Why Our Economy May Be Headed for a
Decade of Depression
The worst is yet to
come?
In September 2006,
Nouriel Roubini told the International Monetary Fund what it didn’t want to
hear. Standing before an audience of economists at the organization’s
headquarters, the New York University professor warned that the U.S. housing market
would soon collapse — and, quite possibly, bring the global financial system
down with it. Real-estate values had been propped up by unsustainably shady
lending practices, Roubini explained. Once those prices came back to earth,
millions of underwater homeowners would default on their mortgages, trillions
of dollars worth of mortgage-backed securities would unravel, and hedge funds,
investment banks, and lenders like Fannie Mae and Freddie Mac could sink into
insolvency.
At the time, the
global economy had just recorded its fastest half-decade of growth in 30 years.
And Nouriel Roubini was just some obscure academic. Thus, in the IMF’s cozy
confines, his remarks roused less alarm over America’s housing bubble than
concern for the professor’s psychological well-being.
Of course, the
ensuing two years turned Roubini’s prophecy into history, and the little-known
scholar of emerging markets into a Wall Street celebrity.
A decade later, “ Dr. Doom ” is a bear once again. While many
investors bet on a “V-shaped recovery,” Roubini is staking his reputation
on an L-shaped depression. The economist
(and host of a biweekly economic news broadcast ) does
Roubini allows that,
after a decade of misery, we may get around to developing a “more inclusive,
cooperative, and stable international order.” But, he hastens to add, “any
happy ending assumes that we find a way to survive” the hard times to come.
Intelligencer
recently spoke with Roubini about our impending doom.
You predict that the
coronavirus recession will be followed by a lackluster recovery and global
depression. The financial markets ostensibly see a much brighter
future . What are they missing and why?
Well, first of all,
my prediction is not for 2020. It’s a prediction that these ten major forces will, by the
middle of the coming decade, lead us into a “Greater Depression.” Markets, of
course, have a shorter horizon. In the short run, I expect a U-shaped recovery
while the markets seem to be pricing in a V-shape recovery.
Of course the markets
are going higher because there’s a massive monetary stimulus, there’s a massive
fiscal stimulus. People expect that the news about the contagion will improve,
and that there’s going to be a vaccine at some point down the line. And there
is an element “FOMO” [fear of missing out]; there are millions of new online
accounts — unemployed people sitting at home doing day-trading — and they’re
essentially playing the market based on pure sentiment. My view is that there’s
going to be a meaningful correction once people realize this is going to be a
U-shaped recovery. If you listen carefully to what Fed officials are saying —
or even what JPMorgan and Goldman Sachs are saying — initially they were all in
the V camp, but now they’re all saying, well, maybe it’s going to be more of a
U. The consensus is moving in a different direction.
Your prediction of a
weak recovery seems predicated on there being a persistent shortfall in
consumer demand due to income lost during the pandemic. A bullish investor
might counter that the Cares Act has left the bulk of laid-off workers with as
much — if not more — income than they had been earning at their former jobs.
Meanwhile, white-collar workers who’ve remained employed are typically earning
as much as they used to, but spending far less. Together, this might augur a
surge in post-pandemic spending that powers a V-shaped recovery. What does the
bullish story get wrong?
Yes, there are
unemployment benefits. And some unemployed people may be making more money than
when they were working. But those unemployment benefits are going to run out in July. The consensus
says the unemployment rate is headed to 25 percent. Maybe we get lucky. Maybe
there’s an early recovery, and it only goes to 16 percent. Either way, tons of
people are going to lose unemployment benefits in July. And if they’re rehired,
it’s not going to be like before — formal employment, full benefits. You want
to come back to work at my restaurant? Tough luck. I can hire you only on an
hourly basis with no benefits and a low wage. That’s what every business is
going to be offering. Meanwhile, many, many people are going to be without jobs
of any kind. It took us ten years — between 2009 and 2019 — to create 22
million jobs. And we’ve lost 30 million jobs in two months.
So when unemployment
benefits expire, lots of people aren’t going to have any income. Those who do
get jobs are going to work under more miserable conditions than before. And
people, even middle-income people, given the shock that has just occurred —
which could happen again in the summer, could happen again in the winter — you
are going to want more precautionary savings. You are going to cut back on
discretionary spending. Your credit score is going to be worse. Are you going
to go buy a home? Are you gonna buy a car? Are you going to dine out? In
Germany and China, they already reopened all the stores a month ago. You look
at any survey, the restaurants are totally empty. Almost nobody’s buying
anything. Everybody’s worried and cautious. And this is in Germany, where unemployment
is up by only one percent. Forty percent of Americans have less than $400 in liquid cash saved for an emergency . You think they are going to spend?
Graphic: Financial Times
Graphic: Financial Times
You’re going to start
having food riots soon enough. Look at the luxury stores in New York. They’ve
either boarded them up or emptied their shelves, because they’re worried
people are going to steal the Chanel bags. The few stores that are open, like
my Whole Foods, have security guards both inside and outside. We are one step
away from food riots. There are lines three miles long at food banks. That’s
what’s happening in America. You’re telling me everything’s going to become
normal in three months? That’s lunacy.
