Offshoring and Outsourcing Commentary for the New Year

It is clear to me that the root cause of many of the economic ills of 2008 was the "government subsidy" of immigration levels about ten times greater than our nation's immigration tradition. See Roy Beck's short YouTube video here: Our Immigration Tradition

When labor markets are glutted by an alphabet soup of work visa programs and the costs of the necessaries of life are bid upwards by the tidal wave of immigration, the "banker class" are the most significant beneficiaries. The U.S. middle class and lower class are the losers in this zero-sum game

Here is a collection of some of my published writings on these topics. I'm anticipating that there will be a big push for increased immigration in 2009, since both McCain and Obama's campaigns called for increased H-1B visas, for example. I wonder out loud if the voice of the middle class will be heard over the "soft rustle of lobbying dollars."

Here are links to nine articles and LTEs that I have written regarding highly-skilled labor markets and the controversial H1-B visa program.

Right sentence
Corpus Christi TX Caller - Times Letters to the Editor: 09.14.08 (Lawyer - and Microsoft Lobbyist - Jack A. Abramoff's role in H-1B Visa program expansion.)

Foreign workers take jobs away from skilled Americans
Washington, DC Examiner Op-Ed 21 August 2008, page 22

Immigrants don’t "make it all work," they take work
6 August 2008 Letter to the Editor, Schenectady, NY Daily Gazette

Whose University is it Anyway?
8 February 2008 University of Buffalo Spectrum (I earned my Ph.D. there in 1984)

The Greedy Gates Immigration Gambit The Social Contract
Fall 2007 (Published in January 2008)

Career Destruction Sites - What American colleges have become The Social Contract
Spring 2005

Missing table regarding H-1B visa usage by NIH Grantees:

How Not to "Solve" the Social Security Problem - Mass immigration is the wrong answer The Social Contract
Summer 1999

Gene A. Nelson, Ph.D.'s 13 April 1996 speech at the National Academy of Sciences Washington, DC headquarters.

Note the draft of my 5 August 1999 Oral Testimony critical of the controversial H-1B visa program before the House Immigration
and Claims Subcommittee, in particular the final two paragraphs

I was able to get "on the record" in the case USA v Jack A. Abramoff. I attended Jack Abramoff's sentencing hearing on 4 September 2008 at the DC District Courthouse. My 110 page "Victim Impact Statement" is document #40 in the Court docket in PDF format. It was filed with the Court on 3 September 2008. A searchable PDF copy here . It is also available including Judge Huvelle's handwritten approval comment via the DC District Court's PACER website.
Please tell me what you think about these articles, particularly the newest Social Contract article, which is about the "Abramoff Visa." Thanks!

There is also a relevant Daily Kos blog posting further up the 01 January 2009 page:
Criticism of Offshoring and Outsourcing

Meta: 

Comments

Dr. Gene Nelson

Please fix your post!

1. No unformatted links, URLs in blog posts. Please correct!

2. Do NOT write a blog post that simply says go to another site and read your post. You can cross post here, that's fine but doing that is not ok!

EP is a true economics blog, community and if you're going to write on EP, it has to be well cited, referenced, formatted and complete piece.

Thanks!

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Thanks for crossposting

Daily Kos can be difficult, because a lot of times criticism of the neo-liberal economics responsible laying behind H1b visas and the like gets you tagged as a racist. Which is utter bull, and is a desperate attempt to shut down the conversation. Most of them are unwitting accomplices. They simply don't understand that, as you say:

When labor markets are glutted by an alphabet soup of work visa programs and the costs of the necessaries of life are bid upwards by the tidal wave of immigration, the "banker class" are the most significant beneficiaries. The U.S. middle class and lower class are the losers in this zero-sum game.

And it's more than that, these firms are doing the H1b visa holders no benefit, because they are contributing to increased income inequality in the US that destroys the demand for their labor in the long run.

