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January 2013, Volume 20, Number 1

Unemployment, Shortages, H-1B

The US unemployment rate was 7.8 percent in December 2012, but private sector employers continued to add jobs. The US added 1.8 million jobs in 2012, an average 150,000 a month. Between December 2008 and December 2012, the private sector added a net 725,000 jobs while government employment fell by 697,000, that is, there was a slight increase in private sector jobs over four years and a decline of over three percent in government jobs.

Some five million Americans, 40 percent of the 12 million unemployed, were jobless six months or more. Unemployment benefits normally last for 26 weeks; there are growing fears that the long-term unemployed will have difficulty finding jobs as the economy recovers. Many employers prefer fresh graduates to the long-term unemployed, prompting proposals to provide tax credits to firms who hire workers who have been jobless six months or more.

During and after the 2008-09 recession, federal and state governments provided $300 billion in unemployment insurance benefits. The federal government provided $5 billion more than the normal $11 billion for retraining programs supported by the Workforce Investment Act (WIA), but most of the federal effort was for UI benefits rather than retraining.

Some 154 million US workers were employed at some time in 2011, including 101 million full-time, year-round workers, seven million fewer than the 148 million in 2007. There were 33 million part-time workers and 20 million workers who worked full time but for only part of the year. Some 24 million workers experienced at least one spell of unemployment in 2011; their median duration of unemployment was 20 weeks.

Unions are pressing President Obama to raise the minimum wage, which has been $7.25 an hour since 2009. Almost 45 percent of the 1.9 million jobs added to the US economy since recovery from the 2008-09 recession were in the retail, food service, and temporary help industries, where minimum wages are common. Bills pending in Congress would raise the federal minimum wage to $10 an hour by 2014 or 2015.

Economic growth has benefited primarily the richest households. The CBO estimated that, between 1979 and 2007, the richest one percent of US households saw their incomes rise 275 percent in real terms, while the poorest 20 percent had an 18 percent increase in real income. Globalization and technological changes that benefit the most educated are expected to continue to increase economic inequality.

Immigrants. An Urban Institute report released in November 2012 found that immigrants were first to lose their jobs during the 2008-09 recession and first to be hired during recovery. However, in mid-2012, some 2.5 years after the recession ended, neither immigrants nor US-born workers had returned to 2007 employment levels. The report noted that the "motivation and willingness to take risks" of many immigrants may make employers especially eager to hire them.

Immigrants with less than a high-school education lost jobs at the fastest rate during recession and had the slowest employment growth during recovery.

A November 2012 report, Home Economics: The Invisible and Unregulated World of Domestic Work, found that US cleaners and caregivers had a median wage of $10 an hour, while nannies earned a median $11 an hour. Unauthorized caregivers earned a median $8.35 an hour, almost 25 percent less than the $10.30 an hour of legal caregivers. The study estimated that 800,000 domestic workers were hired and paid by households directly (other domestic workers were sent by agencies to work in homes), and that three-fourths saved money each month. The National Domestic Workers Alliance was involved in surveying over 2,000 domestic workers.

Labor Shortages. It is sometimes reported that US manufacturers, who employed 11.5 million workers in Fall 2012, cannot fill hundreds of thousands of jobs that pay $15 or more an hour. However, a Boston Consulting Group report in October 2012 estimated that manufacturers have at most 80,000 to 100,000 vacancies for highly skilled workers, less than one percent of the total manufacturing workforce and eight percent of what BCG estimated could be 1.4 million highly skilled manufacturing jobs.

BCG focused on wage growth and job vacancy rates in 50 cities, and found five cities including Wichita where manufacturing wages rose by at least three percent more than inflation for five consecutive years. BCG concluded that skilled labor shortages were localized and most prevalent in smaller cities. BCG, which concluded that skilled manufacturing workers are on average 56 years old, predicted that low US wages and low energy costs might increase the number of US manufacturing jobs and the demand for machinists, welders and industrial engineers.

Many retailers, hotels and restaurants hire part-time workers to save on wages and benefits. Part-time service workers are often paid $10 to $11 an hour and have few benefits, while full-time workers often earn $12 to $15 an hour and have more benefits. Software from Dayforce and Kronos allows service firms to pinpoint demand so that part-time workers can be called in for two- or three-hour shifts.

About 30 percent of those employed in retailing are part-time, and 30 percent of part-time retail workers would prefer full-time work. Many retailers hire more part-time workers rather than converting part-timers to full-time, helping to maximize their variable costs by pushing the risk of market fluctuations onto workers in the form of variable hours of work.

H-1B. Many firms continue to push for an increase in the number of H-1B visas, currently 65,000 a year for foreigners with at least a bachelor's degree, plus 20,000 for foreigners who earned Ms and PhD degrees at US universities. Employers pay USCIS a $325 application fee, plus a $1,500 fee if they have 26 or more full-time employees, and a $500 fraud detection fee. Expedited processing is available for a $1,225 premium processing fee.

Since 2010, employers with half or more of their US workers holding H-1B or L-1 visas must pay an additional $2,000 per H-1B visa fee.

