The Digital Work Force Challenge
Information Impact Magazine, April 2000

"Rather than debating whether or not there is a shortage, policy makers and business leaders need to focus on the critical challenge of meeting the growing demand for IT skills in the United States. These leaders also need to consider important qualitative factors at work in the IT labor market, as they develop education, training, and guest worker programs aimed at meeting this demand."

Kelly H. Carnes

Kelly Carnes is the Assistant Secretary for Technology Policy, at the U.S. Department of Commerce. The views expressed here are not necessarily those of the Commerce Department.

This article is based on a report prepared by the Department of Commerce, The Digital Work Force: Building Infotech Skills at the Speed of Innovation, June 1999.

Questions or comments on Assistant Secretary Carnes' article may be sent to: public_affairs@ta.doc.gov

The Role of Information Technology (IT) in the U.S. Economy

Information technologies are a driving force in our strong economy. Over the past four years, IT-producing industries have contributed to more than one third of real economic growth. In 1996 and 1997, falling prices in IT-producing industries brought down overall inflation by an average of 0.7 percentage points, contributing to the remarkable ability of the U.S. economy to control inflation and keep interest rates low in a period of historically low unemployment. Last year, Federal Reserve Chairman Alan Greenspan told a business audience that "The rapid acceleration of computer and telecommunications technologies is a major reason for the appreciable increase in our productivity in this expansion, and is likely to continue to be a significant force in expanding standards of living into the 21st century."

The Demand for IT Workers

The widespread deployment of digital technology has created very strong demand for highly-skilled IT workers. For more than 15 years, employment in highly skilled IT occupations has grown six times faster than the overall U.S. job growth rate. This high demand is expected to continue. Occupational employment data released recently by the Labor Department's Bureau of Labor Statistics (BLS) show that, between 1998-2008, more than 2 million new skilled IT workers -- computer support specialists, database administrators, computer scientists and engineers, systems analysts, and computer programmers -- will be needed to fill newly created jobs and to replace IT workers leaving the field. That is an annual average demand of about 200,000 skilled IT workers.

Computer engineers, computer support specialists, systems analysts, and data base administrators are projected to be the four fastest growing occupations in the economy during this period.

In the face of this soaring demand, a highly polarized debate has focused on the question of whether there is, or is not, an overall IT worker shortage. On this point, the data are inconclusive. There is evidence pointing to a tight labor market for highly-skilled IT workers — such as rapid growth in the profession, low unemployment rates, and rising salaries (with salaries for IT workers with "hot" skills rising significantly). However, government wage data show moderate growth in IT worker wages in recent years, in line with overall wage growth, in the range of 3-4 percent a year.

Rather than debating whether or not there is a shortage, policy makers and business leaders need to focus on the critical challenge of meeting the growing demand for IT skills in the United States. These leaders also need to consider important qualitative factors at work in the IT labor market, as they develop education, training, and guest worker programs aimed at meeting this demand.

Most IT Jobs are High-Skill

The demand for IT workers has been decidedly upscale. Two-thirds of all workers in the highly skilled IT occupations -- such as computer scientist and engineer, and systems analyst — hold a bachelor's degree or higher. Of those with a bachelor's degree, 46 percent have degrees, minors or second majors in computer science or computer engineering; 86 percent of the degree holders have a degree in a science or engineering discipline.

The trend toward high-skill is expected to continue. BLS employment projections show that about three-quarters of the demand for skilled IT workers during 1998-2008 will be for jobs in IT occupations normally requiring at least a bachelor's degree, and one-quarter of the demand is projected to be in IT occupations normally requiring an associate degree.

This education profile suggests that education and training strategies need to focus principally on the college educated population, and those with equivalent levels of skills and experience.

The Niche IT Labor Markets

The IT labor market is often treated as a monolith, rather than the complex and dynamic market that it is. Supply and demand characteristics vary by industry segment, by IT occupation, and by specific skills. Short product life cycles, and the variety of software and hardware products and their applications, together with the differing business requirements of different industry sectors, have created demand for workers with various combinations of IT skills, experience, and industry knowledge. This is expressed often by employers as needing "the right person with the right skills at the right time."

The mix of knowledge and skills required can vary significantly from one IT job to another, in terms of the specific technical skills needed, industry knowledge and experience, and other qualifications in areas such as project management, communications, and organizational skills. Thus, IT workers qualified for one job may not qualify at all for another.

Even if a company receives many resumes from which to chose to fill its job, the right candidate, with the right skills and experience may not be in the resume mix. This results in low hiring selection rates, often below 5 percent. For example, one IT company had hired 1,000 engineers after receiving 22,000 resumes, or a selection rate of about 4 percent. A technical recruiter lamented that they had gotten 300 applicants at an IT job fair, yet did not find anyone qualified for the job for which they were recruiting.

The "niche market" phenomenon explains some of the diverse views held by businesses and employee groups. The employer who can't find the right person, with the right skills sees a labor shortage. The employee advocate points to the many resumes employers receive and low hiring rates, arguing that there are enough technically trained professionals in the United States, but employers are just too picky.

