Bear Flag Republic Radio Weblog

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The AEA says over 750,000 IT workers have lost their jobs in the past couple of years. The AEA defines the industry as around 5 to 6 million workers total.

The ITAA succeeded in fooling the whole nation into believing there were over 10 million IT workers. They used (in their own words) a definition of IT worker "writ large". In other words, they threw a lot of workers into the IT worker group that did not belong there. All in order to fool a lot of the people, all of the time. Thus, importing up to 200,000 or so temporary foreign workers would have little effect on U.S. workforces. So why is there a problem?

The ITAA (and other sources) estimate there are about 2.1 to 2.2 million software developers, engineers and programmers in the U.S. The ITAA is a lobbying organization and it was only interested in convincing Congress to expand the H-1B visa to import more (mostly) software engineers. Software engineers have usually accounted for one-half to slightly more than one-half of all issued visas. Since the visa is good for three years, renewable once, for a total of 6 years, at any given time, there were up to 600,000 imported, temporary software developers in the U.S. That's about 28% of all software development jobs were thus filled by imported temp workers. The Department of Commerce, in June 2000 issued a report where they said that 28% of all "IT jobs requiring at least a four degree" were filled by temporary H-1B visa workers. The ITAA was quite successful in first making up a huge number (10.3 million) that was irrelevant to the group to be affected by the H-1B visa. Next, the ITAA largely made up a forecast that there would be 1.6 million new IT jobs the year after they made their forecast. Their own report, the following year, could only account for about 400,000 new jobs, not the 1.6 million originally forecast. In fact, every employment forecast issued by the ITAA has been off - by huge amounts. A random guess at future employment growth would have been more accurate.

But the nonsense issued by the ITAA only proved that politicians are incredibly gullible and/or easily bought (the same year, the tech sector contributed tens of millions of dollars in campaign contributions). Very few people ever look deeply into what they are told. Which can also explain how the N.Y. Times or the London Observer can get away with making up news stories.

If the IT industry is in such bad shape, why did average salaries go up? Actually it did not. Apparently it has dropped by about 8%. But it can be difficult to find out real numbers since it all depends on how you define "IT worker". There can also be regional differences. The west has seen a decline in IT salaries while some other areas saw an increase.

Can the average pay go up when so many people are layed off? Economics says that if the number of jobs is decreasing, the demand is going down and supply is going up. Prices paid should be falling. But in some cases, they may have gone up. The only explanation I can think of is that company's layed off their less expensive workers. That would drive the average up. It could even be, as some claim, that a lot of H-1B workers lost their jobs as the IT sector collapsed. And they really have been getting paid less than U.S. residents. Again, the result is the same - the average salary paid would appear to have gone up. Another is that new jobs hired are in limited areas - like network security - where people remain in demand, and hence, get better pay.

Some say that offshoring only accounts for a small percentage of jobs. So why should we worry about offshoring? Within software development, we know that "inshoring" (using H-1B, plus L-1 visa workers) may account for 35% or more of software developer positions now. In the really bad year of 2002, there was documentation around saying that 90% of all open software development positions were filled by temporary imported workers. Do you think that has an impact on software developers?

The most commonly quoted percentages on either H-1B visa usage or offshoring is that they account for only a tiny percent of all jobs in the U.S. But that comparison is totally irrelevant. No one is out importing retail store clerks, for example. For the group for which H-1B visas and offshoring are being used is measured in tens of percent of jobs, not a fraction of a percent. Anyone saying otherwise is lying to you.

The H-1B program protects U.S. workers, doesn't it? Not at all. Contrary to what you read almost every day in the news, there is no requirement that jobs be filled first by U.S. citizens or residents. There is something called a "prevailing wage" rule that has loopholes a mile wide. In theory, H-1B workers are to paid the going rate for their work. But in actuality, the way the prevailing wage is calculated, you could legally (and easily) pay an H-1B worker half of what an American is earning in the same position.

With the H-1B cap having fallen to 65,000, existing workers will find themselves booted out the country because they cannot renew their visa. Absolutely and totally false. An existing visa holder may renew their visa for one additional three year extension regardless of the current cap on new visas.

How is this any different than the move from an agricultural economy to an industrial economy? People growing up on farms moved to cities for better economic opportunities. The industrial revolution was a step upwards. Offshoring is resulting in a step down for those directly affected. The typical worker who's job has been offshored finds future employment that pays much less than was paid before (one half to 60% is not unusual).

Offshoring of software workers just means that low-level programming jobs are moving overseas and our workers just need to move further up the value chain. Please define a "low level programming job". Those who work in the field have no idea what this means. This is an explanation made up out of thin air by greedy CEOs, the ITAA, and free trade enthusiasts. Nor is there any reason why a high level job could not be done overseas?

Don't we have an education gap? Alan Greenspan and loads of other offshore proponents want you to believe that we merely lack sufficient educated workers. And that we can merely "educate" ourselves out of this offshoring problem. A highly educated (with graduate degrees) software developer recently asked, "Just how much education do you think I need?" And quite frankly, the education issue is a nice red herring to throw the discussion off topic. To illustrate, here is a quote from a letter to the editor in the India Times: "Dr Rao has the right idea about the quality of engineers being produced in India. To be honest, most Indian engineers are useless! With the growing number of colleges, just about anyone can start studying engineering. Once in a college, manipulating the system is just too easy.". That quote says a lot. There are good schools in India, but there are also bad ones (I have been fortunate to mostly work with average to excellent Indian engineers). The oft quoted 500,000 engineers per year graduating in India includes a lot of bad engineers, as Indians themselves note by writing letters to publications in India.

