National Research Council Report on Tech Workers

October 2000

Background

The National Research Council (NRC) released in October 2000 a report on Building a Workforce for the Information Economy. This report was requested by Congress in 1998 at the time that it adopted a temporary increase in the annual number of H-1B visas from 65,000 to 115,000 (the visa recipients may work for up to six years in the United States). The purpose of the study was “…to assess labor market needs for workers with high technology skills during the next 10 years.” The assessement was to address inter alia, “The needs of the high technology sector for foreign workers with specific skills and the potential benefits and cost to United States employers, workers, consumers, postsecondary educational institutions and the United States economy, from the entry of skilled foreign professionals in the fields of science and engineering.”

Ostensibly the purpose of the study was to better prepare Congress to deal with pressures for an extension of the H-1B visa increase when it expired in 2001. Congress, nevertheless, did not wait for the results of the NRC study. Earlier in October, prior to the report’s issuance, Congress increased the H-1B visa ceiling from 115,000 to 195,000 per year for an additional three years. In addition it created some loopholes so that some H-1B visas will not be counted against the ceiling.

The National Research Council is an offshoot of the National Academy of Sciences and is often called on by the government to provide professional expertise on scientific issues. Its membership is made up primarily of scientists from U.S. universities. For this specific study, a 16-person committee was formed of six academics, four representatives of high-tech firms, one U.S. Governement participant and five representatives of other orgaizations. It should be noted that U.S. universities apply for H-1B visas for visiting professors. In addition, universities look to the H-1B program to provide U.S. jobs for their foreign student graduates. Thus, a majority of the commission members may have been influenced by their institution’s direct interest in the continuation of and level of the H-1B program.

NRC Report Findings

The NRC committee did not find the “shortage” of high-tech workers, that the industry had been bewailing in their congressional lobbying efforts. Rather, the committee found that employment conditions could best be described as “tightness.” The employment field was broken into two categories. The first category (C-1) included the higher skills and higher wage jobs (development, creation, specification, design and testing). The C-2 jobs include the fields of application, adaptation, configuration, support or implementation. The report says that wages in C-1 positions rose between 1996-99 slightly faster than wages of other professional specialty occupations (3.8% to 4.5% vs. 3.2%) This differential suggested tightness, although not a high enough rate of increase to indicate shortage. The NRC committee said it was unable to come to asimilar finding regarding C-2 jobs because the data were not sufficiently precise.

Specifically addressing the role of the H-1B workers, the commission found that “…the current size of the H-1B workforce relative to the overall Category 1 IT workforce is large enough to exert a nonnegligible moderating force that keeps wages from rising as fast as might be expected in a tight labor market.”

Put less eliptically, Alan Merten, chair of the NRC workforce committee and George Mason Univ. president, told the Washington Post “We feel [the population of foreign workers] is so large that we are totally dependent on it, and it depresses wages.”

Finally, the committee “…found no analytical basis on which to set the ‘proper’ level of H-1B visas. Thus, decisions to reduce or increase the cap on H-1B visas are fundamentally political. The committeee also believes that the use of foreign workers will continue to be necessary for the immediate future, and that foreign workers will continue to make important contributions as described above, but policy governing the use of foreign workers must consider not only the benefits of admitting foreign IT workers but also potential negative effects on the domestic workforce, and take steps to ameliorate those negative effects.”

Univ. of California-Davis computer sciences professor Norman Matloff, the principal source of information challenging the high-tech claims of worker shortage, also was quoted in the Washington Post, commenting that the committee’s claims that it had insufficient data to say whether what level of H-1B workers might be appropriate is “…just a stalling tactic.” He continued, “I just don’t think there’s any question that they’re spinning this the industry way.”

Commentary

In the U.S. market economy, wages provide an indication of the attractiveness of a career option to U.S. students and influence decisions regarding career paths. The NRC finding that H-1B visa workers are sufficiently numerous to dampen upward wage pressures clearly means that the program distorts the operation of the market economy. The program can have the effect, therefore, of discouraging the flow of U.S. students into this field of study at a time when the NRC concludes that steps should be taken to encourage more U.S. students in this direction.

The findings of the NRC were based on conditions prior to Congress’s further increase in the number of those visas this year. Thus, it is reasonable to assume that the conditions described by the NRC understate the conditions that may be expected to prevail in the industry for the next three years as a result of that congressional action.

In light of the findings in the NRC report — and the lack of evidence of the industry-claimed severe shortage of high tech workers — Congress’s action in increasing the visa program appears to have been premature and unjustified. Congress apparently chose to respond to the pleas (and campaign contributions) of high tech firms rather than to the data presented by FAIR and a coalition of high-tech professionals groups that opposed both the extension and the increase.