Immigration News: April, 2004 - Volume #11

Labor: Outsourcing H-1B, L-1

The US had an eight-month recession between March and November 2001, but there has been little employment growth despite resumed economic growth. However, the US added an estimated 308,000 jobs in March 2004, about 10,000 a day, even though the unemployment rate rose a bit to 5.7 percent. Between 2001 and 2003, US employment fell by 2.8 million amidst significant job creation and destruction. There were 57 million layoffs in this period, including 200,000 service and 500,000 manufacturing jobs that may have moved abroad.

There is a difference between the results of the Bureau of Labor's household survey and the Commerce Department's employer surveys that measure employment and unemployment. The monthly survey of 60,000 households estimated that employment rose by 2.3 million between November 2001 and November 2003, while the survey of employers found a loss of 800,000 jobs- an additional 500,000 Americans said they were self-employed. Between 2000 and mid-2003, the US labor force rose by 3.8 million. Up to half of this increase in employed and unemployed workers were recent arrivals from abroad, legal and illegal.

Outsourcing. When the Council of Economic Advisers issued the annual Economic Report of the President, CEA chair Gregory Mankiw sparked an uproar by saying: "Outsourcing is a growing phenomenon, but it's something that we should realize is probably a plus for the economy in the long run. We're very used to goods being produced abroad and being shipped here on ships or planes. What we are not used to is services being produced abroad and being sent here over the Internet or telephone wires. But does it matter from an economic standpoint whether values of items produced abroad come on planes and ships or over fiber-optic cables? Well, no, the economics is basically the same."

Outsourcing or offshoring are becoming buzzwords in the 2004 campaign season. As a result of low-cost computers, high-speed internet connections and the entry into the world economy of countries with large, well-educated work forces like India and China, many IT-related jobs are moving abroad. According to the Indian IT industry, US financial services firms saved $8 billion in the last four years by outsourcing work to India. However, many smaller US firms that outsourced work learned that the savings were not as great as hoped, and that wages and costs are rising rapidly in India and elsewhere as more US firms move jobs overseas.

The US IT industry employs 10.2 million workers, compared to 800,000 in India. Six million US workers are employed in call centers, compared to 300,000 in India. Forrester Research estimated that 3.3 million white collar jobs paying an average $40,000 a year could be outsourced by 2015; other estimates project that outsourcing will rise from 300,000 jobs a year leaving the US today to 600,000 jobs a year departing by 2010. India's MASCO estimates that some 500,000 Indians are employed to service customers overseas and 70 percent of these customers are American.

John Kerry in April 2004 announced a six-point plan to reduce the offshoring of US jobs, including new requirements that US employers tell their workers at least three months in advance if their jobs are lost because of offshoring and eliminating tax credits for firms that move jobs overseas. The number of computer programmers, as defined by Bureau of Labor Statistics, fell from 745,000 in 2000 to 563,000 in 2003.

There are many reports of well-educated technology workers unable to find jobs; 5.2 percent of computer scientists were unemployed in 2003. Although IT workers know that rapid change in their industry is the rule, many are stunned that, after losing jobs in 2001-03, they have been unable to find new jobs because of automation, outsourcing and business strategy changes. IT earnings remain above average: the US Commerce Department reported that employed IT workers averaged $67,440 in 2002, compared to $36,520 for all private-sector workers.

Federal Reserve Chairman Alan Greenspan said in March 2004 that improved education was the best long-term solution to the US job losses caused by globalization, but also endorsed extended unemployment benefits, beyond the usual maximum of 26 weeks for workers who are laid off. Greenspan said that offshoring is part of "creative destruction" that leads to higher living standards, but only if US education is reformed: "We have developed a shortage of highly skilled workers and a surplus of lesser skilled workers."

Lou Dobbs, the CNN anchor who has been highlighting outsourcing, is publishing a book, "Exporting America: Why Corporate Greed Is Shipping American Jobs Overseas," that aims to keep the debate going over the election season.

In February 2004, the Bureau of Labor Statistics issued projections of labor supply and demand for 2002 to 2012, projecting 21 million more jobs, with the fastest growth for registered nurses (up 623,000 jobs) and college and university teachers (up 603,000). However, seven of the 10 occupations with the greatest growth through 2012 will be in low-wage, service fields requiring little education: retail salesperson, customer service representative, food-service worker, cashier, janitor, waiter and nursing aide and hospital orderly.

