Over at Ars, Jon Stokes has a story on the debate over allowing more high-skilled immigrants into the country:
In an op-ed in yesterday’s Washington Post, Microsoft Chairman Bill Gates argues yet again in favor of raising the cap on H1-B foreign worker visas from its present number of 65,000. Gates’ basic argument boils down to this: fewer students at American universities are opting for computer science degrees, which means that we need to raise the H1-B cap so that the software industry can import more foreign labor to fill those jobs that Americans–for whatever reason–don’t seem to be equipped for. Of course, the fact that the importation of cheap foreign labor into the software industry job market hampers American programmers’ ability to compete and leads to depressed wages overall is never mentioned by Gates as a major reason why a computer science degree just isn’t that attractive any more to Americans. Who wants to spend four or five years getting a CS degree, only to be priced out of the job market by foreign programmers who are willing to work for less in exchange for a green card?
The rest of his article is about whether Bill Gates has been making misleading statements about how much Microsoft pays its immigrant employees. I don’t have anything to add to that debate, but I think the argument that Stokes makes above reflects a basic economic fallacy.
Stokes is undoubtedly correct that raising the H1-B cap would depress wages for computer programmers and cause more college students to enter other professions instead. The implicit premise here seems to be that that would be a bad thing. But in fact, if we’re looking to benefit American society as a whole, rather than simply fatten the wallets of programmers–already some of the best-compensated workers in the American economy–this is an argument in favor of raising the H1-B cap.
Indeed, this is a perfect example of what Bastiat talked about in his justifiably famous essay, “What Is Seen and What Is Not Seen.” In this case, talk about “jobs” causes us to think about the labor market backwards. It makes us forget that the scarce resource in the labor market is labor, not jobs. That is, there are far more useful things people would like done than there are people to do them.
High wages are a reflection of the fact that a category of labor is particularly scarce. When wages in a particular industry rise, that’s a signal that there are more wealth-creating opportunities in that industry than there are laborers with the skills necessary to exploit them. Although that’s obviously good for the workers in that industry, the important point is that it’s bad for the rest of society, who are required to pay higher prices for the output of that industry. Because what we’re ultimately after is not programming jobs, but the valuable software that programmers produce. High wages in the software industry reflect are a sign that there aren’t enough programmers to write all the software that society would like to have.
Now, with that background in mind, it’s a bit of a puzzle what Stokes means when he says that American workers are “priced out of the job market by foreign programmers who are willing to work for less.” It’s certainly not the case that the influx of foreign workers will be so large that being a programmer will leave you in poverty. The average programmer might make $90,000 instead of $100,000 after a big hike in the H1-B visa cap, but he or she will still be significantly richer than the average American worker. So in what sense is a student who graduates from college and gets offered a programming job that starts at $40,000 instead of $50,000 “priced out” of the job market?
What I suspect he means is that American workers who would have become computer programmers at $100,000 have more lucrative options once the salary drops to $80,000. Maybe more of them go to law school or business school. Maybe some of them study biotechnology or economics. In any event, what being “priced out of the market” here means is that the American worker has better employment options in other industries. Which, in turn, means that the economy as a whole is made more productive by having immigrants write the software, and native-born Americans perform more lucrative jobs.
I have to say that as a guy with a CS degree myself, I find it unseemly when computer geeks whine about unfair competition from foreigners who have the nerve to be willing to do their jobs for less pay than them. If there’s anything “unfair” about the world labor market, it’s the fact that there are millions of competent engineers who, due to the accident of birth and Western countries’ restrictive immigration policies, are not able to utilize their engineering talents to the fullest. It’s far more “unfair” to an Indian engineer to force him to stay in India, where programming jobs are few and far between, then it is to allow him into the United States and “force” an American engineer to compete with him on a level playing field.
The only thing that “hampers American programmers’ ability to compete” is their over-developed sense of entitlement. There’s no law of nature stating that computer programmers have to earn a six-figure salary. It’s an incredible privilege to live in a society so wealthy and productive that making “only” $60,000 or $80,000 a year seems like an imposition. Programmers should be grateful for those opportunities; it’s presumptuous to demand that the government keep out foreign workers—raising prices for consumers of high-tech products—just so they can continue to enjoy their inflated salaries.