back to article Study suggests US companies use overseas workers to cut wages

An extensive study of the US labor market has shown that the skills shortage which technology firms are constantly complaining about is overstated and firms may instead be using overseas workers to drive down wage costs. In a paper for the Economic Policy Institute by Hal Salzman of Rutgers University, Daniel Kuehn of American …


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  1. Combat Wombat

    In other news...

    Water has been deemed to be "wet"

    Sky has deemed to be "blue"

    Bears reveled to dedicate in woodland areas

    Pope revealed to be of the catholic faith.

    1. Anonymous Coward
      Anonymous Coward

      ...And so the grand LIE is exposed...

      They've been chasing down wages for years. Everyone knows this, we've all felt it as workers in the tech industry. But it was always played down officially, like some dirty little secret. That's globalisation at its finest my friends...

      Soon we'll all be competing on a par with Indian and Chinese wages when local Cost of Living is accounted for.... Slowly but surely we'll have world-wide pay equalization. I now live in South America and work remotely for companies in 1st world countries at a discount. But that little arbitrage will only last so long....

      1. henrydddd

        Re: ...And so the grand LIE is exposed...

        At last I finally know why the Republicans are big on expanding VISAs for foreign professionals, and opening up a guest worker program. They want to drive wages down so that the 1 percent can get more money. Simple.

    2. Gray

      Re: In other news...

      I propose the Pope to dedicate your woodland areas, whereupn the bears will gather to defecate therein.

    3. Brewster's Angle Grinder Silver badge

      Re: In other news...

      I've watched you Americans complain about this for years. Finally, an academic proves your conjecture with the kind of rigour that might impress policy makes, and what do you do? Complain it was obvious all along. If that's your attitude, I'd be campaigning for foreign workers, too.

      1. Destroy All Monsters Silver badge

        Re: In other news...

        Well, dicha know that there are still studies that are being pumped out that have to demonstrate that Hoover and in particular FDR actually are the main causes of the Great Depression, and FDR is no way an enlightened economic fixer? Known in the 30s and obvious to the meanest intelligence, but apparently it still is unclear to the column writes of the NYT and the Indy.

        People just can't into the most basic economics.

        1. hayseed

          Re: In other news...

          Some folks think the inflexibility of the gold standard contributed.

      2. Nuke
        Thumb Down

        @Brewsters Angle Grinder - Re: In other news...

        Wrote :- "what do you do? Complain it was obvious all along. If that's your attitude ......"

        It is not an attitude, it is a fact. It was and is obvious all along.

      3. Tom 13

        Re: kind of rigour that might impress policy makes

        Guess you missed the bit where it said it was for EPI. Which means its the sort of dredges even the National Inquirer wouldn't see fit to print on this side of the pond. If you aren't familiar with the National Inquirer if you think of EPI as the equivalent of the Tobacco Institute, you'll be on the right wavelength.

    4. Field Marshal Von Krakenfart

      Re: In other news...

      Wrong icon Wombat.....

      <---- use this one

  2. BornToWin

    No shitze Sherlock

    Ya think?

  3. Anonymous Coward
    Anonymous Coward

    Well America was built using slave labor ...

    ... and is now sustained using cheap foreign labor. Thats what makes America The Great Country it is today.

    1. Destroy All Monsters Silver badge

      Re: Well America was built using slave labor ...

      1) LOLNO

      2) If you think Prakash is cheap, think again. And consider the 30/70 split.

      3) America is not a Great Country, it's a monetary cripple on its last wheelchair tires.

  4. Anonymous Coward
    Anonymous Coward


    "Study suggests?"

    It's Microsoft who is always complaining about a "shortage of skilled workers". Which is completely false: they don't want to pay software egineers market salaries. If they could only pay minimum wage with no benefits.

    Don't expect anyone in the current Aministration, or Congress, to stand up to Microsoft. They just got another 3000 H1-B visas handout the other week.

    1. Steve Knox

      Re: Shocker!

      It's Microsoft who is always complaining about a "shortage of skilled workers".

      And their products back that up!

  5. Anonymous Coward
    Anonymous Coward

    We've done this one before .. So I'll save everyone some time

  6. silent_count

    Bog standard economics

    1) Employers whine about lack of people who are skilled at producing $WIGITs

    2) Government imports/schools educate more $WIGIT creators.

    3) Larger pool of employees allows employers to drive down wages.

    4) Less money spent on employing $WIGIT creators allows management to pocket excess...