American college students are extremely aware of what is going on with IT jobs, unlike politicians who profess "free trade" and let's ignore the issues. Every college I have looked into has seen plummeting enrollments in computer science, informations systems, network engineering courses and more. One college I know just eliminated their MIS program and has replaced it with an MIS "minor" to fulfill the needs of the declining number of students still enrolled in MIS. Where I teach, we have dropped from, I am told, about 250 full time equivalent students at our peak during the dot com mania, to probably fewer than 70 FTEs now. I too may be out of job by fall as we are already seeing that we will likely have too many instructors for the number of students we have. Students know more about offshoring than do most influential business leaders and certainly the politicians. They see a declining future in IT. With jobs moving offshore and job opportunities in short supply, they are making economic choices to seek a better return on their own investments, elsewhere. Greenspan, et al, will have tough time convincing students to work hard, earn more degrees, and earn less money in the future - and oh, your career may get moved offshore anyway.

Isn't free trade good? Sure. The basic idea is that work flows to those who are most efficient. Efficiency is a bit of nebulous concept. In IT, it seems today to mostly refer to "lowest cost due to poverty". Free trade is also good when there is some sense of balance in the trade. Today, we import 1/2 trillion dollars worth of goods more than we export. That means we are sending dollars overseas. And they are not coming back. (Where are they going? They might come back in the future. Some of the $s are being used for oil purchases and as a basic international currency. But they are not being used to purchase "Made in the U.S.A."). We have had a balance of trade deficit problem since about 1970. As long as our economy grew at a healthy rate, we could get away with that. Many people are getting a bit worried as our balance of trade deficit has now mushroomed to 1/2 trillion $. Besides, if a little outsourcing is so good, wouldn't even more be better?

Free trade theories generally assume trade amongst some what equal partners. When we moved manufacturing jobs to Japan, Japanese workers made a bit less (but not a whole lot less) than U.S. workers. Japan also adopted higher quality processes in manufacturing. This became their comparative advantage. And when we bought their products, their workers made enough money that they, in turn, eventually bought U.S. products. We actually had a "free trade".

With India and China the situation has changed dramatically. First, China holds its currency exchange frozen in time, rather than fluctuating at a market value. This works to China's advantage because it keeps Chinese made products cheap in U.S. markets. (Wal-Mart loves this because Wal-Mart thrives on cheap imported goods). In India, one engineer works at 1/5th to 1/10th the price of a U.S. engineer. That engineer won't be buying as many U.S. made products as will the higher paid U.S. engineer. So we do not exactly have "free trade".

India's comparative advantage is poverty, more than anything. That poverty is caused, in part, by an enormous population (something like 55% of the country's population is under 24 years old) and is what enables them to offer engineering services at cheap prices. China also excludes job unions, and is noted for a few little problems in the "human rights" category. And pollution and environmental destruction and ... you get the idea. How do we level this playing field? Either India must grow its economy very, very rapidly, or the U.S. pay scales must fall, or productivity must magically move way up in the U.S. - yet not use a technique that can also be adopted by others. The most likely scenario currently seems to be a migration of jobs (perhaps 10% of all U.S. jobs) offshore within just a few years time. The only "safe" jobs in the U.S. are those that must be done on-site, and/or may require unique licensing or have strong existing union protections. Meanwhile, U.S. firms seeking lower costs may be outsourcing for the wrong reasons: "Rightsourcing initiatives that have cost savings as their principal intent do not yield strategic gains easily.".

The offshoring problem is the fault of the Republican's right? Oh we wish. Then we could just vote for Democrats and fix the problem. But its not true at all. Al Gore (remember him?) was a very loud proponent of offshoring. Former President Clinton pushed for expanded H-1B programs, which, because they required foreign workers to return home, were effectively a training program for out future foreign competition! Bush came along and has done nothing to address the real issues - except negotiate "free trade agreements" with Chile and Singapore that would allow their foreign workers to freely enter the U.S. You see, that better known "General Agreement on Trade and Tariffs" (GATT) that was talked about so much a few decades ago, magically transmogrified into "General Agreement on Trade and Services". This made it possible to include shipping workers - not just products - around the world. Sen. Hilary Clinton (D-Tata Consultancy) does not get these issues at all. Here in the India Times, their reports recognizes that Sen. Clinton thinks its just about manufacturing jobs. On page two of the article, they write, "If at all there is a silver lining here for India, it is that Clinton has stressed the loss of manufacturing jobs and not service jobs." Service jobs - that's software, accounting, legal work, HR work, tax services, call centers. At least she will work to protect manufacturing jobs. (Oh, by the way, "displaced" software workers are not eligible for government retraining grants - the law says that only manufacturing workers get retraining and software is not manufactured ....). [Edward Mitchell: Common Sense Technology]

comments < 9:35:48 AM        >

Tech Executives Admit that new jobs will be added outside the U.S. where labor is cheaper This is the end of the road for the U.S. tech sector. U.S. tech jobs fell 4% last year. And they wonder why U.S. students are not pursuing careers now in tech? Hello? Duh? When you read the article, note that the tech executives clearly say they are moving offshore for cheap labor. No where do they say they are moving offshore to find educated workers. We can educate all of our workers to the Ph.D. level, but until they accept a $6,000 per year salary, there will not be in any jobs here in the U.S.

Update: Today, Saturday, Secretary of Labor, Elaine Chao has a guest column in our paper saying that the government forecasts a huge demand for software engineers and computer engineers. It would be nice of the government forecasters ever bothered to talk to the tech CEOs who say they will no longer hire in he U.S. Elaine Chao is remarkably out of touch with what is happening. [Edward Mitchell: Common Sense Technology]

comments < 9:33:12 AM        >