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January 2012, Volume 19, Number 1

Labor, Mobility, H-1B, J-1

The US unemployment rate averaged nine percent in 2011, but fell to 8.5 percent in December 2011, as employers added 200,000 jobs. The number of unemployed dropped from 14 million to 13 million, including 5.6 million workers unemployed 27 weeks or more.

Workers who lose their jobs often have difficulty finding new jobs that pay as much as their old jobs. One study found that fewer than 10 percent of those laid off in 2008-09 had found new jobs by 2011 that paid as much or more than their old jobs.

Unemployment insurance, which normally offers 26 weeks of benefits to workers who lose their jobs, provided up to 99 weeks of benefits from 2008-2011. In addition, during 2009-10 the federal government paid 65 percent of health insurance premiums for laid-off workers who maintained coverage through their ex-employer via the Cobra program, a benefit worth an estimated $170 a week.

The Black unemployment rate is usually twice the white rate, and the Hispanic rate 1.5 times the white rate. During the third quarter of 2011, the white unemployment rate was eight percent, the Black rate 16.2 percent, and the Hispanic rate 11.1 percent.

Some 25.2 million workers were jobless sometime in 2010, a sixth of the US labor force. Almost 18 percent of men and 14 percent of women in the labor force in 2010 were jobless at some point during the year. About 69 percent of men 16 and older worked in 2010, as did 58 percent of women. Of the men working in 2010, 69 percent worked full time; of the women, 59 percent worked full time.

Manufacturing shed 2.3 million jobs in 2008-09 and added back fewer than 250,000 by 2011. Many manufacturers and their unions have adopted two-tiered wage scales, offering new hires less than long-time workers, often $12 to $19 an hour compared to $21 to $32 an hour. The effect of two-tiered wages is apparent in unit labor costs, which fell in US manufacturing in eight of the past 10 years.

DOL in December 2011 proposed covering the estimated 1.8 million home care workers under the Fair Labor Standards Act, entitling those who provide care for the elderly and disabled in their homes with minimum wage and overtime protection. Most home-care workers are minority women, many are immigrants, and most work for third-party employers such as staffing agencies.

Home-care workers were exempted from the FLSA in 1974 under the theory that most were youth providing babysitting services; "companionship services" are exempt from the FLSA. Under the proposed DOL rule, all in-home care workers employed by third-party employers would be entitled to minimum wages and overtime pay. DOL says that six million elderly need daily assistance to stay in their homes, and that this number is expected to exceed 12 million by 2030.

The US has a pay-as-you-go social security system that paid $49 billion more in benefits to 55 million recipients than it received in taxes in 2010. The 12.4 percent payroll tax that finances social security is split between employees and employers. In 2005, President Bush proposed allowing workers to divert two percent of their payroll tax into personal retirement accounts, a plan that could make a comeback if the 2011 "temporary" two percent reduction in the worker's payroll tax is extended as planned.

The quarterly Heartland Monitor poll in Fall 2011 found that 60 percent of Americans believe they are living the American dream, defined as "the opportunity to go as far as your talents and hard work will take you and to live better than your parents." (www.allstate.com/heartland-monitor.aspx)

Employment in construction occupations peaked at 6.5 million in May 2006 and fell to 4.9 million in May 2010; 40 of the 46 major construction occupations lost jobs, in some cases half or more. The largest construction occupation, laborers, had the lowest average wages in May 2010, $16 an hour at a time when the average wage in all construction occupations was $21 an hour, the same as the average for all 800 US occupations. Average wages rose in some construction occupations because helpers and workers with little seniority were most likely to be laid off.

Mobility. The US has long seen itself as the land of opportunity, the country in which immigrants can arrive poor and, through hard work, become rich. However, new research suggests that upward mobility from the bottom of the economic ladder may be greater in Europe than in the US. The Economic Mobility Project of the Pew Charitable Trusts (www.economicmobility.org) says that almost two-thirds of those born in the top fifth of incomes stay in the top two-fifths, and two-thirds of those born in the bottom fifth stay in the bottom two-fifths.

For example, more than 40 percent of American men born into the bottom fifth of incomes stay there as adults, compared to less than 30 percent in Scandinavian countries. Similarly, less than 10 percent of US men born into the bottom fifth of the income distribution rose to the top fifth, compared to over 10 percent in Scandinavia.

Reasons for low and declining US economic mobility include more acute poverty, more single mothers, and the high wages of college graduates relative to other workers, that is, few of those from the bottom rungs of the income ladder complete college. Inequality also plays a role, since moving from the bottom of the US income distribution requires more income than moving up from more equal incomes in Scandinavian countries.

Most mobility studies measure relative mobility, asking whether children stay in the same fifth of the income distribution as their parents. The US stands out for having a very high share of those born into the bottom and the top fifths remain there. Some argue that a better measure is absolute mobility, reflecting whether children have more income than their parents. With economic growth, children in the bottom fifth of the income distribution should have more income than their parents.