In a world economy built on mass consumption, the squeezing of wages through labor arbitrage is profitable for the individual, but disastrous for the world as a whole. It's to say the least, anti-social.

I honestly think that one thing that could be done to shut up the people who calling criticism of labor arbitrage racism, would be to provide information to Indian worker in the IT sector. India is a more or less free economy, and giving Indian IT professionals information about what the jobs they held paid when they were in the West, would strengthen the bargaining position of workers in India. And by raising wages there, increase demand for American products in India, and allow for actual competition, rather than labor arbitrage.

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EP & immmigration related topics FYI

The problem with this topic is it always seems to degenerate into name calling. Hence, I request if one is going to write about immigration on EP that one:

1. stick to the statistics, facts and pure labor economics on it. This means absolutely no cultural issues or security issues and so forth.

2. cite well referenced experts. I've read a lot of studies coming out of the Center for Immigration Studies and frankly I see nothing wrong with most of their research methodology so as far as I'm concerned they are valid. Now "some" of the stuff on this topic, isn't appropriate for an economics related site.

3. Just plain be careful. This is a "hot" topic and a couple of things I don't want for EP. I do not want EP to turn into an "immigration" blog for one, we're "all things econ" but global labor issues, outsourcing, etc. is all part of that but not "the" issue. Secondly, I do not want any, absolutely any economic fiction, especially on this topic. Bottom line with immigration related topics is you are dealing with real live human beings so while labor supply/demand and immigration/global migration are assuredly intertwined, one needs to bear this fact into account.

As far as Dailykos goes, well, that's another blog. We're not Dailykos and we are not even partisan. Our goal here is to let the facts, the statistics, the reality come through and enable people of all political flavors to use their brain and start examining facts, details. We're reality based, not philosophy based, although I'm fairly certain the agenda behind many of us is to increase economic prosperity for the United States and especially for working America, working citizens of the United States.

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One thing we should make very clear here

Is that we are NOT against immigration for the purposes of escaping natural disasters or corrupt "fictional" economic and governmental systems.

Our *ONLY* concerns with immigration are labor supply/demand curve and pressure on wages. These are truly economic concepts, and cover *all* immigrants regardless of where they come from (I'm always amazed at the racist angle when being against illegal immigration- the 2nd largest group of illegal immigrants in the United States right now are from Eastern Europe- to be racist against them would be like the racist tensions between Sweden, Norway, and Denmark- where NOBODY else in the world can tell the difference).

For that purpose, I'd like to see more on this blog about reducing the economic cost of immigration- both to the immigrants themselves, and to the natives here. That to me can best be done with a technological solution- a jobs website where employers can sponsor green cards (NOT the indentured-servant visas) for people who wish to come here- with the guarantee of a job for the first two years to establish the new immigrant. Since it's a green card, not specifically tied to the guaranteed job, the immigrant is free to be a rational economic advocate for himself/herself- and start immediately seeking a job that pays better. This would protect wages and jobs for natives as well, by ending the cheap labor/indentured servitude of the H and L class visas. Add instant background checks into it- maybe with a foreign aid program to modernize police data files worldwide- and you could potentially reduce the time to get a green card from the current year or two for an H class visa and five years for a green card to 30 minutes or less.

Such a system would also enable macro-economic rules to be established, such as limiting industry/country quotas.

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Maximum jobs, not maximum profits.

immigration policy vs. trade policy

As someone quite concerned about the impact of labor arbitrage on US wages, I can certainly see problems with immigration. Yet, if we have committed ourselves to virtually open our borders to both goods and services -- which we basically have, alas -- I might prefer that skilled programmers and other workers work in the US, rather than having US firms move their operations overseas, then shipping the goods and services here, which is the usual story. At least Americans get tax revenue and can provide personal services to the workers that way, and get some benefit from their entrepreneurship. The US still has one competitive advantage in this regard: many skilled people would like to move here. China does not yet have this (though it is starting to).

