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July 2017, Volume 23, Number 3

Labor, H-1B, DOL

The US unemployment rate was 4.4 percent in June 2017, near the lowest rate since 2001; employers added an average 180,000 jobs a month in the first half of 2017, about the same as in the first half of 2016. The labor-force participation rate was almost 63 percent. The 2008-09 recession ended in June 2009.

President Trump on June 15, 2017 issued an executive order expanding federally funded apprenticeship programs, doubling the $90 million a year available to help industry groups and nonprofits to train people for jobs, usually for less than a year, often in earn-and-learn programs. The US had six million vacant jobs in June 2017, the most since job vacancy data were collected in 2000; vacant jobs were concentrated in manufacturing, information technology and health care.

There is agreement that employers are taking longer to fill vacant jobs, but disagreement about why. Trump assumes the reason is that workers seeking jobs lack required skills; others point to databases that allow employers to screen workers more carefully for drug or credit issues, eliminating many from consideration.

The largest gap between job vacancies and hires is in health care, which had a million vacancies in April 2017, when 500,000 workers were hired. Most of those hired were home health care aides and personal care aides who were paid less than $26,000 a year.

Seattle raised its minimum wage to $11 in 2015 and $13 in 2016, prompting studies of the effects on wages and employment. The best study found that Seattle's higher minimum wage increased worker wages by three percent but reduced the hours of low-wage workers by nine percent. Seattle has a booming economy, and critics noted that the higher minimum wage may have replaced low- with high-wage jobs that could be accomplished in fewer hours.

Foreign-Born. Almost 17 percent of US workers in 2016, some 27 million, were born abroad. DOL first measured foreign-born workers in 1996, when 11 percent were foreign-born. Between 1996 and 2016, half of the 25 million increase in the US labor force was from foreign-born workers.

Over 65 percent of foreign-born US residents are in the labor force, compared with 62 percent of US born. Pay of full-time US-born workers was a median $860 a week, compared to $715 for the foreign-born.

Half of the foreign-born workers were Hispanic and a quarter were Asian. The unemployment rate for foreign-born workers in 2016, 4.3 percent, was lower than the rate for US-born workers, 5.0 percent.

Robots. Some three million drivers could be displaced eventually by driverless trucks, including over half who drive tractor-trailer trucks. Many truck drivers have secondary school educations, and their likely displacement presents a case of what many expect will be a wave of labor-displacing changes. Studies suggest that in manufacturing the introduction of robots reduces both employment and wages.

Robots are expected to eliminate many current jobs in retail and wholesale trade, transportation and storage, and manufacturing over the next decade. Optimists believe that robots will raise productivity and wages for most workers, while pessimists fear that the spread of robots will increase inequality as low-skilled workers find it more difficult to find and hold jobs. (www.imf.org/external/pubs/ft/fandd/2016/09/berg.htm)

Globalization, technological change and immigration are the major factors reshaping labor markets in the US and other industrial countries and increasing inequality. Globalization via freer trade and investment reduces middle-skilled jobs, especially in manufacturing, while new technologies favor skilled over low-skilled workers, widening the wage gap between them.

Two-thirds of the world's international migrants are in the industrial countries that have a sixth of the world's people. Most migrants are from middle-income developing countries, and the combination of goods and workers from these countries shrinks jobs and wages for similar native workers.

H-1B. The H-1B program makes it easy for most US employers to hire college-educated foreigners to fill US jobs that normally require college degrees. The major protection for US workers is a cap on the number of H-1B visas, 65,000 a year plus 20,000 for foreigners with masters degrees. For FY18, employers requested 199,000 H-1B visas, down from 236,000 in FY17.

About 70 percent of H-1B visas were given to Indians in FY15, followed by 12 percent to Chinese. The top US employers of newly issued H-1B visas in FY14 were outsourcers Tata, 7,100; Cognizant, 5,200; Infosys, 4,000; and Wipro, 3,200. Outsourcers take over the IT work of US firms, do some of the work at the business with H-1B workers, and send the rest back to India.