Your projection of a
“Greater Depression” is premised on deglobalization sparking negative supply
shocks. And that prediction of deglobalization is itself rooted in the notion
that the U.S. and China are locked in a so-called Thucydides trap , in which the geopolitical tensions between a dominant and rising
power will overwhelm mutual financial self-interest. But given the deep
interconnections between the American and Chinese economies — and warm
relations between much of the U.S. and Chinese financial elite — isn’t it
possible that class solidarity will take precedence over Great Power rivalry? In other
words, don’t the most powerful people in both countries understand they have a
lot to lose financially and economically from decoupling? And if so, why
shouldn’t we see the uptick in jingoistic
rhetoric on both sides as mere
posturing for a domestic audience?
First of all, my
argument for why inflation will eventually come back is not just based on
U.S.-China relations. I actually have 14 separate arguments for why this will
happen. That said, everybody agrees that there is the beginning of a Cold War
between the U.S. and China. I was in Beijing in November of 2015, with a
delegation that met with Xi Jinping in the Great Hall of the People. And he
spent the first 15 minutes of his remarks speaking, unprompted, about why the
U.S. and China will not get caught in a Thucydides trap, and why there will
actually be a peaceful rise of China.
Since then, Trump got
elected. Now, we have a full-scale trade war, technology war, financial war,
monetary war, technology, information, data, investment, pretty much anything
across the board. Look at tech — there is complete decoupling. They just
decided Huawei isn’t going to have any access to U.S. semiconductors and
technology. We’re imposing total restrictions on the transfer of technology
from the U.S. to China and China to the U.S. And if the United States argues
that 5G or Huawei is a backdoor to the Chinese government, the tech war will become
a trade war. Because tomorrow, every piece of consumer electronics, even your
lowly coffee machine or microwave or toaster, is going to have a 5G chip.
That’s what the internet of things is about. If the Chinese can listen to you
through your smartphone, they can listen to you through your toaster. Once we
declare that 5G is going to allow China to listen to our communication, we will
also have to ban all household electronics made in China. So, the decoupling is
happening. We’re going to have a “splinternet.” It’s only a matter of how much
and how fast.
And there is going to
be a cold war between the U.S. and China. Even the foreign policy Establishment
— Democrats and Republicans — that had been in favor of better relations with
China has become skeptical in the last few years. They say, “You know, we
thought that China was going to become more open if we let them into the WTO.
We thought they’d become less authoritarian.” Instead, under Xi Jinping, China
has become more state capitalist, more authoritarian, and instead of biding its
time and hiding its strength, like Deng Xiaoping wanted it to do, it’s flexing
its geopolitical muscle. And the U.S., rightly or wrongly, feels threatened.
I’m not making a normative statement. I’m just saying, as a matter of fact, we
are in a Thucydides trap. The only debate is about whether there will be a cold
war or a hot one. Historically, these things have led to a hot war in 12 out of
16 episodes in 2,000 years of history. So we’ll be lucky if we just get a cold
war.
Some Trumpian
nationalists and labor-aligned progressives might see an upside in your
prediction that America is going to bring manufacturing back “onshore.” But you
insist that ordinary Americans will suffer from the downsides of reshoring
(higher consumer prices) without enjoying the ostensible benefits (more job
opportunities and higher wages). In your telling, onshoring won’t actually
bring back jobs, only accelerate automation. And then, again with automation,
you insist that Americans will suffer from the downside (unemployment, lower
wages from competition with robots) but enjoy none of the upside from the
productivity gains that robotization will ostensibly produce. So, what do you
say to someone who looks at your forecast and decides that you are indeed “Dr.
Doom” — not a realist, as you claim to be, but a pessimist, who ignores the
bright side of every subject?
When you reshore, you
are moving production from regions of the world like China, and other parts of
Asia, that have low labor costs, to parts of the world like the U.S. and Europe
that have higher labor costs. That is a fact. How is the corporate sector going
respond to that? It’s going to respond by replacing labor with robots,
automation, and AI.
I was recently in
South Korea. I met the head of Hyundai, the third-largest automaker in the
world. He told me that tomorrow, they could convert their factories to run with
all robots and no workers. Why don’t they do it? Because they have unions that
are powerful. In Korea, you cannot fire these workers, they have lifetime
employment.
But suppose you take
production from a labor-intensive factory in China — in any industry — and move
it into a brand-new factory in the United States. You don’t have any legacy
workers, any entrenched union. You are going to design that factory to use as
few workers as you can. Any new factory in the U.S. is going to be
capital-intensive and labor-saving. It’s been happening for the last ten years
and it’s going to happen more when we reshore. So reshoring means increasing
production in the United States but not increasing employment. Yes, there will
be productivity increases. And the profits of those firms that relocate
production may be slightly higher than they were in China (though that isn’t
certain since automation requires a lot of expensive capital investment).
But you’re not going
to get many jobs. The factory of the future is going to be one person manning
1,000 robots and a second person cleaning the floor. And eventually the guy
cleaning the floor is going to be replaced by a Roomba because a Roomba doesn’t
ask for benefits or bathroom breaks or get sick and can work 24-7.
