WSJ WadhwaWhenever I write about immigration, I hear heart-wrenching stories of computer workers who are unemployed and facing severe hardship. I get bombarded in the comments sections, on Twitter, and via email. Some people get so angry and xenophobic that they threaten me with violence. Their argument is that if there were indeed a shortage of talent, there would no unemployment in the technology industry; that technology companies are making false claims of shortages just so that they can hire cheaper foreign workers.

At the same time, the founders of technology startups in Silicon Valley say that their single biggest obstacle to success—after they have obtained funding—is a shortage of talent. They simply can’t find people with the skills that they need. Big companies such as Google and Facebook buy startups at ridiculously high prices—not for their products, but for their people. The tech industry has a name for this: the “acqui-hire.” There are frequent bidding wars for top talent, with big companies offering big money and startups offering big stock.

So is there a glut of technical talent in the U.S., or a dire shortage? The answer is: both. There are indeed tens of thousands of unemployed engineers—and there are shortages. The mismatch is between skill, location and need.

Some engineers are able to adapt to new technologies and are well worth the higher salaries that they demand. But they are often in the wrong parts of the country. Many are burdened by home ownership and the difficulty of relocating a family. To make matters worse, tech centers with the greatest demand—Silicon Valley and New York City—have the most expensive real estate and the highest costs of living. So these tech workers can’t move there.One of the biggest problems that software developers face is that technology changes rapidly. It is very hard to stay current. Over the past 20 years, we have witnessed a technology shift from mainframe computers to mini-computers (or servers) to personal computers and now to tablets. The languages and architectures for programming these devices keep changing—as does the way the technology is used. The younger generation is very comfortable with apps and social media and has an intrinsically different way of doing things with its tablets and smart phones.  So recent graduates with the latest skills are always in high demand. Older workers with obsolete skills are not.

The Brookings Institution documented this mismatch by analyzing the demand for foreign workers in metropolitan areas. It found that supply and demand for skilled labor varies by region. Demand for foreigners is highest in tech centers such as New York, Silicon Valley, Los Angeles, Washington, D.C., Virginia, Chicago and Boston. And, not coincidentally, these are the places with the lowest unemployment rates for engineers.

Ultimately, we shouldn’t be debating whether there is a shortage or a glut. Hiring foreigners is more expensive and more difficult than hiring locals, because of the visa fees and long lead times for visa processing. And companies face a backlash by anti-immigrant groups for hiring foreigners. So they do it only because they have to. There is a problem caused by the shortage of permanent-resident visas for people from high-population countries, such as India and China—which causes wait times to stretch into decades. While these workers wait for their visas, they are essentially stranded in the companies that sponsored them. They often receive lower salary increases than workers who can readily switch jobs. This is what creates the salary distortion that anti-immigrant groups complain about. It can easily be fixed by increasing the numbers of permanent-resident visas—so that the backlog is cleared and foreign workers aren’t tethered to the employer for too long—and letting the free markets do their magic.

It is best to let U.S. companies hire the best talent wherever they can find it and pay what they think their employees are worth.  If workers are underpaid but are free to change jobs, they will leave and join companies that pay market wages. Supply and demand will find a balance if we remove the regulations that are creating the problems.

Link to article on Wall Street Journal’s website

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  • Benji Bear

    I love your articles.

  • Markangelo

    What slum in the Silicon Valley do these cheaper foreign worker’s reside
    in if the US engineers cant afford to transfer there ?

  • JohnJGilstrap

    Vivek

    I caught your appearance on Bloomberg TV. I think you are
    spot on with respect to diversity challenge in these Silicon Valley/Alley
    companies with public asprirations or profiles. I wrote to Costelo a few years
    ago inquiring about doing high level work addressing the African Mercian marketplace on behalf of TW. My overtures fell on deaf ears. I think there is bubble aspect and even arrogance about the industry. People of color are disproportionately
    high users of many of these social media products yet you look around the industry and the companies and we are not represented in decision-making or mid management roles in any noticeable way. In my experience, firms void of this kind of diversity, lack ultimate market insight and ability to respond market trends with dexterity. In fact, the company becomes vulnerable to niche competitors – for customers and talent. If I were weighing investment in a stock (like
    Twitter) as an elite investor, the lack of diversity and even blindness to it,
    would cause me to pause. My motto is: there is danger in telling just a single story.

    http://www.johnjgilstrap.com

    John Gilstrap

  • jeanne

    Vivek,

    The new immigration bill promoted by fwd.us.com triples the number of H1B.
    The people on these visas almost never do top tier work. They work for half the rate of US employees and often without benefits. This is a cost issue not a capability issue. Since the recession began IT outplacement in the US is down by as much as 30 %. Tripling the H1B visas will not only exacerbate the issue but will eventually drive down the wages of all US IT personnel. To suggest that it skill based is disingenuous at best. Both older and younger workers can easily be trained for the skills required of the H1B employee. When we import engineering labor we erode the economy and destroy high paying job opportunities for our best and brightest.
    Vivek if I am missing anything I would be grateful to hear your thought. Thanks!