The niche market phenomenon suggests that we need to find new ways to increase the scope of IT workers' portfolio of skills and experience.

The Make vs. Buy Decision

Due to time and competitive pressures, many employers seek job candidates with exact skill fit and relevant experience, requiring no additional training. Many companies have concluded that they cannot afford the time penalty and uncertainty associated with "making" the employees they need through training or retraining. Instead, they pursue a "buy" strategy, seeking the exact skills and experience they need for a particular project, and paying a premium for them.

With this approach, companies are able to reduce the risks associated with the uncertainty about future skill needs, while reducing or even eliminating the cost of training. At the same time, employers can be reasonably assured that new hires are able to hit the ground running. Another reason companies may be reluctant to invest in training IT workers is the fear that they will create an attractive target for poaching by other companies, and thus fail to gain a return on their investment.

While these labor market characteristics are most prevalent in the high-growth, fast moving IT-producing industries, IT-using industries -- such as insurance, banking, retail, and manufacturing where technology and markets are more stable -- also feel the effect, because they tap the same pool of labor. They too have to pay premiums to acquire talent in high demand, and they also risk losing employees in whom they have invested to upgrade IT skills.

The Market is Responding

On this topic, the economists have argued that the IT work force challenge is the expected result of the rising importance of IT in our economy and the consequent demand for highly-skilled IT workers, and that, in the long run, market forces will fix the problem. As the economists predicted, we are, indeed, seeing a strong market response to the demand for IT workers.

For example, after a 40 percent drop in bachelor's degrees awarded in computer science between 1986 and 1994, in the past three years, bachelor-level enrollments in leading U.S. computer science and computer engineering programs more than doubled. Community colleges, proprietary training institutions, and IT vendor certification programs have responded to the demand, with many individuals enrolling in these programs which would qualify them for technician and support-level IT jobs. Last year, Microsoft reported that it would train, in that year, 1.2 million people around the world through 1,900 commercial training companies and 900 U.S. academic institutions. Five years ago, they were training 30,000 technical professionals a year. The private sector, and state and regional organizations are stepping up their training efforts. In addition, the Federal government is investing tens of millions of dollars to educate and train workers for IT jobs. Many of these people will be pursuing jobs in the U.S. IT labor market over the next few years.

A Continuum of Challenges

Private sector, academic, and government leaders are exploring ways to meet the growing demand for IT skills. But there is no "silver bullet" solution. There is a continuum of challenges, and action is needed all along the continuum.

We need to focus on improving the "nerdy" image of the technical professions, so more young people will be attracted to science, engineering, and technology careers. We need to strengthen K-12 math and science education, and provide students with better information on technical careers to encourage them to prepare for and pursue careers in science and technology.

Academic institutions must work to keep college-level technical curricula up-to-date in response to rapid technological change, and provide more opportunities for students to experience the work environments to which they will move after graduation. For example, work-study needs to be an important component of high-skill technical education, to provide technical graduates entering the labor market with the work experience that employers seek. Also, the traditional 4-6 year science and engineering education pipeline does not have the inherent flexibility to adequately support highly skilled technical professionals, such as computer scientists and engineers, who need to update their skills frequently to remain viable in the IT labor market.

Industry and government need to explore new models for training incumbent workers and new work force entrants. These include new organizational approaches, such as skills alliances, and new ways to use Federal funding as leverage to increase private sector investment in training. We also need to encourage more women and underrepresented minorities to pursue technical education and careers.

Increasing the number of foreign temporary workers under the H-1B program (for employing foreign professional workers who have at least a bachelor's degree) has been a high priority for the IT industry. Recently, bills have been introduced in both the United States Senate (S.2045) and the U.S. House of Representatives (H.R. 3983) that would increase the number of visas available for skilled temporary foreign workers to as high as 200,000 per year for the next few years.

Given a projected annual demand for IT workers with at least a bachelor's degree of 155,200 (about three-quarters of total demand), and given recent data released by the Immigration and Naturalization Service showing that 62 percent of H-1B petitioners are computer-related professionals, if the visa cap is raised to the level prescribed in S.2045 (195,000), over three-quarters (121,000) of the 155,200 projected IT jobs requiring a four year degree could be filled by H-1B workers subject to the visa cap. H-1B computer professionals exempt from the caps — foreign nationals working in higher education and non-profit research organizations, and those graduating from U.S. universities who have attained a master's degree or higher — would also be in the job market, and could be employed in the United States without affecting the H-1B cap under this bill. Large increases in the H-1B visa cap could reduce the incentive for employers to develop longer-term strategies for building the U.S. IT work force, and reduce the chance that U.S. students, older workers, and other U.S. workers training for IT jobs will actually get one.

It is essential that the Nation meet its demand for IT skills so that we can continue this extraordinary period of technology-driven economic growth into the years ahead.

Nevertheless, the public policy responses designed to address this need should be thoroughly grounded in an understanding of the data on and qualitative factors at work in this critical labor market.

Released: April 21, 2000
iMP Magazine: http://www.cisp.org/imp/april_2000/04_00carnes.htm