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by: William Dube November 2010
The transfer of domestic jobs to cheaper overseas locations, known as offshore outsourcing, has been an issue for manufacturing jobs for decades; now it is impacting white-collar jobs as well.
Some estimates suggest that by 2015, as many as 3.5 million white-collar jobs in high-wage fields like engineering, computer programming, and research and development could be moved to lower cost locations in India, China, and Eastern Europe. Dr. Ron Hira, an associate professor of public policy at RIT, believes that this trend is having severe short-term and long-term repercussions for American workers and inhibits our ability to compete in an increasingly innovative and high-tech world.
"Outsourcing is not a new problem," Hira says. "There have been serious concerns surrounding the movement of domestic jobs to lower cost locations for close to three decades, particularly in the manufacturing sector. However, the current trend involves not only a new class of employees—middle class, white-collar workers—but also the movement of laboratories, R&D centers, and intellectual capacity to foreign countries. These areas have historically been America's competitive advantages, but we are now outsourcing our capacity to innovate."
Princeton University economist Dr. Alan Blinder estimates that approximately 30 percent of American jobs are vulnerable to offshoring. In addition, the U.S. now runs trade deficits in high-tech products (those products that require a large amount of R&D to produce), many corporate research and development facilities are moving overseas, and a number of U.S. universities are training America's international competitors. In addition, significant domestic production capacity in computer hardware, electronics, and high-tech manufacturing—and the high-skilled workers that go with these sectors—have been outsourced.
"If corporations are not doing basic research and complex work in the United States, the nation ultimately loses the capability to develop cutting-edge products, concepts, and companies," notes Dr. William Lazonick, author of Sustainable Prosperity in the New Economy: Business Organization and High-Tech Employment in the United States and director of the Center for Industrial Competitiveness at the University of Massachusetts Lowell. "Ron Hira is a leader in analyzing how the globalization of the high-tech labor force is affecting sustainable employment opportunities in the United States."
For close to a decade, Hira has been at the forefront of the effort to analyze the impact of outsourcing, identify its causes, and advocate for policy reforms that will better protect U.S. workers and improve our overall innovation capacity. His 2005 book, Outsourcing America, coauthored with his brother Dr. Anil Hira, a professor of political science at Simon Fraser University, was one of the first comprehensive analyses of high-skill outsourcing and the corporate and government decisions that have increased its development. The book was a finalist for the Independent Book Publishers Association's Benjamin Franklin award for best business book in 2006, and a second edition was released in 2008.
"Current government practices, including U.S. high-skill immigration regulations, taxation laws, and corporate offshoring policies, are accelerating in the movement of U.S. jobs overseas and reducing our overall research and development capacity," Hira says. "Through my research, advocacy, and organizing efforts I have worked to trigger stronger ction to improve trade, manufacturing, and immigration policies and enhance the American economy as a whole."
Hira has testified before Congress on the impact of outsourcing on American workers, helped develop a series of congressional hearings on national innovation policy, and served on the working group for the Council on Competitiveness' National Innovation Initiative. In addition, he serves as a research associate for the Economic Policy Institute, a Washington, D.C.- based think tank, where he has authored a number of national offshoring reports and assisted in putting together a series of panels on the current state of economic development in the United States. He has also worked to increase the overall profile of the outsourcing debate through a host of national and international speaking engagements and frequent appearances on national television, including CNN, CNBC, PBS, and NBC.
In addition to his national efforts, Hira has worked to assist the Rochester region in publicizing the impact outsourcing has had on the local economy and improving its high-tech business environment. He hosted a regional hearing at RIT of the U.S. China Economic and Security Review Commission, a congressional advisory committee focused on U.S. trade policy that featured local business, labor, and government leaders. The hearing investigated the impact of trade with China on the western New York economy.
He also co-leads, with New York State Assemblyman Joseph Morelle, development of Rochester and the Innovation Economy, a speaker series that brings national innovation experts to Rochester to meet with local leaders and discuss best practices and opportunities for expansion.
"Having witnessed the devastating impact of outsourcing on the people I represent, I'm encouraged to see Ron Hira out there on the battlefield, asking the tough questions," says Congressman Donald Manzullo (R-IL) who held one of the first national hearings on offshoring in 2003. "He provides solid, thoughtful policy recommendations for government and business leaders, and his work should be required reading for every corporate manager and political leader in America."
A key focus of Hira's recent research efforts has been on high-skill immigration, particularly current government policies related to H-1B and L-1 temporary worker visas for skilled foreign labor.
The H-1B is a three-year, non-immigrant visa, created under the 1965 Immigration and Nationality Act, which can be renewed once for an additional three years. The visa provides employers with the opportunity to temporarily employ foreign workers who possess at least a bachelor's degree. Employers can sponsor applications for permanent residence for their workers. The L-1 visa is a non-immigrant visa that allows for intra-company transfers within multinational corporations. Unlike the H-1B, L-1 workers must only possess specialized knowledge regarding the general company operations; no higher educational degree is necessary.
