Skip to navigation
Skip to main content
April 2012 Volume 19 Number 2
Unemployment, Projections, H-1B, J-1
The US unemployment rate doubled between 2006-07 and 2009-10. The 2008-09 recession accelerated the shift toward employers hiring better-educated workers: unemployment is highest, over 13 percent, for workers without a high-school diploma and less than four percent for college graduates. There are about 10 million US workers employed full-time who did not complete high school, and 45 million full-time workers who are college graduates.<< back
John Silvia, chief economist at Wells Fargo Securities, explained the skills mismatches among US college graduates that he says increase the US unemployment rate by up to one percent: "we've got way too many people who got less than adequate degrees and not enough people who can fix things, who understand how things are fixed." Silvia believes that more US students should study science and engineering, and that the US should give green cards to foreign students who earn science and engineering degrees in the US.
The unemployment rate, 8.3 percent in January and February 2012, was projected to average 8.8 percent in 2012, with more job growth expected in the second half of the year. The Council of Economic Advisers projected job growth to be about two million in 2012, up from 1.8 million in 2011. The unemployment rate was 7.8 percent in January 2009 and topped 10 percent in summer 2009. The so-called misery index, the sum of the unemployment and inflation rates, is 12 in 2012, compared to eight when President Obama took office in 2009.
The overall unemployment rate has fallen more than the rate for the long-term unemployed, defined as those without jobs for six months or more. During the 1980s, when many European countries had high rates of long-term joblessness, economists coined the term hysteresis, a term from chemistry meaning that the past affects the present, to explain that employers shun the long-term unemployed, so high rates of long-term joblessness can persist. If the skills and motivations of the long-term jobless erode, they can become less employable over time.
The American Staffing Association reported that its member firms employed an average 2.8 million temporary and contract workers a day in 2011, up from 2.6 million in 2010. Staffing firms hired a total of 12.9 million workers in 2011, reflecting the fact that most workers are employed only a few days or weeks.
Projections. About half of US residents, and two-thirds of those 16 and older, are in the labor force, meaning they are employed or looking for jobs. The US Bureau of Labor Statistics (BLS) makes biennial projections of the US labor market that begin with the size of the labor force, and this projected labor force becomes an input for macroeconomic projections.
BLS projected that real or inflation-adjusted Gross Domestic Product (GDP) would increase by three percent a year between 2010 and 2020, up sharply from 1.6 percent between 2000 and 2010, and that productivity would rise by two percent a year. BLS then estimated industry output and the number of jobs needed to produce this output, and summed these jobs to estimate employment. Labor supply and demand both depend on wages, which BLS does not project, instead relying on "expert assessment" of productivity trends in particular industries and occupations to estimate the number of jobs each will have a decade in the future.
Population is the starting point for the labor and employment projections. BLS projected the number of residents 16 and older and the share of 136 age, gender, and race or ethnicity groups that are expected to participate in the labor force; the size of the labor force sets an upper bound on US GDP growth. Projected GDP is dis-aggregated into commodities, and an input-output model is used to estimate employment by industry after adjusting for productivity.
US labor force growth is expected to slow to 0.7 percent a year between 2010 and 2020, down from 0.8 percent a year between 2000 and 2010. This means that the US labor force is expected to increase by 10.5 million workers during the 2010-2020 decade, down from the 16.6 million increase between 1998 and 2008. The labor force participation rate, the share of those 16 and older employed or looking for work, is expected to fall from 65 percent in 2010 to 62 percent in 2020 due to more retirements in an aging population.
Hispanics and Asians are the race/ethnic groups whose share of the labor force is expected to rise fastest. There were 23 million Hispanic workers in 2010, and there are projected to be over 30 million in 2020. Similarly, there were seven million Asian workers in 2010, and a projected nine million in 2020, reflecting annual growth rates of three percent for Hispanic workers and almost three percent for Asians. The number of white, non-Hispanic workers is expected to shrink slightly, from 104 million in 2010 to 102 million in 2020.
US employment or the number of jobs is projected to rise from 143 million in 2010 to 164 million in 2020, adding 14 percent or 20 million jobs (Jobs exceed workers because some workers hold two or more jobs).
