Guanabara Knocking

A couple of years ago I was touring an American corporate campus when my perky docent said something odd:

In the East Building we have HR and the cafeteria on the first floor, the second floor is Brazil, and on the third is accounting…

Wait, what do you mean by ‘Brazil’ on the second?

Oh, all the work on the second floor is off-shored to Brazil. I’m honestly not even sure what they do.

What is directly in my field of vision has been off-shored to Brazil? I think most people have a familiar facial countenance that emerges when it suddenly occurs they are speaking to a lunatic. With this expression probably unmistakable, I conceded my skepticism that the ‘off-shoring’ initiative had been flawlessly executed.

Chuckling in response, my escort explained that ‘Brazil’ meant the people not the place (was this a Kakistocracy reader?) and that the entire floor was occupied strictly by that country’s nationals. Whether they were imported en masse by a contractor or materialized as the result of focused internal hiring is a matter I didn’t pursue.

And there was little cause for pursuit regardless. The uniform business perspective is that there is a scarcity of American workers willing to toil in the air-conditioned presence of break-room Foosball machines, and no option to fill that void but by alien labor. Certainly compensation can’t attract an American off his BarcaLounger. And even if it could, there’s not a libertarian economist alive who wouldn’t commence ritual self-cutting at the suggestion.

But I think the lack of language precision is one of the catalysts for miscommunication between emissaries of The Economy and a corresponding human being. For instance, when the former says something like “insufficient labor supply” they innocently omit the suffix: “at the price corporations prefer to pay.” Readers may have to simply accept on faith my assertion that this employer wage preference is remarkably modest.

As a result, workers are well-advised to seek salary support contingencies rather than rely exclusively on the good faith of Mark Zuckerberg. One of these additional supports would normally be the levitating effect of supply and demand. Restricted supply (such as the population of America) with equal demand results in higher salaries. And so while Mark may desire to pay his drones in FarmVille credits, because their skills are relatively scarce he is obliged to concede dollars for the talent.

I can assure you this concession is not granted voluntarily. It is borne as a corporate bridle. And men of Z’s ambition naturally seek to cast off their restraints. The costs of labor scarcity being the most galling of all.

Fortunately, there’s a path to circumvent those domestic labor units scheming to use corporate revenues to raise their selfish families. That is by increasing the labor supply (preferably into the cosmos), which drives down wage prices proportionally while stripping workers of pricing power. None of which is any novel insight.

Though I do wonder if importing thousands of competing Indian economists could cut faculty costs in half while ending employee health care and vacation allotments at George Mason University?

No!

No!

Did someone say something? Anyway, these considerations occurred to me upon seeing a recent tweet by the wheedlers and automatons at the Cato Institute.

Let’s get rid of H-1B visa quotas so we can hire the best & brightest from all over the world, & better our economy.

For those readers unfamiliar with key industry terms, the capacity utilization rate of that tweet is impressive. That is to say the actual sophistry output is very close to its maximum economic potential.

Everyone by now at least vaguely understands the H-1B program. It is a Mexican Coyotes program in suits. Voiding the quotas attached thereto is to put the country’s immigration laws completely under the liberal discretion of corporate HR. Whatever job you do, Cato wants seven billion others in domestic competition.

It doesn’t require a vivid imagination to understand the dramatic leveling effect this would have on American living standards. And by level, you should understand it to mean one centimeter above Calcutta. You’d be amazed by how inexpensively the world’s best and brightest will agree to work. As I have written previously, simply consuming the institutional and social capital of the West alone represents an enormous “raise” for most of the Earth’s labor pool. What they are paid beyond is gravy. Thus Cato is asking you to relinquish the acvumulated wealth of your forebears in exchange for larger CEO gold caverns. I’m personally unimpressed with the offer, though it’s each man’s to judge.

Then there’s that appealing tweet coda: and better our economy. It’s become almost a universal charlatan’s tic to substitute plural pronouns where the first person singular is plainly intended. “Our” economy. Who’s our? The American IT staffs training their foreign replacements? Those who can’t find work in their field? Or just the ones who haven’t received a raise in years while working in a Marrakesh bazar? Hopefully their sullen families will understand the big picture.

