Comments on: H-1B Insanity http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/ Jeff Nolan's take on investment, innovation, entrepreneurship and the technology industry Fri, 19 Mar 2010 05:50:28 -0600 http://wordpress.org/?v=2.8.6 hourly 1 By: Brad Ward, Arlington, TN http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/comment-page-1/#comment-182919 Brad Ward, Arlington, TN Fri, 02 Nov 2007 15:37:17 +0000 http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/#comment-182919 There have always been problems with the free markets when it is influenced by government subsidies to corporations like H1B visas. To explain simply what's going on, consider this thought experiment: There are two sellers, #1 & #2, and many buyers in the same market. The two sellers would like to buy their supply to make their product at a low price. The supply includes all inputs to make the product such as materials, labor, manufacturing processes, etc. Ultimately, these two sellers would like to sell their products at a high price and make a profit. Well one day, seller #1 decided that they would like to make more profit but they can't figure out how to take more market share from seller #2 to increase profits. During a meeting with management, seller #1 decides to lobby the government for more H1B visas to help them be more competitive against seller #2 because their labor rate is too high. The government agrees with seller #1 and decides to increase the H1B visa quota. Like magic, the labor rates fall as predicted because of the increase labor supply, and this makes seller #1 happy. Seller #1 can now buy their supply at a lower cost. This in turn, allows their profits to increase because they are still selling high. If seller #2 doesn't take advantage of the H1B visas or the resulting new labor rates, then their profit will be lower because they are still buying the supply at a higher price than seller #1. Therefore, seller #2 will see a decrease in profits. If seller #2 continues to be unprofitable, then they will go out of business after some period of time. Well seller #2 wants to stay in business, so they take advantage of H1B visas as well. So who wins and who loses? Since the labor rate obviously goes down, then the workers for seller #1 and #2 will take a financial loss. That's what happens when the government intervenes. The government basically allowed the sellers to profit at the expense of someone else-the workers. This may not be the intention, but it is certainly the result. Now, let's consider what happens without government intervention: There are two sellers, #1 & #2, and many buyers in the same market. The two sellers would like to buy their supply to make their product at a low price. The supply includes all inputs to make the product such as materials, labor, manufacturing processes, etc. Ultimately, these two sellers would like to sell their products at a high price and make a profit. Well one day, seller #1 decided that they would like to make more profit but they can't figure out how to take more market share from seller #2 to increase profits. During a meeting with management, seller #1 decides to lobby the government for more H1B visas to help them be more competitive against seller #2 because their labor rate is too high. The government disagrees with seller #1 and decides to not to increase the H1B visa quota. Seller #1 is not happy and goes back to management with a different strategy. This time seller #1 decides to improve their manufacturing process to be more efficient and increase productivity. Seller #1 can now buy their supply at a lower cost because they were innovative. In turn, this allows their profits to increase because they are still able to sell high or even slightly lower than before they were innovative. If seller #2 doesn't become more innovative, then his profits will be lower because he is still buying the supply at a higher price than seller #1. Therefore, seller #2 will see a decrease in profits. If seller #2 continues to be unprofitable, then they will go out of business after some period of time. Well seller #2 wants to stay in business, so they become more innovative. So who wins and who loses? Everyone wins because these two sellers are doing more with less. The results are lower supply costs and increased profits that benefit their shareholders and workers. Moreover, the buyers of their products benefit because the price of their products will ultimately decrease. We're essentially making a choice between capitalism and socialism. Should the government make rules that benefit one at the expense of another? There have always been problems with the free markets when it is influenced by government subsidies to corporations like H1B visas. To explain simply what’s going on, consider this thought experiment:
There are two sellers, #1 & #2, and many buyers in the same market. The two sellers would like to buy their supply to make their product at a low price. The supply includes all inputs to make the product such as materials, labor, manufacturing processes, etc. Ultimately, these two sellers would like to sell their products at a high price and make a profit. Well one day, seller #1 decided that they would like to make more profit but they can’t figure out how to take more market share from seller #2 to increase profits. During a meeting with management, seller #1 decides to lobby the government for more H1B visas to help them be more competitive against seller #2 because their labor rate is too high. The government agrees with seller #1 and decides to increase the H1B visa quota. Like magic, the labor rates fall as predicted because of the increase labor supply, and this makes seller #1 happy. Seller #1 can now buy their supply at a lower cost. This in turn, allows their profits to increase because they are still selling high. If seller #2 doesn’t take advantage of the H1B visas or the resulting new labor rates, then their profit will be lower because they are still buying the supply at a higher price than seller #1. Therefore, seller #2 will see a decrease in profits. If seller #2 continues to be unprofitable, then they will go out of business after some period of time. Well seller #2 wants to stay in business, so they take advantage of H1B visas as well. So who wins and who loses? Since the labor rate obviously goes down, then the workers for seller #1 and #2 will take a financial loss.
That’s what happens when the government intervenes. The government basically allowed the sellers to profit at the expense of someone else-the workers. This may not be the intention, but it is certainly the result. Now, let’s consider what happens without government intervention:
There are two sellers, #1 & #2, and many buyers in the same market. The two sellers would like to buy their supply to make their product at a low price. The supply includes all inputs to make the product such as materials, labor, manufacturing processes, etc. Ultimately, these two sellers would like to sell their products at a high price and make a profit. Well one day, seller #1 decided that they would like to make more profit but they can’t figure out how to take more market share from seller #2 to increase profits. During a meeting with management, seller #1 decides to lobby the government for more H1B visas to help them be more competitive against seller #2 because their labor rate is too high. The government disagrees with seller #1 and decides to not to increase the H1B visa quota. Seller #1 is not happy and goes back to management with a different strategy. This time seller #1 decides to improve their manufacturing process to be more efficient and increase productivity. Seller #1 can now buy their supply at a lower cost because they were innovative. In turn, this allows their profits to increase because they are still able to sell high or even slightly lower than before they were innovative. If seller #2 doesn’t become more innovative, then his profits will be lower because he is still buying the supply at a higher price than seller #1. Therefore, seller #2 will see a decrease in profits. If seller #2 continues to be unprofitable, then they will go out of business after some period of time. Well seller #2 wants to stay in business, so they become more innovative. So who wins and who loses? Everyone wins because these two sellers are doing more with less. The results are lower supply costs and increased profits that benefit their shareholders and workers. Moreover, the buyers of their products benefit because the price of their products will ultimately decrease.
We’re essentially making a choice between capitalism and socialism. Should the government make rules that benefit one at the expense of another?

