, 1997.
266. AnnaLee Saxenian, Regional Advantage, 1994, at 156. Furlong is referring to bicoastal U.S. projects; global projects are of course even more difficult.
267. NRC, supra note 55, at 180, 184.
268. Priya Ganapati, Outsourcing Holds Huge Promise for India: Merrill Lynch, India
Abroad, Sept. 13, 2002, at B2.
269. See quote of Stephanie Moore in Larry Greenemeier, GM Taps The Offshore Market,
InformationWeek, Jan. 16, 2002, available at http://www.informationweek.com/story/
IKW20020116s0003.
270. See, e.g., NRC, supra note 55, at 185.

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role. Again, overseas outsourcing does not comprise a major fraction of U.S. software development, but the “bridge” concept isinteresting, in light of the industry lobbyists’ threat to move workoverseas if H-1B caps are not raised. The lobbyists use this point toclaim that the H-1B program saves U.S. jobs, but instead H-1Bs areused to facilitate shipping work abroad, rather than to prevent it.
4. Legal Fees—Finally, the industry lobbyists claim that it actually
costs more to hire an H-1B, rather than less, due to legal fees andother costs. But their estimates of these costs have been exaggerated, and even those figures are smaller than the savings in salary.
Filing for an H-1B is quite simple and cheap; the typical legal fee
for it is only about $1,500 for small employers and down to about$700 for large employers who hire many H-1Bs. A Computerworldarticle reported, “Congress instituted a $500 fee when it raised the
H-1B cap last summer . . . Additionally, employers pay a $110 filingfee plus attorneys’ costs. All told, companies estimate the cost ofobtaining an H-1B visa under the new regulations will range from271
$1,300 to $2,500, including attorneys’ fees.”
In a different category, that of employer-sponsored green cards,
the fees do tend to be around $10,000. However, it should be notedthat many employers have the foreign employees pay the legal feesfor green cards themselves, and much more importantly, evenwhen employers foot the bill, the cost is usually far less than theysave in salary. From data presented earlier it is clear that Type I salary savings per worker, totaled over the multi-year period of de facto
indentured servitude, is easily $50,000, often much more.
E. Conclusions
In assessing any complex issue such as this one, no single study isalone sufficient. No study adjusts for all the important covariates.
Thus it is necessary to look at the totality of studies, and formulate
a judgment that is not only based on the data but also makes qualitative sense.
The data presented here consistently indicate that the H-1Bs
bring employers either Type I or Type II salary savings.272 Let us271. Julia King, ABCs & H-1Bs, Computerworld, Mar. 8, 1999. The $500 fee was increased to $1,000 under AC 21. The industry lobbyists sometimes also cite the cost ofimporting an H-1B from his home country. However, many if not most of the H-1B hires
occur in the U.S., and in situations in which the H-1B is hired from abroad, the employer
typically deducts such expenses from the worker’s salary.
272. Even the NSF study, after accounting for missing covariates, is consistent with this.

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consider whether this makes sense according to the qualitative aspects.
First, as shown earlier the employers’ stated reasons for hiring H1Bs do not jibe with the evidence. This already suggests that the
motivation is instead reduction in labor costs. And as noted earlier,the employers themselves have repeatedly expressed their desire toachieve such a reduction.
Second, as pointed out in the NRC report,. . . economic theory implies that an increase in the supply of IT
workers, including temporary nonimmigrant workers, will cause
the corresponding IT wage rates to be lower than they
otherwise would have been. Theory alone does not imply any
particular numerical magnitude of this effect. It is thecommittee’s judgment that the current size of the H-1B
workforce relative to the overall Category 1 IT workforce islarge enough to exert a nonnegligible moderating force thatkeeps wages from rising as fast as might be expected in a tightlabor market.273
Third, economic theory makes an even stronger point than theone made by the NRC, involving the effect of the de facto indentured servitude of the H-1Bs. An H-1B cannot move around freely
in the open market to achieve the best salary, nor can she negotiate
a better salary from her current employer by threatening to leave.
Thus economic principle alone shows that on average the H-1Bs
make less than they would on the open market.
Thus, both on quantitative and qualitative grounds, it is clearthat H-1Bs are indeed commonly used as cheap labor.
VI. Adverse Impacts on American Workers
Both the size of the H-1B population, and the exploitation of the
H-1Bs, have negative impacts on U.S. workers. However, different
worker groups are affected in different ways, which will be analyzed
in this Part.

273.

NRC, supra note 55, at 187.

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A. General Impact Issues
The National Research Council report states that the sheer sizeof the H-1B population in IT is bound to have an adverse impact
on IT wages. The IT H-1B population stood at about 255,000 in
2000, or about 10 percent of the programmer/electrical engineering workforce.274
Moreover, even that 10 percent figure understates reality, as it
includes older jobs filled before the H-1B boom of the late 1990s.
During the latter period, H-1B usage was sharply increasing. Recall
that the Department of Commerce calculated that 28 percent of
new IT hires between 1996 and 1998 in jobs normally requiring a
Bachelor’s degree were H-1Bs.275 An analysis by the Federal Reserve
Bank of Boston found that in 1999, “Foreign workers accounted forhalf of all the new jobs created in system analysis, programming,and other computer-related occupations that year.”276
As discussed in Part IV, there was no IT labor shortage during
this period of heavy growth in H-1B usage the late 1990s. Thus theimpact of H-1Bs on American IT workers during that time was substantial, especially on older workers and new graduates, as will beseen below.
It was even worse in the severe IT slowdown that began in late
2000. More than 80,000 H-1B visas were issued in 2002.277 Notingthat this was down from 163,000 the previous year,278 industry lobbyists claimed that the system was “working,” with H-1B usage being
reduced as the job market shrinks. Yet in such a dire economic
situation, employers cannot justify hiring any substantial number of
H-1Bs. In fact, the impact on American workers is staggering, as canbe seen, for example, as follows.
Applying the INS’ 52 percent figure for the proportion of computer-related H-1Bs to the 2002 count of 80,000 H-1B visas
granted279 results in a figure of approximately 40,000 visas that were
issued to IT H-1Bs in 2002. Meanwhile, the IT unemployment rate274. NRC, supra note 55, at 163.
275. DOC, supra note 85.
276. Miriam Wasserman, EllisIsland.com?, Regional Rev., Quarter 4 2000/Quarter 1
2001, available at http://www.bos.frb.org/economic/nerr/rr2001/q1/island.htm.
277. Mike Angell, H-1B Program Gets More Heat, Investor’s Bus. Daily, Nov. 20, 2002, at
A4.
278. Karen Kaplan & Alex Pham, Industry Downturn Hasn’t Killed Tech’s Big Appetite for Top
Talent, L.A. Times, Dec. 9, 2001, at C1.
279. Id.

