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April 2016, Volume 22, Number 2

Labor, H-1B

The US added 2.7 million jobs in 2015, down from three million in 2014 but bringing employment to 150 million for the first time in US history; 86 percent of US workers are employed in services, and nine percent in manufacturing.

The unemployment rate was five percent in March 2016, the lowest rate since early 2008. The labor force participation rate rose to 63 percent, and the employment-to-population ratio to almost 60 percent.

The US had 26 million foreign-born workers in 2014, making them 16.5 percent of the 156 million strong labor force. The share of foreign-born workers in the US labor force has been rising, from 15 percent in 2009 to 17 percent in 2015.

Almost half of these foreign-born workers were Hispanic and a quarter were Asian. Foreign-born workers are more likely to be men, 58 percent compared to 52 percent for US-born workers, and were younger, with 74 percent in the 25-54 age group compared to 63 percent. A quarter of the foreign born, compared to less than five percent of the US-born, did not complete high school.

Foreign-born workers are concentrated in lower-wage occupations, explaining why their average earnings of $665 a week are 81 percent of the $820 average of US-born workers. A quarter of foreign-born workers are in service occupations, compared to a sixth of US-born workers, and 14 percent are in construction, agriculture and maintenance, compared to eight percent of US-born workers.

Minimum. The federal minimum wage has been $7.25 an hour since 2009, but 29 states have minimums above this federal level, while five have no state minimum wage. An increasing number of cities have approved minimum wages that are above federal and state minimums, including $15 an hour in Seattle by 2021.

Wal-Mart raised minimum wages for its 1.2 million US employees in 4,600 stores to $10 an hour in February 2016. The average wage of retail workers is $15, and Wal-Mart said that its full-time employees average $13.40 and its part-time employees $10.60. Wal-Mart says that 90 percent of Americans live within 10 miles of one of its stores.

Full-time working women earn 80 percent as much as men, $40,000 a year compared to $50,000 a year. The EEOC is requiring firms with 100 or more employees to report on EEO-1 forms data on pay by gender for 10 job categories. These firms already report employment by race and sex, and EEOC says that it can use the data to look for systemic discrimination.

Some 45 million US residents received Supplemental Nutrition Assistance Program or SNAP food-stamp benefits at the end of 2015. Able-bodied adults who are 18 to 49 and with no dependents may receive SNAP benefits for up to three months in any three-year period, unless they are working at least half time, participating in qualifying education and training activities at least 80 hours a month, or the state has received a waiver due to high unemployment rates.

Many states received waivers during and after the 2008-09 recession, but falling unemployment rates mean that these waivers are ending in 2016.

H-1B. Until quotas are filled, the H-1B program makes it easy for most US employers to hire foreigners with college degrees to fill US jobs that require such degrees. Most US employers only make attestations about their need for foreign workers; they do not have to try to recruit US workers to fill jobs, and may lay off US workers to hire H-1B workers.

In 1990, when the H-1B visa was introduced, US workers were protected by an annual limit of 65,000 visas a year; 20,000 visas were added later for foreigners who earn advanced degrees from US universities. Employers now request far more than 85,000 visas a year, over 85,000 in between April 1 and 7, 2016 and 233,000 in April 2015. DHS uses a lottery to determine exactly which foreigners get H-1B visas.

In January 2016, class-action suits were filed against Disney and outsourcer Cognizant in Orlando by US workers who were required to train their H-1B replacements before being (lawfully) fired in January 2015. Cognizant is H-1B dependent, meaning that 15 percent or more of its workers are H-1B visa holders, and it certified to DOL that US workers would not be displaced by H-1Bs it brought to the US. Some ex-Disney IT workers also filed complaints with the EEOC, alleging discrimination against US citizens.

The 2016 Consolidated Appropriations Act that funds the federal government for FY16 doubled the H-1B hiring fee to $4,000 for outsourcers whose labor forces are 15 percent or more H-1B workers. Bills pending in Congress would reduce the number of H-1B visas to 70,000 a year and create a minimum wage of $110,000 a year.

There are an unlimited number of H-1B visas available to nonprofits, and almost one million foreign students can work while they study and then engage in paid Optional Practical Training for 29 months after graduation if they earned US degrees in science, technology, engineering and mathematics (STEM). USCIS in March 2016 extended OPT for STEM graduates from 29 to 36 months, with the proviso that "a STEM OPT student would not replace a full- or part-time, temporary or permanent US worker."

The combination of limits on H-1B visas but no limits on foreign students has led to the creation of university research parks where private firms hire graduates as H-1B workers. They are considered university employees and thus exempt from the H-1B cap, but their work products are owned by private for-profit firms. Universities receive overhead on the wages and benefits paid to H-1B workers, whose wages are typically lower than they would be in private labor markets.

Mariel. Immigrants add to the supply of labor, which should depress wages or increase unemployment for similar US-born workers. Can these expected effects be measured in US labor markets?

Between April and September 1980, some 125,000 Cuban immigrants arrived in the US, and 60,000 stayed in the Miami area. How did their presence affect US-born workers? David Card found no negative effects of the influx of Cubans, which he attributed to employers developing production techniques that absorbed the newly arrived workers.

George Borjas re-examined the data and concluded that Card was wrong, that is, the influx of Cubans adversely reduced wage growth for US-born workers with less than a high-school education by 10 to 30 percent. Borjas looked for the effects of the additional Cuban workers on non-Hispanic men aged 25 to 59, of whom there were fewer than 30. Other analysts use broader comparison groups of US-born workers and find few or no negative wage effects on similar US workers.

