Kentucky Blues: House’s Outsourcing Bill Threatens McConnell’s Home State, Senate Majority

House Republicans have created a political headache for Senate Majority Leader Mitch McConnell as he tries to keep GOP control of the Senate.

On Wednesday, House Republicans allowed the Democrats to pass an outsourcing bill which dangles citizenship in front of hundreds of thousands of Indian graduates if they take more jobs from American graduates.

The House bill, HR.1044, passed Wednesday by 365 to 65 after a multi-year, stealthy lobbying campaign by Silicon Valley lobbyists which was fronted by ethnic advocacy groups. The lobbies were led by Mark Zuckerberg’ s network of Silicon Valley investors and other technology companies, including Jeff Bezos’ Amazon, and were aided by a near-total blackout by establishment media outlets, such as Bezos’ Washington Post.

The bill now goes to the Senate where the tech lobbyists and investors have already pushed a similar job-outsourcing, salary-cutting, American-replacement bill to the Senate floor.

This outsourcing push is very unpopular among the Republicans’ MAGA base who have felt first-hand the painful impact of legal and illegal immigration on their own incomes, families, and status. The HR.1044 bill is not an amnesty, but it and the Democrats’ DACA amnesty are “crucial,” said one of the Zuckerberg lobbyists who pushed HR.1044.

The bill is also a threat to the careers and prosperity of the many swing-voting college graduates needed by President Donald Trump and GOP Senators in November 2020. The GOP’s share of those college-graduate voters lurched down in 2018, giving the Democrats control of the House.

The bill also extends and deepens the federal government’s implicit policy of rewarding coastal states with imported labor. That regional favoritism discourages investment in the heartland states, including McConnell’s home state of Kentucky and Sen. Susan Collins’ home state of Maine.

Democrats are successfully using the graduate-employment crisis to squeeze many votes from American graduates. In effect, Democrats promise direct government fixes to the problems that they impose on graduates, such as college debt, housing costs, and stalled wages. That tactic is being used in Sen. John Cornyn’s Texas where cheap-labor migration has swelled the Democratic-voting cities and has sucked investment and jobs from the state’s GOP-leaning smaller cities and towns.

The House’s outsourcing vote leaves McConnell is a political jam: He can take the heat from business lobbyists by blocking the Senate’s bill, or he can let the bill pass and hope that the betrayed blue-collar voters and the nowhere-to-go middle-class voters somehow vote for the small-government side of a unified, pro-outsourcing Congress in 2020.

McConnell has “to evaluate this legislation on several different levels,” said Jessica Vaughan, policy director at the Center for Immigration Studies. Vaughan continued:

He ought to be considering the [economic] impact on his homestate of Kentucky. As Majority Leader, he has to consider also how damaging it will be to Republicans to allow this through as a victory for [Sen.] Kamala Harris and Democrats in general, but also for the large Republican constituency which is going to be the air beneath the wings of President Donald Trump’s campaign.

 

Federal Policy

The federal government already allows companies to keep a foreign workforce of roughly 1.5 million foreign graduates in the United States. This non-immigrant workforce holds jobs in a wide variety of promising careers such as therapists, professors, doctors, engineers, managers, software programmers, fashion designers, pharmacists, statisticians, Wall Street analysts, and recruiters.

Ths resident population of foreign workers arrives via the government’s many border loopholes, including the H-1B, Optional Practical Training, H4EAD, L-1, TN, and J-1 programs.

The biggest loophole is the H-1B program for foreign graduates.

Roughly 100,000 H-1B workers arrive each year for jobs in every state, and most go home when their six-year visas terminate, ensuring a churning resident H-1B workforce of around 500,000.

An additional 350,000 H1Bs are being allowed to stay in jobs long past their departure dates because their employers have nominated them for green cards. In 2015, President Barack Obama ordered work permits be given to 100,000 of their spouses.

This resident foreign workforce of 850,000 H-1Bs is larger than the number of Americans who graduate from colleges and universities each year with skilled degrees.

