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August 1995, Volume 2, Number 8

Economics, Education, and Immigration

Economist George Borjas estimated that the net benefits of current immigration are about $7 billion annually, or equivalent to half of Microsoft CEO Bill Gates' net worth, or as much as Americans spend gambling each week. According to Borjas, immigration generates $140 billion per year in benefits to the US, mostly from higher land and capital prices, and imposes $133 billion per year in costs, primarily in lower wages and unemployment among US workers.

The nation's 27 million Hispanics in 1994 are 10 percent of the US population. A Census report released in July reported that, in 1994, only nine percent of Hispanics 25 and older had BA degrees or more, versus 24 percent of non-Hispanics. This 2.7 ratio of non-Hispanic to Hispanic college graduates widened since 1970, when there were 2.3 non-Hispanic BA degree holders for every Hispanic degree holder. About 13 percent of adult Blacks had college degrees in 1994.

Years of education is the best single predictor of income in the US. In mid-1995, the median weekly earnings of full-time workers 25 and older without a high school diploma was $309, versus $428 for high-school graduates, and $593 for high-school graduates with some college. The 30 percent of the adult work force with college degrees earned a median $750 per week.

Real wages have been falling, and many workers reportedly feel poorer because the gap between wages and salaries and total compensation has widened as more of their compensation comes in the form of fringe benefits. This means that workers who get few fringe benefits have seen both their real hourly wages decline and, since they get few fringe benefits, their total compensation decline.

Low earnings translate into relatively paltry savings for retirement. According to a recent survey, a typical white household with members aged 51 to 60 had less than $18,000 in personal wealth (plus $70,000 in home equity), while Black and Hispanic households in this age range had less than $500 in non-real estate wealth. Claims to social security and private pensions accounted for over half of the typical 51 to 60 household's wealth.

Some mainstream US universities are very dependent on foreign students. In 1994, for example, Boston University and the University of Southern California had the most foreign students in 1994, 4,700 and 4,300, respectively, and University of Wisconsin-Madison and University of Texas-Austin followed with 4,000 each. Most foreign students from countries such as Japan and Hong Kong pay full tuition, encouraging US universities to "market" themselves abroad.

US schools that cater to resident immigrants have been accused of fraudulently enrolling needy immigrants in order to collect grant funds from them. For example, the Iade American Schools in Los Angeles was accused of collecting $58 million in Pell grants to needy students to enroll Hispanic immigrants in classes such as auto mechanic and English as a Second Language.

A Stanford-Rand study concluded that there are too many PhDs produced in the US, and that graduate schools continue to admit students to satisfy their need for teaching and research assistants, not because there are jobs waiting for graduates. Unemployment among persons with PhDs is low but, it is asserted, the reason for low unemployment is because many persons with PhDs are underemployed or employed in jobs that do not use the research skills they acquired.

The Stanford-Rand study concluded that there are, in fields such as computer science, 50 percent too many PhDs being produced, 44 percent too many mechanical engineering PhDs, and 30 percent too many physics, chemistry, and mathematics PhDs. The report concluded that increased federal funding for science and engineering will only aggravate the situation by delaying the needed shrinking of PhD programs.

There are estimates that 25 to 40 percent of the scientists and engineers who work in some US research labs are foreign born. This may be true, but most of the nation's two million scientists and engineers-- in a US labor force of 120 million--are US-born.

In a related development, the US Department of Labor in mid-June began to include private companies in the calculation of prevailing wages that universities must pay to post-doctorate foreign researchers, significantly raising their wages. Research labs and medical schools have been forced to raise wages by 30 to 60 percent, so that they pay at least 95 percent of the prevailing wage.

In some cases, foreigners working on research grants must be paid, according to revised DOL prevailing wage standards, more than the government agency making the research grant permits. If the foreign lab workers are switched from F to H-1B visas, then there is no prevailing wage requirement.

The Labor Department says the change in policy should eliminate financial incentives to hire foreign workers over Americans. But educators say it will result in pricing universities out of important research because there are not enough Americans doing similar research.

Several newspapers investigated the H-1B program that admits up to 65,000 temporary foreign workers annually and reported that US employers abuse the "attestation process" that permits them to certify that they looked for but failed to find US workers at prevailing wages and conditions. According to one lawyer, the trick is to describe "the relevant job opening tightly enough that the INS recognizes an American probably isn't readily available for the position, but not so tightly that the INS suspects the description is being tailored for a specific foreign individual."

Employers usually have a foreign worker in mind when they request that the US Department of Labor certify their need for foreign workers. In 1995, only once in every 200 times did the employer who requested foreign workers hire a US worker who was referred to the vacant job for which the foreign was sought. DOL reportedly spends $50 million annually on labor certification activities.

The firm that maintains the White House correspondence system, Mastech, reportedly imported about 1,000 of its 1,200 workers from India under the H-1B program, and is currently being investigated. Two companies that have been heavy users of the program that permits US employers to bring permanent immigrants to the US to fill vacant jobs are Showell Farms and ConAgra Poultry. Showell Farms has reportedly brought "hundreds" of Koreans to the US to be poultry workers for $5 per hour.

Between 1988 and 1994, employers used the Permanent Alien Certification program to bring to the US 793 auto body repairers, 650 carpenters, 186 pizza bakers, 104 car wash attendants, 82 doughnut makers, 51 barbers, 48 insurance salesmen, 35 salad makers, 33 manicurists, 28 chauffeurs, 26 tire repairers, 15 social secretaries, and 12 garbage truck drivers.

A New York church asked DOL for permission to bring an immigrant to the US to be a missionary on the streets of New York, claiming that Americans "lacked enthusiasm and determination" for such work. DOL refused to certify the church's need for the alien.

One California investigator estimates that 40 percent of employer applications for immigrants to fill vacant jobs are fraudulent, in most cases, the alien is already working, and the employer simply wants to legalize his or her status.


Steven Holmes, "Census Report Finds Hispanic Americans Lagging Further in College Degrees," New York Times, July 27, 1995. Mike McGraw, " Boon or boondoggle?; Visa programs hurt U.S. workers, foster abuse," Kansas City Star, July 16, 1995; George Borjas, The Economic Benefits from Immigration, NBER Working Paper 4955. Malcolm Browne, "Supply Exceeds Demand for PhDs in many science fields," New York Times, July 4, 1995; Lena H. Sun, "A US Pay Policy Backfires; Foreigners' Salaries Threaten Research," Washington Post, July 3, 1995.