Though our economic benefits don’t come without costs. Its own pernicious employment cycle being one rarely mentioned. In fields highly impacted by foreign supply, the compensation inducements for domestic entry deteriorate. This lending more pie chart credence to actually exacerbate the original cause. For instance, the most highly intelligent young people are naturally going to flow toward career arcs that don’t place them in jeopardy of benefitting our economy.

Thus a 3SD student with options in any field will tend to select those with the most comfort and compensation. That means a consistent top-tier refresh rate for derivatives voodoo at Goldman Sachs, but much less motivation toward IT and engineering fields. What, you don’t want a 40 year career job-swapping with tribalist Asian peers in constant cut-throat global competition? Unless starting their own company, the incentives for bright youth in this area are distinctly uninspiring.

All of which ultimately leads to fewer Americans entering heavily disincentivized fields, and louder squalling for even worse incentives to make up the difference. An alternative approach would have been to offer improved compensation, conditions, and prestige to induce higher IQ talent into fields that were alleged to suffer deficits. This creating a virtuous cycle of domestic refreshment.

But it was never about worker shortages, best and brightest, or our economy from the outset. This was all just another sordid display of how the cunning fleece the credulous. In this instance the latter being relieved of their national inheritance.

And that is something you will never hear mentioned on the second floor Brazil.

23 thoughts on “Guanabara Knocking

  1. I had a Skype conversation with a former colleague now working as a CTO at an up and coming start up.

    Me: How many Indians have you met that are truly great programmers
    Me: I have run so many projects cleaning up off shore code back at the tele company it’s not funny
    Him: At least one? Maybe

    Not only do they want to replace us all with H1Bs, they want to do it with idiots. US community college graduates could do the same or a better job.

  2. One of your best columns yet. This concern for the economy (i.e., total GDP) is idiotic when it is per capita GDP and wage and standard of living growth that we each individually strive for and that measures the health of the country as a whole.

    • The Economy has never been better. Total GDP (General Demographic Pollution) has been rising uninterrupted since 1965.

    • Roman, Do you know of any place online where there is some sort of easy-to-access list of the negatives to the economy and society associated with mass immigration and diversity? I think it would be helpful to have something like this to counter the many falsities out there regarding these two plagues upon western civilization. Maybe this list could also include a bibliography of excellent, supportive articles.

    • Here’s an excerpt from a very good article I’ve mentioned before. Sorry it’s kind of long.

      “Ultimately, I believe, the pursuit of a mass-immigration society has been rooted in the evolution of global capitalism, which has generated in the West a radical individualism destructive of traditional bonds and loyalties and has produced a cosmopolitan outlook, ever-expanding in its sway, within the dominant class. Leaving aside for a moment the ideological origins of the mass-immigration revolution, the purely economic rationale for mass immigration, embraced since the 1960s as an article of faith at least as much by Labour mandarins as by Tory, has been as pervasive as it has been strikingly superficial. It rests on two erroneous arguments. The first depends upon the obvious observation that an increase in population brought about by immigration will increase the overall Gross Domestic Product (GDP), largely in the form of wages paid to the immigrant workforce. But this argument ignores the crucial distinction between an increase in overall GDP with an increase in per capita GDP. Yes, with mass immigration GDP rises, but that increase merely matches the overall increase in population; immigrants do not add proportionately more to GDP­—and this calculation fails to take into account additional infrastructure and social-service spending that mass immigration of necessity engenders. The second erroneous argument has essentially conflated the low level of labor flows, largely of and for the elite—those globe-hopping high-techies/bankers/medical researchers/sneaker designers/installation artists—that’s necessary for the optimal functioning of a post-industrial world economy with the mass migration of unskilled, poorly educated people from the underdeveloped countries to the economically most advanced ones, in this case Britain. At its crudest, this confusion has arisen from an economically anachronistic conviction that what Britain has really needed is a mass-production and mass-consumption economy stoked by an army of blue-collar workers to produce and consume the products of mills and factories. (Antonio Gramsci dubbed this economic formula “Fordism.”) But this Fordist vision foundered, and continues to founder, on the reality of Britain’s de-industrialization. The flood of cheap labor from Pakistan into England’s North and Midlands in the 1960s, for instance, helped generate short-term profits for mill owners and suit makers, but in so doing it also artificially prolonged the decline of the inefficient and untenable textile industry and delayed and made more painful the economic modernization from which Britain only emerged in the 1990s.”