]]> By: Linux Guru http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/comment-page-1/#comment-160916 Linux Guru Wed, 29 Aug 2007 05:44:51 +0000 http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/#comment-160916 According to the DOL, 85% of H1Bs earn an AVERAGE of less than 50K/year - some as low as $9/hour. These are not the "rare workers" supporters are talking about - only about 10% earn over 100K. H1B is a cheap labor program. The attempt to lift the cap has failed three(3) times and now there is the Grassley/Dubin refrom bill. No one disputes that truely "rare workers" should be imported; and if we can lift the cap to 115K and get 115K $100K/year geniuses - I would applaud that. But, Chang and Patel, the IT monkeys working at Joe Financials are not them. These jobs belong to Americans first and Chang and Patel need to go home! According to the DOL, 85% of H1Bs earn an AVERAGE of less than 50K/year – some as low as $9/hour. These are not the “rare workers” supporters are talking about – only about 10% earn over 100K. H1B is a cheap labor program. The attempt to lift the cap has failed three(3) times and now there is the Grassley/Dubin refrom bill. No one disputes that truely “rare workers” should be imported; and if we can lift the cap to 115K and get 115K $100K/year geniuses – I would applaud that. But, Chang and Patel, the IT monkeys working at Joe Financials are not them. These jobs belong to Americans first and Chang and Patel need to go home!

