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October 2002, Volume 9, Number 10

Labor: Unemployment, H-1Bs

The US unemployment rate fell to 5.7 percent in August 2002, as employment rose by 39,000 to 134 million. Average hourly earnings were $14.82, and average weekly earnings $505.

The US labor force grows by about 120,000 a month or 2.4 million a year. During the late 1990s, employment rose by 200,000 a month, leading to the lowest unemployment rates in 30 years and complaints of labor shortages.

The unemployment rate in August 2002 for those with less than a high school diploma was 7.7 percent; for high school graduates with no college five percent; and for college graduates 3.2 percent. Among the 8.1 million unemployed in August 2002, median weeks of unemployment were nine, the mean duration of unemployment was 16 weeks, and 32 percent of the unemployed, some 2.6 million people, were jobless 15 weeks or more. It appears that, during the 1990s, the growth of temporary help agencies enabled laid-off workers to move into new jobs much faster than before.

The unemployment rate for men was 5.2 percent; for women 4.9 percent; for whites 5.1 percent; Blacks, 9.6 percent; and Hispanics 7.5 percent. However, analysts emphasize that "middle-class jobs" in manufacturing that paid $20 to $25 an hour to people without college degrees have moved to countries with lower wages, so that a worker laid off from a mainline manufacturing plant often is re-employed as a service worker earning less than $10 an hour.

Health insurance costs rose an average of 13 percent in 2002, bringing the cost of insuring a family to an average of $8,000 a year, with employees paying an average of $2,000. With the increases projected by insurance companies, family insurance costs are expected to be $11,000 in 2005. About two-thirds of Americans under 65 are covered by employer-sponsored health insurance, and, as an aging population and advances in technology drive up health care costs, many employers are increasing required employee contributions.

Some 5.4 million US workers received $60 billion in disability pay from the Social Security system in 2001, turning disability into a larger assistance program than Unemployment Insurance or Food Stamps. Many of the men receiving disability pay did not complete high school- three-fourths of disability pay recipients did not complete high school--and when they reach their 40s, they find the average $819 a month in disability pay after the minimum five months of unemployment very tempting, especially for those with back trouble and mental health problems, the two most common disabilities. Another incentive to obtain disability pay is that, two years after the disability checks begin to arrive, recipients receive free Medicare coverage. About 40 percent of disability awards are made on appeal, after an initial rejection of an application.

The average US CEO receives 400 times the annual earnings of the average US worker.

California. California's unemployment rate fell to 6.2 percent in August 2002. Job growth was slow, and the labor force shrank. The state's Employment Development Department projected a net growth of 30,000 non-farm wage and salary jobs in 2003, and 3.2 million by 2010. In July 2002, some 16.5 million Californians were employed and 1.1 million unemployed.

In 2001, Silicon Valley's top 10 tech companies hired at least 2,000 H-1B workers, and laid off 41,000 workers. Some US workers who were laid off and learned that H-1Bs were hired are complaining, although it is legal for most US employers to lay off US workers and hire H-1Bs, so long as they are paid the prevailing wage for the job. However, studies suggest that H-1Bs earn 15 to 30 percent less than US workers.

The California-based Milken Institute predicted a shortage of scientists, engineers and technicians because the state's schools produce too few graduates with math skills. With Latinos projected to be a majority of California workers by 2025, the fact that only eight percent of Latino adults have a BA degree or more, compared to 33 percent of non-Latino adults, means that California will have to "import talent," with the "real risk is that we can't attract enough of them in the future. There are going to be more opportunities locally for them in their own countries."

There is a looming nursing shortage: by 2005, California is predicted to have 162,645 registered nurses, but it will need 181,054--a shortage of 10 percent.

In the Los Angeles area, the Mexican-American Legal and Educational Defense Fund sued to overturn local laws that prohibit day laborers from soliciting work from street corners, and employers from soliciting workers from cars and trucks. Maldef says that such laws violate the 1st and 14th amendment rights of the workers-their right to free speech when they ask for work, and their right to assemble on street corners. About 90 percent of the day laborers are believed to be unauthorized, and most say they earn $8 an hour for 20 to 40 hours a week, paid in cash.

About 10,500 members of the International Longshore and Warehouse Union were locked out of their jobs on the West Coast after they staged a work slowdown in support of their demands for a new contract. The old three-year contract expired July 1, 2002, and the ILWU is resisting management demands that technology be used to handle more freight. Many longshoremen - who earn $80,000 to $158,000 a year-argue that introducing technology could allow some new jobs to be non-union jobs. Under the 1947 Taft-Hartley Act, President Bush could order the ILWU back to work for an 80-day cooling off period; the last time a cooling off period was ordered was during a 1978 coal strike.

Texas. The Dallas Morning News reported that the U.S. construction industry is dominated by Mexican-born workers. The head of the Hispanic Contractors Association of Dallas-Fort Worth says that Mexicans are preferred because "They love to work... their work ethic is completely different."

Estimates based on Census data suggest that 600,000 to 800,000 unauthorized Mexicans are employed in the US construction industry. Most of the Mexicans are employed in the less-skilled jobs, such as painting, dry-wall hanging and cement work.

H-1B. The annual limit on the number of H-1B visas that can be issued is 195,000 a year (16,250 per month) and is scheduled to revert to 65,000 on October 1, 2003. The U.S. General Accounting Office is doing a study of whether US employers prefer H-1B workers. Lobbyists who want to maintain the 195,000 limit say that no study is needed, since the number of H-1Bs fell in FY02 to 6,600 a month, far fewer than the 16,250 H-1B visas a month that can be granted under the current limit.