    5) profit!

    If there really is a skills shortage, show me the corresponding increase in $WIGIT creators' wages. If you can't, then shut up about about the damn skills shortage.

    1. Anonymous Coward
      Anonymous Coward

      Re: Bog standard economics

      What's wrong for a business to reduce the cost and improve profit? Isn't that all business is all about?

      1. Nuke
        Thumb Down

        Re: Bog standard economics

        Wrote :- "What's wrong for a business to reduce the cost and improve profit?"

        If it makes the nation poorer as a whole. That is why there are regulations about business. For example you cannot defraud customers to make a profit, nor use slaves, nor import cheap foreign labour beyond an allowance (the slave trade's modern equivalent). It is that level of allowance, somewhere between zero and infinity, that this is about.

        1. Captain Save-a-ho

          Re: Bog standard economics

          If it makes the nation poorer as a whole.

          If you had any understanding of economics, you'd realize how completely impossible (and consequently, stupid) this statement is. This is categorically fallacious on every level.

    2. Destroy All Monsters Silver badge

      Re: Bog standard economics

      > Bog standard economics

      Someone sure is phoning it from the "Someone Stole My Wages" Labor Union Commitee.

    3. Captain Save-a-ho

      Re: Bog standard economics

      If there really is a skills shortage, show me the corresponding increase in $WIGIT creators' wages. If you can't, then shut up about about the damn skills shortage.

      Depends on the area of IT. In the area of network engineering/architecture, wages have gone up considerably since 2004 (at least for me and all the blokes I know in the business). For server admins, probably not so much since they're competing with a larger, global labor pool and fewer employers (think, demand) due to outsourcing deals.

      In truth, it does generally seem to me that fewer people are electing to go into IT as a field (despite your assertions in #2-3 above), so the wages fall can't continue in some sectors without a new influx of talent globally.

    4. Tom 13

      Re: Bog standard economics

      Not an entirely complete economic analysis. If the wages go up, then the price of the widgets go up. Depending on the slope of the demand curve, demand may fall off to quickly to continue to produce said widgets at a price where you can reasonably continue to talk about a market for the widget.

      In this particular case I don't expect the slope to be steep enough for that to be the issue, but that still needs to be part of the analysis.

  7. Anonymous Coward
    Anonymous Coward

    There's never a shortage of skilled workers, but there's a shortage of qualified skill workers that are willing to do the work for the pay it's offered.

    1. Anonymous Coward
      Anonymous Coward

      Slight correction.....

      Your comment should read:

      There's never a shortage of workers, but there's a shortage of qualified skilled workers that are willing to do the work for the pay it's offered.

  8. Charles Manning

    THere is a shortage of skilled people

    Those that come straight out of university etc are not skilled. Many are borderline useless.

    As has been pointed out in many industries it takes a 10,000 hours (a good 5 years of work) to become skilled.

    During those 5 years the new grads are not worth hiring at inflated rates. They are only worth H1B1 salaries. However the kids have aspirations and a sense of entitlement. They won't work for what they are worth. So instead they cut to other industries where they can earn more. Result: they never really become skilled.

    Gotta laugh: as I write this a pop-up ad offers me good money working on a mine in Australia.

    1. Kevin 6

      Re: THere is a shortage of skilled people

      Hard to get skills when the bottom level entry positions require 5-10 years exp, over $1k of certs in very niche things all for a whopping $10-12 an hour tops, and HR drones pass over anyone that doesn't tick every box of what they are looking for.

      There is no shortage of workers that can usually be easily trained to become skilled, but there is a gigantic shortage of companies that will train new employees, or even give someone a shot.

    2. Anonymous Coward
      Anonymous Coward

      Re: THere is a shortage of skilled people

      Seeing popup ads? WTF do you know about IT then? burrrrrrnnn :D

  9. Dennis Systems Guy

    It's not the number . . .

    The problem organizations like IBM, Microsoft, Google, Oracle, etc. have isn't the NUMBER of STEM graduates in the US -- it's their composition. This is just my personal experience, injest large grain of salt, but we have plenty of people who can do HCI, network design, database design, software engineering, etc. But, if you need someone to write systems (ie. kernel) level code, crazy robust networking stacks, database implementation, or actually build a massively distributed system, we're pretty lacking.

