Making Engineers Low Priced Commodities
Stephen H. Unger 1/03 1. Introduction Even in what were generally regarded as exceptionally good times, many computer (and other types of technical) professionals had difficulty in finding satisfactory jobs during the recent boom. Those with fifteen or more years of experience often had the most trouble. This despite loud complaints by industry about a shortage of computer experts and engineers. Now that the boom is over, the situation is even worse. Even new graduates are having trouble finding good jobs. What is going on? What can we expect in the future if these trends continue? What can we do about it? Perhaps the best way to summarize what is happening is to say that many employers of engineers are adapting what might be called the "just-in-time" concept to engineers. The idea is to "rent", at a minimal price, engineers with the specific skills needed for a project and then to dispense with them upon completion of their tasks. Engineers are pitted against one another in a race to the bottom as jobs are parceled out, on a global basis, to the low bidders. The process began perhaps five to ten years ago and has been developing in various ways ever since. An early glimpse of some key features of this process emerged in a 1996 roundtable discussion [1]. 2. Temporary Work One aspect is the replacement of all or parts of in-house engineering staffs with temporary workers. In other fields these are called "temps". In engineering they may be called "contract workers" or are sometimes given the more exalted title of "consultant". These engineers sometimes contract directly with the employer, but more often are engaged through agencies called "job shops" (hence the term "job shoppers"). They generally are paid at a per diem rate, receiving no medical insurance, vacation time, sick leave, or other benefits. Periods of employment with any one company may range from a few weeks to many months. A considerable range of situations is included here. At the high end are much sought after specialists who operate as true consultants and who do very well financially (at least while their specialties are needed). At the other extreme of this continuum are people hired to do relatively routine work, for modest pay--especially considering the insecurity and lack of benefits. For many people, at least for some periods of their lives, working in the above mode may be very desirable. One may enjoy the variety of work and the opportunity to acquire different skills and knowledge. Seeing different parts of the country and meeting new people frequently might also be considered an advantage. It might be considered a good way to experiment with different kinds of engineering work in different types of organizations, so that one may later make a more intelligent choice about a permanent job. Those who succeed as independent consultants have the satisfaction of being their own bosses and, as mentioned above, are likely to earn a lot of money. But for many engineers, the prospect of spending their careers as temporary workers is very unpleasant. (This group includes some who, for a limited time, regarded this as a good thing for one or more of the reasons mentioned above.) Many, perhaps most, who enter the engineering profession do so because they are fascinated with technology and want to spend their time learning and applying technical knowledge. Having, every few months, to adapt to new work environments, adjust to different computer language dialects, and learn to get along with different sets of co-workers is something that many engineers would find most distasteful. Many who, in a stable environment would attain a deep mastery of the technology they are working on, are very uncomfortable having to be "the new kid on the block" three or four times a year. Another reason many are unhappy in this mode is the financial insecurity. Continual concern about where their next assignment will come from is a source of great anxiety. Sometimes weeks or even months of inactivity may occur between jobs. Finally, particularly for those with families, the need to relocate frequently to different parts of the country can be very disturbing as they and their families are unable to sink roots in any community. Obviously this is very hard on children. In the past, companies employing significant numbers of engineers chose them carefully, regarding them as important assets. It was common to encourage and, at least partially, finance their efforts to educate themselves further, e.g., to obtain masters degrees. In-house training programs, seminars, lecture series, etc. were common, and engineers were encouraged to attend professional conferences. When the need arose for different engineering skills, for example, when a new computer language became important, it was taken for granted that these skills would be acquired by members of the engineering staff. Usually, such learning processes were of an informal nature, self-study and/or engineers helping one another. Sometimes one or more company engineers were sent to take special (often very intensive) courses. The result of this approach was that many engineers remained with the same company for a substantial part of their careers--sometimes never changing employers. They became very valuable to their employers as they acquired a deep understanding of the employer's products and were well situated to deal with problems that arose and to contribute to the development of new versions. An example of the value of retaining experienced engineers is given in a recent article about the development of the DEC Alpha processors [2]. Those companies that have abandoned this approach in favor of relying heavily on transient engineers often find that when troubles arise with their products, there is nobody on hand capable of dealing with them because those who did the design work are gone. Taking the low road with respect to engineering staffs may lead to short run cost savings, but it also frequently leads to disaster, as illustrated by the experience of NASA [3]. 