Laws: July, 2003 - Number #6

The US unemployment rate was six percent in April 2003; California's rate was 6.7 percent. In May 2003, the US rate rose to a nine-year high of 6.1 percent. The US lost 2.5 million jobs since February 2001, the longest sustained period without job growth since World War II.

The inflation-adjusted weekly pay of the median worker fell between 2002 and 2003. Between 1997 and 2002, the weekly pay of the median worker rose almost nine percent, to $656, after adjusting for inflation; high earners at the 90th percentile of all earners saw their real weekly pay rise by over 14 percent, to over $1,400 a week. The rise in the cost of benefits such as pensions and health insurance are one reason why there were few wage gains in the 1990s. The average US worker pays $2,088 a year for health insurance, up from $1,656 in 2000.

H-1B. The tech slump continues: unemployment among electronics engineers was seven percent in the first quarter of 2003, above the overall jobless rate of 5.8 percent in March 2003. The American Electronics Association reported that the number of technology jobs fell from 5.7 million in January 2001 to 5.1 million in December 2002. The US unemployment rate for scientists and mathematicians was six percent in 2003, compared to 0.7 percent in early 1998. There are few signs of a quick rebound, and information technology accounts for nearly 60 percent of all business equipment investment.

Silicon Valley's Santa Clara County had an 8.3 percent unemployment rate; county employment fell by 193,300, or 18 percent from its peak of 1.1 million in December 2000. In May 2003, the federal government agreed to provide 13 weeks of extended unemployment insurance benefits for jobless workers who exhausted 26 weeks of state benefits that averaged $260 a week.

There was a spate of articles about threats to high-wage IT workers in the US from outsourcing (subcontracting work to a firm that operates abroad) or offshoring (work moved overseas by the firm). Forrester Research estimated that 3.3 million telephone-help jobs could move abroad by 2015, 70 percent to India. The New York Times reported that some of the two million college graduates a year in India are employed to prepare US tax returns, evaluate US health insurance claims, transcribe US doctors' medical notes, analyze US financial data, call US consumers to collect overdue bills, read CAT scans, and create presentations for US investment banks.

Analytic stories emphasized growing global economic links that make it easier to buy parts around the world, assemble them in one place, and sell them in another. High-tech production processes are being similarly disassembled and reassembled, with design and purchasing in high-income countries, and routine help and manufacturing in lower-income countries.

The Bureau of Citizenship and Immigration Services (BCIS) reported that, in FY02, there were 215,190 requests for H-1B visas, and that 195,737 were approved. Of those approved, only 103,584 were for first-US jobs (there were also H-1Bs whose visas were renewed), and only 79,100 of the H-1B visas issued in FY02 were subject to the 195,000 a year cap on H-1B visas. 18,600 of the first-US job approvals were exempt because their employers were US universities or non-profit research organizations. Some 163,000 H-1B visas were issued in 2001.

Complaints by H-1B workers against their US employers, many of whom are also immigrants, have increased five-fold since 1998, and back-pay awards are up ten-fold. Several web sites are devoted to criticism of H-1B visas. (www.nomoreh1b.com).

Most employers have had to pay a $1,000 fee for each H-1B application they file, and the $228 million paid so far has provided grants to nonprofits to train US students in math and technology. One educator using H-1B-fee income to train US workers said the "just-in-time delivery system [is being] applied to human resources." Employers who need workers with new skills simply go out and get them - from foreign countries if need be - rather than take the time to retrain existing workers.

In a controversial move, New Jersey contracted with the eFunds Corporation, based in Scottsdale, Arizona, to handle calls for welfare recipients. However, eFunds sent the calls from New Jersey recipients seeking assistance to its office in Bombay, where operators earn $200 a month, which is less than the New Jersey recipients receive. New Jersey legislators introduced bills to keep the jobs in the state, and eFunds moved some of the jobs to New Jersey.

Economist Jagdish N. Bhagwati says that "outsourcing is just trade" and is destined to increase; Bhagwati predicts that visa restrictions will diminish as countries decide it is preferable to have foreigners come in to work rather than see jobs migrate abroad. The Communications Workers of America, which once thought that outsourcing would be confined to technical assistance for computer products, says they did not imagine "you would literally be able to export the entire production process overseas."

There were reports of a backlash against fast-track entry of foreign IT workers in the UK in May 2003. The British Computer Society complained that 1,500 to 2,000 work permits a month were being issued despite significant unemployment among IT specialists; the government removed software professionals from the fast-track work-permit list, but left nurses and teachers on the list. There are allegations that some firms are using intra-company transfers to bring low-wage Indian immigrants into the UK.