Wal-Mart, with $256 billion in annual sales and 20 million shoppers visiting its stores on a typical day, has become the "prototypical enterprise" of the early 21st century, following the Pennsylvania Railroad in the late 19th century; General Motors in the mid-20th century, and Microsoft in the late 20th century. However, unlike GM, which helped build an affluent middle class by paying above-average wages and by providing generous health and pension plans, Wal-Mart pays its "associates" an average of $18,000 a year.

A number of historians have said that Wal-Mart combines 19th capitalism and 21st century technology. For example, using technology, Wal-Mart knows what sells, and orders millions of units for its 3,500 US stores, confident that consumers will buy them at low prices. The quest for ever-lower prices, in turn, pushes factories to continually lower their costs and prices.

New York State is considering legislation to raise the state's minimum wage from the federal level of $5.15 an hour to $7.10 an hour in January 2006; about 700,000 New York workers currently earn less than $7.10 an hour. Connecticut has a $7.10 minimum wage and Massachusetts a $6.75 minimum wage.

Unions. US unions represented 35 percent of workers in 1954; today, they represent 13 percent. The number of union members was 15.8 million in 2003 (13 million in AFL-CIO-affiliated unions), and 8.2 percent of private sector workers were union members. The 64 national unions in the AFL-CIO consider labor law reform their top priority, and Democratic presidential nominee Senator John Kerry (D-MA) agrees.

Under present-day US law, unions organize workers by first persuading at least 30 percent of the employees in a work site to sign authorization cards indicating they want the union to represent them. If the union then wins a secret ballot election supervised by a government agency, the employer must bargain with the union "in good faith" to reach an agreement. However, many employers actively discourage unionization, including unlawfully firing union supporters, so that a majority of workers in many elections vote for no union.

Unions say that employers find it more advantageous to be ordered to reinstate fired workers with back pay and remain union-free than to have to deal with a union. Presidential candidate John Kerry has endorsed labor demands that unions be officially recognized as workers' representatives if they obtain authorization cards from a majority of workers, that penalties for unfair labor practices be increased, and that binding arbitration be used to reach a first contract.

The AFL-CIO in February 2000 announced a reversal in its support for employer sanctions; throughout the 1970's and 1980's, unions were a pillar of support for fines on employers who knowingly hire unauthorized workers. The AFL-CIO renewed its call for legalization in 2004, asserting that there is no evidence that the presence of unauthorized workers displaces US workers- immigrants tend to be concentrated in construction and services, while manufacturing has seen the sharpest loss of jobs.

The AFL-CIO says that, since the government has not enforced employer sanctions laws systematically, employers are able to use the fear of enforcement to intimidate unauthorized workers, and points to cases in which employers called immigration authorities after workers indicated support for unions.

The Union of Needletrades, Industrial and Textile Employees, known as UNITE, and the Hotel Employees and Restaurant Employees union (HERE) announced plans to merge by 2005, creating a union with 455,000 members, 200,000 from UNITE and 255,000 from HERE. UNITE-HERE would, with the Service Employees International Union and the Laborers International Union of North America, become one of the largest unions organizing newly arrived foreign-born workers.

After a 138-day strike, the 60,000 members of the United Food and Commercial Workers Union in southern California reached an agreement with major grocery chains that introduces a two-tier wage system under which new hires receive substantially less in wages and benefits than current employees. Under the new contract, workers receive two lump-sum payments totaling 60 cents an hour for each hour they had logged in the 12 months before the last contract's expiration on October 11, 2003. The UFCW went on strike against Von's, and Ralphs and Albertsons locked out their union members in solidarity.

Students. Enrollments are down in the best US computer science schools, as some students decide to use their software design and programming skills in finance, where there is less competition from foreign workers and a smaller chance of being outsourced. An MIT student said that being a technologically adept investment banker "is less risky than software engineering." Undergraduate enrollments in computer science and computer engineering programs were down 23 percent between 2002 and 2003.

The US has 700,000 foreign students and exchange visitors enrolled in 7,000 US educational institutions in 2004. Many of the foreign students in the US study science and engineering, but other countries graduate far more engineers than the US. For example, in 2002 there were195,000 undergraduate engineering graduates in China: 129,000 in India: 103,000 in Japan; 82,000 in Russia; and 61,000 in the US.

Karl Schoenberger, "Tax relief for offshoring?" Mercury News, March 8, 2004. Steve Lohr, "Microsoft, Amid Dwindling Interest, Talks Up Computing as a Career," New York Times, March 1, 2004.

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