      From the article, “Unmaking England”, by Benjamin Schwarz
      http://www.theamericanconservative.com/articles/unmaking-england/

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  4. FWIW, I’m one of those Ivy League “genius” level IQ folks who began professional life as a journalist and found myself forced into finance by personal financial exigencies. Twenty years ago, when I’d largely fulfilled my familial financial responsibilities and could no longer live with myself by continuing in that line of work, I not only left it but left the USA as well, having been fortunate in seeing the handwriting on the wall with respect to the direction in which things were heading. Neither of my now adult children lives or works in the US, which has become more a vassal state of political zionism than the backwater in which I live a peaceful, simple and rewarding life.

    Roman’s point about GDP is very well taken, but sadly it’s a point missed by most. I’ve come to strongly believe that this US presidential election will be a watershed event in the history of the nation going forward, but I don’t hold out high hopes. If I were there and the age I was when I left (51), I’d wish to do so again before it becomes well-nigh impossible. It appears it is already far more difficult than it was back then.

    • I’m already looking at my options for immigration. I’m not yet 50 so I have an edge in some countries, plus I have skills that are scarce in some quarters. I can’t see waiting around while people flail about trying to correct things that may be beyond salvation.

  5. Porter

    Thank you for every essay you write. I have again posted this at The Burning Platform, with attribution to you and a link to your site.

    If you want to stop by and say hello, please do.

  6. “In fields highly impacted by foreign supply, the compensation inducements for domestic entry deteriorate… Thus a 3SD student with options in any field will tend to select those with the most comfort and compensation. That means a consistent top-tier refresh rate for derivatives voodoo at Goldman Sachs, but much less motivation toward IT and engineering fields… All of which ultimately leads to fewer Americans entering heavily disincentivized fields, and louder squalling for even worse incentives to make up the difference.”

    A few years ago, I regretfully mused to an engineer friend of mine that I ought to have gone into his field, instead of the decent-paying but not-terribly-skilled service position I had at the time (which required nothing but very basic computer competence, and a lot of patience). My father had been an engineer for decades, so I am reasonably sure I could have mastered the necessary subjects, given enough time and effort.

    My friend shocked me by revealing that his annual salary was almost identical to mine, despite his vastly more useful skills and higher stress level- several local power plants apparently had him on-call to prevent widespread blackouts in the event of a malfunction. He griped about the utter failure of all his efforts at rasing his compensation, despite constantly training for additional skills, and that his employer took the overwhelming lion’s share of what their clients paid for his time. The conversation certainly dampened any enthusiasm I might have had for taking night classes.

  7. Remind me again why we keep playing by the rules they make and break? Stupid, shortsighted people such as suits can’t be allowed any control over their betters, (such as, for instance, I, the genius Savantissimo!). They must be abased, dispossessed, crushed.The ones that live. Their bullshit won’t block mortar shells

  8. For anyone interested, I took Yojimbo up on his invitation and responded to a commenter at The Burning Platform as follows.

    It was interesting. I think the author could be clearer. He was at times hard to follow.

    His point seems to be that by importing workers, at lower wages, we are driving down wages and burning up our accumulated wealth. It certainly would drive down wages. But not sure what the impact would be on wealth.

    Wages, in my opinion, are being driven down steadily by foreign competition. I bleated about this from virtually the first post I ever made on TBP, and have steadfastly said that US wages and standard of living will steadily fall. My calcs were the fall would be around 40% over the next decade or two. And so it is happening.

    I also said, and say, the top percentages would do well, but folks in the bottom 20% were going to be slaughtered, as they lack the skills, intelligence, education, etc. to compete with billions of Chinese and Indians. And so it is happening. Looks like I got that right too.

    I pointed out that China graduates more engineers per year than the US has in total, and that the shear weight of numbers would overwhelm the US advantage in tech eventually.

    I have pointed out time and again that 5 per cent of the world’s population is consuming 25 per cent of its resources, and that it would not and could not continue. It will not continue. It cannot.