  • SR

    While I agree that immigration and visa regulation are the two aspects that lead to the imbalance of supply and demand for IT professionals, the companies usually fail to identify talent. There are varieties of intelligence covering talents that are often ignored by the traditional aptitude and IQ tests.

    The basic principles of any field,be it Computer Programming/Coding, Mathematics,Science and others have been the same, over the centuries. For example, 2+2 is still equal to 4 but it is your talent that can make it look like 22 or what chemicals you can mix to get a new solution, etc. You have to apply the basic theories to build something new and innovative. I firmly believe that skills can be taught but talent is something either a candidate possess or does not. Your willingness and your attitude should determine your worth, not your skills that keep changing with times.

    The organizations have to aqui-hire the best people wherever they are, as people are the single most valuable asset any company can have. The organizations that invest into their people are not likely to fail even if the entire infrastructure comes crumbling down. If my organization cares about me, invests in me, gives me the time to think creative and t, I will rebuild the organization from scratch, if needed.

    By
    A recent Computing Graduate on the path of becoming an obsolete talent

  • sakky

    {Note, I originally left these comments on the WSJ board where the above blog posting was first published. I repost my comments here.}

    Mr. Wadhwa:

    Regarding your comment that “there is no general shortage, there are
    regional shortages.” There is no fine distinction between a general
    shortage and regional shortages: the former is simply an aggregation of
    the latter…and could be solved by the market forces that you had
    previously invoked.

    For example, you say that rapid shifts in technology result in older
    tech workers lacking the currently marketable skills that new graduates
    possess. Sure, but given sufficient market incentives, many older tech
    workers would likely retrain themselves to learn those new skills.
    Many older tech workers have far more technically supple minds than you
    seem to give them credit for.

    {As a case in point, you are surely aware that most of the tenured
    faculty at the top university computer science departments – including
    at your current employer at Stanford – are men of middle-age or older.
    Why are these older men teaching computer science at the most
    prestigious universities in the world if older men are truly incapable
    of learning modern tech skills?}

    You also cite the burden of home ownership with (presumably)
    underwater mortgages, family relocation issues, and the high cost of
    living in NYC and Silicon Valley as impediments to labor mobility and
    resulting regional shortages. But again, why can’t these be solved
    through sufficient market incentives? Companies could provide tech
    workers with housing/moving assistance fees, including buying out
    existing mortgages and providing housing allowances for those workers to
    find housing in NYC and SV. They could provide temporary company
    housing for relocating tech workers. They could provide family
    relocation assistance, or, even periodic paid flights for those workers
    to visit their families.

    Ridiculous, you say? Why? That’s what company management gets. If
    a company wants to hire a new manager from another part of the country,
    they will almost certainly pay a hefty relocation assistance fee.

    Certainly the consulting firms and banks are not shy about paying
    relocation fees to fresh MBA graduates. Apparently Columbia University
    and NYU do not produce enough home-grown investment bankers for the Wall
    Street banks, so every year they pay to relocate boatloads of new MBA’s
    from places like Harvard, Wharton, & Stanford. Those banks don’t
    belly-ache about a NYC regional shortage of bankers and therefore lobby
    the government for a ‘banking visa’ to import thousands of foreign
    bankers. They pay relocation fees to obtain the talent that they want.
    So why is it so ridiculous for tech firms to provide relocation fees for
    tech workers to alleviate whatever regional shortages they encounter?

    The reason why many people oppose the H1B system is because it
    arguably deters companies from providing relocation assistance and other
    market-oriented maneuvers to alleviate whatever tech worker regional
    shortages they face. If you think that argument from your detractors is
    wrong, then you should present the empirical evidence that demonstrates
    that they is wrong {a.k.a. that those firms wouldn’t provide relocation
    assistance to tech workers anyway even without the H1B visa system,
    despite those same firms readily providing relocation assistance to
    managers}.