Most of the fastest-growing occupations are expected to be health-related, where job growth is expected to be three percent a year. The number of jobs for registered nurses is projected to increase by over 700,000, from 2.7 million in 2010 to 3.4 million in 2020, with more than 700,000 new RNs hired to replace those who retire. Construction is expected to have the second-fastest job growth, with the number of jobs rising from 5.5 million in 2010 to 7.4 million in 2020 (but still below the peak 7.7 million in 2006).
The fastest growth in productivity is expected in information, which is nonetheless expected to add jobs. Manufacturing (employment down slightly from 11.5 million in 2010) and agriculture (employment down slightly from 2.1 million in 2010) are examples of industries expected to experience productivity but not job growth. Health care and education are expected to have rising employment with declining productivity.
BLS projections have been reasonably accurate because of offsetting errors. The US population has been larger than projected, but the share of residents 16 and older who are employed or looking for work has been smaller than projected.
Errors increase for particular industries and occupations. BLS has consistently projected more doctors than are actually employed and fewer health care service workers such as nurses and health-care aides than are actually employed because it failed to anticipate the effects of health-care cost controls. This error could arise from the lack of wages in the BLS methodology from which labor demand and supply projections are derived.
H-1B. USCIS on April 2, 2012 began accepting employer requests for H-1B visas for foreigners with a bachelor's degree coming to the US to fill jobs that normally require a college degree. Every year, 65,000 regular H-1B visas are available, plus 20,000 for foreigners who earn advanced degrees from US universities, plus an unlimited number for foreigners hired by US universities and nonprofits.
In FY10, some 117,400 H-1B visas were issued, and 30,500 applicants were refused H-1B visas.
Most H-1B visa holders are hired by major US computer firms such as Intel and Microsoft. However, some of the largest users of H-1B visas are temp or staffing firms that send workers from one firm to another.
The so-called Neufeld Memo of January 2010 emphasized that temp firms must have an employer-employee relationship with their H-1B foreigners, that is, they cannot have the firm at which the H-1B visa holder is employed temporarily act as the employer. In March 2012, USCIS clarified that an employer-employee relationship can be established between a temp firm and its H-1B employees if the temp firm pays the H-1B worker's salary, determines where the H-1B foreigner will work, and conducts training and evaluations of the worker.
US employers complained that USCIS in 2012 is issuing more Requests for Evidence (RFEs) when they apply for H-1B and L-1 visas (L-1A is for managers and executives and L-1B is for workers with "specialized knowledge" of a multinational's operations). In 2011, about 17 percent of employer requests for H-1B visas were denied, as were 28 percent of requests for L-1 visas. Many of these denials affected Indians.
Senators Grassley (R-IA) and Durbin (D-IL) support stricter adjudication of L-1 visa applications, arguing that the L-1 program is sometimes used to bring less-qualified workers into the US and undercut US workers.
Computer scientist Norm Matloff argues that employers prefer to hire foreigners with H-1B visas to save money. He distinguishes two types of savings from hiring H-1B visa holders. Type I savings result from hiring better qualified foreigners at the same salary as US workers with lesser qualifications because the foreigners want both jobs and employer sponsorship for an immigrant visa. Type II savings arise from the fact that H-1B visa holders are younger than US workers, and younger workers generally have lower salaries and lower benefit costs.
Most employers who sponsor H-1B visa holders for immigrant visas are mainstream US employers rather than Indian outsourcers. One study estimated that H-1B visa holders waiting for employer-sponsored immigrant visas are paid about $12,000 a year less than similar immigrants who have immigrant visas, that is, their wages rise by about $12,000 a year after they receive immigrant visas and thus have freedom in the US labor market.
IT firms pride themselves on operating meritocracies, hiring and promoting the "best" workers. They acknowledge that, given a deluge of applications, computers screen resumes for key words and skills and that fewer than two percent of resumes submitted are examined by humans. Once potential new hires are identified, many firms look for talent in interviews with committees that include hard-to-answer questions to determine how the applicant reacts and sometimes impromptu tests of writing computer code.