Candidate Trump in 2016 promised to "end forever the use of the H-1B as a cheap labor program." In April 2017, Trump nominated Francis Cissna to head USCIS, the DHS agency that administers the H-1B program and investigates fraud in H-1B petitions (DOL investigates employers who underpay H-1B workers). USCIS created an address to report problems with the H-1B program: reporth1babuse@uscis.dhs.gov

On April 18, 2017, Trump signed the Buy American and Hire American executive order and directed the Departments of Labor, Justice, Homeland Security and State to study existing guest worker programs and recommend changes. There are four levels of skill (and wages) in the H-1B program, and most H-1Bs are hired at the lowest permissible wage: 40 percent of H-1B visas go to entry-level workers, another 40 percent to level two; only 20 percent go to more skilled foreigners.

Trump ordered USCIS to replace the lottery now used to determine who gets H-1B visas with a process that awards H-1B visas to those receiving the highest US salaries. DHS was ordered to review guest worker programs and issue new regulations within 90 days to "restore the integrity of employment-based nonimmigrant worker programs and better protect US and foreign workers affected by those programs."

DHS was asked to "reform" the optional practical training (OPT) program that allows foreign graduates of US universities to stay for up to 30 months after graduation, and to encourage employers to participate in E-Verify, the internet-based system that allows employers to verify that new hires are authorized.

DOL was instructed to investigate cases in which B-1, H-1B, and L-1 visa holders adversely affect similar US workers within nine months. There are proposals in Congress to reform the H-1B program in ways that favor US-based firms such as Microsoft and Intel at the expense of India-based outsourcers such as Tata and Infoys. Some 3.2 million people of Indian descent live in the US, and some Indians considered the efforts to tighten up H-1B and OPT programs as anti-Indian moves.

The TV show 60 Minutes on March 19, 2017 profiled US workers who were displaced by H-1B visa holders. S 180 and HR 1303 would make displacement of US workers by H-1B visa holders unlawful, and give the US Department of Labor more authority to investigate cases in which US workers allege displacement.

Most H-1B dependent employers must attest that they did not lay off US workers before they employ H-1B workers. However, the 1998 American Competitiveness and Workforce Improvement Act allowed H-1B dependent employers to lawfully displace US workers if they pay H-1B workers at least $60,000 or if the H-1B workers have at least master's degrees.

The law creating the H-1B program limits the ability of DOL to investigate H-1B employers unless it receives a complaint or the DOL secretary "personally certifies" that there is "reasonable cause" to believe an employer is violating the law. DOL can make random investigations only of employers who have been found to be willful violators of H-1B regulations during the previous five years.

The Immigrant and Employee Rights section of the DOJ's Civil Rights Division enforces laws that protect US citizens and immigrants from discrimination in hiring and firing. Under Attorney General Jeff Sessions, the IER is expected to investigate more aggressively charges from US workers alleging discrimination against them by employers who hire foreigners via the H-1B and other visa programs.

Currently, most US employers may legally lay off US workers and replace them with H-1B workers, as at Southern California Edison and Walt Disney World. The IER may begin to review the labor condition applications filed by employers when they apply for H-1B workers to ensure that they are not discriminating against US workers.

The optional practical training program allows foreign graduates of US universities to work up to 12 months after graduation in a job related to their degrees. Graduates with STEM degrees can work up to 36 months since 2016 for US employers who are not required to search for US workers or to pay anything more than minimum wages.

There were almost 137,000 foreign OPT workers in 2014. Half had STEM degrees, and over half were from China and India. The US has over a million foreign students, so the number of OPT workers is expected to increase.

Safety Nets. Many Republicans say that government social safety nets have become hammocks, a reference to fears that generous government benefits reduce incentives to work. They want to require some recipients of Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance to Needy Families (TANF) benefits to work in order to boost labor force participation, which peaked at 67.3 percent in February 2000 and reached a low of 62.4 percent in September 2015.

Some Republicans put the value of tax-free government welfare benefits at $20,000 to $40,000, equivalent to working at $10 to $20 an hour for a 2,000-hour year.