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was more than 5 percent,280 which, using the NRC numbers281 would
work out to around 100,000 unemployed workers. In very roughterms, then, it can be argued that about 40 percent of the unemployed American IT workers were displaced by H-1Bs.
Furthermore, there were an estimated 890,000 H-1Bs in the U.S. at
282
that time, which again from the INS percentage figure for IT
would mean approximately 463,000 computer-related H-1B workers. This further places the 100,000 statistic for unemployedcomputer-related Americans in alarming perspective. Note that thisis just counting formal unemployment, not including underemployment, e.g. former programmers now working as bus drivers
because they cannot get programming work.
B. Adverse Impacts on American Workers Over 40
Recall the terms Type I and Type II salary savings. The former
comes from paying H-1Bs less than comparable American workers,
while employers attain the latter by hiring young H-1Bs in lieu ofolder Americans. Older workers are perceived as being more expensive than younger ones. When employers exhaust the supply ofyoung American workers, they turn to hiring younger H-1Bs in lieu
of older Americans. In this manner, the H-1B program is providing
employers with cheap labor.
The Type II savings issue is of signal importance in discussing reform of the H-1B program, for several reasons:•
The magnitude of savings, and the number ofAmericans impacted, under Type II is arguably
greater than under Type I.283•
Most analysts of the H-1B program, in academia,
government and so on are unaware of Type II
savings.
•
Moreover, there is nothing at all in the H-1B worker
protection statutes regarding Type II savings.

280. Stephanie Overby, Cap On, Cap Off, CIO Mag., Jan. 1, 2003, available at
http://www.cio.com/archive.010103/40_content.html. It should be noted that unemployment rates severely underestimate the degree of the problem, as was discussed in Part IV.A.3,
supra.
281. NRC, supra note 55, at 64.
282. See supra note 277.
283. See data analyses in Part V.C.

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Furthermore, as discussed in the following studies, the data demonstrates that IT workers over age 40 experience difficulty infinding work in their profession.
1. Langbein Study—First, in a study commissioned by IEEE-USA,
Dr. Laura Langbein of American University found:Older engineers are significantly more likely to report that
their job search is very difficult than younger engineers . . .
Similarly, the mean age of those who said that it was fairly easy
to find a new job was significantly lower than the mean age of
those who did not select that response . . . older respondents
report significantly more weeks of unemployment than
younger respondent. Specifically, for each additional year ofage, unemployment goes up by 2 weeks.284
2. The NRC Report—The pro-industry National Research Council report found that:. . . older workers are at greater risk for losing Category 1 IT
jobs than are younger workers. This difference becomes evenmore pronounced when compared to the fact that in the restof the economy older workers are less likely to lose their jobs
than are younger workers . . . [this difference is] consistent
with actions taken by employers motivated by the reduction oflabor costs. For example, an employer that terminated moreexperienced (hence older), higher-salaried workers and hired
less experienced (hence younger), lower paid workers would
not necessarily be violating the statutes prohibiting age discrimination . . .
. . . older displaced Category 1 IT workers take about 2.6 more
weeks to find a new job than do younger displaced Category 1
IT workers, though their length of unemployment is about thesame as that of older displaced workers in the rest of theeconomy . . .
. . . younger male displaced Category 1 IT workers experience a
6.6 percent wage gain on their new job; in contrast, older male
displaced Category 1 IT workers experience a 13.7 percent

284. Laura Langbein, An Analysis of Unemployment Trends Among IEEE U.S.
Members 7 (IEEE-USA, 1999).

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On the Need for Reform of the H-1B

wage loss on their new job–a difference between older and285
younger workers of 20 percentage points . . .
The data are presented in Tables 15, 16 and 17.
Table 15
Percentage Laid Off
Field

40+ yrs old< 40 yrs old

IT
Non-IT

12.3%
8.2%

10.6%
6.7%

Table 16
Mean Weeks to Re-employment
After Being Laid Off
Field

40+ yrs old< 40 yrs old

IT
Non-IT

13.5
13.6

11.1
10.1

Table 17
Percentage Change in Wages in Re-employment
After Being Laid Off
Field

40+ yrs old< 40 yrs old

IT
Non-IT-13.73%-19.73%+6.57%-5.73%The NRC’s point that “. . . [this difference is] consistent with actions taken by employers motivated by the reduction of labor costs”
285. NRC, supra note 55, at 142. NRC’s term Category 1 IT workers basically means programmers. The NRC also says that these effects are “consistent with IT employers ending
projects or product lines that rely on older technologies and skills (e.g., FORTRAN and
COBOL) and beginning to invest in projects or product lines requiring newer programming
approaches (e.g., object-oriented languages such as C++).” The references to FORTRAN and
COBOL are misleading. Almost none of the hundreds of job-seeking older programmers I
talk to each year are specialists in those languages. However, the point that the skills issue isintertwined with the age issue is important, and will be discussed later.

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is very significant, showing the connection to the H-1B issue andType II salary savings. Though it would be inaccurate to claim thatthe H-1B program is entirely responsible for the problems older
programmers encounter in the job market—defense industry firms,
which employ few H-1Bs, exhibit the same behavior—the fact isthat the large pool of young H-1B workers is obviously a major factor.
3. Manager Surveys—An Information Week IT manager survey presented a striking illustration of the problems which older
programmers face:
It seems safe to say that experience may not be the most valued commodity, according to a survey of 200 IT managers
nationwide conducted by InformationWeek Research in May.
Though age wasn’t specified in the question, only 2% of the
managers said they would most likely hire a worker with 10 ormore years’ experience. Almost half—46%—preferred to hirea worker with four to 10 years’ experience, while 26% said
they would hire a worker with less than three years’ experience, and another 26% wanted an entry-level worker or recent
286
college graduate.

Figure 3
InformationWeek Poll Results> 10 years
2%

NCG/RCG
26%

4-10 years46%

1-3 years
26%

286. Bob Violino, The Age Factor, Information Week, July 5, 1999, available at
http://www.informationweek.com/742/agefact.htm.

