U.S. high tech companies are also exposing American workers to low-wage, high tech competition through the rapidly growing practice of importing foreign technology professionals from developing countries. These workers -- known as H-1B workers, after the visa regulating their entry into the United States -- are allegedly needed because American high tech industries face a potentially crippling labor shortage. The numbers of these workers have recently been increased from 65,000 to 115,000, and industry is on the verge of pushing through yet another quota hike. . . . employers routinely pay them less than their U.S.-born counterparts receive, with the pay gap standing at 15-50 percent, according to independent estimates.

Just as important, wage and salary trends in high tech industries like software, where H-1Bs have been concentrated, belie the high tech companies' claims of a labor shortage. They strongly indicate that industry is using the new influx of low-paid foreign workers to pump up the supply of labor available to American business and thereby reduce or preempt wage pressures.

Indeed, the unemployment rate for computer programmers over the age of 50 has been reliably estimated at an astonishing 17 percent, and as of 1997, 6.1 percent of new computer science Ph.D.s could not find stable, full-time employment. Small wonder that, according to economist Robert Lerman of The American University, salaries for computer scientists, operations researchers and computer programmers have been absolutely flat for most of the 1990s. Moreover, recent volatility in technology stock prices indicates that stock options are not always adequate substitutes for more conventional forms of compensation.

Remember, this was happening in the US during the 1990s, when we were supposed to be in the middle of a tech boom.

Dean Baker makes a similar point:

Ordinarily, the claim that there is a people shortage would imply that wages are rising at an extraordinary rate. (This is the way economists ordinarily think about markets - shortages mean higher prices.) This means that there is a quick way to verify . . . claims about a people shortage: see if wages . . . have been rising at an extraordinary rate.

I don't know what's specifically happening to wages and employment in Europe's high-tech sector (anybody have this info?), but economy-wide wage growth is not all that spectacular right now:

Wage Growth Slows

Growth in real wages slowed to 0.6 percent across the 12 euro nations last year from 0.8 percent in 2004, according to the European Industrial Relations Observatory's Web site, damping the effect of higher employment.

-- Bloomberg, 8/7/06

And we all know about the unemployment problems. Why can't European firms invest a little in turning unemployed European youth into qualified tech workers? Or make greater efforts to retain and upgrade the skills of older tech workers? Maybe they wouldn't be able to exploit cheap labor that way?

Of course, this kind of argument plainly contradicts the usual story we get about European labor markets:

It is striking how commentators can make seemingly contradictory claims about Europe's dire fate with great confidence. The basic story is that Europe's high wages and labor market protections lead to high unemployment. This is crisis # 1 - too many workers.

Then we find crisis # 2 on the horizon, a surge in the ratio of retirees to workers, which is compounded by Europe's slow population growth. The essence of crisis #2 is not enough workers. . . . In other words, the Europe critics seem to be telling completely contradictory scare stories, without even recognizing this fact.

In the long run, I'd put my money on a labor surplus, not a labor shortage, even in high tech:

What Really Ails Europe (and America): The Doubling of the Global Workforce

. . . the advent of 1.47 billion new workers also pressures labor in advanced countries. The traditional trade story has been that most workers in advanced countries benefit from trade with developing countries because advanced country workers are skilled, while developing country workers are unskilled.

But this analysis has become increasingly obsolete due to the massive investments that the large populous developing countries are making in human capital. China and India are producing millions of college graduates capable of doing the same work as the college graduates of the United States, Japan or Europe -- at much lower pay.

A shifting monopoly

By 2010, China will graduate more PhDs in science and engineering than the United States. The huge number of highly educated workers in India and China threatens to undo the traditional pattern of trade between advanced and less developed countries.

Historically, advanced countries have innovated high-tech products that require high-wage educated workers and extensive R&D, while developing countries specialize in old manufacturing products. The reason for this was that the advanced countries had a near monopoly on scientists and engineers and other highly educated workers.

Job migration

As China, India and other developing countries have increased their number of university graduates, this monopoly on high-tech innovative capacity has diminished. Today, most major multinationals have R&D centers in China or India, so that the locus of technological advance may shift.

Certainly, the rate of technological catch-up will grow, reducing the lead of advanced countries over the lower wage developing countries.

Business experts report that if the work is digital -- which covers perhaps 10% of employment in the United States -- it can and eventually will be off-shored to low-wage highly educated workers in developing countries.

If and when Russia gets its economic act together, labor market pressures on educated and skilled workers will grow.