Why aspiring Chinese engineers wouldn’t go home

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Sheila Li is a graduate student at the University of Southern California. After a year of job-hunting, she received an offer for a full-time job as a software engineer in Austin, Texas. The email came in at 1 p.m., but Li waited five hours– until the sun rose in Beijing– before she called her parents to announce the news. She knew they would be disappointed.

“My parents do not want me to work in the United Sates,” Li said, explaining that her parents hoped she would move to her hometown, Hangzhou, a rising tech hub that incubated both the multi-national e-commerce conglomerate Alibaba and the internet tech company NetEase.

It doesn’t help that Li, 21, like many of her generation, is an only child. Being a woman makes things even harder. “Parents never want girls to go far away,” she said, “but working as a coder in China is exhausting. Plus, I get higher salaries here.”

More than 350,000 Chinese students are currently enrolled at U.S. colleges and universities. A third of them are here to become engineers. A Chinese research firm reported this year that engineering grads received the highest-paying jobs in China, but many aspiring Chinese engineers who are studying abroad are nonetheless determined not to go back home.

Dr. Danny Friedmann is a law professor at Peking University. He explained that there is a gap between the economic growth and a dearth in skilled coders, thus Chinese tech workers receive lower payment than those in the U.S.

“The higher salaries and better working conditions for coders, the higher costs for the companies, which makes them less competitive in the short term,” he said.

A Choice of Lifestyle

Apart from the payment, the reasons may be linked to a relentless work culture. Chinese tech companies have reportedly been pushing their employees to work overtime, encouraging employees to compete to work the longest hours. The companies accommodate this approach with o do this, they offer late meals, night shuttles, and even bunk beds in the office.

Fuzhi Wang is a hardware engineer at Huawei, a Chinese telecommunication equipment company based in Shenzhen. He said that he and most of his colleagues work “9-9-6” — from 9 a.m. to 9 p.m., six days a week. “The company does not mandate long working hours,” he said. “But people simply won’t leave the office at 5 o’clock.”

In August, Huawei passed Apple to become the world’s second-largest maker of smartphones, Bloomberg reported. In 2017, the company invested approximately $13 million, which accounts for about 15 percent of its revenue, in research and product development. Forty-five percent of its workforce are involved in R&D.

This means Huawei’s demand for tech workers is enormous. “Huawei is catching up with the U.S companies, said Yiwei Song, who worked as recruiting coordinator for Huawei in 2017. “It prefers to recruit students that have studied abroad and expects them to bring back fresh ideas.” Students with overseas educations tend to benefit from high salaries and greater opportunities for advancement than those who graduated from domestic universities, she added.

Despite the preferential treatment they receive back home, new grads from China tend to choose Silicon Valley over Shenzhen.

Sheila Li believes there is a bigger backstory — China lacks proper intellectual property protection for tech companies.

“Once company A creates something, company B would steal the idea, which pushes company A to accelerate the process of innovation,” she said. “There are distorted competitions in the market. As a result, engineers have to work day and night to catch up with that speed.”

Dr. Friedmann said China does have a proper intellectual property law system in place in the books, but on the ground, this is not always manifested, for example, because of local protectionism.

“Intellectual property in general is sometimes ill-equipped to protect these fastly developing innovations,” he said, “and in the case of software the copyright protection, it seems too long as well.”

After receiving his master’s degree from the New York University, Zhi Cao went back to Wuhan, the capital city of his home province, to work for a tech start-up.

“I am considering applying for another master’s program in the U.S.,” he said. “Life here (in China) is too intense and I don’t think I could adapt to it.”

Cao had been in the U.S. for six years before he went back to China, since he went to undergrad in New York as well. “I really regret that I didn’t stay in the States,” he said.

Yi Leng just received his master’s degree in engineering from the United States and landed a job at Amazon. “Here everything is based solely on merits,” he said, adding that interpersonal relationships between colleagues were “simpler” in the U.S, while the “guanxi” culture in China, where everything is based on networking, added complexity to the working environment.

Leng has a green card, but he is not obsessed with the idea of living in the U.S. “If I get to play my role and contribute to my own country with what I’ve learned here, I will go back,” he said.

The Challenges to Stay

Unlike Leng, most of international students who intend to work in the U.S. here need an H1B visa. It is a type of non-immigrant visa for international students to work in the United States.

According to MyVisaJob, Facebook, LinkedIn, Amazon, Apple and Google filed 13,875 Labor Condition Applications (LCA) for H1B Visa in fiscal year 2017. A year before that, the number was 11,047.  The trend resulted from STEM-favored policies under the Obama administration as well as rapid expansions of tech giants in the United States. For years, Silicon Valley has been demanding skilled foreign workers, especially in the tech niche.