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Another manager survey found even more troubling problems:
Age does matter when it comes to IT hiring, according to asurvey of 200 Network World readers with some degree of hiring responsibility. The survey clearly shows that younger
network managers tend not to hire older workers.
Only 13% of the 30 survey respondents in the 20–30 age
group hired anyone over 40 in the past year, but that percentage increased as the age of the hiring manager increased. Of
the 80 network managers in the 31–40 age group, 24% had
hired an over-40 person in the past year. The percentage roseto 39% for the 57 managers in the 41–50 age group and up to
45% for the 31 respondents over 50 . . .
The survey results don’t surprise Kathy Nichol, who has 18
years’ experience as a high-tech recruiter in the Dallas area.
Nichol says she works with one thirtysomething hiring manager who gravitates toward “young fast-track managers.” When
Nichol has recommended older workers, her client rejected
them, saying the candidate lacked energy, couldn’t cut it in a
fast-paced environment, or should have been further along careerwise. “He doesn’t even recognize what he’s doing,” Nicholsays . . .
Companies don’t want to hire older workers for entry-leveljobs because they don’t want a 40-year-old reporting to a 24year-old. “It’s a cultural thing,” [Nichol] says. Naturally, thecompany won’t come right out and say age bias is coming into
play, but managers will come up with some other reason not tohire that person, she says.287

287. Neal Weinberg, Help Wanted: Older Workers Need Not Apply, Network World, Sept.
14, 1998, available at http://www.cnn.com/TECH/computing/9809/14/tooold.idg/.

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Figure 4
Network World Poll Results% Who Hired a 40+ in the past year

50
40
30
20
10
0
25

35

45

55

Age of Manager

4. Resulting Attrition—As a result, many programmers leave thefield when it is clear that they reach an age at which they have diffi288
culty finding programming work. An analysis of the National
Science Foundation’s SEASTAT data reveals a steep attrition rate.
Figure 6 shows the percentage of computer science graduates working in software development various numbers of years after theyfinish school.

288. The industry lobbyists claim that low programmer unemployment rates disprove assertions that older programmers are being displaced by H-1Bs. Yet, as my earlier quote oflabor analyst Carolyn Veneri (supra note 106) pointed out, programmer unemployment rates
are not informative to gauge the situation for older programmers, since many have left thefield due to a hostile job market.

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Figure 5
Attrition Rates from CS Grads
Working as Programmers% Working as Programmers

60%
50%
40%
30%
20%
10%
0%
6.5

8.5

10.5

12.5

14.5

16.5

18.5

20.5

Years After Graduation

These attrition rates are striking. Five years after finishing college, about 57 percent of computer science graduates are working
as programmers; at 15 years the figure drops to 34 percent, and at
20 years—when most are still only age 42 or so—it is down to 19
percent.
Clearly part of this attrition is voluntary. But the several data sets
presented earlier put this steep attrition rate in perspective: Most of
those leaving the field do so because employers do not want to hireolder programmers.
It should be noted that other technical fields do not show this
rapid decline of work in their area. For example, consider civil engineering majors. Six years after graduation, 61 percent of them
are working as civil engineers, and 20 years after graduation, therate is still 52 percent; compare this to the decline for computer289
science majors from 57 percent to 19 percent seen above.

289. Industry lobbyists have tried to dismiss the large attrition rate among computer science graduates by saying “They all became managers! ” But civil engineers become managers
too, and yet we don’t see a high attrition rate for that profession. On the contrary, my
SEASTAT analysis found that among those who have been out of school 16 years or more, 13
percent of the computer science graduates were managers, while 18 percent of the civil engineering graduates held managerial positions. See, e.g., Miller, supra note 115.

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The short-lived nature of careers in this field is sharply evident in
the age at which one attains Senior status at various firms, as shown290
in Table 18.
Table 18
Years of Experience to Qualify for a Senior Position
Best Buy
Compaq
Geoworks
Intel
Lotus
OracleSun Microsystems
Corsair Communications
Baan USAThe Learning Company

Senior Programmer Analyst
Senior Software Engineer
Senior Software Engineer
Senior Software Engineer
Senior Software Engineer
Senior Software QA
general technical
Senior Software Infrastructure
Engineer
Senior Technology Engineer
Senior Software Engineer

2 years
3–5 years
5 years
5 years
5 years
4 years
6 years
3 years
3 years
5 years

5. Skill Sets—As we have seen in Part VI.B.2, the NRC reportcites employers’ desires for “reduction of labor costs” and “newer
programming approaches,” i.e. the latest software skill sets, as possible explanations for the difficulties it found that older
programmers encountered in the job market. Since my theme hereis the impact the H-1B program has on older American programmers due to Type II salary savings, relating to the first of NRC’s
possible explanations above, it is important to consider the second
as well. Is it really an issue of skills rather than money?
As seen earlier, the answer to this question is no. Employers recognize that a programmer can become productive in a new skill
very quickly on the job,291 but they fear that the newly-enfranchised
worker would then demand a higher salary.
Thus the real issue is indeed money. Indeed, Intel, which had arepresentative on the NRC commission, reportedly has an active
program to expel older workers, even if their performance is excellent.292 The employer quote presented earlier compactly
summarizes the problem, “I’d love to have somebody with 20 years
290. These are drawn from specific jobs on the firms’ web sites. An exception is Geoworks, whose information is drawn from a Geoworks job ad in Tech Week, July 12, 1999.
291. Not quickly enough, claim the industry lobbyists. Yet this claim does not jibe with
the industry’s actions. Employers typically go months before filling a position. See supra note
151.
292. Tim Jackson, Inside Intel 320 (1997).

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of experience, but unfortunately I’m only paying for three or293four.”
C. Impacts on New Graduates in Computer-Related Areas
Just as H-1Bs adversely impact job opportunities for older
Americans by enabling employers to attain Type II salary savings,
the H-1Bs negatively affect younger Americans due to Type I salarysavings: Many employers hire young H-1Bs in lieu of young
Americans, since the former are cheaper than the latter.
During the height of the Internet boom, industry lobbyists would
often tell the press how “desperate” employers were to hire newgraduates. They painted a picture in which new graduates had multiple offers, all with fat salaries and signing bonuses, months before
they even graduated. Here, for instance, is what two industry executives testified to the U.S. Senate, concerning the bidding wars theysaid firms were having over hiring new graduates:294 “Microsoft’s
Murray agreed that recruitment was incredibly competitive, saying,“ ‘It has almost become a frenzy.’ ” Texas Instruments’ Leven added:“ ‘It’s getting like athletics and I’m beginning to wonder if I’m living in a different solar system.’ ”
Yet the frenzied bidding wars were mainly for a few outstanding
graduates. If you pinned one of these employers down and ask how
many actual offers they made to graduates at a particular school ina given year, they admitted that it was only a handful. Amdahl, forexample, made offers to only six new graduates at UC Davis during
the two recruiting seasons 1998 and 1999, and the firm stated that
this number was larger than for other schools.295
The industry lobbyists’ claim that new graduates of university
computer science programs could easily find good jobs in the field
was also debunked in a Computerworld insert in college newspapers,
titled Careers Spring 1999, which was filled with articles with jobhunting advice for graduating seniors in computer science. Again
contrary to the stories fed to the press by industry lobbyists claiming that most new graduates in computer science were besieged

293. Steen, supra note 135.
294. Patricia Wilson, U.S. Tech Firms Seek Foreign Employees to Fill Void, Reuters, Feb. 25,
1998.
295. E-mail from Jessica Boverio, Amdahl recruiter, to Norman Matloff, Professor ofComputer Science, University of California, Davis (Feb. 1, 2000) (on file with author).