The fundamental
problem today is that people think there is a correlation between what’s good
for Wall Street and what’s good for Main Street. That wasn’t even true during
the global financial crisis when we were saying, “We’ve got to bail out Wall
Street because if we don’t, Main Street is going to collapse.” How did Wall
Street react to the crisis? They fired workers. And when they rehired them,
they were all gig workers, contractors, freelancers, and so on. That’s what
happened last time. This time is going to be more of the same. Thirty-five to
40 million people have already been fired. When they start slowly rehiring some
of them (not
There’s a conflict
between workers and capital. For a decade, workers have been screwed. Now,
they’re going to be screwed more. There’s a conflict between small business and
large business.
Millions of these
small businesses are going to go bankrupt. Half of the restaurants in New York
are never going to reopen. How can they survive? They have such tiny margins.
Who’s going to survive? The big chains. Retailers. Fast food. The small businesses
are going to disappear in the post-coronavirus economy. So there is a
fundamental conflict between Wall Street (big banks and big firms) and Main
Street (workers and small businesses). And Wall Street is going to win.
Clearly, you’re
bearish on the potential of existing governments intervening in that conflict
on Main Street’s behalf. But if we made you dictator of the United States
tomorrow, what policies would you enact to strengthen labor, and avert (or at
least mitigate) the Greater Depression?
The market, as
currently ordered, is going to make capital stronger and labor weaker. So, to
change this, you need to invest in your workers. Give them education, a social
safety net — so if they lose their jobs to an economic or technological shock,
they get job training, unemployment benefits, social welfare, health care for
free. Otherwise, the trends of the market are going to imply more income and
wealth inequality. There’s a lot we can do to rebalance it. But I don’t think
it’s going to happen anytime soon. If Bernie Sanders had become
president, maybe
In Germany, the
unemployment rate has gone up by one percent. In the U.S., the unemployment
rate has gone from 4 percent to 20 percent (correctly measured) in two months.
We lost 30 million jobs. Germany lost 200,000. Why is that the case? You have
different economic institutions. Workers sit on the boards of German companies.
So you share the costs of the shock between the workers, the firms, and the
government.
In 2009, you argued that if deficit spending to combat high unemployment
continued indefinitely, “it will fuel persistent, large budget deficits and
lead to inflation.” You were right on the first count obviously. And yet, a
decade of fiscal expansion not only failed to produce high inflation, but was
insufficient to reach the Fed’s 2 percent inflation goal. Is it fair to say that
you underestimated America’s fiscal capacity back then? And if you
overestimated the harms of America’s large public debts in the past, what makes
you confident you aren’t doing so in the present?
First of all, in
2009, I was in favor of a bigger stimulus than the one that we got. I was not
in favor of fiscal consolidation. There’s a huge difference between the global
financial crisis and the coronavirus crisis because the former was a crisis of
aggregate demand, given the housing bust. And so monetary policy alone was
insufficient and you needed fiscal stimulus. And the fiscal stimulus that Obama
passed was smaller than justified. So stimulus was the right response, at least
for a while. And then you do consolidation.
What I have
argued this what the Fed has been doing ) — you still won’t
have inflation in the short run, not this year or next year, because you have
slack in goods markets, slack in labor markets, slack in commodities markets,
etc. But there will be inflation in the post-coronavirus world. This is because
we’re going to see two big negative supply shocks. For the last decade, prices
have been constrained by two positive supply shocks — globalization and
technology. Well, globalization is going to become deglobalization thanks to
decoupling, protectionism, fragmentation, and so on. So that’s going to be a
negative supply shock. And technology is not going to be the same as before.
The 5G of Erickson and Nokia costs 30 percent more than the one of Huawei, and
is 20 percent less productive. So to install non-Chinese 5G networks, we’re
going to pay 50 percent more. So technology is going to gradually become a
negative supply shock. So you have two major forces that had been exerting
downward pressure on prices moving in the opposite direction, and you have a massive
monetization of fiscal deficits. Remember the 1970s? You had two negative
supply shocks — ’73 and ’79, the Yom Kippur War and the Iranian Revolution.
What did you get? Stagflation.
Now, I’m not talking
about hyperinflation — not Zimbabwe or Argentina. I’m not even talking about 10
percent inflation. It’s enough for inflation to go from one to 4 percent. Then,
ten-year Treasury bonds — which today have interest rates close to zero percent
— will need to have an inflation premium. So, think about a ten-year Treasury,
five years from now, going from one percent to 5 percent, while inflation goes
from near zero to 4 percent. And ask yourself, what’s going to happen to the
real economy? Well, in the fourth quarter of 2018, when the Federal Reserve
tried to raise rates above 2 percent, the market couldn’t take it. So we don’t
need hyperinflation to have a disaster.
In other words,
you’re saying that because of structural weaknesses in the economy, even modest
inflation would be crisis-inducing because key economic actors are dependent on
near-zero interest rates?
