Labor Shortages: Myth and Reality
In industries from agriculture to construction, to health care and high tech, employers complain that there aren't enough workers to fill positions.Crackdown on Indian Outsourcing Firms
David Rosenberg isn't buying it. A North American economist at Merrill Lynch (MER), he is one of a number of economists who say the concerns about too few workers are vastly overblown. Rosenberg recently studied the issue and put out a report entitled Is There a Labor Shortage? If employers are having trouble filling jobs, "perhaps they're not looking hard enough," he says.
Rosenberg argue that in a market economy, there's really no such thing as a true shortage. If you want more of something, you can pay more and have it. When employers say that there's a worker shortage, what they really mean is they can't get enough workers at the price they want to pay, the argument goes. "While it makes for nice cocktail conversation, the data aren't saying there is an acute labor shortage in this country," Rosenberg says.
Rosenberg argues the simplest way to gauge whether there's a worker shortage is to look at the price of labor. According to the basic laws of economics, the tighter the supply of labor, the more it should cost. So if the economy were operating with full or near-full employment, we would be seeing an "explosion in labor compensation," he says.
The price of labor, however, is hardly surging. In fact, key indicators of employee costs show they are tracking or trailing inflation. Average hourly earnings are running at 3.9% year over year, and the employment cost index is at 3.5% year over year.
Most Americans certainly aren't finding their incomes exploding. The wages of 80% of the U.S. workforce—made up of nonsupervisory workers—have been stagnating since the late-1990s boom ended. On Aug. 20, the government released data that showed the average household income increased 4.1% in 2005, to $55,238. But that's still below the average household income in 2000.
Concerns about foreign companies that benefit from a visa program designed to make the U.S. more competitive are taking center stage in Washington, with two senators demanding explanations from overseas users of the system. Senators Chuck Grassley (R-Iowa) and Richard Durbin (D-Ill.) on May 14 sent letters to nine foreign outsourcing companies requesting detailed information on how they use temporary work visas, known as H-1Bs, to bring foreign workers into the U.S.The Great Tech Worker Divide
Until recently, the discussion over high-skill immigration has centered largely on how to bring in more foreign workers adept at such jobs as software development. Technology companies, from Microsoft (MSFT) and Intel (INTC) to Motorola (MOT) and Qualcomm (QCOM), have argued that the U.S. should offer more work visas for noncitizens to improve its competitiveness.
In March, Microsoft co-founder and chairman Bill Gates went to Washington to make the case to Congress. "Simply put: It makes no sense to tell well-trained, highly skilled individuals—many of whom are educated at our top colleges and universities—that the United States does not welcome or value them," he said.
Yet evidence on the H-1B visa program paints a contrasting picture. As BusinessWeek first reported in February, Indian outsourcing companies have become by far the most active applicants for H-1B visas (see BusinessWeek.com, 2/8/07, "Work Visas May Work Against the U.S."). The data, just then released, showed that seven of the top 10 applicants for H-1Bs in fiscal 2006 were Indian outsourcers, led by Infosys and Wipro.
n addition, the temporary visa program includes no requirement that companies in the U.S. try to hire American employees before they turn to foreign workers.
To obtain a permanent visa, companies must conduct and provide to the government a labor market test, in which they demonstrate that they sought to hire American workers first. But the H-1B temporary visa program mandates no such market test. Instead, companies are required only to pay the prevailing wages and benefits for a certain job in a certain market.
Many U.S. companies are enthusiastic supporters of the H-1B visa program. Tech companies may be the most active participants, but the visas are also used by companies from General Electric (GE) and Boeing (BA) to Lehman Brothers (LEH) and Caterpillar (CAT). Companies have been lobbying the government to increase the cap on the number of H-1B visas from the current 65,000.
Is there really a labor shortage, or are tech companies lobbying Congress for more visas and green cards simply to avoid paying Americans better wages?Outsourcing: How to Skirt the Law
Bill Gates, Microsoft's founder and chairman, testified in Washington earlier this year (BusinessWeek.com, 3/7/07) that he feels "deep anxiety" over the competitiveness of the U.S. and says that the country needs to do more "to attract and retain the brightest, most talented people from around the world."
Microsoft is one of the most active American companies in the H-1B visa program, receiving 3,117 certifications in fiscal year 2006. But Schofield says that H-1B workers are on the same pay scale as U.S. workers. Government records show that the median salary for Microsoft's H-1B workers was $82,500, typically at or above the prevailing wage for similar positions.
Schofield is concerned that if Congress does not offer relief by raising the annual cap on H-1B visas and boosting the number of green cards, Microsoft will have to source more employees overseas. Microsoft, along with Intel (INTC), Texas Instruments (TXN), Motorola (MOT), and others, has been pushing for the H-1B cap to be raised from the current 65,000 a year to at least 115,000.
Want to hire cheaper foreign workers instead of Americans? A lawyer tells you how to game the immigration system—and it's all on YouTube.
The trick, according to Cohen & Grigsby attorneys, is to only go through the motions of hiring Americans without ever intending to.
"[O]ur goal is clearly not to find a qualified and interested U.S. worker," says Lawrence Lebowitz, director of marketing for the Pittsburgh law firm Cohen & Grigsby, before an audience of employers at the firm's conference.
The trick, according to Cohen & Grigsby attorneys, is to only go through the motions of hiring Americans without ever intending to.
Play the entire video. It's a real eye opener.
The seminar shows
- How to run ads that do not find any U.S. applicants.
- How to disqualify U.S. applicants who submit resumes.
- How to discourage qualified U.S. applicants from taking the job.
If you have an opinion you can contact Lawrence M. Lebowitz, Vice President of Marketing, Cohen & Grigsby at 412.297.4979 Email: Lawrence M. Lebowitz
Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/
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