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with job offers from anxious employers, the truth is that finding a
job was not so easy after all. The insert starts by stating,
As a computer science or engineering major at an institutionof higher learning, you already have taken large strides towardbuilding a lucrative career. Soon, however, you will be pounding the pavement alongside a horde of other recent grads
armed with resumes touting the same impressive information
technology credentials that you have. How do you distinguishyourself?296
If employers are courting the new graduates so heavily, why theneed to “distinguish oneself”? The insert then says this more explicitly: “The Silicon Valley job market is so crowded that it isn’t always
easy for even the best-apportioned IT grads to differentiate themselves even with a broad array of programming language
experience . . . Having fantastic technical skills just isn’t enough inthe highly competitive world of information technology . . .” Thejob market is “crowded,” “highly competitive”? This certainly is notwhat the industry lobbyists were telling us. They claimed it was theemployers who must compete for workers, rather than vice versa.
And it is not just an issue of finding a job, but rather of finding atechnical job in which the graduates can make use of their skills.
Even as of 1990, only 57 percent of new computer science graduates got programming jobs,297 and my student surveys have shown
the figure has been much lower in the last few years. To a large degree, this is due to employer preference for the cheaper, immobile
H-1Bs.
This was illustrated well in comments by Steve Yurash, an engineering manager at Intel, in a panel discussion on television in
Silicon Valley.298 Another panelist was Murali Devarakonda, a director of the Immigrants Support Network, a national group of H-1Bs
which was lobbying Congress to pass legislation to alleviate their defacto indentured servant status. Yurash discussed the fact that, as amanager at Intel, he had to take matters into his own hands in order to NOT hire an H-1B at Intel:
It’s a matter of what are the mechanisms, how does a hiring
manager in Silicon Valley get a hold of résumés? What happens is, you get a lot of H-1B résumés. I had to go out myself,
296. Joanie Wexler, Help Wanted: IT Strategies, Computer World Careers, Spring 1999,
available at http://www.computerworld.com/news/1999/story/0.11280,34988,00.html.
297. See Figure 6.
298. Straight Talk, supra note 210.

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instead of relying on the Personnel Dept., to go and advertiseat several colleges where I thought I would be able to findsome good employees. And lo and behold, I found a very
good one at Cal Poly, Pomona.
Table 7 shows that starting salaries for new computer science
graduates during 1995–1999 rose much more slowly than for otherfields. One major difference between computer science and theother fields listed such as business administration and accounting
on the other hand is strong the presence of H-1Bs in computer science labor pools. Yurash’s comments show how this is occurring.
D. Impacts on PhDs
As already stated in Part IV.D, about 50 percent of PhDs in computer science at U.S. universities are awarded to foreign students,
many of whom subsequently work as H-1Bs. This is an aspect of the
H-1B question which grabs the interest of many Americans, whowonder how it has come to pass that so few American students seeminterested in pursuing a doctorate in what is putatively one of themost dynamic topics in the world today. This alone demands somecomment. Even more interesting is the fact, to be shown below,that in the late 1980s a group of policymakers in the U.S. government consciously planned for the situation we have today, i.e. toladen our PhD programs with foreign students, with a very familiar
goal—to hold down PhD salaries in engineering and science.
Thus, even though I have demonstrated that PhDs only compriseabout 1 percent of computer-related H-1Bs, it is an aspect of the
H-1B program which is important to the American public, andwhich once again boils down to an issue of cheap labor. It will thus
be addressed here.
First, why do so few American computer science students pursue
a PhD? The answer is that it simply does not pay. During the five or
six years of doctoral study, a PhD student is foregoing several hundred thousand dollars of income he/she would make in industry
during that time. PhD salaries in computer science are higher thanthose for Bachelor’s degree holders, of course, but not sufficiently
higher to overcome this loss of income. The NRC study calculated
that “Assuming a fully supported 5-year doctoral degree (effectively
tuition and fees totaling zero), the total earnings [in comparing a

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PhD with a worker holding only a Bachelor’s] equalize in about 50
years.”299
In other words, for most workers, the PhD never catches up financially. Add to that the perception—largely correct, as we saw
earlier—that a doctorate is not necessary in order to make pathbreaking contributions in the computing world, so most American
students simply do not see the point of pursuing a PhD.
The lopsided financial comparison of a PhD and a Bachelor’s
stems from the fact that the salary premium for a PhD over a
Bachelor’s is not large compared to other fields, as seen in Table
19.300
Table 19
Salary Premiums Paid to PhDs Relative
to Bachelor’s Graduates
Computer Science
Economics
Political Science

38.7%
116.0%
150.0%Why does a PhD bring such a small percentage salary premium?
As mentioned above, a group of policymakers in the federal government actually planned for this to occur. The central factor
underlying the small magnitude of the salary premium in the CS
case is the H-1B and related foreign-labor programs. A 1989 policy
paper by Peter House, Director of the Policy and Research Analysis
Division of the National Science Foundation warned of a trend ofincreasing PhD salaries in science and engineering, and proposed
remedying this “problem” via having large enrollments of foreign
students in U.S. PhD programs.301 The NSF paper not only notedthat the foreign influx would hold down salaries, but also concededthat this lid on salaries would dissuade domestic students from pursuing a doctorate:
299. See NRC, supra note 55, at 245.
300. Edwin S. Rubenstein, Piled Higher and Deeper, American Outlook, Fall 1999.
301. Eric Weinstein, How and Why Government, Universities, and Industry Create Domestic Labor Shortages of Scientists and High-Tech Workers, NBER, MIT, 1998, available at http://
nber.nber.org/peat/PapersFolder/Papers/SG/NSF.html#SG (last visited Jan. 6, 2003). The
Weinstein paper also chronicles the NSF’s lobbying of Congress to incorporate a major science and engineering component into the Immigration Act of 1990, by projecting a scienceand engineering shortage. That shortage never materialized; on the contrary, there was ascience and engineering glut in the early 1990s, causing the NSF to come under congressional scrutiny. See also Daniel S. Greenberg, A Shortage of Scientists and Engineers, Wash. Post,
Aug. 18, 1991, at C7.