]]> By: Emman http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/comment-page-1/#comment-117905 Emman Sat, 26 May 2007 06:43:12 +0000 http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/#comment-117905 American IT workers are being displaced by misuse of the visa program by Indian outsourcers. As an IT professional, I’ve witnessed it several times. I also know that the visa holders were paid considerable less, making them more attractive to the American companies. I’ve also witnessed American IT workers being laid off and replaced by visa-holders from India. American IT workers are being displaced by misuse of the visa program by Indian outsourcers. As an IT professional, I’ve witnessed it several times. I also know that the visa holders were paid considerable less, making them more attractive to the American companies. I’ve also witnessed American IT workers being laid off and replaced by visa-holders from India.

]]> By: IT Matters http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/comment-page-1/#comment-102115 IT Matters Thu, 12 Apr 2007 22:00:57 +0000 http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/#comment-102115 What we need is MORE legislation on this matter, not less. As a resource management software developer I have the privilege to see contractor rates and foreigners easily make 30% less. What's worse is that the typical foreign workers usually have numerous layers of head hunters that take slices of their paycheck. This should be illegal. As a result of foreign workers the overall pay rate of all tech workers has been dropping for years and the glut of workers from the bust of dotcom should have been absorbed by now. Due to (cheaper) foreign workers there are plenty technology professionals that have moved on to different sectors of the business. For the amount of time they've committed to their profession this is a shame. As for the 150K visas being picked up the first day...it's the head hunters grabbing visas that is not linked to real people. They're grabbing these for future candidates. That's another scam that needs to be fixed. There are real people looking for work in foreign countries that cannot get a hold of a visa because they were grabbed by these head hunters. Nothing wrong with foreign workers...they bring a wealth of culture but we need to make sure that our family is taken care of before we adopt some more. What we need is MORE legislation on this matter, not less. As a resource management software developer I have the privilege to see contractor rates and foreigners easily make 30% less.

What’s worse is that the typical foreign workers usually have numerous layers of head hunters that take slices of their paycheck. This should be illegal.

As a result of foreign workers the overall pay rate of all tech workers has been dropping for years and the glut of workers from the bust of dotcom should have been absorbed by now.

Due to (cheaper) foreign workers there are plenty technology professionals that have moved on to different sectors of the business. For the amount of time they’ve committed to their profession this is a shame.

As for the 150K visas being picked up the first day…it’s the head hunters grabbing visas that is not linked to real people. They’re grabbing these for future candidates. That’s another scam that needs to be fixed. There are real people looking for work in foreign countries that cannot get a hold of a visa because they were grabbed by these head hunters.

Nothing wrong with foreign workers…they bring a wealth of culture but we need to make sure that our family is taken care of before we adopt some more.

]]> By: its4us2think http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/comment-page-1/#comment-99429 its4us2think Wed, 04 Apr 2007 17:49:59 +0000 http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/#comment-99429 Thinking from the other side, I can see that why people like to regulate H1B: - Demand may be there today for tech workers but what if it goes the other way down the line in say 6 months or 1 year. You cannot just send back all the H1Bs. - Every individual (and company) tries to maximize his profits and wants to minimize the competition, so it is natural to think that opening up the flood gate will affect them one day or other by lowering their salary. - There are hidden costs and implications in these kind of immigrant influx. It will be borne by the the society, not necessarily by the company that brings them in the beginning. (pretty much the reason why lot of people argue for sealing of borders with Mexico) As always truth is in between the two extremes. Depending on whom you talk and how good they are in their arguments you get swayed one way or other. (of course, each individual is biased in one way or other depending on what is there for him). I can see why Jeff and others entrepreneurs are arguing for more visas (most of the engineers who're working day and night feel the same). But at the same time when you look back for what happened in last bubble and afterwards, you can see that there is a possibility that the job market could slump in future. Having benefited from H1B myself, I dont argue against increasing H1B or dont agree with protectionist arguments. But at the same time, having come to the middle age category now, I can see why people are worried about younger/cheaper workers flooding in!! Thinking from the other side, I can see that why people like to regulate H1B:
– Demand may be there today for tech workers but what if it goes the other way down the line in say 6 months or 1 year. You cannot just send back all the H1Bs.
– Every individual (and company) tries to maximize his profits and wants to minimize the competition, so it is natural to think that opening up the flood gate will affect them one day or other by lowering their salary.
– There are hidden costs and implications in these kind of immigrant influx. It will be borne by the the society, not necessarily by the company that brings them in the beginning. (pretty much the reason why lot of people argue for sealing of borders with Mexico)