“I can imagine the day when a large portion of tech workers will be coming from Ohio and Michigan,” said Professor Dowell Myers, Director of the Population Dynamics Research Group at the University of Southern California. “I can imagine that day, but it’s impossible.”

Myers said the United States has a shortage of workers, shortage of all levels — blue collar, white collar and scientists’ levels. As a result, Chinese and Indian engineers become “important shares of the technology workers”, he said, and added that they can be influenced by the recent immigration policy.

President Trump’s Buy American and Hire American Executive order gives creates more barriers for H1B petitions to be approved. This disincentivizes companies to sponsor new grads. The number of petitions the immigration department received in 2018 has drastically decreased from 236,000 in 2016 to 190,098, according to its website. That means employers have shrunk their quotas for international employees.

Notably, Amazon this year earlier began a round of corporate layoffs. Back in 2016, the company sent out a huge amount of job offers. At that time, applicants were only required to complete two online assessments before they got recruited. Now, it takes multiple rounds of interviews for an applicant to proceed into the final phase of recruiting.

Amazon is also locating its second headquarters in East Coast. Myers suggested such locations, as opposed to the West Coast, is centered in an area with a higher percentage of this was to give more jobs to native-born Americans than immigrants in the job pool.

Source: Institute of International Education (Created with Infogram)

Despite the shift in political climate, the number of Chinese students coming to the United States for higher education is increasing. Engineering remains the most popular major for them. The field of math & computer science witnessed a drastic increase of 18 percent in its student population of all origins from 2016 to 2017, according to the Institute of International Education.

“Even if tech companies do not reduce the number of positions for foreigners,” Li said, “more and more international students are flowing into this industry with a hope to secure a job here, the competition of job-hunting in the States would only be fiercer year after year.”

Wildfires Are Lighting Insurance Companies into Flames – Final Project

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Widespread fires burn through thousands of California homes year over year. This doesn’t only affect the homeowners and their families but also lays immense pressure on firefighters in these dry areas in addition to the struggles of insurance companies that insure these households and properties that are prone to blow up in flames.

The aftermath of recent Northern California wildfire. Source: NBC News

Considering the recent fires burning through Northern and Southern California, I am discussing the economic impact that this disaster-prone state has on insurance companies. As one of the driest states in the United States of America, it seems like insurance companies struggle as California officials don’t do much to mitigate these risks. There is not much of a boundary for homeowners to build on land that is so dry that the probability of a wildfire is high. It feels like these fires that happen on a yearly basis are not enough for someone to take a step in the direction for safer housing, which would result in insurance companies saving money, as well. While public resources are spent defending or salvaging what is left of those homes which shouldn’t have been built in the first place, insurance companies must defend themselves or they are at risk for driving themselves out of business.

As California residents sift through the ash and hope to rebuild, funds may be insufficient, as insurance companies don’t need to cover one homeowner’s lost property, but the entire community (if not more). According to a Forbes article discussing insurance and loss of use for the recent victims of the Woolsey and Camp Fire in Los Angeles and Ventura County, “What is often overlooked is loss of use coverage. How long will it take to repair or rebuild?” (Gorman). Loss of use, or living expenses during the duration of the recovery process, usually covers living expenses and rental value. Although, not all insurance plans have this, and when a fire causes destruction, Californians may be surprised when their insurance companies don’t fully cover these temporary living costs. Homeowners in these high-risk areas must understand that in cases of natural disasters, they may be left with a much lighter wallet than expected.

According to a Los Angeles Times article discussing fleeing insurers, insurance companies in high-risk areas for natural disasters are no longer agreeing to insure homes. For example, a couple living in Lake County in Northern California is denied insurance. In the area which the couple resides, “50% of the land has been burned by fires in the past several years” (Newberry). With an already expensive premium of $2,100, their rate had skyrocketed to $5,800 in only two years (Newberry). The increase in California wildfires leads to more fleeing insurers. What insurers have continued to do in California is to inflate the price of insurance in high-risk areas to veer builders away from this land, and make home buyers think twice before buying a property with a likelihood to catch fire.

The Los Angeles Times article also provides statistics on the California Department of Insurance: This department acknowledges that the trend of inflating insurance prices is a rational and fair response on the part of the insurance companies. In 2017 alone, they “received nearly $12 billion in claims from wildfires that destroyed more than 32,000 homes. It makes sense that companies will write fewer – if any – policies in areas where they predict losses will outweigh what they can recoup through premiums.

What’s next? Legislators must act to protect home buyers and homeowners who have made efforts to reduce wildfire risk.

