CUTTING OFF THE BRAINS

By John Greenwald

MICROSOFT CHAIRMAN BILL GATES hates it. So does Intel president Andy Grove and virtually every other chief executive in Silicon Valley. In Washington the representatives of America's vaunted high-tech industries hate it too. Phyllis Eisen, senior policy director of the 14,000-member National Association of Manufacturers (NAM), one of the country's most powerful business lobbies, decries it as "insane."

The target for those gigabytes of scorn is the last hurrah of Republican Senator Alan Simpson, 64, the deacon of U.S. immigration law, who is retiring this December after 18 years in Congress. Simpson, who sponsored a major reform of U.S. immigration rules in 1986, has some further fine-tuning in mind. What has businessmen so riled up is provisions in Simpson's 200 plus-page immigration package that would sharply curtail the number of foreign skilled and professional workers who can enter the U.S. on employment visas each year. Those in the technology business charge that at best the cutback would erode their competitive edge and at worst could threaten their future growth and prospects.

The bill, which awaits consideration by the Senate Judiciary Committee, would slash the annual employment-visa quota from 140,000 workers to 90,000 within a year of its passage. Some companies that hire immigrants would have to pay a fee of $10,000-or 10% of each worker's salary, whichever is higher--for worker training. Simpson also wants to require some new arrivals to be proficient in business English, and would limit the stay of foreigners transferred to the U.S. from a company's overseas branches to three years--vs. a five-to-seven-year limit today. To increase the odds that the bill is considered this year, Simpson has cannily tied it to a more popular measure combatting illegal immigration. A softer version cleared the House Judiciary Committee last October.

Simpson sees his legislation as a way to keep business from driving down American wages and giving away jobs to foreigners willing to accept low wages. "Employers should be able to obtain skilled foreign workers," the Senator says, "but not with an abandon that leaves 1.1 million skilled young Americans chiseled out of jobs." He dismisses criticism of the bill as "a very deft operation of near hysteria" and asserts, "We're not trying to do one damn thing to [hurt] American competitiveness."

Labor Secretary Robert Reich has warned that legal loopholes encourage some companies "to avoid their responsibility to train U.S. workers for these important high-tech jobs." But to executives who say they cannot find enough homegrown employees to design computers and other advanced products, the Simpson bill is a dangerous threat to America's technological edge. "Instead of building a bridge, this whole effort is carving out a moat," says NAM's Eisen.

The seriously irate include not only the chairman of Intel but also those of Hewlett-Packard, Texas Instruments, National Semiconductor and other companies; they expressed their misgivings last September in an urgent letter to Representative Henry Hyde, an Illinois Republican who is chairman of the House Judiciary Committee. The letter noted that foreign students account for one-third to one-half of all those enrolled in U.S. graduate schools in science and engineering. "It should be no surprise," the executives wrote, "that highly skilled U.S. engineers are not always available on a timely basis." Microchip giant Intel, for example, hired 300 engineers with master's or doctoral degrees last year. About 100 of them came from outside the U.S. "It's a pretty small number percentage-wise," says Tom Waldrop, an Intel spokesman, "but they have a very high effect on the success of the company."

Nor is a job given to a non-American always a job lost; in fact, sometimes the opposite is true. One of the signatories to the Hyde letter is Zvi Or-Bach, an Israeli engineer who six years ago founded Chip Express, a manufacturer of custom-made microchips that has 64 employees--only 30 are foreign--in Santa Clara, California, and 30 more in Israel. Under the Simpson bill, Or-Bach argues, he would have been unable to hire enough skilled workers to start up his thriving firm. In fact, there would have been no one to dream up the company, since Or-Bach came to the U.S. in 1981 on a visa to work for Honeywell. "If this happened 10 years ago, this company would not be here," Or-Bach says. "That would be very shameful." Simpson, however, intends to push ahead for a vote later this year.

--Reported by Hannah Bloch/Washington and David S. Jackson/ San Francisco

With reporting by HANNAH BLOCH/WASHINGTON AND DAVID S. JACKSON/SAN FRANCISCO