3. Hit the Ground Running An essential part of the "just-in-time" approach to engineering is that employers insist on hiring only engineers who, immediately after being put on the payroll are able to begin working directly on the company's problems. Thus, they hire only contractors or job shoppers with precisely the skills needed on the current job. For example, a company may filter out all job applicants who do not have experience with Oracle 8i. Experienced software engineers who have worked with closely related systems and who would have no trouble in mastering the required system or language in a matter of weeks are rejected without even being interviewed, if their resumes do not include the magic words. Instead of focusing on the most capable people, the emphasis is placed on the precise skill set of the applicant. Extensive general experience is, in effect, considered a liability. It is clear that a major consideration is to pay as little as possible for engineering talent. Thus, since engineers with several decades of experience would be more costly, the tendency is not to hire them unless their experience precisely fits the immediate needs of the company. This is the essence of age discrimination. As indicated above, altho it may lead to benefits with respect to the next quarterly earnings report, the long term consequences, in many cases, are harmful to employers--and to the public when the consequences are defective products. 4. Importing Engineers Apart from recent graduates of American Schools, the largest pool of engineers that can be hired at minimal rates is outside the borders of the USA. In particular, several Asian countries graduate significant numbers of engineers, and since pay scales in these countries are a fraction of American rates, many of these engineers are happy to come here to work. Another source is the former Soviet Union and other Eastern European countries where a similar situation prevails. Furthermore, in places like Russia, the economic situation is such that large numbers of able, experienced engineers have great difficulty finding work. This has led to pressure by employers to amend US immigration laws to allow the importing of engineers (and computer programmers) from abroad under a temporary program called H-1B. Each year, 195,000 H-1B visas are issued, each at the request of a specific employer. There is pressure to increase this number. In some cases, these permits are issued to outstanding individuals with excellent credentials. But the great majority of those admitted under the H-1B program are very ordinary engineers or programmers. Various provisions in the law ostensibly ensure that H-1B visas are issued only when it is not possible to find US residents capable of filling an employer's needs, and to guard against the incoming engineers being grossly underpaid by American standards. In practice, these provisions are ineffectual or rarely enforced. The engineers with H-1B visas are essentially tied to their employers (often job shops), are generally underpaid, and are easily induced to work long hours without extra compensation. There are examples of companies that have discharged most of their technical staffs, replacing them with H-1B people at a significant payroll savings. The H-1B program has been justified as being necessary to meet a severe shortage of technical professionals, particularly in the computer field. There is indeed a shortage. But it is a shortage of people with very narrowly defined skills who are willing to work long hours for modest pay. Evidence for this is the fact that employers of such people interview only a small fraction of the people who apply for jobs, and then make offers to a small subset of this group. While high salaries and other inducements are offered in some special cases, for the most part, average compensation (including non-salary forms) of engineers and other computer professionals have barely rebounded to the levels they were at 12 years ago, and have not been increasing at a rate significantly faster than compensation in most other occupations. Many experienced engineers send out scores of resumes without ever being called for interviews. Of this group, many have completely left the field, for example to become real estate salespeople. Others have been forced to accept positions such as salespeople in computer retail stores. Twenty years after graduation, most computer science graduates are no longer in the computer field. These factors do not seem consistent with the claim that employers are desperate to find engineers or programmers. More detailed arguments, with extensive references can be found in an online paper by Norman Matloff [4]. 5. Exporting the Jobs Bringing in people from abroad to work at lower pay scales is one way to drive down engineering salaries in the US. A complementary technique is to export the work to places where people are paid a fraction of what they would get here, even as H-1B visa holders. In India, for example, an engineer can live very well on a salary one fifth of what he or she would receive in the US. Hence many American based companies have arranged to have software written in places such as India, or the Philippines. Teams of engineers in Russia have been engaged by US firms to design chips. An article in the business section of the New York Times about Romania [5] states, "For less than $5000 a year, a foreign company can hire the best and brightest [engineers] here to do work for which it would pay at least $60,000 a year in the United States." This article mentions a satellite facility built by Raytheon in Romania that employed 300 people, with plans to increase that number to 500. These arrangements are, ironically, made more feasible by the enhanced communications facilities developed in large part by US based engineers. Altho these facilities do make it possible to outsource certain projects, in many cases there are serious problems associated with coordinating work done abroad with other parts of a project being carried out in the US. However, given the enormous potential savings in salaries, and given the rapid pace at which long distance communications facilities are being developed, it seems likely that, over the years, we will see increasing use of job exporting in the engineering field. What is now in the early stages for engineers has been carried virtually to completion for people in the manufacturing field. Long ago, shoe manufacturing, the clothing industry, and electronics manufacturing, to give just a few examples, largely vanished from the US. These industries have relocated to places in the world where wages are extremely low. In cases where workers in those places succeeded, perhaps thru organizing themselves, in raising their pay scales significantly, the manufacturers simple pulled out and moved elsewhere. A good case can be made that many social problems in the US stem largely from the outflow of good manufacturing jobs. Note also that many engineering jobs went with the exported factories. 