As always truth is in between the two extremes. Depending on whom you talk and how good they are in their arguments you get swayed one way or other. (of course, each individual is biased in one way or other depending on what is there for him).

I can see why Jeff and others entrepreneurs are arguing for more visas (most of the engineers who’re working day and night feel the same). But at the same time when you look back for what happened in last bubble and afterwards, you can see that there is a possibility that the job market could slump in future.

Having benefited from H1B myself, I dont argue against increasing H1B or dont agree with protectionist arguments. But at the same time, having come to the middle age category now, I can see why people are worried about younger/cheaper workers flooding in!!

]]> By: Brian Despain http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/comment-page-1/#comment-99412 Brian Despain Wed, 04 Apr 2007 16:35:36 +0000 http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/#comment-99412 Indeed once you add the cost of the worker's H1B to the process, you will find that an H1B worker is MORE expensive than a similarly qualified American worker. Indeed once you add the cost of the worker’s H1B to the process, you will find that an H1B worker is MORE expensive than a similarly qualified American worker.

]]> By: Jeff http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/comment-page-1/#comment-99396 Jeff Wed, 04 Apr 2007 15:43:54 +0000 http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/#comment-99396 I think the pool of visas could be dramatically increased with the regulations focused on wage equality. In other words, it’s not right to hire foreign workers for the primary reason that employers pay them a lower wage. In high tech there is relative wage equality so this isn’t an issue but I can see some industries potentially abusing this. I think the pool of visas could be dramatically increased with the regulations focused on wage equality. In other words, it’s not right to hire foreign workers for the primary reason that employers pay them a lower wage. In high tech there is relative wage equality so this isn’t an issue but I can see some industries potentially abusing this.

]]> By: Tilman Sporkert http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/comment-page-1/#comment-99386 Tilman Sporkert Wed, 04 Apr 2007 15:07:22 +0000 http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/#comment-99386 One problem is that there is just one big pot for all H-1B visas, regardless of country and skill or education level. I believe a very large portion of the applications are for lower skilled and lower paid employees, from just a few countries. Those applications totally crowd out everybody else. I read in the newspaper today that immigration officials are considering setting aside 20,000 slots for people with masters degrees. Assigning visas by country, like it is done with green cards, could also help. One problem is that there is just one big pot for all H-1B visas, regardless of country and skill or education level. I believe a very large portion of the applications are for lower skilled and lower paid employees, from just a few countries. Those applications totally crowd out everybody else. I read in the newspaper today that immigration officials are considering setting aside 20,000 slots for people with masters degrees. Assigning visas by country, like it is done with green cards, could also help.

]]> By: Jeff http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/comment-page-1/#comment-99366 Jeff Wed, 04 Apr 2007 14:30:11 +0000 http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/#comment-99366 Frank, Not really shady, all the immigration lawyers know what the dates are and have everything ready to go because they know it’s a first-come-first-serve. There is an entire legal sub-industry that has developed around this process because of the complexity and what it means for companies hiring foreign workers. Frank,
Not really shady, all the immigration lawyers know what the dates are and have everything ready to go because they know it’s a first-come-first-serve. There is an entire legal sub-industry that has developed around this process because of the complexity and what it means for companies hiring foreign workers.

]]> By: Frank http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/comment-page-1/#comment-99334 Frank Wed, 04 Apr 2007 13:06:39 +0000 http://jeffnolan.com/wp/2007/04/03/h-1b-insanity/#comment-99334 This is ridiculous and its very shady how it ended before it even started This is ridiculous and its very shady how it ended before it even started

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