Digital Economy
CHAPTER V
THE INFORMATION TECHNOLOGY WORKFORCE (84)
Information technology workers not only produce and maintain the Nation's
computing and communications infrastructure, they also generate the knowledge,
ideas and information critical to the development of the digital economy.
Demand for IT workers has increased with the spread of networked computers, the
Internet, e-commerce, and the associated growing demand for high-quality
digitized products and services. Moreover, the demand for IT workers is
increasingly focused on more highly-skilled and highly paid people, as the
rapid pace of innovation rewards high skills and technology reduces the number
of less-skilled and lower paid IT jobs.
In 1998, the IT workforce--covering workers in IT-producing industries and
workers in IT occupations in other industries-- totaled roughly 7.4 million
workers, or 6.1 percent of all workers. While IT employment has grown faster
than overall employment for many years, the growth in both IT-producing
industries and IT occupations accelerated in the mid-1990s. IT industry
employment grew almost 28 percent from 1994 to 1998, and employment in IT
occupations increased by 22 percent over the same period. By contrast, over
those same years, total U.S. nonfarm employment rose by about 11 percent.
This chapter examines past and recent employment trends, wage trends and skill
requirements in IT-producing industries and IT occupations. (See Table 5.1 for
a list of IT occupations and Appendix Table 5.4 for descriptions of duties.)
(85) We also analyze the factors affecting the supply of IT workers and how the
public and private sectors are responding to the growing demand for IT workers.
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Table 5.1
IT-Related Occupations
Engineering, science, and computer Electrical and electronics
engineers
systems managers Computer engineers
Database administrators Computer support specialists
Systems analysts All other computer scientists
Computer programmers Electrical and electronics
technicians
Broadcast technicians Duplicating, mail and other office
machine operators
Computer equipment operators Billing, posting and calculating
machine operators
Data processing equipment repairers Data entry keyers
Communications equipment operators Electronics repairers, commercial
and industrial equip.
Electrical powerline installers and
repairers Electrical and electronic equipment
assemblers, precision
Telephone and cable TV installers
and repairers Electromechanical equipment
assemblers, precision
Central office and PBX installers
and repairers Electronic semiconductor processors
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IT-PRODUCING INDUSTRIES
Employment in IT-Producing Industries Accelerates After 1994
Jobs in IT-producing firms, after growing more slowly than overall employment
in 1993 and 1994, increased dramatically in 1995 and thereafter, growing at an
average annual rate of 6.5 percent. (Figure 5.1) The number of workers in
IT-producing firms grew from 3.9 million in 1992 to 5.2 million workers in
1998. Even at this level, employment in IT-producing firms in 1998 accounted
for less than 5 percent of total private employment.
The overall growth in IT-producing industry employment masks a churning of IT
jobs, with significant job increases in some areas and significant declines in
others. Among all IT-producing industries, software and computer services
recorded the fastest employment growth. (86) Job positions in these areas
nearly doubled, from 850,000 in 1992 to more than 1.6 million in 1998.
(Appendix Table 5.1) Over the same period, job growth in the hardware and
communications services industries was close to the growth in overall
employment. Within these areas, computer hardware retailers and pay television
service providers saw the fastest growth, while other sub-industries
experienced job reductions, including manufacturers of computers, electron
tubes and some types of communications equipment. (See Appendix Table 5.1 for
industry detail.)
A vibrant economy always produces significant job creation and job destruction.
However, some recent job churning appears to be directly related to several
factors associated with the digital revolution:
* oMany information technologies have short life cycles, and employers intent
on quickly getting a product or service to market often prefer to hire
workers skilled in new technologies rather than retrain their current
workers. (87)
* oComputing and communications technologies have lowered barriers to entry,
especially to markets that provide information technology and other
services. These technologies provide small businesses with size and
resource advantages usually available to larger, established companies.
(88) By using the Internet, they can compete outside of local markets, even
in global markets. The same technologies allow foreign companies greater
access to U.S. markets. More players in the market means more job churning
as there will be winners and losers.
* oEmployment in IT-producing industries is also affected by the increasing
use of outsourcing to other industries. For example, Fortune 1000 companies
outsource an estimated 60 percent of their e-commerce projects. (89)
IT Industry Wages Consistently Higher Than Average
The average annual wage for workers in IT-producing industries was $58,000 in
1998, or 85 percent higher than the $31,400 average wage for all private
workers. Since 1992, wages paid by IT-producing industries have grown by 5.8
percent per year, compared with private-industry average wage growth of 3.6
percent annually. As a result, the wage gap between these IT workers and all
workers widened by more than $10,000, or two-thirds, over this period. (Figure
5.2)
Among workers in all IT-producing industries, those in software and computer
services industries, including computer programming services and software
development, earned the highest average wage of $65,300 in 1998. (Appendix
Table 5.2) The wages of these workers also grew at the fastest rate over this
period, an average of 6.7 percent per year.