This federal decision to flood the college-graduate labor market with H-1Bs and other contract-workers has a huge impact on how company revenue is divided among employees and investors, and among economic classes and geographic regions.

 

Voters Lose, Investors Gain

Most of the imported white-collar workers are Indians, and most are eager to take jobs at wages far below what American graduates need to pay their debts, get married, and buy starter homes.

Nearly all foreign graduates will work for less than Americans because work in America is better than work in India’s caste-divided society. Also, many Indians hope to leverage their temporary work permits into hugely valuable green cards and citizenship for themselves, their children, and all of their descendants.

This national difference means that U.S. investors and their Indian subcontractors can cut their U.S. payroll costs by hiring imported Indians graduates instead of skilled Americans.

The extra labor also means that expanding employers generally do not need to offer extra salaries to lure American graduates away from other companies. It also reduces companies’ incentive to illegally prevent marketplace competition, which they describe as “poaching.”

The existence of the H1B program helps outsource large business operations to India, saving more money for U.S. investors. For example, in 2017, CBS’ 60 Minutes showed how Disney transferred one of its computer divisions in Florida to an Indian firm, which then replaced the American workers with Indian H-1B workers and gradually moved the division’s work over to India.

Many American graduates say they lose job opportunities to Indians whenever American firms delegate hiring decisions to Indian subcontractors or Indian managers. They lose jobs because nepotism is normal in India’s caste-divided culture, and the payoffs almost are almost impossible to track because they can be made on the Indian side of the U.S.-Indian cultural divide. On July 4, the Times of India reported that a major Indian firm attributed fake claims to Apple Inc. as it tried to smuggle more white-collar workers into the U.S. labor market.

Many middle-class parents spend a fortune educating their few children, yet find their children’s progress blocked by foreign managers, temporary workers, and outsourcing, Vaughan said. “They have been having [their child] go to science camps all her life, and they want her to be an engineer or a medical researcher, yet the jobs are not going to be there for her.”

For example, Congress has failed to add funding for the residency training of Americans doctors since 1997. The policy failure means many young Americans cannot become doctors. But the failure is being hidden by visa programs which import doctors from western Africa, the Middle East, and India, often via the H-1B program. The imported doctors in Kentucky, Iowa, and other states are now leading the push for passage of the far-reaching HR.1044 legislation, even though legislators in Congress could vote for a smaller-scale proposal which pairs extra funding for U.S. students with a focused fix for the foreign doctors.

Overall, the H-1Bs and the vast supply of legal and illegal migrants in American workplaces force down Americans’ salaries nationwide, even as they also create some extra jobs selling goods and services to migrants. Additional immigrant labor needs to eat and to sleep — so it serves as cheap workers, consumers, and renters for many companies and real-estate investors. The extra sales are doubly useful for Amazon, Wal-Mart, the construction industry, and landlords from Maine to San Diego. But it does little to raise American employees’ average productivity, skills, or wealth.

The bottom line is that the flow of all immigrants and visa workers transfers roughly $500 billion a year in employees wages up to CEOs and investors. The $500 billion estimate is based on the formula used by a September 2016 study by the National Academy of Sciences. That huge economic transfer explains why investors and business groups fight so hard for extra immigration — and why so many investors and companies quietly pushed HR.1044 through the House this week.

The economic transfer is so large that it helps explain why employees’ share of the new wealth in economy has dropped by 10 percent, or six points, since 2000.

The legislation, HR.1044, claims to promote fairness for high-skilled contract-workers, dubbed “immigrants” by the advocates. The bill removes “country caps” which limit Indians’ share of the 120,000 green-cards awarded each year to employees nominated by their companies. That change would allow Indians to get roughly 100,000 green cards each year, up from roughly 23,000. The change would allow the 300,000 Indian workers — and their 300,00 family members — get on a fast track to green cards, citizenship, and the voting booth.

