Monday, January 30, 2017

Why The Cold War Between Tech CEOs and Trump Is About To Go Nuclear

By Tyler Durden

Over the weekend, openly defiant CEOs, particularly among the tech sector, expressed their displeasure with Trump's Friday executive order temporarily banning refugees and limiting travel from seven Muslim countries, with both words and deeds, among which the following (summary courtesy of Axios):
  • VCs funding the ACLU: Several venture capitalists, as well as a few entrepreneurs, took turns soliciting donations to the American Civil Liberties Union through social media and personally matching those donations.
  • Airbnb volunteers to help provide housing for impacted immigrants: The home-sharing company said that it will work with travelers and organizations to provide housing for those impacted by the executive order, whether through volunteer hosts or by funding housing.
  • Lyft and Uber commit millions of dollars to legal aid: On Sunday, Lyft said it will donate $1 million to the ACLU over the next four years. Later in the day, Uber said it will create a $3 million legal defense fund for impacted drivers, as well as provide legal assistance and compensate their lost wages.
  • Google is setting up a $2 million crisis fund: The search giant has set up a fund that will donate to the American Civil Liberties Union, Immigrant Legal Resource Center, International Rescue Committee, and UNHCR.
On Monday morning, former US Treasury Secretary Larry Summers, speaking in an interview with Bloomberg Television, said that he is “gratified” by what he heard from the tech community.  “As global businesses, they have a huge stake in the United States being a nation of the Statue of Liberty rather than being a nation of refugee camps.” He added that “they have a huge stake in the United States supporting an open and tolerant global system, they have that stake for their employees, their customers, they have it for the reputation of the United States and they have spoken out.”
That may be, but the biggest reason for the anger by tech CEOs at the Trump administration is a simple, and a more selfish one. The reason for the simmering cold war between tech CEOs and Trump can be summarized in just three letters: H1-BThe bottom line is that tech CEOs fear Trump will single them out for outsourcing jobs or shut down the so-called H-1B visa program they use to hire high-skilled foreign employees for crucial engineering and technical jobs.
And, as Axios adds, White House officials say they are right to be nervous, especially about changes to the visa program. Chief strategist Steve Bannon and policy chief Stephen Miller are known to be deeply skeptical of the program, and will have a strong, vocal ally when Jeff Sessions gets confirmed as Attorney General. Some further observations:
  • Trump's mixed messages: On the campaign trail, he promised to "end forever the use of H-1B as a cheap labor program." He later signaled in a meeting with tech leaders that he's most concerned about companies misusing the visas to displace lower-wage American workers.
  • How it works: Visas are capped at 65,000 a year, with 20,000 additional visas for foreign workers with master's degrees. The demand for the visas is so high that the cap is usually exceeded within a few days of the application window opening. The visas are distributed to companies through a lottery system.
Tech companies such as Microsoft, Google, IBM, Cisco, Apple, Intel and Facebook say the visas are crucial for specialized jobs they can't fill domestically because of a shortage of American graduates with the right technical skills. When CEOs spoke out over the weekend about the ban, they pointed out the importance of allowing the "best and brightest" to work in the U.S.
Which is why if a news report about Trump's next imminent executive order is accurate, the simmering cold war between the tech CEOs and Trump is about to nuclear.
Bloomberg reports that the Trump administration has drafted an executive order aimed at overhauling the work-visa programs technology companies depend on to hire tens of thousands of employees each year.  If implemented, the reforms could force wholesale changes at India companies such as Infosys Ltd. and Wipro Ltd., and shift the way American companies like Microsoft Corp., Amazon.com Inc. and Apple Inc. recruit talent. Companies would have to try to hire American first and if they recruit foreign workers, priority would be given to the most highly paid.
The draft of Trump’s executive order covers an alphabet soup of visa programs, including H-1B, L-1, E-2 and B1. The first is a popular program with technology companies and is aimed at allowing them to bring in high-skill workers when they can’t find local hires with the appropriate skills. The legislation caps the number of people who can enter the U.S. annually at 85,000, including those with undergrad and master’s degrees.  
The average salary of an H-1B worker at Apple is reportedly more than $100k.
“Our country’s immigration policies should be designed and implemented to serve, first and foremost, the U.S. national interest,” the draft proposal reads, according to a copy reviewed by Bloomberg. “Visa programs for foreign workers … should be administered in a manner that protects the civil rights of American workers and current lawful residents, and that prioritizes the protection of American workers -- our forgotten working people -- and the jobs they hold.”

The foreign work visas were originally established to help U.S. companies recruit from abroad when they couldn’t find qualified local workers. But in recent years, there have been allegations the programs have been abused to bring in cheaper workers from overseas to fill jobs that otherwise may go to Americans. The top recipients of the H-1B visas are outsourcers, primarily from India, who run the technology departments of large corporations with largely imported staff. 
“If firms are using the program for cheap labor, I think it will affect them and they will have to pay workers more,” said Ron Hira, an associate professor at Howard University. “If tech firms are using the program for specialized labor, they may find there are more visas available.”