However, despite claims from employers that they use skilled guest worker visa programs to attract talented foreign workers and help them remain permanently in the United States, evidence shows the visa programs to be increasingly a means to help outsource U.S. jobs or recruit cheap temporary labor.
"Some companies are gaining an unfair advantage by using the H-1B and L-1 visa categories to pay substandard salaries and suppress benefits and working conditions for foreign and domestic workers," says Dr. Ray Marshall, professor emeritus of economics and public affairs at the University of Texas at Austin and a founder of the Economic Policy Institute.
Hira authored a 2010 EPI report, "Path to Skilled Permanent Immigrants or Cheap Temporary Labor," which examined the 20 U.S. employers receiving the most H-1B skilled worker visas and the 20 receiving the most L-1 visas. The results indicate that, despite claims to the contrary, on average, employers actually apply for permanent residence status on behalf of just 13 percent of their H-1B workers and 7 percent of their L-1 employees. In both visa programs, it is the sponsoring employer—not the worker—who is permitted to file for permanent residency on behalf of the worker.
"Proponents of expanding these visa programs argue that it's in our national interest to attract the best and brightest workers from around the world and to keep them here permanently," says Hira. "But these employers are saying one thing and doing quite another. They are spinning these workers through a revolving door in order to drive down wages and help send more jobs overseas."
The analysis shows that in practice many employers use guest worker visa programs simply for temporary labor mobility and reduced labor costs, not to bring needed skilled foreign workers permanently to the United States. For example, according to U.S. Department of Labor records, an international computing firm, which ranked 10th in H-1B use and 14th in L-1 use in 2008, applied for permanent residence for none of its H-1B or L-1 workers.
Hira argues that in some cases foreign workers are brought to the United States for job training by American workers, then after the training, foreign workers return home and do the same work for less pay, while the American workers may be laid off. In other cases, foreign workers are brought to the country temporarily to coordinate operations between the U.S. and workers in their home countries often because they can be hired to do the job more cheaply.
Hira calls for a series of reforms to current U.S. policy to reduce misuse of the visa programs and more properly protect both American and foreign workers. These changes include:
"If the goal of our skilled-immigration policy is to capture the best and brightest, then we ought to align our policies to meet those goals," Hira says. "When skilled foreign workers are needed we should rely primarily on permanent immigration to supply them.
"Several reform measures to the program have been proposed and are now working their way through Congress, and it is my hope that guest worker visas can be overhauled to ensure that foreign workers cannot be exploited and American workers are not undercut," he continues.
Outsourcing might be good for American corporations, but it's not necessarily good for American workers, and it's likely to be bad for the American economy in the long run. Instead of American companies competing against foreign rivals—which was the case in the 1980s when American semiconductor, auto, and steel manufacturers lost market share to Japanese manufacturers—companies are now pitting their American workers against their overseas counterparts. This changes the political dynamics and often leads to American companies advocating for policies that are harmful for American workers and the economy.
"Substantial reforms are needed to numerous areas of government policy because much of what outsourcing companies do to damage American labor, product, and service markets is perfectly legal," adds Dr. Ray Marshall, who served as U.S. Secretary of Labor under President Jimmy Carter when outsourcing first began to impact the American economy.
Hira does believe that the current national economic and political environment makes it more likely that real reforms can be implemented, but sustained action will be needed to affect real change.
"There is more attention to offshore outsourcing now due to enhanced media coverage, the 2008 economic collapse, and the persistent unemployment problem," Hira adds. "Sensible reform is being fought by those benefiting from outsourcing. Only through an active public, and more attention by policymakers to these complex problems, will we be able to craft the right solutions. The alternative is that America will continue to lose high-wage jobs and its capacity to innovate."
Highly skilled jobs in the United States are in increasing danger of being outsourced to lower wage countries. Dr. Alan Blinder, economist at Princeton University and former vice chair of the Federal Reserve, has developed an offshorability index rating the vulnerability of occupations to being outsourced. The scale goes from 25-100, with 100 being the most vulnerable to being offshored. Any rating above 50 indicates an occupation that is offshorable, and above 75 is highly offshorable. Blinder bases the index on the interpersonal demands of the occupation, the ability of other countries to perform the job more efficiently, and employers' ability to compensate foreign workers at reduced rates compared to American workers.
|*||Estimates based on United States Department of Labor, Bureau of Labor Statistics Occupational Employment and Wages for May 2009|
|#||Estimates based on PayScale.com data|
|§||Estimates based on J.M. Gemini's Guide to China Markets|
|†||Estimates based on Phillipines Department of Labor Statistics for July 2006 and August 2008|