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A growing influx of foreign PhDs into U.S. labor markets willhold down the level of PhD salaries to the extent that foreign
students are attracted to U.S. doctoral programs as a way of
immigrating to the U.S.302 A related point is that for this group
the PhD salary premium is much higher [than it is for Americans], because it is based on BS-level pay in students’ homenations versus PhD-level pay in the U.S. . . .
[If] doctoral studies are failing to appeal to a large (or growing) percentage of the best citizen baccalaureates, then a key
issue is pay . . . A number of [Americans] will select alternative
career paths . . . For these baccalaureates, the effective premium for acquiring a PhD may actually be negative.303
A foreign student in a PhD program who wishes to obtain a U.S.
green card will typically be sponsored for an H-1B visa by a U.S.
employer, and the foreign national will remain in H-1B status forthe duration of the several years it takes for the employersponsored green card to be processed.
Note by the way that the influx of foreign students also holds
down graduate assistantship pay, in the same manner as describedfor industrial pay above. This further dissuades American students
from pursuing a PhD.
To be sure, some of the foreign doctoral students are indeed oftruly outstanding talent. As discussed in Part IV.E, their immigration should be strongly supported. But they comprise only a small
proportion of the foreign student population in PhD programs andthat population is used, in effect, in the U.S. as a source of cheap
labor.
E. Immigrant Entrepreneurship
The industry lobbyists have also claimed that the immigrant techspecialists have actually increased job opportunities for American
programmers and engineers, by working on new products whichlead to job creation, and also via entrepreneurship.304
302. They could also try immigrating directly, i.e., become H-1Bs right after obtaining
their Bachelor’s degrees. However, PhDs go onto a faster, safer green card track. Moreover,by being already based in the U.S. when they enter the job market, they have more control
over the type of job they get, and thus are somewhat less susceptible to exploitation.
303. Id.
304. See Cappelli, supra note 120.

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The first claim is an obvious fallacy. The employers could fill
those positions with Americans (U.S. citizens and permanent
residents) instead of H-1Bs and still get the job-generating effect.
But the second claim, though also misleading, is more subtle. The
industry lobbyists cite a 1999 study by a UC Berkeley urban
planning professor, AnnaLee Saxenian, showing data on Asian
immigrant entrepreneurship in Silicon Valley.305 However,
Saxenian’s data show that the rate of immigrant entrepreneurshipis no higher than, and in fact is likely less than, immigrant
representation in the workforce. She finds that the Asian
immigrants comprised 21 percent of the scientists and engineers in
the technical workforce in 1990, but founded only 19 percent of
new businesses during 1985–1989. By the year 2000, the Asianimmigrant proportion of the technical workforce had grown to 37
percent,306 while their proportion of new business lagged behind at
29 percent, according to Saxenian’s data.
It must also be pointed out that these firms may not employ
many programmers and engineers anyway. For instance, according
to Saxenian, 36% of the Chinese-owned firms are in the business of“Computer Wholesaling,” meaning that they are simply assemblers
of commodity PCs, with no engineering or programming work being done.307
Moreover, as Saxenian notes, the situation is even worse because
the immigrant entrepreneurs—and for that matter, immigrantmanagers in non-immigrant—founded firms—tend to hire only
from their own immigrant ethnic groups. Those jobs are largely notopen to the general workforce. This can be seen quantitatively
from, for instance, the study by B. Lindsay Lowell of Georgetown
University, who found that “ . . . a study of the top 100 companies
employing H-1Bs in 1998 shows that 60 percent of their CEOs had
South Asian surnames.”308 Another researcher found that at Cadence Design Systems, a prominent computer-aided design (CAD)
software firm, “foreign-born Chinese-American engineers may represent as many as 80 percent of the technical staff.”309
305. AnnaLee Saxenian, Silicon Valley’s New Immigrant Entrepreneurs (Pub. Policy Inst. of Cal. (PPIC), 1999). PPIC is funded by an industry-related source, William R.
Hewlett, co-founder of Hewlett-Packard.
306. Supra note 86.
307. Saxenian, supra note 305.
308. B. Lindsay Lowell, H-1B Temporary Workers: Estimating the Population,
Institute for the Study of International Migration 11 n.4 (Inst. for the Study of Int’l
Migration, Georgetown Univ., 2000).
309. Melanie Erasmus, Immigrant Entrepreneurs in the High-Tech Industry, in The State of
Asian Pacific America: Reframing the Immigration Debate 180 (Ronald Lee & Bill Ong
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The San Jose Mercury News ran an in-depth analysis of the situation, finding that:. . . even among engineering professionals, subtle ethnic division is part of the valley’s culture.
A half-dozen university researchers studying the valley’s workplaces say the segregation patterns are disturbing.310“You’re seeing more and more firms that are homogenous
ethnically, from the entrepreneur all the way down to the production worker,” said Edward Park, a University of Southern
California sociologist who has visited dozens of Silicon Valley
firms over the past decade . . .
Workers say the tension is especially pronounced between engineers from India and mainland China. The Indian
engineers coming on temporary H-1B work visas now outnumber the Chinese by 5–1 . . .
. . . one Intel engineer who emigrated from mainland China[said] “Many Chinese think that Congress has a policy of favoritism toward India.” He asked that his name not be used,saying it would hurt him in his largely Indian work group.
F. Conclusions
The magnitude of the H-1B population significantly impacts
American IT workers adversely. This occurs both at the younger(new graduate) and older (age 40+) ends of the age spectrum.
Moreover, despite the small number of computer-related PhD H1Bs, the adverse impact on PhD salaries is substantial.
VII. Proposals for Reform
Demetrios Papademetriou, a former Labor Department immigration official, once observed, “Do you want me to call it a sham?
310. Ken McLaughlin & Ariana Eunjung Cha, Divisions: Segregation Trends Emerge in HighTech Industry, Experts Say, San Jose Mercury News, Apr. 16, 1999.