The Nature of Wildfires

The risks of more intense wildfires ahead increase due to climate change and the expansion of urban living near forest areas. The geography in California, especially near the coast which is a popular place to live is mountainous and dry. There are dense populations living in California locations which have a high risk of wildfire around them. According to Lloyd’s report, Wildfire: A Burning Issue for Insurers, global warming “is expected to increase average global temperatures and, in some regions, drought frequency and severity will increase” (Doerr). This could lead to a longer season of more frequent fires.

The Lloyd’s report, Wildfire: A Burning Issue for Insurers, also discusses the socio-economic and land use changes in society: “Population growth at the fringe of urban and wildland areas in North America has raised the likelihood of wildfire ignitions, whereas rural depopulation and abandonment of traditional agriculture has led to vegetation build-up, increasing the risk of severe fires” (Doerr).

Not only is it important to understand the weather and living trends of people to analyze potential risk of fires, but sometimes fires start from actions out of our control. Maybe lightning strikes a tree in the middle of a desert, or someone forgot to stop their cigarette from burning. In densely populated areas, accidental human ignitions are a common cause to wildfires. These wildfires pose a threat to lives and infrastructure; massive losses can occur, which will affect insurance companies.

Wildfire Risk

Recently, the insurance industry has taken hit after hit with regards to covering damage due to California wildfires. The threat of wildfires extends beyond the months of summer, but even when the Santa Ana winds blow in the fall.

According to Risk and Insurance’s article about living with wildfire risk, “The evolution of wildfire risks creates challenges for the insurance industry, especially as events occur more often in areas with significant insurance penetration” (Amaral). Therefore, the expected increase in wildfires in urban areas will have some implications for the insurance industry.

Risk and Insurance further discusses the risk management which insurance companies undergo to protect their companies. According to Kevin Van Leer, product manager at RMS (Risk Management Solutions), “‘From a (risk) modeling point of view, probabilistic methods can enable insurers and reinsurers to better manage their accumulations of exposure, particularly in the wildland-urban interface.’ But several challenges remain on proper aggregation of exposures” (Amaral). Factors like the amount of rainfall in the summer and snow in the winter must be considered to understand and mitigate risk. The unpredictability of weather trends leaves insurance companies walking on eggshells deciding which areas to choose are the most prone to yet another fire.

Mitigating Risk

For less houses to be burned down and more healthy and happy humans to live in society, a joint effort between public agencies and private owners is necessary. According to Lloyd’s Wildfire: A Burning Issue for Insurers, “Different public policies can increase the commitment of private landowners, such as subsidizing private spending on fuel treatments, enacting legislation that marries insurance availability and premiums to risk mitigation behavior and providing education about wildfire risk and mitigation. For instance, laws exist in some US states that require fuel treatments on private land” (Doerr). But, why don’t laws exist in all US states, especially the states more prone to fires? Although the government and insurance agencies have taken steps to fix the problem, there is still a long way to go.

Inflated premiums could prove effective, as it would drive away the lower income homeowners that are unlikely to pay a high insurance premium each month. Although, the wildfire risk affecting more valuable homes still poses an issue for insurance companies even if the homeowners can afford it. In a case when the home burns down, the insurance companies are still accountable for paying the losses. Rather than raising premiums in high-risk areas, insurance companies should minimize areas available for homebuilding.

Introducing zoning regulations prohibiting or limiting building in high wildfire risk areas would be a significant advancement in wildfire mitigation.

Often, homeowner’s and insurance agencies’ preferences differ. Neighborhoods form as many homeowners adore the natural aesthetic living in wildfire-prone areas; therefore, effective mitigation should be enforced on a neighborhood level. Insurance companies must zone these high-risk areas by either restricting all homeowners to build property. The other option is restricting none, but inflating the insurance premiums higher than their 3 story roofs. Insurance companies will need to offer similar mitigation efforts for adjacent properties to maintain homeowner trust and commitment.

The “new normal” which insurance companies face is almost double the costs of damages from the previous year. Based on Insurance Journal, an analysis from Moody’s breaks down the losses of the recent fires in Northern and Southern California. The losses in California generated last year were around $12.5 billion, while these recent fires in the past few weeks alone have predicted losses of $6.8 billion— and fire season is not finished just yet (Jergler). With years of wildfire history showing fires worsen year over year, it is shocking to see neither insurance companies or government agencies taking more action to minimize the risk.

What the Future Holds

Milliman, a management consulting published an article written by consulting actuaries David Chernick and Paul Anderson, about how insurance companies react to California wildfires. While California real estate continues to rise, “the amount of coverage selected by policyholders had not kept pace with the increase in home values, especially on policies that were 10 or more years old” (Anderson).