    I have highlighted that the US is living off debt. The author of the article seems to not comment on that – the US has squandered trillions and trillions and probably tens of trillions consuming instead of investing.

    The US has a very weak group of employees once you get below the top 20%. Those bottom 80% are going to be crushed, year after year.

    I have said the US middle class was an unsustainable anomaly and it was going to disappear. So far that seems to be accurate.

    The author seems to be suggesting that the situation is salvageable.
    No, it is not. The bottom 80% are going to be screwed.

    Folks need to do everything possible to claw into the top 20%. That means they need to compete like mad. Educate and skill up. Work long hours. Save. Invest.

    The days of wine and roses are ending. The US cannot produce enough to be able to consume 25% of the world’s resources. The middle class, such as it is, thinks there is divine right to that standard of living. They still have not woken up. They think Trump can save the day. Not going to happen, even if he is elected.

    The bottom 80% are competing not against the bottom 80% of China and India. No, they are actually competing against the top 10% of China and India, who will happily work for what the bottom 80% of Americans get. And the top 10% of China and India will be harder working, smarter, and better educated.

    It is going to be a bloodbath. The blood letting will ever gain speed.

    Yojimbo, thanks for the invitation to stop by. You have a lively group.

    I thought I’d respond to some commenter points. And since LLPOH invested the most effort, it’s his I’ll discuss.

    To begin, whether intentionally or not, he’s speaking only obliquely to my thesis. It doesn’t matter anyway, workers are all screwed isn’t responsive to the question of H1B visas specifically or foreign chicken helots in general. I’m not opining on whether his dire prediction is necessarily wrong, though it offers no bridge to a resulting position.

    I.e., American workers below the 80th percentile are all screwed regardless, thus…

    Screw them more?
    Screw them less?
    The screwing is just right?

    He doesn’t say.

    Next–if I characterize his position accurately–sub 80per. workers can not compete with Chinese and Indian talent.

    I don’t know what precludes this competitive effect from the top earning tiers as well. China suffers no deficit of high-IQ potential executives if their reported test scores can be believed (they can’t). But scores aside, there is no reason whatsoever the same asian/subcon swamping effect wouldn’t cross all social strata, including our lowest. 82 million Chinese live on less than a dollar a day, which should offer heady competition for our far more richly compensated underclass of domestic dindus.

    So really Americans are fairly superfluous in America. But that’s not really true.

    There’s a reason American executives try to circumvent and manipulate state policy in order to import cheap labor units when they could simply export their headquarters just as easily. That is because these ostensibly worthless Americans do something that Chinese and Indians display little aptitude for: building and maintaining a clean, stable, prosperous, low-viscosity, and (decreasingly) safe society.

    Of course that’s not just my opinion, but also that of the Indians and Chinese themselves, whose feet always tell the truth even when their tongues may choose to lie. Until I see Americans committing mass birth-fraud for Chinese papers in Shenzhen, I’m little inclined to marvel at projections of oriental potency.

    And this is what I find so despicable about our managerial class. They won’t dare put their bodies where their mouths are and decamp to the source of all that “best and brightest.” No, they want to roost strictly in the West without having to employ the very people who make it the most desirable location. Does someone think it’s our topsoil that’s unique?

    Well to hell with that. CEOs want Indian workers? Calcutta beckons.

    Next LLPOH mentions that 5 per cent of the world’s population is consuming 25 per cent of its resources, and that it would not and could not continue. It will not continue. It cannot.

    I didn’t know specifically what resources he meant. So I did a search, the results of which may or may not correspond to the commodity he had in mind. What I found was a reference to “energy” consumption, which was finally clarified to be oil (America representing 22% of global consumption according to the article I tracked down.)

    If this is the resource being cited, I don’t think percentage of the world’s population is the relevant ratio. Rather, what is that 5% producing with 22% of the oil is the question. And the answer to that isn’t particularly startling or unbalanced: America generates 24% of nominal world GDP. Input to output. There really is a simple reason why 82 million citizens of the Congo are so economical with the world’s resources. Because they produce practically nothing but more Congolese.

    Finally, LLPOH speculates that I find the situation salvageable while he does not. That’s true, with caveats. Anyone who reads my blog will not find it heavily varnished in optimism. Though America, and the West, may be salvageable in the only way that truly matters: as an inheritance to our children.

