The economy has begun to rebound, but recovery in the job market remains elusive, and information technology industries in particular continue to report cuts. “Given the non-cyclical factors that have influenced the IT labor market, it is unclear how soon unemployment rates for workers in computer-related occupations will return to pre-2000 levels,” read the U.S. Department of Commerce’s Digital Economy 2003 report released last month.
The report details the state of IT industries-including the communications equipment, communications services, computer hardware, and software and computer services industries-in the U.S. It finds that trends like the relocation of IT jobs outside the U.S. and the displacement of human workers in favor of improved technology indicate recent IT-related job losses are occurring on a structural, rather than cyclical, basis.
Structural job loss, according to the Commerce Department, is indicated if employment cuts continue after a recession has ended, whereas cyclical job loss is signaled by a quick recovery in employment following a recession.
Commerce points to several factors that amount to structural-and therefore potentially permanent-job losses. A decrease in demand for IT workers following the Y2K build-up and the bursting of the dot.com bubble, for example, are two reasons for lasting job loss.
Moreover, technological advances can eliminate a job or automate processes so fewer workers are required. According to the Commerce Department, IT jobs requiring little training are the most likely to be replaced by technology, but high-skill jobs in IT installation, maintenance and repair occupations also can be affected.
Commerce cited a recent Sprint PCS initiative as an example. The company substituted voice-recognition software for human operators, which increased productivity by 15 percent from 2001 to 2002, but also meant the loss of 11,500 jobs.
In addition, offshoring or foreign outsourcing-in which a U.S. company relocates part of its operations outside the country or outsources work to a company in another country or outsources to another U.S. company that sends the work offshore-has led to continuing loss among U.S. IT jobs.
Forrester Research predicts 3.3 million U.S. services jobs will be relocated abroad over the next 15 years, amounting to $136 billion in wages. More than 400,000 of those jobs are expected to be IT jobs, and most of them to be in the software development and customer service or call-center sectors.
Those structural losses, combined with cyclical losses brought on by the widespread economic downturn, spelled trouble for the IT job market, which had just come from a period of record growth.
According to the report, from 1993 to 2000, employment in IT industries grew more than twice as fast as employment in all private U.S. industries, adding more than 1.8 million jobs. However, between 2000 and 2002, that trend took an about-face and IT industries lost more than 600,000 jobs, making up one-fourth of total private industry jobs lost during the period.
Several companies in the wireless field are now optimistically noticing cyclical job loss is coming to an end as the economy rebounds, but the effects of the structural losses linger.
Recent experiences of Boulder, Colo.-based Boulder Corp., which outsources to IT companies, including several major wireless players like Lucent Technologies Inc., Sierra Wireless, Avaya Inc. and Cisco Systems Inc., reflect some of the findings of the government survey.
Boulder Corp. offers companies outsourced services from complete IT departments to specific hardware and software. The company can fill in missing skills or provide a complete project team. Boulder Corp. also offers project consulting, options for enterprise storage and disaster recovery and e-mail management.
Many companies are looking to outsource rather than hire to fill jobs that were cut during the downturn to keep costs down, said Boulder Corp. President Lesley Taufer. In addition, the practice of outsourcing certain skills or jobs has become more practical and efficient with new technologies geared toward businesses with a scattered workforce.
“We’re doing a lot more project work that we’ve not seen before,” said Taufer, which indicates companies are outsourcing rather than hiring. And therefore, “I’m hiring a lot more,” Taufer explained.
Hiring, however, has not been an easy process. Although flooded with responses to job openings, Taufer finds few qualified applicants. The government study noted that employers increasingly are seeking harder-to-find, multi-talented employees with a combination of a formal education, specific technical skills, certifications, work experience and soft skills including interpersonal or business skills.
Taufer said she is having trouble finding engineers with the right skill sets, and noted that many current job seekers put their education on hold and stopped getting new certifications during the downturn. “They thought it was a dying art,” Taufer said. Apparently not, since Boulder Corp. is currently seeking six engineering consultants. “We have almost more job [openings] than we have manpower,” Taufer said.
Another obstacle for Taufer in the hiring process is job seekers still expect to receive the six-figure salaries they did before the downturn. “We can’t afford to pay that. Nobody wants to pay that,” Taufer said.
IT industries include workers of varied skill levels and salary ranges, but on average the sector is more skilled and better paid than the typical private worker. According to the Commerce Department, more than half of jobs in IT now require an associate’s degree or higher.
In 2002, the average annual wage for IT workers was $67,440, down 1.3 percent from $68,330 in 2001. Those earnings range from $95,740 for highly skilled engineering managers to $23,220 for communications equipment operators. Meanwhile, the average annual wage for all private workers increased 1 percent in 2002 to $36,520.
But job losses since 2000 have occurred across all skill levels, and are not concentrated in low-skill categories as is common. In fact, high-skill positions account for almost half of the IT-related jobs lost since 2000.
Mark Newhall, co-founder of IdealWave Solutions, an executive search firm focused on the wireless industry, agreed that salary demands of employees in the wireless space could prove problematic for companies. During the past three years, companies hired top-tier talent for less than the market rate, Newhall explained. But as the recovery begins, that may pose a problem for companies unwilling to raise salaries to a competitive rate.
Newhall also agreed that new technology allows companies to accomplish more with fewer staff members, but added, “There is always a need for top-tier talent in any company.”
And in fact, IdealWave has noticed a significant increase in employment opportunities during the past six months, indicating companies are selectively hiring, and Newhall expects sustained, steady growth from here.
“The focus is on needs-driven products, getting to market and producing revenue,” said Newhall. So it makes sense IdealWave has noticed companies currently seem most interested in filling jobs that drive revenue, including positions in business development, sales and product management, rather than engineering or operations-related work.
Indeed, Newhall is optimistic about the space, and believes the people that are still in the industry are committed to it. “The past three years have been an interesting ride in the industry, but the mass exodus is over,” said Newhall. “The wireless industry is very close to bursting out of its shell.”