The end of the dot.com boom has increased unemployment among high-tech workers, and Amit Govil, managing director and CEO of Sapient India in New Delhi said in September 2002: "Programming is becoming commoditized. If you can do programming for $20, $25 an hour, why would you pay $150 an hour?"

The immediate policy issue is what to do with the $1,000 per H-1B visa collected from employers and used to fund the training of US workers. Some $138 million has been collected since 1999, but most of these funds were spent to train US workers to do lower-level work, including laying cable for TV and telephone. The Bush administration proposed that $1,000 per H-1B funds be shifted to the INS to help them more quickly handle applications from H-1Bs seeking immigrant status.

Other Guest Workers. A Ventura County labor contractor, Servicios Agricolas Mexicanos, brought 38 Mexican lemon pickers to California to work from February to April 2002 under the H-2A program. In September 2002, he was sued by California Rural Legal Assistance, charged by 10 workers with not paying the workers for the time they spent traveling to and from work, and while waiting for the lemons to dry enough to be picked; the suit sought $250,0000. The workers were guaranteed at least $7.56 an hour, but they worked for piece rate wages and earned an average $9 to $10 an hour, according to the contractor, who said he lost $3,000 on what is acknowledged to be a pilot effort to use the H-2A program in California.

New York City has 2,000 green groceries, 80 percent owned by Koreans, who often hire Mexican immigrant workers. In September 2002, the Korean American Association of Greater New York agreed to pay workers at least the minimum wage, plus 1.5 times the $5.15 minimum for hours over 40 in a week, which could raise the pay of workers employed 12 hours a day, six days a week, to at least $450 a week, up from the $240 to $300 some grocers currently pay. Grocers who sign the agreement must allow their wage records to be checked twice a year, and are allowed to display a symbol attesting to their compliance.

The Baltimore Sun reported that some 2,000 Micronesians and Marshall Islanders have been brought to the US under the 1986 Compact of Free Association that allows the island residents to settle and work in the US without visas; the islands were U.S. trust territories. The islanders sign contracts to be nursing assistants or to work in amusement parks, and the "body brokers" who link islanders and US employers collect fees from the employers as well as take deductions from the workers. Since 1986, some 14,000 islanders - nearly a tenth of the population - have moved to Hawaii and the U.S. territories of Guam and the Northern Mariana. Some of the body brokers have been unusually aggressive, collecting fees from workers and employees as well as receiving grants from the US Department of Labor for training disadvantaged workers. One recruiter dismissed the complaints of workers, saying Micronesians have "an American Indian-type drinking problem" that causes them to act disruptively and show up late for work or not at all.

In 1999, three class-action suits were filed on behalf of the 13,000 migrant workers in Saipan, the capital of the Commonwealth of Northern Mariana Islands, an archipelago of 14 islands near Guam in the Pacific Ocean and a US territory since 1976. Saipan has its own minimum wage, $3.05 an hour, and its own immigration laws, and has allowed Asian garment manufacturers to establish plants and to import workers to make "Made in America" clothes.

The suits charged that Saipan factory owners violated U.S. labor law by, for instance, imposing work quotas that in effect indenture the migrants, most from China, and that recruitment fees paid by migrants, often to government-affiliated brokers, violate the Fair Labor Standards Act because they leave migrants with less than the minimum wage. In September 2002, Gap Inc, JC Penney Co, five other major US retailers, and 23 manufacturers agreed to settle the class action lawsuit, making a one-time contribution to a $20 million fund that will finance a program to monitor labor law compliance and compensate some of the 30,000 migrants who were employed at some time in Saipan.

Labor Day/Unions. The US celebrated Labor Day on September 2, 2002. The Aspen Institute projected that there would be no growth in the number of US-born workers aged 25 to 54 between 2002 and 2020, and that there would be little growth in the percentage of workers with more than a high school education. The Bureau of Labor Statistics reported that, between 1996 and 2001, foreign-born workers accounted for 89 percent of the growth in the age 25 to 54 work force, and for 53 percent of the growth in workers with doctoral or professional degrees. DOL reported that 669,000 individuals participated in major training initiatives financed by the department in 2001.

The proportion of workers represented by unions has dropped from one in three in 1955, when the AFL-CIO was created by a merger of rival federations, to one in eight in 2002. There are 9.5 million male union members, and 6.8 million female union members. Opinion polls suggested that 50 percent of nonunion workers would vote for a union if they could, and 43 percent would vote against union representation; support for unions is up from 30 percent in the early 1980s, when 65 percent of workers said they would vote against union representation.

The Major League Baseball Players Association, which has called eight strikes since 1972, is considered the strongest US union in terms of raising wages for the workers it represents. Founded in 1954, the Players Association hired leaders from the United Steelworkers of America in 1966, and they doubled the minimum salary for players, to $12,000 a year. A 1970 suit over the reserve clause, which allowed team owners to unilaterally renew a player's contract year after year, increased solidarity, a 1972 strike resulted in the players getting everything they wanted, in 1973 players won the right to have an independent arbitrator determine pay, and in 1976, players won the right to be free agents. In 2002, minimum salaries are $200,000 a year, and average salaries are $2.3 million.

Jennifer Bjorhus, "U.S. workers taking H-1B issues to court," San Jose Mercury News, September 26, 2002. Walter F. Roche Jr., "Indentured in America," Baltimore Sun, September 15, 2002.