    Consider Japan. That country has more than double the debt/GDP of America. It also has a rapidly aging population simultaneously caused and exacerbated by a very low TFR.

    And, barring war, none of it will be more than a blip in the sweep of their history.

    Japan will rely on its own labor, innovating where it must, turning to robotics where possible. And when one day their debt has either been serviced or renounced, and their women recall the intricacies of reproduction, they will look about to find a Japan still full of Japanese.

    To ourselves and our posterity is a wealth all its own.

  9. One of your best articles and I 100% agree. Coming from the tech industry, I have seen it flooded with incompetent H1Bs. At the same time I have seen bright American students make the bright decision to not jump into an industry where they are constantly at risk of being swapped out for Rupesh and his 8 cousins by the bean counters in accounting.

    H1Bs are a scam and need to be eliminated. Not just because they destroy salaries of U.S. tech workers, but also because they destroy U.S. tech capabilities by keeping new competent workers from entering the field while filling it with shit-tier programmers that to shit-tier work.

    Finally, hiring foreign nationals is a major security and intellectual property theft risk for companies. Chinese nationals will steal to help China. Indian nationals will steal to help themselves by selling the secrets to China.

    American companies are fools for what they are doing and they will all pay the price eventually.

      • I’ll throw in a note for optimism.

        I’m a product manager for a small dev shop in the US where the (100% white American male) developers easily make $175k+/yr. The majority of the work comes from American companies that have previously attempted outsourcing to countries including China, India, and the Ukraine (white, but not any better).

        When I asked why, the head of the firm broke it down like this: 10-20 years ago, software development was still about coding. In his estimate, less than 2% of the American population had the ability to be good software engineers. In that environment, it made “business sense” to import more people who could code so you could get shit done.

        Things have changed. In simple terms, software engineers created libraries of “basic” commands. Instead of spending 6 hours writing “X+Z+Y—>A” to perform a basic function, they just write “A” to achieve the same effect. Obviously, this has limits, but it tremendously amplified each engineers’ output, which in turn shifted the focus from “being able to code” to “having good judgment to pick the right commands + being able to code”. This raised the bar significantly.

        Turns out the US and (to a lesser degree) the West are the only places where you can consistently find software engineers with good judgment. Sure, you can find them in China/India/wherever, but unless you are lottery-level lucky, you’ll blow more money on finding that diamond than you would hiring Americans to just do it right the first time.

        Compounding the judgment problem is the fact that outside the Anglosphere, autocracy generally rules. This means that, at best (if you’re lucky), you’ll get exactly what you asked for. And I mean exactly. Case in point: one company outsourced their app to Ukraine, confident in their ability to produce accurate mockups for the outsourced team to follow. The dev team followed the mockups to a T…including spending thousands of dollars worth of time on the navigation buttons. Turns out Apple provides a number of high-quality tools for app development, including navigation button templates, backed by Apple’s consumer research R&D. The Ukrainians didn’t use Apple’s tools because the nav buttons in the mockups were ever so slightly different than Apple’s buttons, and they wanted to get it exactly right. The company was appalled when our software team pointed that out to them when we reviewed their code.

        The entire nav button process would have cost ~$600 for us to do it. It cost us more than that to fix it on top of what they’d already paid the Ukrainians. I’ve run into more and more American businessmen who’ve had the same experience and swore off ever outsourcing software again.

        All that to say, it seems that, for software at least, we’ve broken through a ceiling where it no longer pays to import a large number of “smart” foreigners since they don’t have the combination of IQ+judgment required. Of course, that hasn’t settled into the general consciousness yet, but that’s the actual tech reality. So there’s room for hope.

  10. Pingback: Lightning Round – 2016/08/18 | Free Northerner

  11. Wealth is driven down by hiring lower cost foreign workers because: (1) unemployed Americans consume tax payer dollars that would have been invested in infrastructure (new or maintenance), (2) Americans forced to work at lower paying jobs because of the oversupply due to foreign worker imports pay less taxes, can afford less homes and save far less. Both conditions lead to lower per capita wealth, AND lead to lower national wealth.

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