    I'm a 3rd year PhD student, and I took a course on low level network (more than UDP but less than full TCP) implementation in the Linux kernel. There were 2 Americans in the room -- me and the professor (now retired). Every other student was an Indian on a student visa. It was a hard class; it kicked my butt all around the room. I could have easily taken a class that required a lot less time, effort, and thought and fulfilled the same requirement, but I was and am generally interested. That scale seems to balance a lot differently for a lot of younger American workers than it did for me. Twenty Indian guys and gals took the class and largely did better than me, the only American born student.

    The real problem is that our STEM graduates are often taking the easy way out. You COULD take that physical chemistry class, or you could take the chemistry education class -- they fulfill the same requirement. But when you get out there in the job market, nobody wants to know that you found a better way to teach students about reaction X or Y. They want to know if you can do the job.

    I know PhD graduates who can only program proficiently in a single programming language. I know 12. I know PhD graduates who couldn't manage their own workstation. I could manage anything from OS/2 to Slackware to Windoze to BSD (just please keep me away from that Mac). BUT, that's because I'm interested in learning all the things. It's a personal work ethic, interests, and character thing. If this study lumps me with the guy who can only function in Python on a Ubuntu box, it misses the greater point. It's not just graduates we need -- it's skills. And, in my experience, the effort it takes to get certain skills scares domestic students off wholesale.

    The problem in America's hiring of STEM, and especially CS/IT, is that what they get in school is not what is expected in the industry. I know people in the field who have 0 higher education who have had to fire doctorate bearing people for incompetence. If we really want to analyze this, we need a better way of describing educational outcomes than just "Got a BS/MS/PhD in CS." Not all of those are created even remotely equally. . . at least not where I've been.

    1. Kenno

      Re: It's not the number . . .

      Sure except what you learn today becomes obsolete tomorrow. Even if it is bleeding edge right now.

      While you can constantly retrain and retrain and retrain, you can only do it for so long before it starts to outrun you and you fall behind.

      I remember the late 90s and early 00s, work do an 10 hour day job, then it was a case of study, if you were lucky your boss would send you to a training provider. If you weren't you'd have to buy a text book or pay for your own training. You can only keep this up for so long as all this study and work means this mythical thing called life, relationships etc suffer because of it. Even if you're good at your job doesn't mean you won't get fired either.

      1. madestjohn

        Re: It's not the number . . .

        Damn ... I don't work in tech at all but you pretty much described my life, ... Except the study bit was just more work, plus an admittedly fair bit of drinkng.

        ... You pretty much defined everyones life in general ... Damn, now i really need a drink

  10. Gray
    Big Brother

    A Land Where Only $$$ Rulez

    I once thought a nation existed for the sake of its people. Silly me; it seems the people exist for the sake of the corporate gristmill, and the government taxmill.

    I once thought a university education was desirable to produce an enlightened people; corporate CEO's complain that an education mismatch exists: university graduates are insufficiently specialized to become an instant cog in their gristmill.

    I once thought that promising young people would be regarded as a national asset, to be supported in their quest for an education; it seems that increasing numbers of US students emerge with an undergraduate degree, a crushing burden of student loan debt, and a life of indentured servitude to US banks.

    I once thought that government and corporate interests existed to further the prosperity of the nation and its people; that all would rise and fall together. Now it seems the people exist for the sake of the corporate gristmill, and the government taxmill.

    Didn't that just go in a circle?

    I'm reminded of a time in a western city where I worked in graphic arts. The major printing houses chose not to train skilled workers; they preferred to poach journeymen workers from the other printing houses. I see that has expanded to a global reach: rather than train its own journeymen, US corporations prefer to poach from outside.

    1. skeptical i

      So, is the point of government to serve its people? [was: A Land Where Only $$$ Rulez

      Or to serve them up with au jus and a side of fries? Looks a LOT like the latter, don'cha' think?

      <-- throw another on the barbie

  11. Anonymous Coward
    Anonymous Coward

    Not only in the U.S.A

    Same problem elsewhere.

    I know from bitter experience that 'skills' are based on exams where the answers can be found easily on the Internet (usually the question/answer word for word). This is then sold to any potential customer as 'We have experienced people - they all have to pass exams'. What you get is (usually) a drone who has no experience and can't think for himself. Meanwhile the local guys with the experience struggle to find jobs because the drone is so much cheaper. And this bull-shit about no skills being available locally - that just boils down to the companies in question claiming this is the case. Rather than even try to source local engineers they would rather ship in another inexperienced drone or 50. I could go on but I think I will bust a blood-vessel.