Opponents of an increase in the number of H-1B visas emphasize that wages in IT, the sector that employs half of H-1B workers, have been almost flat over the past decade. Adjusted for inflation, average hourly earnings of workers with at least a bachelor's degree in computer and math occupations rose from $37 an hour in 2000 to $39 in 2011. The Yoh index of IT wages has also been flat at about $32 an hour. Many IT employers talk of "just-in-time talent supply chains," that is, hiring workers only when they are needed. (

Microsoft, which requested 4,100 H-1B visas a year recently, proposed paying $10,000 for each of what it hopes would be an additional 20,000 H-1B visas and $15,000 each for 20,000 immigrant visas for foreigners with science, technology, engineering or mathematics (STEM) degrees during a September 2012 conference at the Brookings Institution. The fees would be used to subsidize STEM education.

Microsoft's Brad Smith said "our industry faces a talent shortage that is rapidly approaching the dimensions of a crisis? There are not enough people graduating with computer science degrees for the jobs we are creating." Smith said that Microsoft had 6,000 job openings, including 3,400 for developers and engineers, and that the typical $100,000 entry-level salary of newly hired programmers and software engineers doubles to $200,000 with signing bonuses, stock options and office and related hiring expenses.

Universal Placement International and its owner were convicted in December 2012 in Los Angeles of luring Filipino teachers with H-1B visas to teach in Louisiana schools under exploitative contracts. The 350 Filipinos alleged that UPI required them to pay recruitment fees of $5,000 before departure, and another $11,000 in the US, from private lenders who charged three to five percent monthly interest, making the annual rate 43 to 80 percent.

The suit was filed under the Trafficking Victims Protection Act, the Racketeer Influenced and Corrupt Organizations Act, and California's Employment Agency, Employment Counseling, and Job Listing Services Act. UPI stressed that it was convicted only of violating the California law, which requires recruiters to disclose all fees to job seekers. UPI said that Louisiana schools refused to pay H-1B fees, while the Filipino teachers were eager to pay UPI fees in order to "get a chance to come to this country." US employers are required to pay H-1B fees and cannot recoup them from workers.

The House approved HR 6429 in November 2012 to end the diversity immigrant visa lottery and transfer the 55,000 visas to foreigners who earn advanced degrees from US universities in science, technology, engineering, and math (STEM) fields. Democratic opponents of the mostly Republican-supported STEM Act argued that, while they supported more immigrant visas for foreigners earning Masters and PhDs in STEM fields, they did not want to eliminate the diversity visa program. The Senate did not act on HR 6429.

The US Department of State issued about 80,000 L-1 visas in FY12, including 30,000 to Indian IT workers, so that employees of multinationals abroad could enter the US to work in the firm's US operations. L-1A visas are issued to executives and managers and L-1B visa to employees with "specialized knowledge" of the company's products and services. Many US multinationals obtain a blanket L-1 certification, showing that the firm is a multinational and making the L-1 visa issuance process only a check of whether the individual applicant is an executive or a worker with specialized knowledge who has been with the multinational sufficiently long abroad.

The Startup Act 2.0 bill would make up to 75,000 probationary immigrant visas a year available to foreigners who raise at least $100,000 in capital and hire at least two US workers during their first year of holding the visa. If the Startup visa holder hired five full-time employees during the next three years, she could apply for a regular immigrant visa at the end of four years. Eric Schmidt of Google called the lack of a start-up visa for foreign entrepreneurs "the single stupidest policy the U.S. government has around high-tech immigration."

EEOC. The Census released data on the US work force based on the 2006-2010 American Community Surveys; the ACS collects data from two million US households each year.

The US labor force between 2006 and 2010 was 67 percent non-Hispanic whites, 15 percent Hispanics, 11 percent Blacks, and five percent Asians. The number of Hispanics in the labor force, 22.5 million in 2010, rose from 14.7 million in 2000.

Productivity. The US economy grew by an average 3.6 percent a year between 1950 and 1999. Between 2000 and 2012, economic growth averaged 1.9 percent a year.

Productivity growth is the fundamental source of productivity growth that supports rising per capita incomes, and productivity growth is slowing, from about three percent a year in 1950 to one percent a year in 2010. Economist Robert Gordon argues that the 250 years of productivity growth between 1750 and 2000 may turn out to be "a unique episode in human history."

Gordon argues that there were three industrial revolutions linked to general-purpose technologies that transformed peoples' lives. The first centered on steam engines and railroads between 1750 and 1830, the second on electricity, internal combustion engines, indoor plumbing, radios and telephones, entertainment, chemicals, and petroleum between 1870 and 1900, and the third on computers after 1960.

Gordon believes that the second industrial revolution was the most important of the three, as the electric light bulb, internal-combustion engines, and power stations set in motion 80 years of rapid productivity growth between 1890 and 1972. The spin offs of these innovations, from airplanes and air conditioning to interstate highways, fostered many one-off events, including urbanization and freeing women from household chores. Gordon emphasizes that the transition from animal to mechanical power reduced animal waste on roads, and that public health in cities prevented the spread of disease and increased life expectancy.

Gordon identified six obstacles to faster US productivity growth, including demography (a slower-growing workforce), education (stabilization at less than half of US adults having college degrees), persisting inequality, globalization, energy limitations and environment concerns, and too much debt. Gordon suggests that slow growth and rising inequality could end the expectation that children do better than their parents economically. During the 20th century, economic growth averaged two percent a year, which allowed real incomes to double every 35 years. Gordon believes that, during the 21st century, economic growth will average only one percent a year so that real incomes may not double until 2100.

Patrick Thibodeau, "H-1B at 20: How the 'tech worker visa' is remaking IT in America." Computerworld, November 17, 2010.