Tim Lee

Will Stirs the High-Skilled Hornets Nest

My colleague Will Wilkinson has a great commentary on Marketplace where he points out that more H1-B visas means less inequality:

Increases in wage inequality over the past few decades is primarily a story of the supply and demand of skilled labor together with the effects of technological innovation. Wage increases tend to track improvements in the productivity of labor and gains in productivity tend to be driven by innovations that help workers do more in less time. But in recent decades, technical innovation has increased the productivity of more highly-educated workers faster than it has for less-educated workers. These growing inequalities in productivity have helped create growing inequalities in wages.

But that’s not the whole story. The American system of higher education produces skilled workers too slowly to keep up with the demand. This scarcity in the supply bids up the wages of the well-educated even more, further widening the wage gap. If we raised visa quotas on skilled labor, that would help bring supply in line with demand and reduce the wage gap between more and less skilled workers.

These days, almost everybody but their beneficiaries think agricultural subsidies are a lousy idea. They benefit a few already relatively wealthy American farmers and agribusiness firms to the detriment of poor farmers around the world. But H-1B visa restrictions are subsidies that benefit relatively rich domestic workers over their poorer foreign peers, and so it turns out many of us liberal-minded college grads are enjoying our own protectionist boost.

In this case, it seems the moral outrage is… well, we seem to be keeping it to ourselves.

Will is spot on. And he’s greeted with a cacophony of condemnation from commenters who either don’t seem to have grokked Will’s basic argument, or who make nakedly self-serving arguments of the form: I have an advanced degree, and I don’t make as much money as I’d like, therefore we need to keep the brown people out to push up my wages. This has the virtue of candor, if nothing else, but normally when people advocate positions that benefit themselves at the expense of people less fortunate than themselves, they at least have the decency to pretend that’s not what they’re doing.

What virtually all of the commenters seem to be missing is that the costs of protectionism for high-skilled Americans falls not only on immigrants who are unable to make better lives for themselves, but also on less-skilled Americans who are forced to pay higher prices for goods and services produced by high-skilled workers. That I take to be Will’s point, and hardly any of the commenters seem to have even taken note of it, much less offered a coherent response.

Of course, this isn’t terribly surprising. People are rarely rational when their own self-interest is involved. No matter how wealthy or successful you are—and the people who are effected by H1-B increases are overwhelmingly among the better-compensated workers in the wealthiest country on Earth—it’s always possible to feel beleaguered. By world and historical standards, a software engineer making $80,000 a year is obscenely wealthy. Yet apparently many such workers feel it a grave imposition to be asked to compete on a level playing field with foreign-born workers, few of whom grew up with the privileges and luxuries that most middle-class Americans enjoy as a birthright.

July 16, 2008 | Comments |

Viewing 34 Comments

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    ". By world and historical standards, a software engineer making $80,000 a year is obscenely wealthy."

    That's nice to know but conflicts with the idea of free markets. That is, what matters is how that salary compares in today's markets. Today, $80k is nice but it's not going to allow you to have a family, a $300k mortgage, 2 cars, 2 kids and other aspects of a modest middle class lifestyle without a spouse working another job full time.

    More so, the reasons for issuing more visas should not be "so we can drive down wages". Otherwise your motivations are no different than those tech workers who want to block the visas because they think it'll hurt them. That is, both sides are looking to use force via the government to bring about what they want.
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    Today, $80k is nice but it’s not going to allow you to have a family, a $300k mortgage, 2 cars, 2 kids and other aspects of a modest middle class lifestyle without a spouse working another job full time.

    I'm sorry, but $80k is more than a "modest middle-class lifestyle." That income puts you roughly in the top quarter of households, and you'll probably be in the top 10 percent if your spouse works as well. Outside of a few expensive coastal cities, $300k will buy more than enough house for a family of four to live comfortably. The median home price nationwide is a little over $200k, and about 30 percent of people can't afford to buy homes at all. America is a wealthy country, and so many of us have an inflated concept of what a "modest" middle-class lifestyle looks like. Being a wealthy country isn't a bad thing by any means, but let's not be melodramatic about it.

    You put "so we can drive down wages" in quotes, but I don't think either I or Will said anything about driving down wages. That's not the point. The point is that increased skilled immigration would increase the total wealth and benefit both the Americans and the immigrants, on average. It might have the effect of depressing the wages of higher-skilled workers, even as it makes those lower down on the income ladder better off. I (and Will) am not objecting to the wealth of rich Americans. What am objecting to is the notion that propping up the wages of a particular class of American workers is a good justification for limiting immigration. It's not a good justification, and it's especially not a good justification when the policy has the effect (as the low H1-B visa cap does) of redistributing wealth from relatively low-wage Americans to relatively high-wage ones. You aren't entitled to a $300k house and two cars, especially if it's coming out of the hide of people who are significantly worse-off than you are.
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    "You aren’t entitled to a $300k house and two cars, especially if it’s coming out of the hide of people who are significantly worse-off than you are."