  12. James 51

    I use to work for a company in the UK that was an off-shored IT support branch of a US company. Their policy was to hire only non-IT graduates and then train them up so they could pay them 50% of what would normally be expected for doing those jobs. The local government paid for their training and a large part of their wages for the first year. After about 6 or 7 years the bribes ran out and then we started to hire people directly from eastern Europe and India to fill positions.

    If the skills gap was as wide as it is made out to be, then you would expect market forces to push people into fill it from the local economies, particularly with the unemployment rates the western world is experiencing.

    1. Captain Save-a-ho

      Complete Bollocks

      If the skills gap was as wide as it is made out to be, then you would expect market forces to push people into fill it from the local economies, particularly with the unemployment rates the western world is experiencing.

      Market forces are working as they are designed for those companies not on the government dole. You just stated that market forces weren't at work, as local government was interfering. In your example, the market pressures didn't come to bear until the gov't money ran out. By that time, cheaper labor sources from abroad overtook local sources who have been demanding a job because they believe it to be a right (my assumption, but likely).

      Unemployment rates in IT are quite low (some say less than half the overall rate). But don't let facts get in the way of a fine whine.

      1. James 51

        Re: Complete Bollocks

        "overtook local sources who have been demanding a job because they believe it to be a right (my assumption, but likely)." I have never heard of anyone demanding a job because it was their right (other than Prince Charles but that's an argument for another day). BTW because of not hiring qualified IT staff by definition they were bringing in people struggling in other lines of work. Sometimes that paid off, the best coder on one team I worked was a former accountant. Sometimes it didn’t.

        I didn't say that all of the internally sourced workers were cheaper. The ones from Eastern Europe were paid even less than the locals when they started but some of the workers from outside the EU were actually paid more than the local rate for qualified professionals doing their jobs. Their visa was tied to the job though so they couldn't afford to make a fuss when asked to do anything that might raise an eyebrow (nothing illegal, just not best practice or put up with poor managers). I think the idea was to train them up and then they could go back to their home countries and open new out sourcing offices there. That tended to back fire though. Most (but not all) of them found other local firms that would sponsor a visa and pay them more and they jumped ship, got a better offer back home or just got homesick and decided it wasn’t worth it.

  13. izntmac

    It is sad the USA is doing this

    It is sad to see American companies doing this. This is one of the practices that is hollowing out the middle class in America and also goes along with our loss of manufacturing job. The US has lost a lot of its economy over the past 30 years in manufacturing and in technology. Pick up an American branded computer from the late 1990s or early 2000s and it was made in the USA or at least assembled here. Now it is cheaper to make them in China and ship them. The US government also sign free trade agreements as opening up markets for US products. Usually these end up costing US in manufacturing and in other areas. This is sad and is causing our country's decline.

    1. Destroy All Monsters Silver badge
      Big Brother

      Re: It is sad the USA is doing this

      "This is one of the practices that is hollowing out the middle class in America and also goes along with our loss of manufacturing job."

      Absolutely not.

      The economy does not all have the same behaviourial logic as a set of front-to-back evaluated IF-THEN rules.

      The fact that you are even able to write this using a dirt-cheap ADSL is proof enough that cheap manufacturing and international trade is a Good Thing.

      What is actually "hollowing out" stuff is the agressive government sector: money printing to the benefit of the 1% (euphemistically called "necessary bailouts" by the smug operators or "recovery efforts" by useful idiots), immense amounst of debt, foobared interest rates with no relationship to market valuation (inciting people to malinvest), and revectoring of savings and production capacity via taxes and inflation to non-productive uses: wars, wall street casinos, greenfagging, homeland security and an immense army of bureaucrats.

      It's a bad sign when you cannot be productively employed but if there is always a job top be had at the nearest recruiting office. It has nothing to do with evil capitalists.

      Further rather to-the-point reading in The Great Deformation, now at hollowing-out bookstores.

      1. Nuke

        @Destroy All Monsters - Re: It is sad the USA is doing this

        Wrote :- "The fact that you are even able to write this using a dirt-cheap ADSL is proof enough that cheap manufacturing and international trade is a Good Thing."

        The cheap ADSL is only possible because some over-worked Chinese girl is making it for a handful of rice. You might think that is a Good Thing for *you* but :-

        1) Is it a good thing from a world point of view? Sounds like we are back as it was in the UK around 1700-1900 when the middle classes lived off the subsisting poor, but now on an international scale. Yes, I know what you are going to say, but those mill owners also said their workers were "better off" than if the mill were not there.