For the last decade,
debt-to-GDP ratios in the U.S. and globally have been rising. And debts were
rising for corporations and households as well. But we survived this, because,
while debt ratios were high, debt-servicing
In December 2018, Jay
Powell said, “You know what. I’m at 2.5 percent. I’m going to go to 3.25. And
I’m going to continue running down my balance sheet.” And the market totally
crashed. And then, literally on January 2, 2019, Powell comes back and says,
“Sorry, I was kidding. I’m not going to do quantitative tightening. I’m not
going to raise rates.” So the economy couldn’t take a Fed funds rate of 2.5
percent. In the strongest economy in the world. There is so much debt, if
long-term rates go from zero to 3 percent, the economy is going to crash.
You’ve written a lot
about negative supply shocks from deglobalization. Another potential source of
such shocks is climate change. Many scientists believe that rising temperatures
threaten the supply of our most precious commodities — food and water. How does
climate figure into your analysis?
I am not an expert on
global climate change. But one of the ten forces that I believe will bring a
Greater Depression is man-made disasters. And global climate change, which is
producing more extreme weather phenomena — on one side, hurricanes, typhoons,
and floods; on the other side, fires, desertification, and agricultural
collapse — is not a natural disaster. The science says these extreme events are
becoming more frequent, are coming farther inland, and are doing more damage.
And they are doing this now, not 30 years from now.
So there is climate
change. And its economic costs are becoming quite extreme. In Indonesia,
they’ve decided to move the capital out of Jakarta to somewhere inland because they know that their capital is
going to be fully flooded. In New York, there are plans to build a wall all
around Manhattan at the cost of $120 billion. And then they said, “Oh no, that
wall is going to be so ugly, it’s going to feel like we’re in a prison.” So
they want to do something near the Verrazzano Bridge that’s going to cost another $120 billion. And it’s not even
going to work.
The Paris Accord said
1.5 degrees. Then they say two. Now, every scientist says, “Look, this is a
voluntary agreement, we’ll be lucky if we get three — and more likely, it will
be four — degree Celsius increases by the end of the century.” How are we going
to live in a world where temperatures are four degrees higher? And we’re not
doing anything about it. The Paris Accord is just a joke. And it’s not just the
U.S. and Trump. China’s not doing anything. The Europeans aren’t doing
anything. It’s only talk.
And then there’s the
pandemics. These are also man-made disasters. You’re destroying the ecosystems
of animals. You are putting them into cages — the bats and pangolins and all
the other wildlife — and they interact and create viruses and then spread to
humans. First, we had HIV. Then we had SARS. Then MERS, then swine flu, then
Zika, then Ebola, now this one. And there’s a connection between global climate
change and pandemics. Suppose the permafrost in Siberia melts. There are
probably viruses that have been in there since the Stone Age. We don’t know
what kind of nasty stuff is going to get out. We don’t even know what’s coming.
Job
losses continue to mount in US despite reopenings
28 May 2020 4
Roughly
2.1 million Americans applied for unemployment benefits last week despite the
gradual reopening of businesses around the country, bringing the running total
since the coronavirus shutdowns took hold in mid-March to about 41 million and
increasing concerns that the scourge is doing deep and potentially long-last
damage to the economy
WASHINGTON (AP) — The coronavirus
crisis threw at least 2.1 million Americans out of work last week despite the
gradual reopening of businesses around the country, stoking fears Thursday that
the scourge is doing deep and potentially long-lasting damage to the U.S.
economy.
Amid a few glimmers of hope, most of
the latest economic news from around the globe was likewise grim, as some of
the world’s most populous countries continued to report rising infections and
deaths. The confirmed U.S. death toll topped 100,000, the highest in the world,
on Wednesday.
The latest job-loss figures from the
U.S. Labor Department bring to 41 million the running total of Americans who
have filed for unemployment benefits since the coronavirus shutdowns took hold
in mid-March.
There were some encouraging signs:
The overall number of Americans currently drawing jobless benefits dropped for
the first time since the crisis began, from 25 million to 21 million. And
first-time applications for unemployment have fallen for eight straight weeks,
as states gradually let stores, restaurants and other businesses reopen and the
auto industry starts up factories again.
But the number of U.S. workers
filing for unemployment is still extraordinarily high by historical standards,
and that suggests businesses are failing or permanently downsizing, not just
laying off people until the crisis can pass, economists warn.
“That is the kind of economic
destruction you cannot quickly put back in the bottle,” said Adam Ozimek, chief
economist at Upwork.
The U.S. unemployment rate was 14.7%
in April, a level not seen since the Depression, and many economists expect it
will be near 20% in May.
The figures come amid an
intensifying debate in Congress over whether to extend $600 in extra weekly
federal unemployment benefits, provided under rescue legislation passed in
March but set to expire July 31.
Democrats have proposed extending
the payments, while Republicans have argued that the extra money could
discourage laid-off workers from returning to jobs that pay less than they are
getting on unemployment.
Kelly Kelso, a 30-year-old roadie
from Nashville for the rock group Foreigner, got her first unemployment check
last week after more than eight weeks of waiting. She said she is still
receiving far less in benefits than the $1,250 per week or more that she made
on tour.
Though she is reluctant to leave the
music industry, she said, “I have a cosmetology license. If all else fails, I
could go back to doing hair.”