At minimum, if we must have H-1B and H-1A programs, priority might go to industries suffering intense competition from low-wage countries. Those industries might soon be wiped out in the US anyway, so they could have higher priority for immigrant workers to help compete.

For example, at present a large share of H-1A (unskilled) visas go to landscaping businesses. This looks to me purely a way to reduce US wages - landscaping businesses would still exist if they had to pay workers $30,000 per year. It would make more sense to give higher priority in H-1A visa quotas to, say, seafood processing, which has largely moved to Southeast Asia often in near-slave labor circumstances. If Indonesians are going to process shrimp anyway, they may as well do so here, which at least employs some Americans and provides taxes and adequate labor conditions.

I have not fully thought through all the implications of this, but there could be some political support for such a change if it were a good idea.

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the key here is to realize

H-1B, the Professional skills areas are calling the "outsourcing Visa". The reason is they use these Visas for training purposes and to move technology offshore. So, not only is it a labor issue, it is a R&D lost issue for the United States. We are now hemorrhaging lost R&D to cheaper labor offshore. That's the top tier jobs, $100k+ US jobs so that's not the way to go.

You don't want to enable the importation of cheaper labor into the United States because that displaces U.S. workers and erodes wages. The bottom line is labor arbitrage, wage arbitrage has to be stopped for many economists have pointed out, these practices are a race to the bottom and will eventually destroy the entire U.S. middle class.

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I'm kinda fine with that also

With one huge change:

I want all of those imported professionals to be put on the true immigration track. To come here, they need to renounce ties to the "old country", they need to be given true green cards (not these stupid indentured servant temporary visas), and they need to be encouraged to buy houses and settle down like the rest of us.

That would mean they'd have the same costs as an American programmer- and demand the same wages.

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Maximum jobs, not maximum profits.

not necessarily

One can flood a labor market with plain ole immigration too. All things static, or in the case of the U.S. hemorrhaging jobs that are going offshore or disappearing, you flood the labor market, even with green cards and wages with go down. Supply/Demand 101.

It's not just "programmers" which can mean anything from a tech to an engineer, it's the entire Professional careers area. Even U.S. teachers are getting displaced by guest workers.

Another thing to note is the use of U.S. citizenship/green card status as a "trading tool". As it is we have a lot of foreign lobbyist organizations using recent immigrants with U.S. citizenship status as front organizations to basically lobby for their foreign interest.

Not exactly adopting one's new country in deeds is going on and citizenship is seen more as a business tool or to assist the mother country instead of taking seriously the responsibilities of citizenship to this country.

i.e. is one truly an American now or is one still a citizen from the country where they originated from?

First just pass S.1035 (intact, not gutted by lobbyists) which reforms the H-1B and L-1 Visas.

Then on green cards that's better but watch out because corporate lobbyists are moving to green cards with your above argument, but in truth, they are planning the same agenda, just with a less controversial vehicle. i.e. global labor arbitrage but this time with a "green card" instead of a NIV (non-immigrant Visa).

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not necessarily

Good points from everyone about the need to keep the workers and their skills here, if they come at all. Just as companies that get US subsidies to build factories should have to give them back if they move overseas, companies that import skilled workers should have to pay stiff penalties if the workers leave.

I don't doubt that skilled (or unskilled) workers reduce wages for competing US workers. But given that we have gone and committed ourselves to the WTO and NAFTA, the choice seems to be unemployment by immigration competition or unemployment by import competition. Which is better, i.e., which offers the best chance of alternative employment, if either? I suspect immigration is better, though I don't see how any definitive answer could be possible. I will read through Dr. Nelson's articles.

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The thing to remember is

Any new immigrants- IF they're true immigrants- are *also* new consumers. New consumers who will demand living wages, and spend money on our goods.

That's why I have a lesser problem with them than the guy who sends 4/5ths of his paycheck back to the homeland and will retire in 3-5 years to live like a king.