Paul Anderson is asked how wildfires will affect insurers’ future decisions on where to write policies. After a major wildfire, insurance companies will “look to re-underwrite their books to ensure that their exposure and their risk are appropriately spread out in these wildfire-prone areas” (Anderson). Chernick adds that companies should not write insurance policies for an entire area, as a natural disaster can spike the losses if insurance companies write policies for all houses in a concentrated area (Chernick).

Getting insurance is becoming harder as companies reject to insure houses just close enough to the woodlands that a spark of fire could burn up an entire city. There are many of those houses still standing in California. In an article explaining the effect of wildfires on Insurance companies in California published by the Insurance Journal, author Sarah Skidmore Sell discusses that it is harder for in-state residents to find and hold on to insurance (Sell).

“We are not at a crisis point yet, but you can see where the trends are going,” Insurance Commissioner of California, David Jones, stated in an interview (Sell). Jones’ expectations for the future of insurance companies is to “opt not to renew policies or to simply stop writing homeowners policies in areas with the highest fire risk” (Sell). Rate increases and reclassifications of fire-prone areas are also expected.

As claims continue to settle and policyholders and insurance companies undergo huge losses during times of natural disaster, it is shocking that we haven’t seen any necessary corrections in the insurance industry.

Rather than targeting the main issue that has led to the most disastrous fires of all time—climate change—insurance companies are canceling policies, boosting their prices and crossing their fingers that they get lucky enough to insure houses that don’t burn down.

How Insurance Companies Should Protect Themselves

According to the Union of Concerned Scientists, “the effects of global warming on temperature, precipitation levels, and soil moisture are turning many of our forests into kindling during wildfire season” (Is Global Warming Fueling..). The dry and hot areas in California are getting drier and hotter. This article on global warming impacts proves that global warming is a pressing issue that insurers must face: In the western United States, wildfires have been “increasing in frequency and duration since the mid-1980s. Between 1986 and 2003, wildfires occurred nearly four times as often, burned more than six times the land area, and lasted almost five times as long when compared to the period between 1970 and 1986” (Is Global Warming Fueling..).

Mike Scott, a contributor to Forbes who writes about the intersection of the environment and business, questions why insurance companies are not investing in a low-carbon economy. “The impacts of climate-related risks are a growing reality for the insurance sector. This reality has key implications for that sector’s valuation,” the report adds. “Weather-related financial losses, regulatory and technological changes, liability risks, and health impacts related to climate change have implications for the business operations, underwriting, and financial reserving of insurance companies.”Yet, the insurance industry is not aligning itself with initiatives to improve the issues that are causing the insurance companies to bury themselves in their own grave.

 

Works Cited:

Amaral, Rodrigo. “Living With Wildfire Risk.” Risk & Insurance, 12 Sept. 2017, riskandinsurance.com/living-wildfire-risk/.

Anderson, Paul, and David Chernick. “California Wildfires: Implications for Insurers and Policyholders.” Milliman, 2 Nov. 2007, www.healthcarefinancenews.com/news/transitional-policies-risk-corridor-tweaks-bring-new-market-implications.

Gorman, Megan. “What California Wildfire Victims Should Know About Insurance And Loss Of Use.” Forbes, Forbes Magazine, 18 Nov. 2018, www.forbes.com/sites/megangorman/2018/11/13/what-california-wildfire-victims-should-know-about-insurance-and-loss-of-use/#19d68f4e5423.

“Is Global Warming Fueling Increased Wildfire Risks?” Union of Concerned Scientists, 24 July 2018, www.ucsusa.org/global-warming/science-and-impacts/impacts/global-warming-and-wildfire.html#.XAdAky2ZOu4.

Jergler, Don. “How Insurance Industry Might React to ‘New Normal’ of California’s Historic Wildfires.” Insurance Journal, 14 Nov. 2018, www.insurancejournal.com/news/west/2018/11/13/507414.htm.

Johnson, Alex, et al. “ Northern California Wildfires Claim at Least 15 Lives as More Than 100K Acres Burn.” NBCNews.com, NBCUniversal News Group, 10 Oct. 2017, www.nbcnews.com/storyline/western-wildfires/one-killed-major-wildfires-ignite-overnight-across-northern-california-n809206.

Newberry, Laura. “As California Fire Disasters Worsen, Insurers Are Pulling out and Stranding Homeowners.” Los Angeles Times, Los Angeles Times, 31 Aug. 2018, www.latimes.com/local/lanow/la-me-ln-wildfire-homeowners-insurance-20180830-story.html.

Sell, Sarah Skidmore. “Fires May Make It Harder for Homeowners to Get Insurance in California.” Insurance Journal, 14 Aug. 2018, www.insurancejournal.com/news/west/2018/08/14/497977.htm.