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Do you want me to call it a hoax? Sure it is. This program has neverworked, and it never will.”311
Assuming that Dr. Papademetriou’s utter pessimism is too simplistic, what, then, can be done to fix H-1B? To answer thisquestion, Part VII will first show why the current laws and regulations regarding H-1B are failing, and then discuss proposals—myown and those made by other—for reform.
A. Why the Current Laws and Regulations Fail
The law requires that the employer of an H-1B pay at least theprevailing wage, i.e., the average salary earned by American workers
of comparable experience, education and skills. Industry lobbyists
cite this law as ensuring that employers cannot underpay H-1Bs,
i.e., will not attain Type I cost savings by hiring H-1Bs. But the regulations are riddled with such gaping loopholes as to render this law
virtually useless.312 These loopholes, which are well-known to Human Resources (HR) staff, immigration lawyers and so on, include(but are certainly not limited to) the following•
The DOL recognizes a wide variety of sources ofwage data from which the employer can choose inclaiming prevailing wage for a given position. Thesesources include both government agencies—theState Employment Security Agencies (SESAs)313—
and wage surveys conducted by numerous private
firms. Moreover, different data sources are collectedin different manners, using different definitions ofjob titles, different granularities in categorization ofworkers, and so on. As a result, there is wide variation from one survey to another, thus allowing theemployer to select the lowest of many widely varying
figures.
•
Job titles, most of which are far too coarse, are notstandardized across data sources. A given job title
311. Mike McGraw, Boon or Boondoggle: Visa Programs Hurt U.S. Workers, Foster Abuse, Kansas City Star, July 16, 1995.
312. Therefore, the laws imposing penalties on employers who violate the law are virtually useless. Most employers who use H-1Bs for Type I salary savings have nothing to fear, as
they are in full compliance with the regulations. The law actually states that the employer
must pay the higher of the prevailing wage and the actual wage, the latter being the average
wage of similar workers in the same firm. This too is subject to abuse via a myriad of loopholes. See, e.g., Fragomen, supra note 24.
313. Also known as State Workforce Agencies (SWAs).

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might encompass many quite different jobs withvery different wage levels. For example, in some surveys the category Software Engineer could include
both programmers who do operating systems kernel
work—one of the most challenging types of softwaredevelopment—and those who write very simple application software. An employer of an H-1B kernel
programmer could use the average salary of all
Software Engineers as the prevailing wage, eventhough it would be far lower than what kernel programmers make. Even more importantly, a
programmer could have job titles such as Programmer, Software Engineer, Systems Analyst, Member of
the Technical Staff, and so on. The employer canthen exploit the fact that these titles are defined differently in different surveys, and then simply assign
to the H-1B a job title for which one of the surveys
quotes a lower average salary.
•In the open labor market, specific software skills
314
play a major role in determining salary. Yet mostsurveys do not take specific skill sets into account,and the employer of an H-1B can simply choose asurvey which doesn’t do so. In this way, the employer
can hire an H-1B programmer who has a “hot” skill
worth, say 20 percent more in the open market, but
pay him the salary of a general programmer—all infull compliance with DOL regulations.
•Levels of experience, education, skill sets and so on
are also generally tabulated in a very coarse manner,
if even tabulated at all. For example, an employer
who wishes to hire an H-1B who has a Master’s could
choose a survey which doesn’t take education into
account, and thus get a Master’s-level worker for the
price of a Bachelor’s level worker.
As an example, taking simple information from an entry fromthe DOL’s Online Wage Library315 for 2002 wages of Software Applications Engineers in Santa Clara County, California (i.e. Silicon
Valley), the data reveals much about the H1B program. The entry
lists Level I (0–2 years of experience) and Level II (more than 2314. See Table 4.
315. U.S. Dep’t of Labor, Employment Training Administration, Online Wage Library, at
http://www.flcdatacenter.com (last visited Sept. 17, 2003).

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years of experience) mean wages of $62,171 and $97,864, respectively.
First, the prevailing wage pertains to the job, not the worker. The
employer can define the job to be Level I even though the worker
may have 4 or 5 years of experience. The employer thus hires amore-experienced worker for the salary of someone with less experience. As immigration lawyer Sean Olender puts it, “Thisdisparity often results in very experienced candidates being underpaid.”316
Oleander goes on to say that the disparity can result in “very inexperienced candidates being overpaid,” but more likely theemployer will choose a different wage survey, or simply hire theworker under another job category. Another possibility is to try theService Contract Act data, also available through DOL; this data,for instance, defines four experience levels for the Programmer
title, rather than just two.
Second, note that education and skill sets are not mentioned inthis SESA entry at all, again because the prevailing wage is based on
the job. For instance, as long as the job does not require a Master’s
degree, the employer need not account for the H-1B’s Master’s degree in determining prevailing wage. Moreover, even though theemployer may be hiring the H-1B because she may have experience
using the XML data language, the general job category Software
Applications Engineer would not have such a requirement, andthus the prevailing wage determination need not account for XML
experience.
These points were well illustrated in an investigation of actions
by the Bank of America by John Miano of the Programmers Guild.
In 2001 Bank of America (BofA) in Charlotte, NC “outsourced” its Human Resources (HR) functions to a company
called Exult. As part of the arrangement, the Bank of America
employees supporting these functions were made Exult employees.
At the end of 2001, Exult announced it was “outsourcing” itscomputer programming work to two “H-1B bodyshops,” HCL
and Hexaware. Unlike in the previous “outsourcing,” the existing employees were fired and replaced by foreign H-1B
workers. The American BofA/Exult employees were forced to316. Oleander law office web page, Prevailing Wage Analysis, at http://www.usvisalaw.com/prevaili.htm (last visited Jan. 9, 2003).

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train their replacements in order to collect a severance package.
The affected employees had very specialized skills in that they
worked with PeopleSoft and Oracle . . . reported salaries[were] $70,000–$90,000 for the BofA/Exult employees wholost their jobs . . .
Attached below is [a Labor Condition Application] filed by
HCL for some of the H-1B replacements at BofA/Exult. The
salary for the H-1B workers is $39,184, about half of what thepeople they replaced made . . .
The first step used here in the wage depression process is tocall the H-1B workers generic “systems analysts.” So instead ofusing the higher-than-average wage for the specialized skills ofOracle and PeopleSoft, the employer uses the wage for systems
analysts as a whole.
. . . employers can get a prevailing wage for Level 1 and Level
2 . . . which in this example are $41,246 and $69,618 respectively. So now the employer claims the H-1B workers are“Beginning level employees” and uses the lower wage as theprevailing wage.
The law only requires H-1B workers to be paid within 95% of
the prevailing wage. The employer takes 95% of $41,246 andcomes up with a wage of $39,184. Thus, the company is paying
the H-1B workers about half of what the workers they replaced
317
made.
It is important to reiterate that all of this appears to be fullycompliant with the regulations. The employer does not have to takeskill sets, e.g. PeopleSoft, into account, and the job titles are vague
enough that these jobs could be described as Systems Analyst positions. Nor do the regulations forbid hiring a more experienced
worker into a Level I job and paying Level I wages. It is also not a317. John Miano, How to Underpay H-1B Workers, Programmers Guild web site, at
http://www.colosseumbuilders.com/Guild/h1b/howtounderpay.htm (last visited Jan. 8,
2003).

