Building a Workforce for the Information Economy (2001) / Chapter Skim
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Characterizing the Workforce Problem
Characterizing the Workforce Problem
Pages 92-132
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From page 92... ...
Note, however, that the appropriateness of any given remedial action depends also on how one sees the origin of that problem, and the intent of this chapter is to focus on the first and second propositions. 3.2 REPORTS OF DIFFICULTY IN HIRING The reports of IT employers that have considerable difficulty in finding workers for their open IT positions are based on 92
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From page 93... ...
1Large vacancy rates are not surprising given the low levels of unemployment in the IT sector. As a rule, vacancy rates tend to move in inverse relation to the unemployment rate and positively with the employment and population rate.
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From page 94... ...
Finally, the variation in patterns and severity of difficulty experienced by individual employers is considerable, although the committee has not encountered an IT employer who has said that he or she has no difficulties in hiring. For example, the committee has heard reports of turnover rates a contributor to vacancy rates that vary from 5 percent to 50 percent per year, as against a national average rate of 11.7 percent per year for non-IT workers (Box 3.1~.
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From page 95... ...
CHARACTERIZING THE WORKFORCE PROBLEM 95 the number of jobs in the workforce) , the following relationship can be used to estimate V: V= (T+ G)
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From page 96... ...
Joint Venture: Silicon Valley Network indicates a value for F of 3.7 months for "high-tech jobs" and further estimates that the turnover rate in Silicon Valley is twice the national average.4 The national turnover rate for all workers is about 14 percent.5 All of these numbers give a vacancy rate of about 11 percent in these IT professions, if the conditions that characterize the Silicon Valley IT workforce obtain nationally. But, of course, they do not the IT labor market is much tighter in Silicon Valley than elsewhere and, as noted in Chapter 2, the majority of employers of Category 1 IT professions are not IT-sector firms (and not in Silicon Valley either)
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From page 97... ...
Assuming that the Silicon Valley calculation for vacancy rate above is valid for IT-sector companies in all geographic regions (which it is not) , a composite vacancy rate of about 6 to 7 percent is indicated.
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From page 99... ...
Thus, individuals (incumbent workers, those entering the labor force, and those that may leave the labor force) have many more options available to them than when the overall labor market is more slack.
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From page 100... ...
100 BUILDING A WORKFORCE FOR THE INFORMATION ECONOMY lain an understanding of trends in the sector in which the job seeker is interested and knowledge of his/her market worth. Furthermore, the trend toward multiple applications has been fueled by the ease of posting resumes on the Internet.
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From page 101... ...
In the first case, the fact that many IT occupations especially in Category 2 do not require significant amounts of formal IT training suggests that the number of computer science (CS) graduates produced yearly is not a good indicator for the labor supply as a whole taken across all IT occupations.
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From page 102... ...
When demand exceeds supply in a particular occupation, compensation tends to rise relative to compensation in other occupations that require similar education, effort, and working conditions. Rising compensation attracts into a field more people who are willing to work (increasing the current supply)
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From page 103... ...
As noted in Chapter 2, Current Population Survey (CPS) data indicate average annual wage increases in constant dollars of 3.8 and 4.5 percent for computer programmers and for computer systems analysts and scientists, respectively, during the period from 1996 to 1999, rates somewhat higher than the average annual wage increases of 3.2 percent for professional specialty occupations.
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From page 104... ...
The average annual increase in income for computer systems analysts and scientists was 41 percent higher than that for individuals in professional specialty occupations from 1996 to 1999, while the average annual increase in income for computer programmers was 19 percent higher than that for individuals in professional specialty occupations during that period. In any event, there are several practical difficulties with using wage data to determine the existence of a labor shortage.
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From page 105... ...
, BLS data themselves cannot signal trends if cash payments other than base wages constitute a changing fraction of total compensation. Similar comments apply to stock options and equity stakes, which the BLS data also do not include, and which are also important elements of compensation in much of the IT sector and in some IT-intensive firms as well.
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From page 106... ...
106 BUILDING A WORKFORCE FOR THE INFORMATION ECONOMY compensation for workers in this category, who tend to work in the smaller companies. By contrast, some larger, more established firms report increasing pressure to raise base salaries rather than stock options, indicating a different trend from that generally seen in the compensation pattern of small companies.
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From page 107... ...
3.3.5 Time to Reach Equilibrium When supply and demand are not in balance, labor markets will take some time to reach equilibrium. (Box 3.5 describes some reasons that markets may take a longer rather than a shorter time to clear.)
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From page 109... ...
Thus, the committee's characterization of the IT labor market is the following: Today, the IT labor market is tight, though the nature and extent of such tightness vary by employer, by type of IT work involved, and by geographical locale. The fundamental driver of this tightness is growth in the use of IT throughout a strong economy, a tightness that is significantly exacerbated by the currently low unemployment rate in the overall labor market.
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From page 110... ...
For example, growth in the demand for IT workers is not uniform across all IT occupations. Coarse as they are, BLS job projections through 2008 indicate the most significant growth in the demand for computer scientists, computer engineers, and systems analysts, with much less significant growth in demand for computer programmers.