All IT-producing industries paid wages that were higher than the total private
industry average wage in 1998, and almost all of them had higher than average
annual wage growth from 1992 to 1998. Nonetheless, some IT jobs and non-IT jobs
in IT industries remain low-skilled, low paying positions. The wages for these
positions have increased very slowly, if at all. (90)
IT OCCUPATIONS
Employment in IT Occupations Accelerates After 1994
One could define the class of jobs considered "IT occupations" in many
different ways. The broadest definition would recognize that, as the economy
becomes more digitized, most occupations will involve the manufacture or
operation of equipment that includes forms of information technology, such as a
computer chip. A more narrow definition might include only the "core" IT
occupations of computer scientists, computer engineers, systems analysts and
computer programmers; these are the IT positions that require the most
education and skills, are the highest paid, and are in greatest demand. Here,
we adopt a middle ground and include as "IT occupations" those positions
involved in creating, operating and maintaining the IT infrastructure required
to facilitate e-commerce and other Internet or network-related activities. (See
Table 5.1 for list of IT occupations.)
Employment levels in these IT occupations were flat during the early 1990s and
have risen steadily since 1994. In 1992, there were 4.3 million workers in
these IT occupations. By 1998 the number had grown to 5.3 million. (Figure 5.3)
The fastest growth occurred among the core IT occupations, where the number of
jobs increased by 957,000 between 1992 and 1998, or almost 80 percent.
Highest Skilled IT Workers in Demand
The number of highly-skilled IT workers, or IT workers in occupations that
generally require at least an associate degree, increased from 2.2 million in
1992 to 3.2 million in 1998. The fastest growth occurred among those with the
highest skills - core IT occupations - who increased their share of total IT
employment from 28 percent to 41 percent. (Figure 5.4 and Appendix Table 5.3)
Between 1994 and 1998, total high-skilled IT employment increased 35 percent,
more than three times as much as the national average, and core IT occupations
grew more than five times faster than all other jobs. By contrast, employment
in lower-skilled IT occupations, such as computer operators, communications
equipment operators and billing and posting clerks, declined from 926,000 to
852,000, or 9 percent. During the same period, employment among
moderately-skilled IT workers, including telephone and electronic equipment
installers, assemblers and repairers, grew somewhat more slowly than the
national average.
Private surveys and interviews with Chief Information Officers provide
additional insight into the specific IT skills in greatest demand. The growth
in e-commerce, for example, has increased demand for workers with
Internet-related technical skills, including network specialists, help desk/end
user support staff and Internet/intranet developers. E-commerce growth has also
increased the demand for workers with a knowledge of sales, marketing and
business planning. Many IT workers that used to work in back offices are now
required to learn how to deal with customers and convince them to make online
purchases. (91) In addition, as more firms outsource for IT services, demand
has increased for project managers and people who can negotiate and manage
vendor contracts. (92)
High Skilled IT Occupations Pay High Wages
The earnings of IT workers vary greatly, based on their skills and educational
levels. For example, the Bureau of Labor Statistics (BLS) estimates that in
1998 computer engineers, who typically have at least a bachelor's degree,
earned an average of $59,900. (Appendix Table 5.4) By contrast, lower skilled
occupations such as billing, posting and calculating machine operators, which
usually do not require a college degree, earned on average only $21,300.
Historical wage data are available for only a few IT occupations, including
core IT workers. From 1992 to 1998, weekly earnings of computer programmers
increased from $685 to $843 or 23 percent. (Figure 5.5) The median weekly
earnings of computer scientists, computer engineers and systems analysts,
although higher than average, increased from $810 in 1992 to $952 in 1998, or
at the same 17.5-percent rate as the average for all occupations.
Private wage surveys provide more current wage estimates of new occupations and
new skills in great demand. According to Computerworld's 13th annual survey,
1998 and 1999 pay increases for IT positions averaged 4-to-5 percent, much less
than the 11 percent increase in 1997.
RHI Consulting estimates that starting salaries for IT workers in 2000 will be
6.8 percent more than in 1999, with jobs related to Internet development,
networking, consulting, and systems integration seeing even larger than average
increases. IT consultants with skills such as the ability to work with Oracle,
PeopleSoft and SAP software can earn more than $100 per hour, depending on
level of expertise. (93)
Earnings in IT occupations also vary by geographic location and company size,
as they do for many other industries. Computerworld estimates that in 1999,
webmasters/web designers earned on average $53,100, including bonuses. (94)
However, this compensation ranged from $43,800 in New England to $59,600 in the
Pacific region. Further, larger companies with more than $500 million in
revenue paid webmasters/web designers an average of $58,600, compared to
smaller companies with less than $100 million in revenue which paid an average
of $48,400.