The bill would also accelerate the citizenship reward for the next wave of Indians who choose to become a contract-worker. That next wave of Indian outsourcing may be huge because there are no caps for non-profit employers in the H-1B program or in the Optional Practical Training program — and there are many good jobs in the healthcare sector that can be profitably transferred to Indian graduates.

The legislation will also create many new political fights once the accelerated Indian migrants push important employees — such as nurses — and other national groups to the back of the line. If the bill become law, the legislators and lobbyists will be back at work the next day trying to win advantage from the policy wreckage.

Kentucky and Heartland States Lose, Coastal States Gain

The huge number of immigrants and H-1B workers also shifts wealth and economic growth from the heartland over to the coasts.

In 2017, companies in Kentucky asked the federal government for approval to import almost 5,000 foreign H-1B graduates, according to government data. The data suggests Kentucky has a population of roughly 5,500 H-1B workers and that the vast majority are paid less than $70,000 a year.

The population saves money for the Kentucky CEOs who hire the 5,000 contract-workers.

But if Kentucky graduates had won those jobs, they would have earned more money, spent more money and paid more taxes in the state — and would also have encouraged the next generation of Kentucky students to stay in the state.

Moreover, the H-1B population in Kentucky comprises just 5,000 workers out of a national H-1B workforce of at least 800,000.

This means very few investors in Kentucky are boosting their profits by using H-1B labor — while thousands of investors in other states are boosting their profits with wage-cutting H-1B workers.

While companies in Kentucky asked for almost 5,000 H-1B visa workers in 2017, New York companies asked for 83,000 H-1B contract workers and New Jersey companies asked for 62,000 H-1B contract workers.

The skewed distribution of H-1B workers and investors has enormous knock-on economic effects.

For example, the huge supply of H-1B workers in California ensures that investors in Silicon Valley never face a labor shortage which would require them to establish operations outside the state where skilled Americans are graduating from college. Instead, they can locate their investments and create jobs close to their homes in California, New York, or Seattle, far from Kentucky.

The San Jose Mercury News reported in January 2018:

About 71 percent of tech employees in the [Silicon] Valley are foreign born, compared to around 50 percent in the San Francisco-Oakland-Hayward region, according to a new report based on 2016 census data.

Immigrant techies tend to go to “the center of the action,” [said] Seattle venture capitalist S. “Soma” Somasegar …

FWD.us is one of the leading business groups behind the stealthy HR.1044 push. The group is led by wealthy anti-Republican West Coast investors, including Facebook’s Zuckerberg, Google’s executive chairman, Eric Schmidt and Microsoft’s president, Brad Smith.

The H-1B policy is the college-graduate version of the federal government’s immigration policy, which puts a far bigger thumb on the scale.

Each year, four million Americans turn 18 and start looking for a job in California, the Dakotas, Colorado, or other states, including Kentucky.

But the government inflates each year’s natural labor supply of 4 million young Americans by importing roughly 500,000 working-age immigrants, and by “refreshing” the resident population of 1.5 million white-collar visa workers, 2 million work-permit holders, and 8 million-plus working illegal immigrants,

Overall, the resident population of temporary, legal, non-immigrant workers in the United States is at least 4 million, including the white-collar H-1Bs and the blue-collar H-2Bs, the H-2A agricultural workers, J-1 visa workers, plus asylum seekers, and various forms of temporary workers.

The 4 million workers in the temporary legal workforce provide roughly one-seventh the size of the overall legal immigrant workforce of 28 million within the larger population of 45 million legal and illegal immigrants.

That combined foreign-born population of roughly 45 million has a huge impact on states, and it tends to move a large share of the nation’s growth, income and wealth from low-migration states — such as Kentucky — to high-migration states, such as California, Chicago, and New York.

For example, renters pay real-estate owners roughly $1,500 a month for a two-bedroom apartment in Kentucky’s biggest city. In crowded New York, real-estate investors get $6,000 a month for a decent two-bedroom apartment.

Ownership of a home boosts personal wealth in Kentucky by roughly $145,000, according to Zillow. But an average home in New York state makes the owner richer by roughly $300,000. People who own homes in California have seen their value spike to $550,000 in the last 20 years.