The Trump administration did not respond to a request for comment on the draft. The proposal is consistent with the president’s public comments on pushing companies to add more jobs to the U.S., from auto manufacturing to technology.
It’s not clear how much force the executive order would have if it is signed by the president. Congress is also working on visa reforms and the parties will have to cooperate to pass new laws. Zoe Lofgren, a Democratic congresswoman from California, introduced a bill last week to tighten requirements for the H-1B work visa program.
"My legislation refocuses the H-1B program to its original intent – to seek out and find the best and brightest from around the world, and to supplement the U.S. workforce with talented, highly-paid, and highly-skilled workers,” Lofgren said in a statement.
Meanwhile, as Bloomberg adds, India’s technology companies, led by Tata Consultancy Services Ltd, Infosys and Wipro, have argued they are helping corporations become more competitive by handling their technology operations with specialized staff. They also contend the visa programs allow them to keep jobs in the U.S. and that if they have to pay more for staff, they will handle more of the work remotely from less expensive markets like India. Trump, however, see things differently.
“Inspections and investigations in the past have shown no cases of wrongdoing by Indian IT services companies, which have always been fully compliant with the law,” said R Chandrashekhar, president of Nasscom, the trade group for India’s information technology sector. “The industry is open to any kind of checks in the system, but they should not cause any hindrance to the smooth operation of companies.

The proposed Trump order is also aimed at bringing more transparency to the program. It calls for publishing reports with basic statistics on who uses the immigration programs within one month of the end of the government’s fiscal year. The Obama Administration had scaled back the information available on the programs and required Freedom of Information Act requests for some data.

Whatever specific changes are implemented, they are likely to add to the expenses for India’s technology companies. That may accelerate a shift to new kinds of services, such as cloud computing and artificial intelligence, said Raja Lahiri, partner at the Mumbai-based partner at consultancy Grant Thornton India
“The visa challenges are not going to go away easily,” he said. “They will continue to be a challenge for Indian IT companies.”
But while the pain for India will be acute, it will be Silicon Valley that may be most impacted, as suddenly its favorite source of cheap, skilled labor is eliminated. How it will responds remains to be seen.
The above originally appeared at ZeroHedge.

22 comments:

  1. F'ck the tech companies! Please show RW as a libertarian how H-1B program is a libertarian program? How do I benefit as an American? Yes, I know, there are too damn many regulations and taxes. If I were not taxed to death, I could have a few bucks in my pocket so as not to be a wage slave.

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    1. It's libertarian to the extent that it permits some employees to escape some degree of employment prohibition.

      It benefits you as an American by affording you a larger possible universe of workers to employ and lower consumer prices due to increased productivity.

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    2. So you say. Do you have any proof they are 'more' productive? Funny these same companies 20 years ago were hiring anyone with a technical degree even it was not computer science.

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    3. Lower consumer prices from lower wages? Engineering often doesn't work that way because engineers create things that save and make money for the company. You can hire an engineer for $100,000/yr and he'll make you $200,000 a year or you can hire an H1B Visa engineer and he'll get the work done and cost you $50,000/yr. The typical analysis says the H1B visa engineer is cheaper because that $200,000 is the unseen.

      Delete
    4. Jimmy Joe Meeker,

      Your example assumes that competition doesn't exist. Sure a firm CAN just pocket the difference, but competitors have access to these same resources and would undercut them on price.

      Delete
    5. Happens all the time with competition. Corporate structures have huge and nearly universal blind spots. They see salary cost not lost opportunity.

      Delete
  2. Personal family members have been screwed over with the H-1B visa program. They set up for interviews with employers who ask whether they would be able to be comfortable with some unusual and irrelevant work requirements all so they can fill out the regulatory paperwork that their search for a suitable domestic worker ended in vain. The same requirements then magically disappear for an imported worker who can barely speak intelligible english.
    Further, Corporations use it to create modern day indentured servants. The hosted worker is not able to quit their job until they find another willing "host" less they and their entire family is deported.
    In a free employment market, I suppose any company could hire anyone they please, so I guess this doesn't follow libertarian principles to be on Trump's side in this. But what is a citizen to do when we see our entire nation being gutted through the current self serving corporate regulatory environment?

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    1. Great post! This is exactly what is going on. No one addresses these companies lay off thousands and then whine to Congress for more H-1's because you know, 'Muricans don't have 'da skillz' to do these jobs. Total BS!

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    2. Then the whining that american kids won't go into these fields.... there are other things more monetarily rewarding for smart american kids to do. Like go work for goldman sachs. No shortage of people wanting to work there. After all on wall street when you make companies millions or more you get rewarded for it. As an engineer you get to keep your job for a little longer... or maybe not.