Another looming storm cloud:
Economists say the sharp loss of tax revenue for state and local governments is
likely to compound the damage from the shutdowns by forcing additional
public-sector layoffs in the coming weeks.
Those layoffs have just recently
started showing up in the weekly jobless claims report. Washington state, for
example, reported layoffs of government employees.
Job cuts are also appearing far
beyond the initially hit industries such as restaurants and stores, a sign that
the damage is spreading even as businesses reopen. Washington state said it saw
layoffs in insurance, and New York state reported job cuts by information
technology companies.
Economists say many of the jobs lost
are never coming back, and double-digit unemployment could persist through
2021.
And as discouraging as the numbers
are, the real picture may be worse. The government counts people as unemployed
only if they’re actually looking for a job, and many Americans probably see no
point in trying when so many businesses are shut down.
Airlines and aircraft manufacturers
are struggling after air travel plummeted early in the outbreak. Boeing is
cutting more than 12,000 U.S. jobs through layoffs and buyouts, many expected
to be in the Seattle area. European budget airline Easyjet said it will cut up
to a third of its 15,000 employees. American Airlines plans to eliminate about
5,100 jobs.
Amtrak likewise announced it will
lay off about 20% of its 18,000 workers amid a collapse in train ridership.
A number of European countries have
strong safety-net programs that are underwriting the wages of millions of
workers and keeping them on the payroll instead of adding them to the ranks of
the unemployed. But the economic damage is mounting there, too.
Nissan is rolling back production in
Spain in a move the government said could lead to 3,000 direct job cuts and
thousands more losses at the automaker’s suppliers. And French unemployment
claims jumped 22% in April, with 843,000 more people seeking work.
Elsewhere around the world, India
saw another record daily jump in coronavirus cases. Russia reported a steady
increase in its caseload, even as the city of Moscow and provinces across the
vast country moved to ease restrictions in sync with the Kremlin’s political
agenda.
And South Korea reported its biggest
jump in infections in more than 50 days, a setback that could erase some of the
hard-won gains that have made it a model for the rest of the world.
Worldwide, the virus has infected
more than 5.7 million people and killed over 355,000, with the U.S. having the
most confirmed cases and deaths, according to a tally by Johns Hopkins
University. Europe has recorded about 170,000 deaths.
The true dimensions of the disaster
are widely believed to be significantly greater, with experts saying many
victims died without ever being tested.
___
Sewell reported from Cincinnati.
Associated Press reporters from around the world contributed to this report.
___
Government
Agencies Still Hiring H-1B Visa Employees for American Jobs
Evan
Vucci/Associated Press
27 May 2020 151
13:48
Government agencies around the
country are hiring thousands of foreign H-1B workers to fill well-paid
government jobs needed by U.S. graduates.
The
governments’ hidden workforces of roughly 18,000 H-1B employees are an easy
target for President Donald Trump as he searches for ways to open up good jobs
for the many American graduates who have been forced out of jobs by the
coronavirus crash.
Trump
also needs to do something because he has yet to begin to deliver any part of
his dramatic 2016 campaign trail promise : “I will
end the use of the H-1B as a cheap labor program forever, and institute an
absolute requirement to hire American workers first for every visa and
immigration program. No exceptions.”
The
H-1Bs are being imported and hired at all levels of government throughout the
United States.
A
small share of the H-1Bs is hired directly by government offices, via a
deliberately complex and lengthy process managed by the Departments of Labor,
State, and Homeland Security (DHS), plus a small army of immigration lawyers.
For
example, roughly 130 foreign H-1B employees are being hired by organizations
with “department” in their names. They include the California Department of
Corrections and Rehabilitation, the New York Police Department, and the
Arkansas Department of Public Safety, according to the Labor Department data.
Many
more H-1Bs are imported by U.S. or Indian staffing companies and are then
leased by government agencies. So the federal data from October to late
March shows that roughly 3,000 H-1Bs have been requested or leased by
government departments from various staffing firms.
The
departments include transportation, agriculture, labor, health and human
services, and interior. Roughly 85 H-1Bs are being sought for the federal and
state Labor Departments, including the Labor Departments in Vermont, Idaho,
Georgia, and Pennsylvania.
Many
of the imported H-1B employees are being hired to maintain and operate computer
systems, at promised salaries above $90,000, even as those tasks can be done by
many American graduates.
The
state-level departments who want H-1Bs from staffing companies include the
Georgia Department of Transportation, Washington’s Department of Corrections,
the Ohio Department of Job & Family Services, and Maryland’s
Department of Human Services.
Roughly
100 foreigners are being requested for rental to taxpayer-backed commissions,
including the Palm Beach County Board of County Commissioners
the Washington Suburban Sanitary Commission, and the Texas Health and
Human Services Commission.
More
H-1Bs are requested by counties and boards, including the Pennsylvania Liquor
Control Board, the election boards in New York and in North Carolina, the Palm
Beach County Governmental Center, and the Superior Court of Orange County.
An
additional 400-plus H-1Bs are being rented by government “offices.” These
include the Colorado Governor’s Office of Information Technology, the U.S.