A second factor that helps to determine the impacts of Marielitos is the comparison cities. Borjas considered the most important variables to be wage and employment growth before 1980, and used Anaheim, San Diego, Rochester, and San Jose as comparison cities. Other studies focus on cities with worker characteristics similar to Miami, making New York City, Los Angeles and Dallas the comparison cities.

The debate over the impacts of Marielitos on Miami continues to resonate almost four decades later. Card's findings bolstered so-called immigrant supply siders, who believe that migrants add to economic activity and benefit themselves and other residents. This theory is similar to supply-side economists who believe that tax cuts encourage additional work, benefiting those whose taxes go down and others via increased economic activities.

Inequality. The top one percent refers to the million or so Americans with the highest incomes (about 112 million income tax returns are filed each year). Within the top one percent, income gains are concentrated in the top 250,000 earners, who tend to be CEOs, plus elite lawyers, doctors and athletes earning at least $640,000 a year in 2013.

The IRS estimated that 83 percent of the $2.6 trillion in federal taxes owed by individuals and businesses was paid as due, leaving $450 billion to collect. IRS audits recouped $65 billion of unpaid taxes, leaving $385 billion in unpaid revenue.

The Earned Income Tax Credit, enacted in 1975, provides over $60 billion a year to low-earners with children (both the earner and the children must be legally present in the US). The Additional Child Tax Credit, enacted in 2001, provides another $30 billion a year to low-earners with children (the children must be legal, but not necessarily the earner).

Assortative mating, people marrying people like themselves in education, earnings potential, and values and lifestyle, may be contributing to inequality. Wives earned 78 percent as much as their husbands in 2015, up from 52 percent in 1970; women generally earn 79 percent as much as men. Almost 30 percent of wives earned more than their husbands in 2015.

Some sociologists say that marriage used to be a story of men seeking homemakers and women seeking breadwinners, but today focuses more companionship, with similar interests and goals. People marry later today, when they are more mature and can better evaluate potential spouses. Over time, the children born to better educated and higher earning parents are likely to get more education and marry similar spouses.

Growth. Will there be a "jobs-pocalypse" as computers replace workers? Most studies suggest that computers are more likely to transform rather than eliminate jobs, since humans have unique problem-solving skills and are flexible and creative. In areas such as E-discovery in law, lowering the cost of reading documents may expand markets more than displacing workers.

The US labor market is polarizing, with new jobs being created at the top and bottom of the skills ladder as mid-level manufacturing and production jobs are automated or move to lower-wage countries. At the top of the skills ladder, the number of jobs that require non-routine cognitive skills, as with professionals, is expanding, as are non-routine manual labor jobs such as child and elderly care.

Economist Robert J. Gordon believes that five Great Inventions spurred US productivity growth, that is, electricity, urban sanitation, chemicals and pharmaceuticals, the internal combustion engine, and modern communication. Gordon believes that the refinement of these inventions generated the rapid economic growth between 1920 and 1970 that the US has come to see as the norm rather than the one-time event that it was. Gordon believes that rising inequality, a plateau in education levels, and an aging population will make it hard to return to the golden age of economic growth.

The Congressional Budget Office in January 2016 projected two-percent growth for the US economy over the next decade, noting that slower growth in the US labor supply restrained growth. In response, some admissionists urged more immigration to fuel labor force and economic growth.

Uber, the car-ride service now valued at $60 billion, uses smart phone apps to link drivers and customers. Can similar on-demand apps link service providers and customers in other areas? Experience is showing that transferring the Uber model may be hard. Instacart, which delivers groceries, raised its price for each delivery from $4 to $6 and lowered workers' pay to reduce losses. Many other on-demand services are trying to make money with workers earning half of the median US wage of $20 an hour.

Students. Almost a third of the 975,000 international students in US colleges and universities in 2015-16 were from China, followed by 15 percent from India. There are a total of 1.2 million foreigners with student visas, including those in high school and learning English.

There are fake US universities that obtain student visas for foreigners so that they can work part time when classes are in session and full-time when there are no classes. DHS's Immigration and Customs Enforcement accredits institutions to that issue letters so that foreigners can obtain student visas and monitors the student-visa holders in the US.

ICE established the University of Northern New Jersey to explore fraud in student visas, and arrested 21 brokers in April 2016 who recruited students from China and India seeking student visas to work in the US. The UNNJ paid brokers up to $2,000 for each student, and the brokers also charged fees to the 1,000 students who enrolled.

ICE hopes to crack down on false universities, brokers, and students. Susan Xiao-Ping Su, the founder of Tri-Valley University, was sentenced to 16 years in prison for creating a false university to enable foreigners who wanted to work in the US to get student visas.

State governments reduced support for public universities during and after the 2008-09 recession, prompting a search for full-tuition paying students abroad. Some Chinese students in the US have weak English and wind up spending time with other Chinese at US universities.

At Idaho State in Pocatello, 10 percent of the 12,000 students are foreigners, mostly men from Gulf oil exporting countries, some of whom had limited English and math, making it hard for them to complete engineering classes, a popular major. Accusations of cheating by students and discrimination by professors and other students prompted Saudi Arabia to announce that its King Abdullah Scholarships would in the future be limited to the top 100 US universities.

Donald Trump lent his name to Trump University in 2005, an operation that offered "free introductions" to real estate investing and induced attendees to pay for additional classes. Universities have traditionally emphasized research and taught both undergraduates and graduates, but many teaching and for-profit colleges renamed themselves universities by offering a few master's degree programs. After lawsuits, Trump University was renamed Trump Entrepreneur Initiative.

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