L-1. L-1 visas allow multinationals to transfer executives, managers and employees with specialized skills from a foreign subsidiary to a US location or affiliate, that is, movement within one firm. L-1 visas are easier to obtain than H-1B visas, allow the foreigner to remain in the US up to seven years, and there is no limit on the number that can be issued; 57,721 L-1 visas were issued in 2002, and 59,384 in 2001. A third of the 32,416 L-1 visas issued in the first six months of 2003 went to Indians, up from 20 percent in 2001 and 31 percent in 2002.

According to the Bureau of Citizenship and Immigration Services, the stock of L-1 visa holders in the US rose from 75,315 in 1992 to 328,480 in 2001.

L-1 visa holders are employees of multinational firms while in the US. US employers of L-1 visa holders do not have to pay the $1,000 fee required for H-1B visas, nor do they have to promise to pay the prevailing wage to L-1 workers.

In Florida, Siemans was accused of replacing US workers with foreigners who had L-1 visas employed by Indian and US firm Tata; the Tata workers were paid $36,000 a year, well below the prevailing wage. Siemans contracted with Tata for software maintenance, and Tata sent a team to Siemans, transferred as much of the work as possible to its Indian subsidiary, but brought Tata workers from India on L-1 visa holders to work at Siemans.

BCIS says what Siemans and Tata did was unlawful: "If an L-1 comes into the United States to work, they're coming to work for their specific company that petitioned for them, not for another company that they're being contracted out to." The State Department, which issues L-1 visas, says that the Siemans-Tata agreement is lawful: "The fact that someone is on the site of (a client) does not make them ineligible for an L-1 as long as . . . the company they actually work for is truly functioning as their employer in terms of how they're paid and who has the right to fire them."

To clear up the confusion, Representative John Mica (R-FL) introduced legislation that would make it harder for IT firms with operations in the US and abroad to bring workers into the US on L-1 visas and send them to other US firms to work; Mica's bill would prohibit the transfer of workers with L-1 visas to third parties. Other pending legislation would limit the number of L-1 visas to 35,000 a year.

Defenders of using L-1 visas the way Tata did at Siemans say they allow foreigners who helped to develop software to oversee its implementation and trouble shoot; critics allege that L-1 visa holders are often simply foreign workers with no special skills.

By one count, there were 384,000 H-1B temporary workers in the US in 2001 compared to 329,000 L-1 intracompany transfers.

H-2B. Up to 66,000 foreign workers a year may receive H-2B visas to fill temporary nonfarm jobs for up to one year, but employers can bring H-2B workers into the US only after the US Department of Labor certifies that no qualified and willing US workers are available to fill the jobs. Employers of H-2B workers do not have to pay the workers' transportation to the US or provide them with housing in the US.

About a fourth of the DOL H-2B certifications in FY01-02 were for landscape laborers, 10 percent for forestry workers, seven percent for housekeepers in hotels and motels, and four percent each for stable attendants and tree planters.

In Maine in September 2002, 14 Honduran and Guatemalan workers in the US with H-2B visas died when the van driven by their crew foreman went off a bridge on a private road; they were employed by Idaho-based Evergreen Forestry Services. The workplace was 2.5 hours each way from where the men lived, and the men paid $84 a week to ride in the van. DOL fined Evergreen $17,000, the maximum, for violations of the Migrant and Seasonal Agricultural Worker Protection Act for not registering the driver of the van, and said it would revoke Evergreen's farm labor contractor license.

However, Peter Smith, owner of Evergreen, also owns 40 percent of Progressive Environmental, which was certified to bring 343 H-2B forestry workers to Maine in 2003, and 390 to Idaho.

Some companies bring unskilled workers to the US. GTO International (www.gtoint.com/gto/) began as a recruiter of H-2B Mexicans to work in seasonal US landscaping and golf course jobs. GTO charges $135 for each H-2B processed, which involves helping place ads for US workers and offering the prevailing wage, which GTO says is $8 to $12 an hour. When US workers do not show up, GTO recruits workers for up to 10 months in Mexico to fill the US jobs. A maximum of 66,000 seasonal H-2B workers can be admitted each year.

A study by the Community Development Research Center at the New School University in New York City estimated that 6,000 to 8,000 day laborers congregate at 57 places in New York City. Day laborers earned an average of $9.37 an hour in the spring and summer, when there are more construction and gardening jobs, and $7.61 an hour in the winter. Hours of work are irregular: in May 2002, average earnings were $855. About 90 percent of the workers surveyed were from Latin America and 75 percent were unauthorized.