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violation of the H-1B statute to lay off Americans and replace themwith H-1Bs.318
The loopholes are so pervasive and intricate that immigration attorney Joel Stewart has boasted, concerning the green card processthat most H-1Bs undergo and which also uses prevailing wage,“[e]mployers who favor aliens have an arsenal of legal means toreject all U.S. workers who apply.”319
Another key point is that H-1B law is concerned only with preventing Type I salary savings, not Type II. There is nothing in thelaw or regulations aimed at employers who hire younger H-1Bs inlieu of older Americans.
B. A Proposal for Reform
This section will discuss reform of the H-1B and employer-based
green card systems, as well as of related nonimmigrant visa types,
such as the L-1 visa for intracompany transfers, under the following
rubric of goals:•
First, reform must remove the employers’ ability toattain both Type I and Type II salary savings. The latter is just as important as the former.
•
Second, beyond salary issues, reform must remove
the employers’ ability to hire guest workers for thereasons of their “loyalty.” The guest workers must beallowed full mobility in the labor market, including
during most of the time they are being sponsoredfor green cards.
•
Third, reform must include all employers of guest
workers. As discussed earlier, the abuses of the program include many large firms, contrary to the320
claims of the industry lobbyists.
•
Fourth, reform must include guest workers ofhigher-level educational qualifications. As discussed
in Part VI.D, these workers are subject to abuse too,and do have adverse impacts on Americans.

318. Unless the employer is considered H-1B-dependent, a category comprising only 50
out of 50,000 H-1B employers. See supra note 51.
319. Joel Stewart, Legal Rejection of U.S. Workers, Immigration Daily, Apr. 24, 2000, available at http://www.ilw.com/lawyers/colum_article/col_joels/2000,0424.shtm.
320. See, e.g., supra notes 75–79.

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93•

Fifth, reform must not apply only to times of economic slowdown. Many American workers weredisplaced during the boom times circa 1998.
•
Sixth, reform must include not only the H-1B program, but also related alternative work visas such as
L-1, which can be used as substitutes for H-1B.
•
Finally, the guest worker and employer-sponsoredgreen card processes must be streamlined. Currently
there is an elaborate bureaucracy which annoys employers while providing little or no protection to
U.S. workers.
The crux of this proposal is a radically revamped, integrated guest
worker and green card processing system with the following features:
1. Scope:
The proposal would apply to all computer- and engineering-related (CER) guest workers, including
those in the present H-1B and L-1 nonimmigrant
programs, as well as the employment-based EB-series
green card categories. In other words, CER workers
would be removed from the coverage of those programs, and covered by the new one proposed here.
Yearly caps in those existing programs would be reduced accordingly.
Employer Eligibility:
To be eligible for hiring a guest worker in a given
job, the employer must not have laid off Americans
in the same OES job category within the past 6months; must attest that she will not lay off Americans in the same OES job category within the next 6
months; must not have any more than 15 percent ofher technical workforce consisting of guest work321
ers; and must not have been found to be a violatorof guest worker hiring laws in the past.
The wage paid for the position must be at least
equal to the median national wage for the given job
category, according to the government OES data.322
321. Note the qualifier technical.
322. There are no levels of experience factored into this median. It is simply the medianover all workers in the given profession. For example, the OES figure for the 50th percentile(i.e. median) salary for all Software Application Engineers in 2001 was $70,210; see supra note

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In addition, the employer must attest that the wage
is “competitive,” given the nature of the position,
education and skills required and so on; however,this would not be subject to government review, except in the case of an enforcement action.
The Job Advertisement Period:
This phase would replace the current H-1B Labor
Condition Application with a public, Web-based
process. An employer who wishes to hire a guest
worker would first add an entry to a fully-public
DOL database on the Web, listing the nature of thejob and the salary range to be paid. The employer
need not have an actual foreign national ready for
hire, but the job must be real, ready to be filled if
qualified Americans apply.
During this phase of the process, American workers who see thedatabase entry could apply to the employer for the position. If theemployer fills the position with an American, the employer thenwould mark the database entry accordingly.
If, however, the position is still unfilled after 30 days, the employer would have automatic permission to hire a guest worker,
without any DOL review. As a condition for this, the employer must
attest that no American applicant for the position possessed theminimum requirements for the position and was willing to work at
a salary in the stated range. The employer must keep on file herreasons for rejecting the American applicants in case of a future
enforcement action, but would ordinarily not have to make suchinformation public.
The employer would be required to update the database toreflect the foreign hire, and would be required to state the main
qualifications of that worker, specifically including his college
degrees and subject majors, and his work experience. The
employer need not state the worker’s salary for public inspection,
but it must be at least the minimum stated in the database, and theemployer must enter the worker’s salary in a nonpublicly-accessible
portion of the database for DOL use. In addition, the employer
198. This idea is borrowed from the recent AFL-CIO/CWA proposals to reform H-1B, in AFLCIO Unions, CWA propose H-1B reforms, TechsUnite.org, Dec. 20, 2002, available atwww.techsunite.org/news/techind/h1breforms.cfm (last visited Aug. 21, 2003). Employers
may argue that this requirement harms guest workers who are new graduates, but as AFLCIO/CWA points out, “This will help assure that these guest workers will be paid a minimallyappropriate salary commensurate with the highly prized and difficult-to-find skills that they
allegedly possess.” Id. This provision would be an important component in preventing TypeII abuse of the H-1B program.

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must disclose whether anyone involved in the hiring process is a323
relative or friend of the guest worker. The guest worker would
then be granted a work visa.
The 3-Year Work Period:
The guest worker would be permitted to work in the
U.S. for up to 3 years after being granted the workvisa. He would be permitted to move from employer
to employer at any time. However, each new employer would be required to undergo the 1-month
job advertisement period described above. If theworker were to leave a given employer, the employer
would be required to notify the DOL (via an entry
in the database), on penalty of future debarment
from the guest worker program.
If the guest worker were to be unemployed for more than 60
consecutive calendar days, his work visa would be canceled immediately, and he would be given 15 days to leave the U.S. Failure toleave within that time period would result in his debarment fromguest work for five years.
Employment-Based Green Cards:
If, at the conclusion of the 3-year work period, theguestworker has never been unemployed for morethan 60 consecutive calendar days, he would be
deemed to have proven his value to the U.S. economy, and granted a temporary green card. No
324
employer sponsorship would be involved. The
temporary green card would be valid while he waits
for an immigrant visa under the yearly green card
quotas. He would be free to work during this time,and any new employer from this point onward
would not go through the job advertisement procedure.