The US is experiencing job polarization, meaning that a growing number of jobs are at the top and bottom of the wage ladder. The fastest US job growth between 1980 and 2010 was in occupations that had higher than average wages, such as computer and math occupations, legal, or management occupations, and in occupations with lower than average wages, such as building and maintenance, farming, health support, personal care and food preparation.

The occupations that exemplify the disappearing middle-of-the-job distribution include machine operators and administrative support workers. In 1980, 10 and 18 percent of US workers, respectively, were in these occupations; by 2009, it was four and 14 percent. In 2009, about 15 percent of US jobs were considered high skill and 17 percent were considered low skill. http://libertystreeteconomics.newyorkfed.org/2011/11/job-polarization-in-the-united-states-a-widening-gap-and-shrinking-middle.html)

Middle-class Blacks, many of whom worked for state and local government agencies, were especially hard hit by the 2008-09 recession and the shrinking of public sector employment. The unemployment rate for Blacks is about twice that of whites, 15 percent compared to eight percent in October 2011. Blacks, who found jobs in the US Postal Service beginning in the second half of the 19th century (a quarter of Postal Service employees are Black), have long looked to government jobs to achieve middle-class incomes. With state and local governments running deficits, public sector layoffs are frequent and long-lasting.

H-1B. There are 65,000 "regular" H-1B visas a year available to US employers seeking to hire college-educated foreigners. In November 2011, two months into FY12, USCIS reported that all had been requested. Another 20,000 H-1B visas available to US employers seeking to hire foreigners with advanced degrees were gone for FY12 in October 2011. An unlimited number of H-1B visas are available to universities and nonprofit research institutions.

A common assertion made by employers is that H-1B workers create jobs for US workers. Stuart Anderson, the Senate staffer who helped to expand the number of H-1B visas in 1998 and 2000 and now heads the National Foundation for American Policy, argues that each H-1B visa is associated with five more US jobs, a result reflecting simple correlation rather than causation.

There were about 4.2 million foreign-born residents 25 and older with at least bachelor's degrees in science, technology, engineering or mathematics in 2010, and 55 percent of these foreign-born STEM workers lived in 10 metro areas led by New York, Los Angeles and Washington DC. The leading countries of origin of foreign-born STEM degree holders were India and China. The US Department of Commerce, which released these data in November 2011, included the social sciences and psychology in the definition of STEM.

The President's Council on Jobs and Competitiveness released a report in October 2011 urging that foreign students who earn degrees in science, technology, engineering or math from a US university be allowed to stay in the US. The Council also urged "provisional visas" for immigrant entrepreneurs.

J-1. The J-1 exchange visitor visa or cultural exchange program has been administered by the US Department of State since 1963. Some 300,000 foreigners a year arrive with J-1 visas in 14 categories, including 16,000 interns in 2010 and 132,000 summer work travel trainees.

Trainees have graduated from a foreign educational institution, while interns are still studying. Both trainees and interns are allowed to work in the US up to four months and to travel an additional month in order to have a US work-and-exchange experience. J-1 visa holders must purchase their own health insurance, and US employers do not pay Social Security or unemployment insurance taxes on their wages.

Some 53 designated sponsoring organizations arrange for entry and internships, and 132,000 J-1 visas were issued in 2010. In recent years, most J-1 visas have been issued to Russians, Brazilians and Eastern Europeans. Two-thirds of the J-1 visitors were brought to the US by 14 of the 70 entities authorized to arrange US exchange visits.

On August 17, 2011, over 200 J-1 foreign-student visa holders employed in a Hershey-owned warehouse in Palmyra, Pennsylvania protested low wages and large deductions from their pay. Ohio-based logistics firm Excel operated the warehouse for Hershey, and used SHS Staffing Services to find workers. SHS used the Council for Educational Travel USA (Cetusa) to recruit foreign students willing to pay $3,000 to $6,000 to come to the US.

The J-1 student workers at the Hershey warehouse were paid the promised $8 an hour, but had $395 a month deducted from their wages to cover the cost of apartments they shared with three other J-1 visa holders. The protests were prompted in part by deductions for rent that were higher than neighbors paid for similar apartments. Cetusa, whose commercial affiliates manage housing and insurance for the J-1 visitors it brings to the US, blamed the National Guestworker Alliance for organizing the protest.

The J-1 program has turned into a guest worker program larger than the H-2B program managed by DOL to admit up to 66,000 foreigners a year to fill seasonal nonfarm jobs. In response to the Hershey protests and other problems, DOS hired 18 inspectors to check on sponsoring organizations and employers and said that it would not allow the J-1 program to expand until it was reviewed.

Julia Preston, "Pleas Unheeded as Students' U.S. Jobs Soured," New York Times, October 17, 2011.