Government Publishing Office, and the NYC Financial Information Services Agency
and Office of Payroll Administration.
This
set of almost 3,000 leases and hires is just the six-month tip of an iceberg.
Each
H-1B lasts three years. So if 3,000 H-1Bs are being hired or extended during a
period of six months, then another 15,000 H-1Bs were likely hired or rented
during the prior two-and-half years of the three years.
The
data only reveals the H-1Bs who were imported for scheduled work in government
offices. It does not show or count the many H-1Bs who were imported by staffing
companies for a different job and were subsequently reassigned to a staffing
job in a government center. That reassigned H-1B population may be larger than
the 15,000 shown in the data. A large population of reassigned H-1Bs would help
explain the many anecdotal reports that Indian visa workers are a majority in
many federal computer centers.
The
iceberg goes much deeper, however, because many contractors also import H-1Bs
and other visa workers to help build software for government agencies. For
example, four states hired a Minneapolis-based software company that includes
many H-1B workers to build websites where state residents could file for
unemployment benefits. Amid the coronavirus crash, the H-1B software provided by Sagitec
Solutions proved inadequate .
Business insists that India's H-1B visa
workers are vital to the Fortune 500 economy. #H1B https://t.co/URX7rB6nof
There
is some evidence that this project was, at least in part, off-shored and
that H-1B (temporary foreign worker) visas were used extensively. This seems to
have led to decisions such as the code supporting the
obscure Indian Gujarati language and comments being written in a style
consistent with offshore programmers.
But
this huge iceberg of visa workers is a huge profit center for the layers of
staffing companies. The staffing companies take large commissions from each
H-1B hire, both legally and — according to accounts provided by Indian H-1Bs —
not so legally.
For
example, Company A may win a contract to deliver 100 H-1Bs to a government
agency. Company A then rents the 100 H-1Bs from subcontractors B, C, and D. But
those subcontractors can rent H-1Bs from each other before renting them to
Company A. This hidden back-scratching process would allow the companies’
executives to take three bites from each workers’ $100,000 salary — and also to
hire lobbyists to protect the lucrative H-1B process.
Many
H-1Bs also have to pay kickbacks to their managers to ensure they are not sent
home, usually to India. The managers “get a back cut,” said Vikram from Texas,
a former H-1B worker who is now a citizen. “It happens all the time,” he said.
The
H-1B numbers in this article are drawn from Labor Department data.
The
Labor Department’s data includes the names of the hiring company, promised wage
levels, job location, and job title. Crucially, the data also includes the
“secondary entity business name,” which displays at least one expected
workplace for each H-1B imported by staffing companies.
The
data includes requests for new hires, as well as requests for three-year
extensions of current workers’ initial three-year visa. The numbers in this
article include new hires and visa extensions.
Few
hiring requests by agencies are denied — even when the jobs are in critical
infrastructure, or allow foreign access to private information, such as tax
receipts and health data.
Federal
law says non-profit groups — including government agencies — are exempt from
the supposed annual cap of 85,000 H-1B new workers. Nationwide,
roughly 90,000 “Cap Exempt” H-1Bs are employed by
non-profit groups, including agency, research laboratories, universities, and
hospitals.
DHS
officials do deny many requests by staffing companies for H-1Bs. But the
denials have little impact because the staffing companies make sure to ask for
many extra H-1Bs, usually after collecting letters from companies that say the
extra H-1Bs are needed.
Companies
game this approval process to ensure they have extra H-1Bs on hand to win new
contracts in bidding competitions against firms that only hire Americans,
including legal immigrants.
Fortune 500 lobbyists warn Trump that any
pro-American reform of the visa-worker programs may lead to discrimination. #H1B https://t.co/9GVu0THsli
The
Labor Department data cited
in this article is presented on a site operated by Virgil Bierschwale, a
Texas-based software expert who says he cannot find a job amid the flood of
Indian and Chinese visa workers. Many Americans have been sidelined because
employers are eager to use the growing number of college graduate illegals,
many of whom have overstayed their visas, he said.
“Some
of us can’t work anymore because there are so many state and federal agencies
using H-1Bs. … Government agencies using our tax revenues to basically displace
us,” Bierschwale said.
The
flood of foreign workers allows companies to discriminate against older
Americans, and to exclude young American graduates, he said. “You used to be
used to be to climb the ladder and work your way up — there is no climbing the
ladder anymore because the [visa workers] are getting all jobs,” he said.
“It’s
very difficult” to get jobs in a crashed labor market that was already flooded
with imported workers, said an Indian-born citizen who formerly worked as an
H-1B worker. “I don’t see a chance — I might need to leave my IT career and
work at Walmart or something,” he said May 27.
Companies
have imported roughly 750,000
H-1Bs for a very wide variety of jobs needed by American
graduates. In addition, at least 700,000 other foreign graduates hold jobs via
the uncapped L-1, OPT, CPT, H4EAD, and TN visa programs while roughly 800,000
Americans will graduate from four-year colleges with skilled degrees in 2020.