    Good god man are we now just socialist, pretending that free trade is good because it achieves the social engineering that command and control could not. How about this: the labor we are importing is able to undercut our wages because there domestic economies are basket cases,and that therefore by importing there high skill labor to the US( at a discount due to lack of options) we are killing off whats left of their domestic economy and thus make those that remain even worse off ( OH and not even you and your egalitarian friends can believe that we can import 4-5 Billion people on H1-B.

    SO even if we grant the notion that US national interest has no baring on the question of immigration ( we can discuss what that interest is an how H1-B quota advance or retard it )it is pure folly to suggest that the US, and it would seem only the US, has a moral duty to lower its standard of living to match the rest of the world.


    Perhaps if there was no escape path to the US, more reform, both economic and political would be demanded in there home counties by the would be emigrants. This might actually elevate the world wide standard of living with out the zero sum game that is currently driving down US wages.

    BTW you may want to investigate the role of fraud and corruption,as well as civil unrest in these countries-- do you think this might have something to do with the lack of advancement there.

    Oh and one more little detail --the high cost of the US, as well as our declining infrastructure and disastrous education system, are the result of taxing ourselves to death to support an empire over which we have police responsibility but for which we earn little benefit other than cheap imports and downward pressure on wages.

    The dollar is falling as a result of our trade deficit and soon we will have no choice but to stand down as police of the high seas, extract value from our territories, or defend the standard of living differential which in part supports that military largess. One day the Iran will try to block the Strait of
    Hormuz -- who will prevent this -- The French :) no wait chindia :)
    N
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    Good point, but why admit skilled workers as H1-Bs, indentured to a single employer, when you could give them regular green cards?

    Companies often hire H1-Bs because they can hold the threat of "if we fire you, the government deports you" over them. That extra employer power gives employers incentive to replace citizens or permanent residents.
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    Don, I'll take any liberalization I can get, and yes I'd rather hand out green cards than H1-Bs. Somehow, though, I doubt most of the opponents of H1-Bs are motivated by an excess of concern for immigrants' welfare.
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    Tim, you are showing your coastal elitism here. Both with your cliche attempt to bring race into this, and this:


    I’m sorry, but $80k is more than a “modest middle-class lifestyle.” That income puts you roughly in the top quarter of households, and you’ll probably be in the top 10 percent if your spouse works as well. Outside of a few expensive coastal cities, $300k will buy more than enough house for a family of four to live comfortably. The median home price nationwide is a little over $200k, and about 30 percent of people can’t afford to buy homes at all.


    You won't be making $80,000 a year in most areas of the country. Furthermore, $80,000 a year, when adjusted for the cost of living, is not that much money in most of the areas where it's the average software developer's salary. $80,000 in metropolitan D.C. is the equivalent of about $30,000-$35,000 in rural Virginia when adjusted for the cost of living in both areas. It's no easier to have a middle class lifestyle on one income than the other; the $200K house in Rockingham County is equivalent to the $400K-$500K townhouse in Fairfax or Loudon Counties when you adjust for income levels.


    Somehow, though, I doubt most of the opponents of H1-Bs are motivated by an excess of concern for immigrants’ welfare.


    Why should they be? Does our government exist to serve our interest, or the world's interest?

    Furthermore, the excessive concern about income inequality smacks of socialist sentiments, not capitalist ones. Any good libertarian knows that equality beyond legal equality and liberty are mutually exclusive.
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    Any good libertarian knows that equality beyond legal equality and liberty are mutually exclusive.

    Which is exactly what I'm advocating: greater legal equality for whose who weren't fortunate enough to be born in the United States.
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    Tim, you said, "People are rarely rational when their own self-interest is involved." In fact, I think they're very, very rational. What they lack is self-awareness. They are so fixated on their own interests that they can't fathom how policies that buoy their own circumstances might unfairly and needlessly impoverish others.

    Marc Grundfest is a case in point. He can not even perceive that free trade in labor might improve the circumstances of everyone in the aggregate. Why? Because it would erode a protectionist subsidy to a class he perceives himself to be a member of. And he wraps it up in one of the most brilliant ideological errors I've come across: opposing equality and fairness simply because it's a fondness of the left. Wow.
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    I happen to be an advocate of opening up H1B quotas, but only on the basis that it covers **all** disciplines. None should be exempt, especially ones like lawyers. If you can hire an Indian software developer, I want to be able to hire an Indian lawyer certified to practice law in America to represent me at $10/hour plus travel costs while I'm in court.