        2) This situation can only be temporary. As manufacturing moves more and more to India and the East (Africa next) such places will be able to charge higher and higher prices. Eg, if China were to become the only place steel or ADSLs were made, they could charge other nations whatever they like. Why will they be content for ever with selling it cheap to the West? They might not even sell it for any price, as they will need it all for themselves when those ADSL factory girls all want cars.

  14. I think so I am?

    Its all about the skill level

    There is an entitlement issue with many of this generations below 45 year old. An its get worse and worse the younger you go. You have 16 year olds with the IQ of a bog brush thinking they can go to UNI get a degree in painting nails or learning about some war 400 years ago and come out the end strait into a £40-50k job.

    If all your skills allow if for cleaning bogs, better except that fact. Someone has to clean bogs and wash dishes its just to many people in the west think its beneath them even when they have no worth while skills.

    1. Anonymous Coward
      Anonymous Coward

      Re: "skill level"


      There is an issue with morons of all generations where they are actually incapable of writing a single coherent sentence and yet they think that their opinion is of value and others will pay attention to it.

      Maybe if you had bothered to listen in school you would be able to communicate with other intelligent beings. This might have helped you get a better job than cleaning bogs.

  15. Anonymous Coward
    Anonymous Coward

    For a moment, I thought I was reading a Mash article

    That's not the Institute for Studies, is it?

  16. Anonymous Coward

    I'm upset that Salzmann, Keuhn and Lowell are mentioned...

    And they forgot to credit Dr. Obvious!!

    Academia can be so harsh.....

  17. Anonymous Coward
    Anonymous Coward

    Mixed feelings about this

    I'm one of those imported to do "interesting" programming to the US and I have to side with some seemingly contradictory statements here. On one hand, I've been doing much more than just programming... I've rolled the functions of app analyst, quant researcher, app lead, and programming grunt into a simple person for well over a year at least once and when they sponsored my Greencard, in the middle of this horrible job crisis back in 2010, not a single applicant showed up saying that they could do everything that I did, so at least from where I stand, it seems that indeed there weren't any locals who can actually do what I've already done. On the other hand, I've always felt that I make less than what an American born would make if he could do all that I've shown I can do. Part of it is that the H1-B program basically means that chances are very high that it will take you 6+ years to go from hired fresh from gradschool to Greencard, during which you cannot change position or be promoted to something where your profile changes as your visa can technically become invalidated and you need to re-apply. I'm not sure about how you feel, but I think that it's during those first years where most growth will happen and working on an H1-B during that time you are forcibly kept in place.

    Don't get me wrong, I'm not saying that I earn badly (if you really want to figure out how much I make, I alone make it to the 80 percentile of household incomes for 2012 and together with my wife we make it up to the 90 percentile), I'm just saying that if I were American born I get this feeling that I'd be making quite a bit more.

    Perhaps the problem is that we've all accepted that nobody else should know how much we make. I think that this only benefits the employers, but not the employees. Otherwise, how do you know if you make too much or too little for what you do?

  18. Anonymous Coward
    Anonymous Coward


    I think the biggest problem isn't "skill shortage". It's "management disconnect".

    See, when your "boss", ie, the person who tells you what yo do, is different from the person who evaluates if you did a good overall job, who himself is different from the person who will actually approve of any kind of pay increase, it because extremely easy for bosses (because you now have 3 different bosses) to throw the ball around any time you attempt to negotiate your salary.

    This then makes it extremely easy for management to stonewall anything short of a pay decrease (remember, if you aren't getting at least inflation, your salary went down year on year), because now the person who will say "yes" isn't even the person you negotiate your salary with. If they come back with a no, you then basically have to call your "second boss" an incompetent idiot because he can't deliver what was promised, so another round of trying to fight for what you are worth.

    And that doesn't even include all the bogus "metrics", defined as the vaguest way they could say "he did his job", turned around enough to almost sound like 4 or more statements so they can give you good grades on 3, zero on the forth one and claim they did you a favor by giving you the minimum they are allowed to give this year, while turning around and giving the biggest rise they can to some idiot with a brown nose who's job it apparently is to screw up or denigrate anything you do.

    It doesn't matter if the skills you have are rare, you're good with them and the people you actually work for (IE your clients) love you.

    I won't even start on how HR thinks checked boxes on a checklist are the only way to evaluate people in IT.

    "What do you mean it doesn't matter if you don't know how to do X, you know how to figure it out? That's not on my checklist".

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