Many
former H-1B and other visa workers overstay expired visas and create an extra
pool of illegal college graduate labor. Also, companies allegedly
use the little-monitored B-1 visa to sneak white-collar
illegals into U.S. workplaces, further reducing salaries and opportunities for
U.S. graduates.
Most
of the H-1Bs are working software jobs in exchange for pay and the chance of
citizenship. But no U.S. graduates are exempt from the H-1B competition. The
list of targeted jobs include doctors,
psychologists, marketing analysts, architects, fashion designers, editors,
designers, creative writers, managers, engineers, and much else.
“Young
kids have no clue that it could happen to them,” said Bierschwale. “When I was
40 years old, I had the best skills out there, but two years later, the manager
said, ‘If I can get ten people for the price of you, it does not matter what
skills you have.’”
For
example, the Centers for Disease Control and Prevention (CDC) has asked to hire
or extend 19 H-1Bs in fiscal 2020. The CDC’s 19 H-1Bs include two
biologists, five epidemiologists, and three statisticians. The CDC also wants
to hire or extend three H-1Bs from staffing companies, including Leidos Inc.
and IShift Corp.
In
2019, CDC hired 18 foreign employees at an average salary of $82,195,
according to the H1BData.info website, which
also relies on government data. That pre-coronavirus 2019 inflow of foreign
workers included 12 epidemiologists and six economists.
An
email to the CDC was not returned.
According
to a database held
by DHS’s U.S. Citizenship and Immigration Services agency, the CDC has applied
for five foreign H-1B workers and to extend work visas for four other foreign
employees. Since 2018, the agency has filed for at least 51 foreign employees,
the DHS site says.
Many
U.S. executives also prefer H-1Bs because the H-1Bs know they will get
sent home if they argue with their managers, unlike U.S. professionals, said
Bierschwale. “If somebody like me sees something wrong, I’ll tell them it is
wrong, and they don’t want that. [U.S. executives] want Indians and Chinese who
stay quiet.”
Bierschwale’s
website shows that two government-backed businesses use a large share of
federal H-1Bs.
The
Federal National Mortgage Association, dubbed Fannie Mae, wants to hire or
extended 575 H-1Bs, including H-1Bs imported by Accenture, Cognizant, Ernst
& Young, HCL Global, Hexaware Technologies, and Mastech Digital, many at
$120,000-per-person costs.
The Federal
Home Loan Mortgage Corporation, or Freddie Mac, wants to hire or extend 141
from staffing companies, at salaries around $100,000.
This
data matches data from nine months of 2019, presented in
October 2019 by Bloomberg:
Data
indicate Fannie Mae and Freddie Mac, which are directed by the
Federal Housing Finance Agency under a conservatorship, are the most popular
destinations among federal agencies for H-1B workers placed by third-party
companies. Together, the two account for at least 1,340 H-1B workers sponsored
by more than 460 different third-party companies.
Also
high on the list is the Health and Human Services Department (at least 290 H-1B
workers), Amtrak (at least 60 H-1B workers), the Commerce Department (at least
60 H-1B workers), and the National Aeronautics and Space Administration (at
least 40 H-1B workers).
The
Pentagon and the armed forces do not hire visa workers directly, according to
the data.
The inflow of India's visa-workers creates a huge 'bonded
la
Car rental giant Hertz files for bankruptcy protection with $19BILLION
of debt after share prices plummet and 10,000 staff are laid off amid the
coronavirus pandemic
·
Hertz filed for bankruptcy protection Friday after
skipping car-lease payments last month
·
The coronavirus pandemic has crippled the Florida-based
company, which was already struggling with billions of dollars in debt
·
The company laid off around 10,000 North American workers
amid the coronavirus crisis and their share price has plummeted more than 80%
this year
Car rental company
Hertz filed for Chapter 11 on Friday after failing to reach a standstill
agreement with its top lenders.
That staggering
amount is made up of '$4.3billion in corporate bonds and loans and $14.4
billion in vehicle-backed debt held at special financing subsidiaries'.
Florida-based Hertz
began bankruptcy protection proceedings in the U.S. Bankruptcy Court in
Wilmington,
Delaware, in an
attempt to avoid a forced liquidation of its vehicle fleet after bookings
dropped off overnight due to the coronavirus pandemic.
'Today's action will
protect the value of our business, allow us to continue our operations and
serve our customers, and provide the time to put in place a new, stronger
financial foundation to move successfully through this pandemic and to better
position us for the future,' Chief Executive Paul E. Stone said.
Amazon CEO Jeff Bezos, who is rescinding
a $2-an-hour hazard pay increase for his warehouse workers at the end of the
month, led the pack, increasing his personal wealth by $34.6 billion since the
onset of the pandemic. Facebook CEO Mark Zuckerberg was close behind, adding
$25 billion to his fortune. Tesla CEO Elon Musk, who reopened his California
auto plant in defiance of state regulators and with the support of President
Trump, saw a 48 percent increase in his wealth to $36 billion in just eight
weeks as the stock market rebounded from its collapse. All told, the nation’s
620 billionaires now control $3.382 trillion, a 15 percent increase in two
months.