    This would not fly, however, because immigration law is a racket under our current system, and those who stand to benefit from it will not expose themselves. You'll never see management and the legal profession open themselves up to competition. An immigration policy that allowed foreigners to practice American law would probably do far more to free up capital and help our economy than 100,000 visas for engineering staff.
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    Mike, I don't disagree; I'd like to see liberalization of the more protected high-skill professions, including lawyers and doctors, as well. But protectionism in one industry isn't an argument for protectionism in another. Free trade in IT workers' labor is a good idea whether or not we have free trade in lawyers' labor.
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    Marc Grundfest is a case in point. He can not even perceive that free trade in labor might improve the circumstances of everyone in the aggregate. Why? Because it would erode a protectionist subsidy to a class he perceives himself to be a member of. And he wraps it up in one of the most brilliant ideological errors I’ve come across: opposing equality and fairness simply because it’s a fondness of the left. Wow.


    The free trade in labor is one-way. When Americans can just as easily move to China and India to start businesses, this argument will have more merit. From the perspective of the average worker, this isn't protectionism, it's correcting a one-sided relationship that harms them, and only benefits business owners.

    And Tim, while it may be true that you consider yourself an advocate for greater legal equality, you do so without paying even the slightest attention to history's lessons on political power. Every massive wave of immigration has brought with it political changes, and our own country is no exception. However, I suspect that it doesn't bother you in the least that our country has absorbed closing in on 20,000,000 or more foreigners from socialist countries in the past decade or two. That is the downside to "increased legal equality" for foreigners that you, and the rest of the beltway libertarians, refuse to acknowledge.
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    MikeT, ask Tim where he lives.
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    Mike, I don’t disagree; I’d like to see liberalization of the more protected high-skill professions, including lawyers and doctors, as well. But protectionism in one industry isn’t an argument for protectionism in another. Free trade in IT workers’ labor is a good idea whether or not we have free trade in lawyers’ labor.


    It is an argument for reevaluating priorities. Seeing as how America is increasingly a country that produces less and less wealth of its own, without foreign labor, it is far more important to focus attention on protected professions that produce no wealth at all. Otherwise what you get is less incentive for Americans to join professions that focus on wealth-production versus service jobs that produce no wealth (medicine, law).

    One of the reasons that libertarians are rarely taken seriously is that most libertarians treat all policies as though they are atomic. That's what you're slipping to in your argument here. You fail to see the harm that can be done by a policy that opens up competition only to those who produce wealth, and not to those who are in management or in service professions that produce no wealth like law or medicine.
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    MikeT, ask Tim where he lives.


    Didn't he make the move to Princeton for a MS?
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    Not yet.
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    And Princeton isn't in the Beltway either.
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    And services also produce wealth.
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    And services also produce wealth.


    They can, but not nearly as much as product-producing endeavors, and law and general medicine are at the bottom of professions that produce wealth. My fear is that if society doesn't pry open these professions first, the only outcome will be stagnate wages for engineers, and even more incentive to join the ranks of the protected services professions.
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    Tim, you're forgetting that those $80k / year software jobs are rarely nationwide. They're frequently in areas like San Jose, Denver, Boston, suburban DC, Seattle, etc. Median housing prices in those cities is those cities is $250k - $500k+. Now, you can get that $200k house in Boise, Indianapolis or Albuquerque. But you'll struggle to find many opportunities. And those you do find more often than not will be paying $60k / year and not $80k.

    But overall there are several issues with these claims :
    a) Calling laws that regulate the movement of people across the borders "protectionism". We're not talking about free trade of goods but actual human beings. A few of these wanting to move about are murders, thugs, drunk drivers, thieves, child molesters, etc. Sure, most are not but there are plenty of valid reasons for regulating who can and can not enter the US or live there.
    b) Lack of any evidence of how much, if any, this alleged lack of supply is driving up wages. What constitutes a lack of supply? How short handed is the US, if at all? How much more are wages being driven up than they would be if the demand level was met?
    c) Are they're enough qualified candidates in other countries to meet these demands?


    I also have issues with claims like this :
    "What virtually all of the commenters seem to be missing is that the costs of protectionism for high-skilled Americans falls not only on immigrants who are unable to make better lives for themselves, but also on less-skilled Americans who are forced to pay higher prices for goods and services produced by high-skilled workers."

    So how is it that low wage workers pay more? If anything JIT manufacturing, more efficient retail distribution, etc - all things highly dependent on skilled workers coordinating and managing them - have LOWERED the cost for goods and services. Surely you're aware of studies that have shown Wal-Mart's affects on prices, correct? Or look at trading stocks. 20 years ago if Bob The Builder wanted to invest some of that overtime into stocks, what would it have cost him? $50? $100 per trade and with what? A $500? $1000? $2500 transaction minimum? Today Bob The Builder has all sorts of options from $20 / trade to programs that let him invest just $20 / month into a stock.

    I'm all for opening things up, I just think you're making a lot of at best un-cited and at worst incorrect claims.
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    And Princeton isn’t in the Beltway either.


    I wouldn't accuse it of being in the beltway. The term "beltway libertarian" generally refers to the liberaltarians who turned on the rest of the libertarian movement that tended to support Ron Paul. Tim revealed that tendency when he immediately went into a race attack over immigration.

    Sorry for the confusion there.