IT LABOR MARKET IMBALANCES
The IT Worker Supply Debate
The question of whether the U. S. is producing an adequate supply of IT workers
has been much debated in recent years. There is no single common definition of
"IT worker" and no agreed-upon method for identifying an occupational
shortfall. In theory, market forces will eventually resolve any imbalance
between supply and demand. However, the evidence on short-term market responses
is inconclusive. (95)
The Bureau of Labor Statistics examined the available national employment and
wage data for core IT occupations over the period 1992 to 1997. They reasoned
that an imbalance should produce above-average growth in both employment and
wages, and below-average unemployment rates. BLS found that while the
unemployment rates for core IT occupations were consistently lower than the
national average for this period, employment and wage growth had not been
consistently above average for all core IT occupations. They concluded that the
evidence on IT labor market imbalances remains ambiguous. (96)
A more detailed examination of employment and wages in core IT occupations
supports this judgment. Between 1992 and 1994, employment among computer
programmers fell; in the following four years, this employment grew by an
average of 5 percent a year. Over the same period, the number of computer
scientists, computer engineers and systems analysts grew at a 16.5 percent
annual rate. (Figure 5.6) The fact that median weekly earnings for both
occupations grew at 3.0 and 3.4 percent annually - little faster than the 2.9
percent national average - seems inconsistent with a serious imbalance in labor
supply and demand. One possible explanation is that businesses have been using
non-wage benefits such as stock options to attract employees. Other reasons may
be that the rapid growth of employment in these areas has reduced the median
experience and skill level, suppressing median wage growth, or that high
relative pay and a sense of job security may be keeping down additional wage
gains. Finally, the recent moderate growth in wages may also indicate that
growth in the supply of IT workers (whether from foreign sources or graduates
from IT and other technical training programs) is keeping pace with demand.
A study by the Computing Research Association evaluated past assessments of the
supply of IT workers. (97) The study found evidence of temporarily tight labor
markets in specific regions and occupations and argued that such tightness
should be expected in any field undergoing rapid technological change. The
report further noted that more useful findings could be produced by segmenting
the market by geographical area or occupation, but that the data needed to
conduct such analyses do not exist. Several Federal initiatives are currently
underway to improve IT-related employment data collection. (98)
Meeting the Demand for IT Workers
As the importance of IT to the American economy continues to grow, so will the
demand for IT workers. In response, government and business are taking steps to
increase the numbers of IT workers.
One such step is the Federal Government's H-1B visa program, which admits
foreign skilled workers to the United States. Congress raised the H-1B visa
limit from 65,000 to 115,000 in 1998. This year, this ceiling was reached in
March, with employers demanding 50,000 more H-1B visas than at the same time in
1999. (99) Consequently, several bills have been introduced in Congress to
either raise the limit (up to 200,000) or to temporarily remove the cap.
Although many workers who enter the country under the H-1B visa program hold
jobs other than IT jobs, a recent Immigration and Naturalization Service (INS)
survey found that over 60 percent of H-1B visa petitioners are IT workers.
(100) Applying the INS estimate to the current H-1B visa limit of 115,000
suggests that the H-1B program currently fills over 70,000 IT jobs, equivalent
to 28 percent of the average annual demand for IT workers with at least a
bachelor's degree during the 1996 to 1998 period.
A number of public/private partnerships also have been created to increase the
supply of IT workers from various sources, including the current pool of
workers, retired people, and high school and college students. Outlined below
are some representative examples of recent initiatives by the Federal
government, public/private partnerships, and private companies to increase the
supply of IT workers and raise the technical IT competency of American workers.
Federal Efforts
* oThe Department of Labor (using funds from the $500 H-1B visa filing fee)
plans to award grants of $12.4 million in FY 2000 to train U.S. workers for
IT and health care jobs often filled by immigrants. The Department also
will fund an additional $40 million for projects to train workers in local
markets. Under these programs, private companies seeking IT workers can
work with local governments and educational institutions to develop
training. (www.dol.eta.gov)
* oThe Department of Education is providing $135 million in grants to train
400,000 teachers to use information technologies more effectively in the
classroom. (www.ed.gov/ PressReleases/08-1999/wh-0824.html)
* oThe Department of Commerce's Technology Administration created and
maintains the GO4IT website that provides access to a searchable database
containing descriptions of a wide variety of IT work force initiatives
around the country.(www.go4it.gov) The Department of Labor maintains
America's Career Kit consisting of America's Career InfoNet
(www.acinet.org), America's Job Bank (www.ajb.dni.us) and America's
Learning Exchange (www.alx.org).
Public/Private Partnerships
* oCisco Systems, the Communications Workers of America, Arizona State
University and the Departments of Labor and Education are developing an
online system to help retired military personnel and others to assess and
improve their IT skills.
* oThe National Association of Manufacturers encourages its member companies
to spend at least 3 percent of their payroll on worker training.
* oThe Department of Labor with the American Society for Training and
Development are expanding America's Learning Exchange, (www.alx.org) a
clearinghouse for information on education and training, financial aid and
skills analysis.
* oThe Department of Education and the Conference Board disseminate
information about the economic benefits of workplace learning to U.S.
businesses and unions.
Private Efforts
* oFord Motor Co., Intel Corp, Delta Airlines and American Airlines recently
announced plans to provide computers and low-priced Internet access to all
their employees, as a way of raising the technical literacy of their
workforce.
* oSome firms are taking advantage of distance learning systems, such as
those provided by Saba Corp, which provide electronic learning platforms
and infrastructure for a number of companies, including Qwest
Communications, Ford, and Continental Airlines. Saturn, P&G and IBM also
have intranets or online technologies that provide information and training
services to employees, suppliers and customers throughout the world.