US unemployment claims approach 40
million since March
The United States
Department of Labor reported on Thursday that more than 2.4 million Americans
applied for unemployment insurance last week, bringing the total number of new
claims to 38.6 million since mid-March, when social distancing measures and
statewide stay-at-home orders were first implemented in an effort to slow the
spread of the coronavirus.
Even with the push by
the Trump administration since then to reopen the economy and the easing of
lockdown orders in all 50 states—despite a continued rise in COVID-19
infections and deaths—the US marked its ninth straight week in which more than
2 million workers filed for unemployment. While this is down from the peak at
the end of March when 6.8 million applied for unemployment insurance, it still
dwarfs the worst weeks of the Great Recession in 2008.
It is expected that the
official unemployment rate for May, which is to be reported by the federal
government in the first week of June, will approach 20 percent, up from 14.7
percent last month. This is a significant undercount, with millions of
unemployed immigrants unable to apply for benefits, and many other workers who
are not currently looking for work and therefore are not counted as unemployed.
A
man looks at signs of a closed store due to COVID-19 in Niles, Ill., Thursday,
May 21, 2020. (AP Photo/Nam Y. Huh)
Fortune magazine
estimates that real unemployment has already hit 22.5 percent, which is nearing
the peak of unemployment reached during the Great Depression in 1933, when the
rate rose above 25 percent. Millions more are expected to apply in the coming
weeks, pushing the numbers beyond those seen during the country’s worst
economic crisis.
But even these figures
do not capture the extent of the crisis now unfolding across the country.
Millions have been blocked for weeks from applying for unemployment compensation
because of antiquated computer systems, and a significant share of those who
have applied have been denied any payments. On top of this there are
significant delays in processing applications in multiple states, including
Indiana, Missouri, Wyoming and Hawaii. Meanwhile, Florida, which has some of
the most stringent restrictions, has refused to extend its paltry three-month
limit on payments for the few who manage to qualify.
Sparked by the
pandemic, the greatest economic crisis since the 1930s is already having a
devastating impact on the millions who have seen their jobs suddenly disappear,
while millions more will see wages, benefits and hours dramatically curtailed
whenever they are able to return to work. Optimistic projections that the US
economy would quickly bounce back once stay-at-home orders were lifted are now
becoming much gloomier.
A University of
Chicago analysis from earlier this
month projects that 42 percent of lost jobs will be permanently eliminated. At
the current record number, this will mean a destruction of 16.2 million jobs,
nearly double the number of jobs which were lost during the Great Recession
just over a decade ago.
“I hate to say it, but
this is going to take longer and look grimmer than we thought,” Nicholas Bloom,
a Stanford University economist and one of the co-authors of the study, told
the New York
Times .
A survey by the Census
Bureau carried out at the end of April and beginning of this month found that
47 percent of adults had lost employment since March 13 or had someone in their
household do so, and 39 percent expected that they or someone else in the home
would lose their job in the next month. Nearly 11 percent reported that they
had not paid their rent or mortgage on time and more than 21 percent had slight
or no confidence that they would do so next month.
With millions missing
their rent or mortgage payments, tens of thousands of families will be thrown
out on the street in the coming weeks and months, leading to a dramatic rise in
homelessness even as the coronavirus continues to spread. While many states
took steps in March to place a moratorium on evictions, and eviction notices
were unable to be filed due to court closures, those measures are now expiring
and courts are reopening.
The Oklahoma County
Sheriff announced Tuesday via their Twitter page that the department would
resume enforcing evictions on May 26. Nearly 300 eviction cases were filed in
Oklahoma City between Monday and Tuesday. This process is being repeated in
cities and counties across the country. Evictions are also set to resume in
Texas next week, where many families were ineligible for aid due to the
undocumented status of one or another parent. The CARES Act provision, which
blocks evictions from properties with federally subsidized mortgages, expires
on July 25; in Texas this only accounts for one-third of homes.
Meanwhile, another wave
of layoffs and furloughs is expected by the Congressional Budget Office at the
end of June, when the multi-billion-dollar Payment Protection Program (PPP)
expires. Sold as a bailout which would help small businesses keep workers on
their payroll in the course of necessary shutdowns, the PPP was in fact a
boondoggle for large corporations, their subsidiaries and those with
connections to the Trump administration. Many small business owners have not
seen any aid, and many do not qualify for loan forgiveness.
Amid historic levels of
social misery in the working class, times have never been better for those at
the heights of society, with America’s billionaires adding $434 billion to
their total net worth since state lockdowns began. Financial markets have
soared, underwritten by $80 billion per day from the Federal Reserve.
Amazon CEO Jeff Bezos,
who is rescinding a $2-an-hour hazard pay increase for his warehouse workers at
the end of the month, led the pack, increasing his personal wealth by $34.6
billion since the onset of the pandemic. Facebook CEO Mark Zuckerberg was close
behind, adding $25 billion to his fortune. Tesla CEO Elon Musk, who reopened
his California auto plant in defiance of state regulators and with the support
of President Trump, saw a 48 percent increase in his wealth to $36 billion in
just eight weeks as the stock market rebounded from its collapse. All told, the
nation’s 620 billionaires now control $3.382 trillion, a 15 percent increase in
two months.
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