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From page 111... ...
20This combined requirement for management skills and deep technical knowledge seems to be more characteristic of the IT sector than in other industries, where less technical or less technology-specific background is required for management (Salzman, Hal, "Information Technology Labor Markets," commissioned paper prepared for the Committee on Workforce Needs in Information Technology, 2000~. 21Joint Venture: Silicon Valley Network.
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From page 112... ...
22More recently (in the last year or so) , anecdotal evidence suggests that at least in some geographical areas, stock options and equity stakes provide insufficient financial incentives for certain workers in start-up companies, and so such workers command higher salaries than they might have in the more distant past, especially as compared with more well established firms.
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From page 113... ...
J 1 1 tJ As a result, most agencies are operating with high vacancy rates and experiencing high attrition rates in their IT workforces. For example, the Department of Defense is budgeted to operate with a combined IT workforce of approximately 60,000 and reported a current vacancy rate of 10 to 12 percent, with expectations that that figure will rise in the coming years.
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From page 114... ...
Nevertheless, government service pay scales appear to be a key barrier to recruiting and retaining IT workers. It is axiomatic that government cannot offer stock options or equity stakes that promise riches.
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From page 115... ...
· Frequent-flier miles. Even such a modest perquisite as the right to 26For the draft classification standards for federal IT positions, see Office of Personnel Management, 2000, Administrative Work in theInformation Technology Group, Washington, D.C., July, available online at |
From page 116... ...
The CIO Council has spawned the STAR program (Strategic Tactical Advocates for Results) , in which agencies work not only with IT people but also with business people to bring better project management skills to the fore.
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From page 117... ...
Finally, the CIO Council and OPM have identified career development as a key component of attracting, retaining, and improving the people in the federal workforce. They have challenged all agencies to spend at least 3 percent of their total IT payroll on professional development of their IT workforce, and many agencies are complying.
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From page 118... ...
government and specifically the U.S. government as represented by the contracting officers involved generally insists as a contractual matter on approving individual personnel (in addition to specifying personnel requirements)
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From page 119... ...
IT work, and/or · Reduce the value capital available (e.g., stock options) for compensation of IT workers.
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From page 120... ...
An additional effect of an overall downturn would be a slackening in the overall labor market, a phenomenon that might make IT a more attractive employment choice for people not now in the IT sector or in IT-intensive firms and thus increase the potential supply of new IT workers. Even absent a downturn, current growth rates in market capitalization, revenues (for those that have them)
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From page 121... ...
Finally, narrow demographic groups forecast labor supply as projections of the labor force based on past trends of participation. (Adapted from National Research Council, Office of Scientific and Engineering Personnel.
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From page 122... ...
32For more discussion of the limitations, see National Research Council, Office of Scientific and Engineering Personnel, 2000, Methods of Forecasting Demand and Supply of Doctoral Scientists and Engineers, the report from which this discussion is derived.
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From page 123... ...
Projectbased employment can take several forms: · A "regular" employee of the firm, receiving benefits (e.g., health insurance) , pension, or stock options or equity stakes, but without the
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From page 124... ...
Furthermore, in some instances, shorter job tenures are common, which may be due to the nature of the work in a sector in which workers can be displaced after a project ends. Both firms and individual workers may have some incentives to prefer project-based arrangements.33 For example, firms may obtain greater flexibility to address economic, strategic, and technological changes with project-based workers because they can more easily change the size and composition of their effective labor forces.
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From page 125... ...
Moreover, the experience that a new worker can bring from a different IT firm means that the present IT firm does not have to subsidize the new worker's learning. This kind of human capital flow has been a feature of successful IT-focused regions such as Silicon Valley.
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From page 126... ...
It is thus reasonable to ask if such approaches might be promising in the field of IT. Tools For IT, the analog of mechanized agriculture is tools that enhance individual productivity, noting that productivity is, by definition, the ratio of useful output to human work input to produce that output.
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From page 127... ...
will indeed emerge as the result of continued research and development in the area, although the magnitude of the productivity improvements that can be expected from the use of tools is a matter of sharp dispute within the IT community.
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From page 128... ...
454-469 in Software Engineering Project Management, Richard H Thayer, ed.
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From page 129... ...
(See Box 3.7 for a discussion of illustrations.) Others feel, however, that while there is undoubtedly some productivity to be gained, there is no silver bullet in such an approach, largely because software development is an extremely complex process.41 The Likely Impact of Improvements in Productivity For a fixed amount of work, the impact of productivity improvements, whether from tools or management techniques, is to reduce the number of personnel needed to perform that work.
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From page 131... ...
Furthermore, the presence of unexercised and/or unvested stock options and equity stakes in the compensation of workers in a relatively new and growing industry may help to explain the fact that mean wages in the IT sector have risen only somewhat more rapidly than wages in other sectors of the economy. Because
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From page 132... ...
IT work, and reduce the value of capital available (e.g., stock options) for compensation of IT workers.
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