This government-accelerated shift of wealth from rural to urban, from the heartland to the coasts, is being decried by establishment critics as “the next big inequality crisis.” But those critics decline to recognize a huge part of the problem — the government policy of skewing wealth by flooding the U.S. free market with imported labor.

Of course, there are other causes for this wealth shift, such as luck, climate, and technological trends.

But the government’s immigration policy has shortcircuited the normal economic factors that would help spread the new wealth to Kentucky and other heartland states, including Iowa, Indiana, Tennessee, and Kansas.

Those factors —  rising real-estate prices, congested roads, a shortage of local workers, pressure for wage increases — would normally redistribute some investment and wealth back to the low-wage, low-unemployment, low-traffic, low-crime heartland states, such as Kentucky.

But the federal government discourages investment in Kentucky and other heartland states by delivering a continual supply of migrant workers — including the H-1B contract-workers — to coastal investors. Federal immigration policy “smothers what would otherwise be a competitive advantage for Kentucky,” said Vaughan.

Unfortunately for Sen. Susan Collins and the high-school graduates in Maine, the coastal state lags behind other states in productivity and income growth because investors know they can earn more profits by hiring the migrants who prefer to settle in warmer California or even other New England states.

On July 7 the New York Times described the same government-skewed development process within high-immigration Texas, where GOP Sen. Cornyn is up for election in 2020:

Nearly all of the net growth in jobs and new businesses in Texas over the last decade, Labor Department data show, has been concentrated in four large metropolitan areas — Austin, Dallas, Houston and San Antonio. Those areas accounted for more than four out of every five jobs created in the state since the recession ended, their populations swelling with surges of young and talented workers. Collectively, the four saw double the rate of job growth as the rest of Texas.

A similar geographic inequality is playing out in other places in America, alarming officials at the Federal Reserve. While the latest jobs report showed the economy’s continued strength after 10 years of expansion, the effects have been uneven, with the wealthiest parts of the country reaping a disproportionate share of the gains. The economy has evolved toward more technology and service jobs, favoring areas with highly educated workers and high-end professional service industries — and leaving smaller, traditionally blue-collar towns like Longview at a disadvantage.

While the richest neighborhoods in Texas’ most dynamic cities have grown much richer as the recovery wore on, the poorest parts of the state fell even further behind. The Economic Innovation Group, a Washington think tank, sorts ZIP codes across the country on a five-point scale, with “prosperous” at the top and “distressed” at the bottom. Research from the group found that from 2008 to 2016, the most prosperous ZIP codes in Texas — heavily concentrated in those star metro areas — accounted for more than two-thirds of the state’s net growth in jobs and business establishments.

…

There were only 1,800 more jobs in the Longview area in April than there were 10 years ago, according to the Labor Department, an annual growth rate of less than 0.2 percent. Gregg County, which includes Longview, lost more businesses than it created from 2012 to 2016, the innovation group’s data show.

Nationally, the counties that flipped from President Barack Obama in 2012 and 2016 to Donald Trump in 2016 have shown little gain in population or jobs in the last few years, according to the Economic Innovation Group:

The country’s political landscape is being changed by economic, demographic, and technological trends that are decades in the making. The national economy continues to enjoy record growth even as “left behind” places fail to see the same gains. The outsized political power of these “left behind” places, embodied in the group of flipped counties, was apparent in the 2016 election. Had voters in counties that switched party allegiances between the Obama and Trump eras hoped for a change in economic trajectory, their hopes have so far been unfulfilled.

What, if anything, has changed over the first two years of the Trump administration? Employment growth has continued, albeit at a slower pace. Business establishments have proliferated faster among the rural, exurban, and flipped counties that President Trump carried relative to before the election. But the gaps between left behind places and the rest have not meaningfully narrowed.