Once hired, many young IT employees work long hours in "fun-oriented" work places, with food, snacks and services readily available. The goal is to have workers consider long hours to be "normal," and to increase their attachment to a particular employer with stock options that may not vest for five or more years. Some IT employers value a second "golden handcuff" available to hold H-1B workers who are being sponsored for immigrant visas. If foreigners received immigrant visas when they graduated from US universities with S&E degrees, they would be free to change jobs, and this mobility in the US labor market could enable them to command higher salaries.
A Brazilian business support manager for SuperValu who was being sponsored for an immigrant visa sued after her job was eliminated in a reorganization, stopping the sponsorship. Katia Guimaraes sued SuperValu, alleging national origin discrimination because her supervisor said that she was "targeting" Guimaraes so that she could not get an immigrant visa. After her job was eliminated, Guimaraes sued, but the Eighth Circuit ruled March 23, 2012 that she failed to establish a prima facie discrimination case and dismissed her suit after concluding that discrimination to prevent a foreigner from obtaining an immigrant visa is not national origin discrimination.
The number of Americans 25 and older with at least a bachelor's degree reached 30 percent in 2011; 11 percent had graduate degrees. The most common degrees were in science and engineering; 35 percent of bachelor's degrees were in S&E. Among Asian Americans, 50 percent had bachelor's degrees and 20 percent graduate degrees.
In 2004, some 10,600 foreign students earned PhDs in science, technology, engineering and mathematics from US universities. In 2005, over 70 percent were still in the US and by 2009, 64 percent were in the US (The lowest retention rates were for agricultural sciences and economics).
Michael Finn of the Oak Ridge Institute for Science and Education, who obtains Social Security numbers of all new PhDs and tracks their earnings over time, says that most foreign-born PhDs who want to stay in the US find ways to do so. Almost all Saudis who earn PhDs in the US return to Saudi Arabia within five years, while almost 90 percent of the Chinese are in the US five years later.
J-1. The US Department of State in January 2012 barred the Council for Educational Travel, USA (Cetusa) from bringing more J-1 exchange visitors to the US for at least two years. Cetusa charged East Europeans $3,000 to $6,000 for J-1 visas and placed 400 at a Hershey packing plant, where they worked for the federal minimum wage. In August 2011, some 200 of the J-1 visa holders walked out to protest the high rent that Cetusa deducted from their wages, and OSHA fined packing plant manager Exel in February 2012 for intentionally failing to report serious injuries.
Over 109,000 foreign students came to the US under the J-1 Summer Work Travel program in 2011, which allows four months of work followed by travel, making it the largest US guest worker program for low-skilled workers (a peak 153,000 student-workers were admitted in 2008). By some estimates, US sponsors such as Cetusa collect over $100 million a year in fees from foreign student workers. DOS pledged to return the Summer Work Travel program to its original goal of a cultural exchange program rather than a guest worker program.
Nurses. Hospitals sometimes allege that there are shortages of registered nurses. However, there are far more Americans with RN licenses than are employed as RNs.
Some RNs in Detroit alleged that eight area hospitals met to discuss and hold down the wages of registered nurses, which averaged $33 an hour or $69,100 a year in 2011 across the US. Three Detroit-area hospitals settled a class-action suit filed that alleged violations of the Sherman Antitrust Act, while five others are fighting the suit. The nurses alleged that the hospitals exchanged wage information and refused to recruit from one another in order to hold down wages; a trial will be held on their suit in 2012.
The average US wage in all occupations in 2011 was $22 an hour or $45,300 a year. The largest 10 occupations in 2011 were retail salespersons (4.3 million); retail cashiers (3.3 million); general office clerks (2.8 million); food preparation and serving workers, including fast food workers (2.8 million); registered nurses (2.7 million); waiters and waitresses (2.3 million); customer service representatives (2.2 million); janitors and cleaners other than maids and housekeeping cleaners (2.1 million); hand laborers and freight, stock, and material movers (2.1 million); and secretaries and administrative assistants (2.0 million).
Average wages of food preparation and serving workers were $9.03 per hour or $18,790 per year, followed by cashier ($9.73 per hour or $20,230 per year) and waiter or waitress ($10.05 per hour or $20,890 per year).
Sommers, Dixie and James Franklin. 2012. Employment Outlook 2010-2010. Monthly Labor Review. January. Pp 3-20. http://www.bls.gov/opub/mlr/2012/01/home.htm