In tech revival, job outlook still dim
Steve Lohr and Matt Richtel/NYT
Tuesday, March 9, 2004
For computer scientists and engineers, the 1990s were close to paradise - until the technology boom collapsed. But even as business has started to pick up again, the job market they operate in has become the toughest ever.
While this group represents a comparatively affluent sliver of the American work force, it also illustrates the broader forces - higher productivity, cost-cutting business practices and increased global competition - that have combined to make job growth throughout the American economy so frustratingly sluggish.
The U.S. Commerce Department reported Friday that the economy added just 21,000 jobs last month, another disappointing performance, particularly when the economy has been growing strongly since last summer and corporate sales and profits are rising.
Well-educated technology workers have long been at the forefront of American economic growth and innovation, used to working in a field where rapid change is the rule. As markets shift, new technologies emerge and companies die. Yet such changes typically meant little more to them than moving rather easily from one well-paying opportunity to the next.
That is no longer the case. An upturn in demand for all kinds of workers, including those in technology, may be just around the corner, economists keep saying, but David Friedman has seen no evidence of improvement yet. Friedman, a veteran software engineer in Austin, Texas, moved from one job to another during the technology boom years of the 1990s. But his last job ended in March 2001, shortly before the software start-up where he was working folded.
Friedman, who holds a doctorate in electrical engineering, has found little demand for the kind of software design work that is his specialty. Building software, Friedman observed, is "becoming the equivalent of blue-collar work."
Unemployment has certainly spiked in computing, making it more like blue-collar work in that sense. The jobless rate last year among computer scientists, for example, was 5.2 percent, the highest level since the government began tracking it as an occupation two decades ago. In most of those years, the unemployment rate for computer scientists was under 2 percent. Similarly, unemployment among electrical engineers last year, at 6.2 percent, was the highest in 20 years, according to the Bureau of Labor Statistics.
By comparison, the unemployment rate for all workers, skilled and unskilled, averaged 6 percent last year, a much smaller increase from the low point of about 4 percent for 2000, and well below the 7.8 percent jobless rate peak of the early 1990s.
The persistence of record-high unemployment among skilled computer engineers suggests that something beyond the usual up-and-down cycle of business is at work.
"You have multiple effects going on - automation, outsourcing and business strategy - all playing a role," said Ronil Hira, an assistant professor for public policy at the Rochester Institute of Technology. In the boom years of the 1990s, companies scrambled to invest in new technology and hire technology experts, eager to tap the new markets of the Internet and fearful that dot-com start-ups might put them out of business. Both the promise and the threat of the new Internet technologies were exaggerated, at least in the short run.
Most companies still maintain that Internet-era technologies can deliver large benefits to their businesses, enabling improved communications with suppliers and customers, better competitive intelligence and quicker responses to shifts in the marketplace. But in a big switch from the past, most companies are now intent on using the technology investments they made in the boom years more efficiently, which means employing fewer technology workers.
"In the last few years, companies have been totally focused on cost-cutting," said Erik Brynjolfsson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology. "The pendulum really swung, and that has led to a lot of the slow job growth."
One way companies have cut costs is to send some computer programming technical support work to developing nations, like India, where programmers are paid a small fraction of the wages in the United States.
Lisa Pineau of Plano, Texas, lost her job as a programmer of large mainframe computers in November 2002, as the work was taken over by an overseas contractor. Her $45,000 salary was the second income in her family, but since she lost her job the family has had to refinance its house and sell one of its two cars. Pineau's husband, Pat, is a manager in the computer center of a bank, and some of its technical work is being farmed out to an outsourcing company in India.
"If Pat loses his job, we're in trouble," Pineau said.
The migration of jobs abroad, one industry effort to increase productivity, has become a political issue in this campaign year. Yet the offshore outsourcing trend, industry analysts and economists say, mostly points to a new round of global competition, resulting from low-cost computers, high-speed Internet connections and the entry into the world economy of developing nations with large, well-educated work forces like India and China.
Productivity is the engine of prosperity and high-paying jobs. A study by the U.S. Commerce Department last year found that the average annual wage for workers in the information technology sector was $67,440 in 2002, compared with $36,520 for all private workers.
Higher productivity also led to improved profits recently for technology companies. The industry's sales, after a two-year downturn, recovered a bit last year, and revenue in the United States is projected to grow nearly 5 percent this year to $394 billion, according to International Data Corp., a research firm. Indeed, recent sales figures have been coming in stronger than anticipated, suggesting growth this year could go even higher. "All the numbers are rolling in higher than we expected," said Kevin White, an economist at IDC.
So the ingredients for new hiring - industry growth and profits - appear to be falling into place. Yet as long as companies remain focused mainly on reducing the expenses of their computer operations, job growth may be slow.
"The productivity and cost-cutting are impressive, but it means less hiring," said Steven Milunovich, a technology analyst at Merrill Lynch. "But what we have not seen is a lot of new technology projects inside corporations."
A shift may be imminent. A survey of more than 450 chief executives worldwide, sponsored by International Business Machines and released last month, found that 80 percent of the executives planned to shift their primary goal this year from cost-cutting to projects intended to generate new growth.
If so, it ought to be good news for skilled, out-of-work engineers like Friedman, the Texas software designer, who remains eager to work in the field on innovative new projects.
"Eventually companies are going to realize they still need high-level creative people," he said, "not to do coding, but to do high-level design."
The New York Times
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