I want more US consumers- and US Citizens. Now if we can only get ALL US consumers to live within their paychecks....

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-------------------------------------
Maximum jobs, not maximum profits.

Corrected Post, Per Request

It is clear to me that the root cause of many of the economic ills of 2008 was the "government subsidy" of immigration levels about ten times greater than our nation's immigration tradition. See Roy Beck's short YouTube video here: Our Immigration Tradition

When labor markets are glutted by an alphabet soup of work visa programs and the costs of the necessaries of life are bid upwards by the tidal wave of immigration, the "banker class" are the most significant beneficiaries. The U.S. middle class and lower class are the losers in this zero-sum game

Here is a collection of some of my published writings on these topics. I'm anticipating that there will be a big push for increased immigration in 2009, since both McCain and Obama's campaigns called for increased H-1B visas, for example. I wonder out loud if the voice of the middle class will be heard over the "soft rustle of lobbying dollars."

Here are links to nine articles and LTEs that I have written regarding highly-skilled labor markets and the controversial H1-B visa program.

http://www.caller.com/news/2008/sep/14/letters/
Corpus Christi TX Caller - Times Letters to the Editor: 09.14.08
Right sentence (Jack Abramoff's role in H-1B Visa program expansion.)

Foreign workers take jobs away from skilled Americans
Washington, DC Examiner Op-Ed 21 August 2008, page 22
http://www.dcexaminer.com/opinion/columns/guestcolumnists/NO_Foreign_wor...
or http://tinyurl.com/GeneNelsonOpposesH-1BVisas

Immigrants don’t "make it all work," they take work
6 August 2008 Letter to the Editor, Schenectady, NY Daily Gazette
http://www.dailygazette.com/news/2008/aug/06/0806_print/

Whose University is it Anyway?
8 February 2008 University of Buffalo Spectrum (I earned my Ph.D. there in 1984)
http://spectrum.buffalo.edu/article.php?id=35243

The Greedy Gates Immigration Gambit
Fall 2007 (Published in January 2008)
http://www.thesocialcontract.com/pdf/eighteen-one/tsc_18_1_nelson.pdf

Career Destruction Sites - What American colleges have become
Spring 2005
http://www.thesocialcontract.com/pdf/fifteen-three/xv-3-207.pdf
Missing table regarding H-1B visa usage by NIH Grantees:
http://www.jobdestruction.com/ShameH1B/Library/BrainSavers/H-1BVisaUsage...

How Not to "Solve" the Social Security Problem - Mass immigration is the wrong answer
Summer 1999
http://www.thesocialcontract.com/pdf/nine-four/ix-4-260.pdf

Gene A. Nelson, Ph.D.'s 13 April 1996 speech at the National Academy of Sciences Washington, DC headquarters.
http://www.engology.com/ArtNelson.htm

Note the draft of my 5 August 1999 Oral Testimony critical of the controversial H-1B visa program before the House Immigration
and Claims Subcommittee, in particular the final two paragraphs
http://judiciary.house.gov/Legacy/nels0805.htm

I was able to get "on the record" in the case USA v Jack A. Abramoff. I attended Jack Abramoff's sentencing hearing on 4 September 2008 at the DC District Courthouse. My 110 page "Victim Impact Statement" is document #40 in the Court docket in PDF format. It was filed with the Court on 3 September 2008. A searchable PDF copy is available at: http://www.cwalocal4250.org/outsourcing/binarydata/Abramoff.pdf . It is also available including Judge Huvelle's handwritten approval comment via the DC District Court's PACER website.
Please tell me what you think about these articles, particularly the newest Social Contract article, which is about the "Abramoff Visa." Thanks!

You must have Javascript enabled to use this form.

one more thing

you need to learn how to format your URLs (links).

See the right hand corner, user guide on how to do that.

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Here's the eco-reality of the situation

As opposed to the economic fiction, here's my opinion of the problems with unlimited immigration and free trade.