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    3. I won't be ever spend any money for Disney:

      http://www.breitbart.com/tech/2016/12/14/disney-it-workers-file-lawsuit-claiming-company-replaced-them-with-h-1b-visa-workers/

      Or Fecesbook:

      http://www.vdare.com/posts/zuckerberg-lobbying-wins-facebook-massive-h1-b-loophole

      These corporations are using the system which is not particularly libertarian.

      Delete
  3. I work for one of the big silicon valley tech companies mentioned as a software engineer. There's two major uses of H1-B visas: outsourcing companies like Wipro and Infosys who hire lower-skilled technicians to do simple tasks for IT departments of large companies like P&G or McDonalds, and those hired by companies like Google/Amazon/etc to do software engineering. For the low-skilled stuff, there is no reason an American can't do the job. It would be a great way for a new grad from a middle-tier state school to get a start in the industry.

    For the high-skill Google-type jobs the picture is very interesting indeed. The availability of foreign talent makes the hiring 'bar' brutally high. The interviews are nothing but coding challenges done on a whiteboard. If you don't get the answer right off the bat, the interview is usually over right then. Many graduates of top schools like Stanford/MIT can't cut it. What I find most interesting is the elite background the Indians I work with have. They generally come from very wealthy families (i.e. several million USD net worth) and their fathers have paid for private / foreign education from preschool to a Master's degree. It's a far more privileged background than the typical US citizen who goes to Idaho State for engineering. They also consider themselves 'global citizens' and often want dual citizenship. However, if this high-skill program was severly cut the impact on these companies would be huge. They would lose 60-70% of their workforce (and the knowledge those workers have).

    FYI, I wasn't trying to analyze the situation from a libertarian perspective, just a view from the ground inside a big tech firm.

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  4. For what it's worth: If they shut down the H-1B type programs completely, dummy foreign companies would be set up (they already are, of course) and the work would be contracted out to them. Net gain for American workers = less than zero.
    There's no way out of the Global Village.

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    1. Solid answer and I believe recent articles line up with this prediction.

      Delete
    2. Capn, do you mean on-site or off-site?

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  5. Capn and Chad are spot on. I have a hi-tech friend from India who came here on a H-1B. He has changed companies 4 times. Now manages a team for Siemens that has members (mostly engineers) all over the world. He's making much more than $100K. If Trump deports him, he'll work from Canada, UK, France or any number of other countries. G'mint can't stop immigration with a wall and it can't change the weather by taxing CO2. But that doesn't mean it won't try.

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    1. But it will succeed in making these types of work arrangements less efficient.

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    2. What about the other unseen effects? Won't domestic talent with these skills become more valuable and in demand, and therefore more domestic people will train or seek the education to fill these positions?
      Or is it foreign workers or nothing as your comment seems to imply?

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    3. Maybe, but if they weren't inferior substitutes, then they'd already have these jobs. All that would happen is that the universe of possible employment relationships would shrink, ergo it would result in a less optimal situation.

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    4. @Evan Smiley
      "Maybe, but if they weren't inferior substitutes, then they'd already have these jobs"

      Would they? Isn't an H-1B candidate an employers dream? They are largely captive. I believe I read that the H-1B employee turnover rate relative to native candidates is be substantially lower. I believe it is also widely known that the average H-1B candidate salary requirements are less than native employees.
      As libertarians, isn't this the kind of distorted market we know government meddling tends to create? I don't believe one group or race is inherently smarter. Perhaps they are in an environment that allows, fosters, demands, and/or rewards the discipline to develop oneself.

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    5. I mean, I feel like by listing reasons that employers might prefer immigrant labor you're only helping make my point.

      And I agree that H1B is not an kind of ideal libertarian program, but that's primarily because it's much too narrow.

      Total prohibition < Partial prohibition (e.g. H1B) < Actual freedom

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    6. Not sure if unowned's comment "Or is it foreign workers or nothing as your comment seems to imply?" was directed at me or not, but that is not what I was trying to imply. Job's should go to whoever a company wants to give the job to, period. If someone is willing and able to do a job at a lower rate than someone else, then why shouldn't they get the job? Getting upset about that is like getting upset that water evaporates. I just got 2 quotes to remove a dead tree from my yard ($1300 and $725). Who do you think I'm going to hire? Do you search for the highest price when you are looking for a product or service? Is that how a society becomes wealthy, by raising prices?

      Delete
  6. @Smiley
    "And I agree that H1B is not an kind of ideal libertarian program, but that's primarily because it's much too narrow."
    All things being equal, I wonder if an employer would hire a foreign worker they had to relocate and assimilate if the law didn't handtie that employee to the employer through work visa regulations and such.

    "Total prohibition < Partial prohibition (e.g. H1B) < Actual freedom"
    H1B isn’t even a small step toward freedom. It is an government/corporate created incentive.

    ReplyDelete

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