STEM, Immigration, H-1B Visas, and Wages

There is no diversity crisis in tech:

Repeat after me: there is no “diversity crisis” in Silicon Valley. None. In fact, there is no crisis at all in Silicon Valley. Silicon Valley is doing absolutely gangbusters. Apple has $200 billion in cash reserves and equivalents — and a market valuation of about $630 billion. Amazing. Facebook now garners a billion daily users. This is a nearly unfathomable number. Google is worth nearly $450 billion and has $70 billion in cash on hand.

This is not a crisis. Silicon Valley is swimming in money and in success. Uber is valued at around $50 billion. Companies like Airbnb are remaking travel and lodging. Intel is moving forward into the global Internet of Things market. South Korea’s Samsung just opened a giant R&D facility in the heart of Silicon Valley. Google and Facebook are working to connect the entire world. Netflix is re-making how we consume entertainment.

Silicon Valley is home to the next phase of the global auto industry. Fintech and biotech are transforming banking and medicine. The success of Silicon Valley is not due to diversity — or to any bias. Rather, to brilliance, hard work, risk taking, big ideas and money.

Want to be part of this? Great! Follow the example of the millions who came before you. Their parents made school a priority. They took math and science classes, and did their homework every night. They practiced ACT tests over and over. They enrolled in good schools and focused on English, Political Science and Humanities.

Okay, that last bit is not true. They took computer programming, engineering, chemistry — hard subjects that demand hard work. They then left their home, their family, their community, and moved to Silicon Valley. They worked hard, staying late night after night. They didn’t blog, they didn’t let their skills go stale, they didn’t blame others when not everything worked out exactly as hoped.
Are you doing all of these? Are you doing any of these? Do them!

This is hilarious to read and also true. Some people insist the economy is weak because of too much wealth inequality or not enough job creation, and here we have Silicon Valley in a wealth-creation boom. If you’re failing to participate post-2008 tech boom, maybe blame low-IQ, majoring in a low-ROI subject, or a lousy work ethic – not discrimination, crony capitalism, or other imagined roadblocks. Not to make this too political, as epitomized by the likes of Sanders, we’re becoming a nation of crybabies looking for excuses and scapegoats for our own failings, while wishing ill upon the successful. We want to believe IQ is not important and that the only way people get ahead is through connections, not competence. People are getting rich for being smart and creating economic value, not by sitting around and whining all day.

We keep hearing about how foreign tech workers are displacing native tech workers and suppressing wages, so I decided to investigate the veracity of these arguments.

A report from Brookings sheds doubt on the belief that foreign tech workers are undercutting wages of American tech workers:

H-1B visa holders earn more than comparable native-born workers. H-1B workers are paid more than U.S. native-born workers with a bachelor’s degree generally ($76,356 versus $67,301 in 2010) and even within the same occupation and industry for workers with similar experience. This suggests that they provide hard-to-find skills.

And from a report, H-1Bs Don’t Replace U.S. Workers:

Furthermore, foreign workers with a bachelor’s degree or higher actually had 4 percent higher median earnings in 2013 than native-born workers, which discredits the idea that foreign workers are“undermining” the wages of Americans.

Also from the report:

If employers were turning to H-1Bs to cut labor costs, we would expect petitions to rise during times when employers are laying off experts in computer and mathematical fields, which include 60 percent of H-1Bs. This classification includes computer and information scientists, computer systems analysts, software and web developers, computer programmers, actuaries, and other similar positions. It excludes positions at tech companies that do not involve mathematics or computer expertise.

Chart 1 compares the unemployment rate in these occupations to the pace of H-1B applications, as measured by the number of months before the cap on visas was reached. If the H-1B opponents’ theory is correct, we would predict that the cap would be reached faster as the unemployment rate increases when companies are looking to cut back on labor costs. But the opposite is true. When companies begin to shed workers, they also decrease their requests for H-1Bs.

The number of H-1B visas has stagnated due the cap which is limited to 65,000, relative to the much more common D1 visa:

Also, the quantity of H-1B visas has been stagnant for over a decade. And STEM jobs are hard to fill, further lending credence to a shortage:

In a statistical analysis of over 50,000 openings, we find that those requiring STEM knowledge take significantly longer to fill, even controlling for requirements for education, experience, training, and managerial knowledge, as well as wage rates and metropolitan area location. The most commonly requested H-1B occupations in each metropolitan area also take longer to fill.

From US News and World Report: Short on STEM Talent

Moreover, many people are economically better off with STEM skills. It’s often noted that college graduates out-earn those with only high school diplomas, and among workers with college degrees, STEM majors earn some of the highest salaries.

Likewise, jobs are more plentiful in STEM fields, which is why the unemployment rates are low for grads with these degrees. According to the Conference Board, there are currently three job vacancies advertised online for every unemployed computer worker; by contrast, there are more than six unemployed construction workers per vacancy.

It pays to be smart. STEM jobs, unlike most blue collar jobs, pay well, have comfortable working conditions, and are impervious to macroeconomic swings. The housing sector was roiled in 2006-2008, resulting in the loss of many construction jobs that have not returned since due to the vast oversupply of housing that remains to this day. A lot of low-IQ but well-paying clerical jobs in the housing/financial sector were lost in 2007-08, which too have not returned. Ditto for the manufacturing sector, which has been in decline since the 60’s:

Then in 2014-2015, the oil/energy sector imploded, resulting in the loss of even more blue collar jobs. A lot of low-IQ but high-paying clerical jobs in the housing/financial sector were lost in 2007-08, which too have not returned. Meanwhile, despite a small overblown hiccup in 2001-03, the quantity and salaries of STEM jobs keep rising, with no obvious headwinds:

High IQ jobs pay more and offer superior job security. Software developers, for instance, saw salaries soar 26 percent over the same period, culminating in an average of $82,000 in 2013, up from $48,000 in 1980, which agrees with the post-2008 theme of competence, IQ, and technical ability being more valued more than social skills.