Unions. One of the most successful union organizing drives involving immigrants has been the Justice for Janitors campaign (www.seiu.org/building/janitors/), which organized 100,000 workers in 20 cities. Most janitors are employed by cleaning contractors, not building owners, but pressure on owners led to contracts in the late 1990s that raised wages and provided health insurance to workers and their families.

In 2000, the Justice for Janitors campaign won a contract in Los Angeles that raised wages to $10 an hour for 9,000 largely immigrant janitors, and included employer-paid premiums for health insurance for janitors and their families. That contract is expiring, and employers asked that janitors pay 25 percent of the health insurance premium. However, a new five-year agreement was negotiated that maintained full employer-paid health insurance, but provided minimal wage increases.

In Sacramento, where a new contract promises to raise wages from $6.75 an hour to $8.50 by 2008, the janitors contract requires employers to pay $126 a month for health insurance, and workers to pay 30 percent of their health care costs. However, the coverage does not apply to workers until they have been on the job one year (64 percent qualify) and does not cover the worker's families until employment passes five years (nine percent qualify). Justice for Janitors is asking for a one cent increase in the typical six cents a month payment a building owner makes to a cleaning contractor to clean each square foot, under the theory that the extra cent per square foot can provide janitors with better health insurance.

The Unite union is trying to organize the 17,000 largely immigrant employees in 365 plants owned by the Cintas Corporation, the nation's largest uniform rental company. Cintas had revenues of $2.3 billion in 2002, and strongly opposes unions, saying "We believe we have a special culture here that would be jeopardized by the kind of hostile actions that characterize the union's approach to dealing with the company."

Between 1977 and 1997, the proportion of US workers with 12 or fewer years of education who were represented by a labor union declined from 29 to 14 percent. The union wage premium also declined for these workers, from 58 to 51 percent. If these workers lose their jobs, they are likely to need education and skills to obtain jobs that pay as much as their union wages.

Economy. Defined-benefit pensions pay retired workers a percentage of their earnings; defined-contribution plans pay retired workers a pension based on their contributions and their earnings. In 2002, the assets of defined-benefit pensions were $1.5 trillion, compared to $2.5 trillion for defined-contribution plans. Many firms with defined-benefit plans are asking the IRS to allow them to give retirees a lump-sum cash amount and end their pension obligations.

The US Department of Labor has a web site (www.GovBenefits.gov) that allows residents to answer questions and determine if they are eligible for benefits under 417 federal benefit programs, from Social Security to home loans. The Workforce Investment Act (WIA) provides funds for, inter alia, Adult Basic Education (ABE), including English as a Second Language (ESL) for adults.

AmeriCorps, the "domestic Peace Corps," allows 50,000 to 75,000 volunteers to serve 20 to 40 hours a week building homes, teaching English, and cleaning parks and streams. Volunteers get modest living stipends, and all are eligible for $4,725 grants to pay for college or graduate school, or to pay back student loans.

New York City in May 2003 approved the first law to protect an estimated 600,000 domestic workers, including live-in housekeepers and nannies, by requiring 70 licensed employment agencies to give nannies written contracts that spell out their job responsibilities, wages and expected hours. Families must sign an agreement that they are aware of the nannies' rights to the minimum wage, overtime and Social Security. The law provides fines of up to $1,000 and a one-year prison sentence for violating employment agencies.

The 400 richest US taxpayers reported average incomes of $174 million in 2000, up from $47 million; an income of at least $87 million was needed to be in the richest 400 in 2000, up from $24 million in 1992. The top 400 reported 1.1 percent of all income earned in 2000, more than double the 0.5 percent of US income in 1992; they paid 1.6 percent of US income tax in 2000, up from one percent of taxes in 1992. According to the IRS, 2,022 Americans with incomes of more than $200,000 paid no income tax anywhere in the world in 2000.

The highest-income 1.3 million households pay 37.4 percent of individual federal income taxes; the half of Americans who earned less than $27,682 in 2000 paid less than 4 percent of income taxes.

Foreigners are playing an ever-larger role in the US economy. Foreigners hold about 36 percent of US government debt, and 18 percent of corporate debt. About two-thirds of the footwear sold in the US is imported, as is 45 percent of the apparel; 42 percent of the computers and office equipment; 33 percent of photo equipment; and 29 percent of motor vehicles.

James Flanigan, "Should We Fear High-Pay Job Shift?," Los Angeles Times, June 22, 2003. Carrie Kirby, "L-1 visa's use provokes opposition by techies," San Francisco Chronicle, May 25, 2003.