A global economic system is a system of abundant surplus, not a system of scarcity. ALL of our economic models, regardless of what school you belong to, are based on scarcity, on a limited supply, of everything from natural resources to labor. While there are still some global limitations (fossil fuels, for example) what we really are looking at is a global surplus being used faster than it is created, not a true scarcity.

This is especially true of third world labor. 80 million new citizens of Earth are born each year, in a population of 6.7 billion. But only 2.97 billion jobs are available in even the best of times; chances are during a downturn like this we'll go down to 2.5 billion jobs or so, in a population of 6.7 billion. When you think about it, that's an average of 2.68 mouths to feed per job.

But with the surplus of labor that this shows, and normal supply/demand curves, the price of labor gets driven forever cheaper- and there's no way to keep feeding people- thus creating our current deflationary crisis.

I guess what I'm saying is- we need much better models!

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Maximum jobs, not maximum profits.

The Big Picture is that "Overpopulation is Profitable."

If you are a member of the economic elite, overpopulation is good news. Why? Because overpopulation (even via immigration) creates labor gluts when the labor supply of a region or nation exceeds its carrying capacity. Labor gluts drive down the market clearing price for labor.

Furthermore, the population increase also causes the demand for the necessaries of life to be increased, which tends to increase the market price for those necessaries.

The economic elite are enriched via both scenarios while the middle and lower classes suffer economic losses. This is a classic "zero sum game."

The economic elite also tend to own the mass media - and promote policies via those media outlets that serve their economic interests. Examples that come to mind include The Wall Street Journal and The New York Times.

In systems theory, this is a "positive feed forward" system, so it tends towards instability.

Instability in this example means population crashes - and economic crashes.

One of the big contributing factors in the U.S. Great Depression was the "great wave" of immigration circa 1910 to 1924. As the U.S. economy crashed, there were bloody riots and people were killed. The political elite finally noticed and reacted strongly. In the depth of the Great Depression, mass repatriation was used to create jobs for about 1/2 million Americans. See author's 09 October 2008 published Washington Times LTE regarding forced repatriation

Rather than improving models, I advocate more citizen involvement in government. There are powerful, free tools for citizens to demand moderate reforms, such as the SAVE Act of 2009 via the website at NumbersUSA.com

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Trade, immigration, and age discrimination

I am generally sympathetic to immigration and immigrants, but Dr. Nelson's articles do suggest some serious problems with the H-1B program. To give the "unavailability of domestic workers" test some teeth, it might be wise to add an additional requirement that firms demonstrate that without foreign workers, they would be unable to compete with low-wage foreign industries. Otherwise, why can't they just train some domestic workers, or pay more?

Additionally, whatever the benefits of trade and immigration may or may not be, they create some winners, and some big losers -- those who lose their jobs and never get another one as good. As Dr. Nelson points out, older workers fall into this latter category most often. A North Carolina study found that of laid-off manufacturing workers age 55 and older, fewer than half found jobs in a year, and these earned on average 61% of their former wages. They face not only unemployment but age discrimination and investment in additional training yields less payoff.

It is very difficult to prove that any given employer has discriminated against job applicants based on age, and the victims either get jobs elsewhere or lack the money to pay for the legal effort required. Class action lawsuits are an obvious approach but the same business and libertarian groups that favor unrestricted imports have greatly diminished the effectiveness of class actions.

Still, the link between trade, immigration, and age discrimination could have political significance, because older Americans tend to have more political influence than younger ones, and might form new coalitions. Might the American Association of Retired Persons think of trade and immigration as age-related issues? Is there an American Association of Involuntarily Retired Persons?

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I'm quite impressed with the

I'm quite impressed with the discussion here regarding immigration loopholes. These opened a lot of new issues for me. I'm forwarding these to my friends. Overpopulation is indeed a double whammy on the current state of economy. Thanks for the space, Dr. Gene.

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