And so it begins. . .the war over jobs

We've been having some discussion, both on and off the blog, about the short-sighted notion of trying to "save" jobs for locals by discriminating against foreigners. Senators Grassley, Durbin, and Sanders put the toxic H-1B visa restriction in the TARP renewal, and now we're starting to see the fruits of this bad policy.

• Protests and wildcat strikes in Britain and Ireland over the employment of foreign workers in the construction and energy sectors.
• Bank of America has withdrawn formal job offers made to MBAs in the United States
• The government of South Korea is cutting work permits for foreigners by 66%.
• Mexico retaliates on trucking restrictions with tariffs.
  

I'm fairly confident that protectionist moves like this make the nativists happy. But the thing to remember is that the United States has much more to lose from a trade (or jobs) war that most other countries. Our firms are much more global than those of virtually any other country (with the exceptions of the U.K. and the Netherlands). Most large firms (Fortune 500) earn at least a third or their revenues in international markets. For many, the figure is more than two-thirds.

If India restricts U.S. presence (sales by firms, employment of US citizens), we have much more to lose than most trading partners. This is a classic prisoners' dilemma. It's tempting to think one country can impose restrictions in the interest of "fairness" or some other excuse. But other countries retaliate. And the downward spiral begins.

While the details differ, this is all reminiscent of the Smoot-HawleyAct -- which led to plunging global trade in the 1930s and made the Great Depression much much worse.

I hope we can pull back in time. But I'm starting to doubt it. If and when unemployment goes to 11 - 12% because large, global firms are slammed in foreign markets, I hope the nativists look back and realize what they've wrought. But I doubt they will. They'll just identify and mobilize against another convenient scapegoat.

South Korea to Slash Labor Permits

According to a report in Industry Week.com South Korea is planning to reduce the number of work permits it approves for foreigners to just one third of last year's figure to safeguard existing jobs amid the global downturn. The Korean ministry has been quoted as saying "The reduction in foreign labor is needed to protect job security not only for Koreans but foreigners as well who are already staying here."

This past March Bob referenced a discussion posted in a Growthology.org publication that stated the loss of skilled immigrants to the US would result in an economic catastrophe that will hurt US competitiveness for decades to come, if H-1B visas be restricted . I wonder if the Korean economy will be adversely affected in a similar manner by their ministry's decision. Check out the two articles above. I would be interested in any comments.

More on H-1B Visas

Phil Fersht over at Horses for Sources has an interesting post today on the H-1B visa issue. He cuts into the issue from a somewhat different direction than I did in my Feb 20 Detroit News editorial (link), but makes some points that are complementary to the argument I made there.

As you may recall, the Grassley/Durbin ameendment to the TARP program would make it extremely difficult for US firms receiving TARP program to employ H-1B visa workers. The H-1B visa program is designed to allow foreign workers withspecialty skills to come to the United States on a temporary basis when US firms can not find Americans to do the job. Note that the program requires the employer to pay prevailing wages.

My op-ed piece argued that the H-1B visa program helps save US jobs. The logic is that work is mobile. If firm's can't bring the people they need here to do the work, they will simply move the work to the people they want to employ.

The piece has created some hysterical backlash -- largely from message board nativists using pseudonyms. I'll deal with that in another post.

Phil makes two important arguments.

1. Durbin/Grassley will have a negative impact on US businesses.

The main point being that offshoring already exists. In most cases, H-1B staff are bringing skills into the country that are shared with onshore IT and operations staff to create a stronger learning environment for the host business.


2. We need to avoid isolationism, or businesses will move backward.

Hobbling firms from upgrading their IT systems, or managing their global operations by cutting them off from global talent will be counterproductive.

--- --- ---

A somewhat different take on things, but largely pointing in the same direction.

I heartily recommend Phil's blog (Horses for Sources). Check it out.

More on H-1B Visa Restrictions

The Detroit News editorial got quite a response. The comments on the DetNews site were amusing ("Kennedy is an idiot," or ""you wouldn't feel that way if Professor jobs were offshored.") The comments were undoubtedly heartfelt, but basically emotive primal screams.

Much more amusing were the emails that came to the WDI site. Apparently I'm a "traitor," a "corporate shill," an "elitist," and an "ivory tower idiot." Good to see that my correspondent's thesauri are getting a workout.

Back to the issue at hand, The Kauffman Foundation (which focuses on promoting entrepreneurhip) issued a report that agrees with the position outlined in the DetNews Op-Ed-- Genius Need Not Apply; We'll Take the American Guy Instead.

The money graphs:

Immigrants have contributed disproportionately in the most dynamic part of the US economy - the high-tech sector - co-founding firms such as Google, Intel, eBay and Yahoo. In addition, immigrant inventors contributed to more than a quarter of US global patent applications. Immigrant-founded US-based companies employed 450,000 workers and generated $52 billion in revenue in 2006.

"Losing these skilled immigrants is an economic catastrophe that will hurt US competitiveness for decades to come," said [Vivek] Wadwha.

It's worth a read. A worthy counterpoint to the furtive emoting that passes for policy discussion these days.

Detroit News Op Ed: Work Visas Stop Offshoring of High-Skill Jobs

Published a commentary piece in the Detroit News this morning, which was written in response to a very misinformed piece by Froma Harrop that ran about two weeks ago.

Here is the original piece by Harrop: Don't Expedite Offshoring with More Work Visas

Here is my piece than ran today: Work Visas Stop Offshoring of High-Skill Jobs

My submission tackled Harrop more directly, but the editors took out the direct references.

This should lead to some amusing venting in the DetNews comments section. As of 9:30am this morning, only one not-to-bad comment. But globalization tends to bring out the crazies, often with elaborate policy proposals that ignore basic economics or incentives. Should be interesting.