Places don’t change overnight, and any president has limited power to reorganize local economies. Historic trends like flatlined population growth and shrinking workforces require sustained, meaningful economic growth to see any kind of reversal. However, among voters there is a strong belief in the power of the executive branch. To the extent that flipped counties’ political swing reflected voter dissatisfaction with the status quo, the latest data provide no evidence that their trajectories will have meaningfully changed by 2020.

Currently, there is little reason for coastal investors to put their money into these high-unemployment districts. Since November 2016, the federal government has provided them with roughly 2 million legal migrants, roughly 400,000 working-age migrants from Central America, 200,o00 new H-1Bs, and many additional H-2Bs, L-1, OPTs, refugees, H4EADs, etc., plus many illegals who were not deported.

The EIG is run by investors, so its proposed fix for those flip districts is a scheme to funnel more migrants into those districts — which would also flip those districts blue.

Politics

One political result of this economic skew is growing pessimism among college graduates — and a resulting turn leftwards. The Associated Press reported:

A college degree has long been a ticket to the U.S. middle class … a collaborative analysis of the 2018 General Social Survey by The Associated Press-NORC Center for Public Affairs Research and GSS staff … found that 35% of graduates described themselves as working or lower class, up from just 20% who felt that way in 1983. By contrast, only 64% of college grads say they feel they belong to the middle or upper class.

This pain among the graduates is reshaping the Democrats’ 2020 pitch.

Democrats oppose any fix to migration, so they are eagerly offering to spend taxes ameliorating the damage.

The damage includes a wide-scale return by American graduates to their parents’ houses and the widespread use by migrants of cheap tenements close to their l0w-wage jobs which support the winners in the high-tech cores of the nation’s economy.

So Democrats and progressives in New York have imposed their own solution — more rent control. HousingWire reported:

“These reforms give New Yorkers the strongest tenant protections in history,” Assembly Speaker Carl Heastie and Senate Majority Leader Andrea Stewart-Cousins said in a joint statement. “For too long, power has been tilted in favor of landlords and these measures finally restore equity and extend protections to tenants across the state.”

The Editorial Board of The Wall Street Journal had a different view. In a piece titled, “Albany goes wild,” the newspaper said: “There’s a lot of ruin in New York, but progressives who control the state and city governments are intent on showing how much. Law by law, Gov. Andrew Cuomo and Democrats are chipping away at the policies that made New York City livable after decades of decline and returning to the bad old days.”

Similarly, Democrats jostling for the 2020 nomination are promising more housing aid, and a rollback of college loans. For example, Sen. Liz Warren wants to solve the housing problems created by migration with a new tax on suburban homeowners.

Democrats are exploiting graduates’ worries and anxiety, Vaughan said:

They want to tap into that anxiey, but they have already denied that immigration has any thing to do with these problems and the will not adopt any immigration fixes because that would anger key [pro-migration] constituencie. So the Democrats have to find other issues to talk about  — trade, student loans, jobs, education, equal pay and minimum wages — while they ignore the elephant in the room which is immigration.

In the medium term– by 2030 — the GOP will also lose more seats as the Indian migrants become citizens and vote Democratic.

The HR.1044 legislation will add roughly 600,000 Indian voters to the rolls during the next 10 years. Indians are highly likely to donate to Democratic causes and to vote Democratic. For example, the chief Senate sponsor of the bill is Sen. Kamala Harris, whose mother is Indian.

Roughly 77 percent of Indians supported Democratic candidates in 2016, while only 16 percent said they voted for President Donald Trump, according to a post-election survey funded by the National Science Foundation.

A growing population of skilled migrants in a district also tends to pull American-born voters into the Democratic camp, said an April 2018 study. “Our strongest and most significant finding is that an increase in high-skilled immigrants as a share of the local population is associated with a strong and significant decrease in the vote share for the Republican Party,” said the report, authored by pro-migration economist Giovanni Peri, Anna Maria Mayda, a Georgetown University professor now at the U.S. State Department, and Walter Steingress, an economist at the Bank of Canada.

“If Republicans get on the wrong side of this issue,” said Vaughan, “and go along with this special interest legislation, unwittingly they will be weaving the rope that will hang them.”