Some government programs promote work, including the earned-income tax credit enacted in 1975 and expanded several times since then. Many states have their own EITC programs, and the combination of federal and state tax credits mean that a single mother earning $10,000 can receive an additional $5,000 in federal and state EITC payments. About 80 percent of eligible US residents claim EITC benefits.

In 2015, three million California residents claimed $7.3 billion in EITC credits and received an average $2,400. Federal and state EITC credits were twice federal, state, and local expenditures on CalWORKs cash assistance. In San Joaquin Valley counties, half of children live in families that receive federal EITC credits.

The EITC is the largest US anti-poverty program, distributing $68 billion to 29 million low earners in 2013; 19 percent of all tax filers received EITC payments. In 2015, a tax filer with one child could receive up to $3,359, and up to $6,242 for three or more children.

The IRS estimates that a quarter of EITC payments are improper, almost always cases of: (1) checks being issued on behalf of children who were not in the US at least half of the year; (2) to low earners underreporting their incomes to obtain higher EITC payments; and/or (3) some married couples filing as single to obtain more EITC payments. Many of the improper payments are made because tax preparers who prepare returns for low-earners assure clients that they are eligible for the payments.

Other safety net programs have longer term effects. Food stamps are credited with making poor children healthier, so that they are more likely to work as adults. Safety net programs do not necessarily generate enough additional work and taxes to pay for themselves, since many of those have low earnings and do not pay significant taxes.

DOL. Are workers employees or independent contractors? DOL's economic realities test looks at six factors, ranging from the degree of employer control over the work performed to whether the worker's managerial skill can affect his or her opportunity for profit or loss. DOL says that, if workers are economically dependent on employers, they are employees.

DineEquity Inc, owner of the IHOP and Applebee's chains, and Denny's were fined far more often for wage and hour violations than fast-food chains without wait staff. DineEquity had an average of six violations and over $1,000 in back wages recovered per restaurant, almost all from IHOP. Denny's and IHOP restaurants are often open 24 hours a day, and some franchise owners fail to supplement the tip income of wait staff to ensure that they receive at least the minimum wage during slow periods.

DOL's Wage and Hour Division enforces minimum wage and other workplace laws. Under the Obama administration, WHD investigators responded to complaints and also investigated workplaces based on analyses of where violations were most likely. WHD has 100 field offices and 1,000 investigators. States have additional inspectors to enforce state labor laws.

Patrick Pizzella, nominated to be deputy labor secretary in June 2017, worked with lobbyist Jack Abramoff in the late 1990s to help Commonwealth of the Northern Mariana Islands ward off the extension of federal labor and immigration laws to the US territory. CNMI factories were importing guest workers at low wages to make "Made in the USA" garments.

Student Debt. US students owed $1.3 billion to lenders in early 2017, double the student debt of 2007. About 40 percent of student loans were made to students or their parents who had subprime credit scores below 620, double the 20 percent of all mortgage loans made to subprime homeowners. About eight million student borrowers have not made any repayments for at least a year.

One problem area is the Parent Plus program created in 1980 that allows parents to borrow unlimited amounts to cover the tuition and living expenses of their children at six to eight percent interest; the unlimited provision aims to allow even poor children to attend expensive schools. In 2017, 3.5 million families owed $78 billion or an average of $22,000 to Parent Plus.

Medicaid. Medicaid is a joint federal and state program that provides health insurance for 77 million poor and low-income people at a cost to the federal government of $368 billion in 2016, almost 10 percent of the federal budget. Only Social Security and Medicare are larger federal programs.

Medicaid currently is open ended, meaning that states report how much they spent and the federal government reimburses them for 50 to 80 percent of their costs. Republicans want to cap federal spending on Medicaid to give states incentives to reduce costs, perhaps by offering them block grants and allowing states more leeway to decide whom and what to cover.

Population. The US in 2016 was 61 percent white, 18 percent Hispanic, 12 percent Black, and eight percent Asian and other. By 2051, the US is projected to be 47 percent white, 27 percent Hispanic, 13 percent Black, and 14 percent Asian and other. Clark county, Nevada (Las Vegas) and Cook county, Illinois (Chicago), have populations today similar to that of the US in 2051.