323. OIG, supra note 23, discusses the fact that the H-1B and employment-related green
card programs have often been used to bring relatives or friends of the employer or manager
to the United States.
324. This idea is borrowed from, though is greatly different from, the proposal made in2000 by consultant Paul Donnelly, a former staffer for the Congressional Commission on
Immigration Reform (CIR). Donnelly’s proposal was adopted by IEEE-USA, and endorsed bysome prominent industry figures, such as Linux inventor Linus Torvalds, Apple Computer
co-founder Steve Wozniak and industry analyst Esther Dyson. See Letter from IEEE-USA to
Sen. Trent Lott, May 10, 2000, available at http://www.ieeeusa.org/forum/POLICY/2000/
00may10.html (last visited Jan. 10, 2003).

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Hiring Priority for Americans:
The law would state very explicitly that American
workers are to be given strong priority in hiring, andwould include the following provision:
An employer may not fill a position with a guest
worker if an American who meets the qualifications
is willing to accept an offer in the salary range statedin the database. Qualified American applicants may
not be rejected on the grounds that they are“overqualified” or have higher demands forcompensation than do foreign applicants.
Moreover, qualifications for the position may not be
specified in undue detail. A specific skill may not be
included in the list of qualifications if the worker
could become reasonably productive in the use ofthat skill within a month, via on-the-job learning.
Qualifications for an applications programmer job,for example, should not normally include unreasonable demands regarding specific programming
languages, operating systems, and so on.
Establishment of a Commission:
A Commission on Technical Guest Workers would
be established within the DOL. The Commission
would appoint review committees in each major
DOL region, consisting of members from industry,
professional and labor groups, and academia.
Any American who felt he had been wrongly rejected
for a position in favor of a guest worker would be able
to file a simple, convenient Web-based challenge,
citing the information given by the employer about
the worker and the position.
If the Commission finds in a challenger’s favor, the employer
would be required to offer a similar position to the challenger, at asalary to be worked out among the interested parties, including the
local review committee. An employer whose hires of guest workers
are successfully challenged in a specified number of instances
would be debarred from hiring guest workers for a substantial period of time.
As industry lobbyists are fond of pointing out, the DOL has received relatively few complaints over the years. Thus, workload for
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97change once workers update their current “You can’t fight City
Hall” perception of DOL.
The National Interest Waiver:
Currently, the National Interest Waiver (NIW)
exception to permanent labor certification allows aforeign national of truly exceptional ability to apply
for a green card on his own, without employer
sponsorship. Under the proposal here, a candidate
for a NIW would first need to obtain a work visa as
described above. He would then submit anapplication for a NIW, which would be adjudicatedby the Commission on Technical Guest Workers,
using the same criteria used in the current NIW
program. If this status is granted, the worker would
receive a temporary green card as described earlier,and the job would be exempted from therequirement that American applicants must be
given priority. Note that even if the Commission
declines the worker’s application for a NIW, theworker can still obtain a green card via the 3-year
process outlined here.
Yearly Cap:
The normal yearly cap on guest workers would be
set at 65,000. The Commission on Technical Guest
Workers would have the power to increase that
number by 20 percent in a given year if unusually
rapid economic expansion warranted it; larger increases would be left to Congress.
Note what is missing from this proposal—bureaucracy and delay.
The adjudication of the work visa and green card would be almost
completely automated, and should work in “real time.” The system
would eliminate the need of large firms to maintain special Immigration Departments, and small firms would find that theirexpenses for legal fees would be reduced to a small fraction of theircurrent level. The DOL would be able to re-assign its army of LCA
reviewers to much more productive activities and paperwork for
the INS should be reduced as well.
Labor advocates may be alarmed at my elimination of what has
up to now been the cornerstone of the H-1B and green card processes—the notion of prevailing wage. But it should be clear frommy analysis of loopholes above, as well as from the industry’s extremely aggressive history of lobbying Congress and DOL forMATLOFFTYPE11-7-03.DOC

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favorable laws and their implementation (Part II), that establishinga truly fair and effective prevailing wage determination system
would be both technically and politically of very high difficulty.
Instead, the safeguards in this proposal against Type I and TypeII wage abuse by employers take on different forms. This proposal
guards against Type I savings by eliminating the indentured servitude problem which currently enables those savings. To guard
against Type II savings, it includes the provision that the guest
worker be paid at least the median for the given profession, a requirement that Table 14 shows would be effective in eliminatingmuch of this kind of abuse of the H-1B program. In addition, thesystem has recruitment and anti-layoff provisions, makes the entire
process transparent to American workers in a timely manner, andestablishes the Commission on Technical Guest Workers, which
would give them a clear, easy avenue through which they could filecomplaints.
The proposed requirements that employers recruit American
workers and not be allowed to hire H-1Bs if they have laid off
Americans are hardly radical. On the contrary, as pointed out earlier,325 under GATS employers are already required to do so. The
Commission’s work, as well as maintenance of the database and soon, would be funded by the money saved in DOL and INS bureaucracy due to this new system. Additional funds, if needed, could comefrom the $1,000 H-1B user fee currently earmarked for training. (Asdiscussed earlier, the training programs are neither necessary nor
effective.) Part of the user fee revenue should go toward funding
special graduate assistantships for U.S. citizen/permanent resident
PhD students, at a stipend level at approximately double the levels
common today, in order to reduce usage by U.S. doctoral programsof foreign students as cheap labor.
No single component of this plan would be sufficient to deal
with the problems of the current system, and of course even all thecomponents collectively would not be 100 percent fail-safe. However, the system should be quite workable, and should be attractive
to sincere employers.

325.

See supra text associated with note 26.

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VIII. Overall Conclusions
The H-1B program has a long history of abuse by IT employersof all types and sizes. The abuse is largely, but not exclusively, due
to the de facto indentured servitude of the H-1Bs.
Meanwhile, the industry lobbyists have a long history of manipulating the development of H-1B statutes and regulations in both thelegislative and executive branches of the federal government. They
have engaged in massive public relations campaigns that claim IT
labor shortages of various kinds, claims that have proven to be false.
The bottom line is that the industry wants H-1Bs as a source ofcheap, compliant workers who will gladly work 14-hour days.
Given the tenacious manner in which the industry has acted toquash needed reforms of the program, an impasse might appear
inevitable. Yet on the contrary, many employers will find this proposal appealing because it greatly facilitates their hiring of H-1Bs
while adding reasonable safeguards against abuse.