6. What Is the Basic nature of the Problem? The core of the problem is the concept of treating engineers as commodities to be rented at the lowest price, arrived at via a free market operating globally. (A similar statement might be made about people in other occupational categories, but let us leave this for another forum.) If this concept were fully implemented in practice, a relatively small number of "superstars" would prosper, while most engineers in this country would be driven out of the profession or faced with living on near minimum wages. Over the long haul, there would likely be great fluctuations world-wide in the supply of engineers as student's choices of profession swung wildly in response to current market conditions. If this concept were implemented only within the borders of the US, and one might argue that something like this HAS been in effect for a long time, the instability would be much less, because the general living standard here is relatively high. Should the importing of engineers and the exporting of engineering work outlined above be left to grow in an unchecked manner, then it is hard to see how most US based engineers (including those who came here originally on H-1B visas) would be able to remain in the profession. 7. What Can We Do? Individuals might try to understand the system and maneuver as best they can to survive professionally. One might spend a lot of time studying various technology trends to try to guess what skills are likely to be important over the next few years and then make sure one acquires those skills. The trick is, at all times, to be one of the relatively few engineers who cannot easily be replaced. Those who can succeed at this ought to do well, but a lot of very good, hard working engineers might not be good enough (or lucky enough) at the guessing part. Almost by definition, most people would not be winners in this race. Even many of those who succeed are likely to find themselves leading stressful lives quite different from what they had in mind when they became engineers. Individuals, with few exceptions, can't do it alone. Large organizations are doing the damage, and real solutions are going to require action by other large organizations. Rather than pleading with corporate managers to act responsibly toward their employees and communities, we must see to it that legislation is enacted that will protect more farsighted and responsible managements from being handicapped in the short term with respect to less scrupulous organizations. What is needed are changes in the terms of international trade and of national tax laws to discourage making engineers (and, for that matter other working people) into commodities commanding minimal prices. Why can't we just let the "free market" take care for the problem? Blind trust that somehow the "invisible hand" will make things come out all right is not likely to be rewarded. The corporations that influence government policy and that implicitly cooperate on such matters as salary standards for engineers, display no such blind trust. In order to protect their careers, engineers will have to work thru their professional societies, who in turn may have to ally themselves with other groups, in order to redress the balance. And we shouldn't be distracted by those who express horror at the idea of interfering with "free trade". In an idealized economic model, Ricardo [6] showed how free trade benefits all participants when each trading partner exchanges what it produces most efficiently for what other participants produce most efficiently. If, for example, due to differences in climate and soil conditions, the US produces corn more efficiently than it produces bananas, and Guatemala produces bananas more efficiently than it produces corn, then both the US and Guatemala benefit when Guatemala, in effect, trades bananas for US grown corn. It is this theory that underlies the valid arguments for the benefits of free trade. Using this model to argue that it is also socially desirable for US companies to be encouraged to set up semi-conductor factories in Malaysia in order to take advantage of the fact that workers in Malaysia are paid far less than American workers is in no way justified by the Ricardo theory. There are, of course, situations where imports of manufactured goods are fully justifiable on other grounds. For example, Japanese automobiles are popular in the US because they are high quality products, NOT because they are produced by low paid workers or designed by low paid engineers. Similarly, altho Danish engineers and factory workers are at least as well paid as their American counterparts, wind turbines produced in Denmark are highly competitive in the US due to their excellent technological features. These are examples of fair competition based on efforts to produce good products at reasonable prices, rather than on taking advantage of people living in poverty. 8. Xenophobia? One might ask if the above discussion is basically a xenophobic diatribe directed against our colleagues in other countries. The short answer is no [7]. The basic problem is not with the engineers who come here, or who work for US based companies abroad, but rather with the system that permits companies to operate in this fashion. Clearly the companies are not motivated by a desire to improve the well being of engineers in India or Russia. If the people of the United States decide that justice requires that we do something to raise living standards of engineers in India or Russia, then the burden of this ought to be born by our country as a whole, and not imposed arbitrarily on those in this country (via birth or immigration) who chose to go thru the arduous educational process necessary to become an engineer. The "one" who asked the question at the start of this paragraph might, in turn, be asked if he or she is in favor of dismantling all restrictions on entry to the US, and then whether ALL international borders ought to be obliterated. While this discussion has been focussed on the situation in the US, it should be recognized that, in varying degrees, the same problem exists in many other nations--or would exist if their laws permitted it. What other industrialized countries today permit foreign nationals to enter freely and take jobs as engineers? Protecting the livelihoods of American engineers by legislating taxes on the import into the US of software (or other products) produced by people paid far less than American engineers and programmers is a very reasonable idea that should be debated on its merits. Attacking it with slogans based on the words "free trade" is not a constructive contribution to the discussion. Similarly, allowing corporations to bring in large numbers of engineers from low-wage countries in order to depress salaries for American engineers must be justified by real arguments, not by references to the Statue of Liberty, or by spurious claims that there is a severe shortage of engineers in the US. It is important to understand that these arguments against the H-1B visa program do not constitute an attack on people based on nationality, but rather a defense of the careers of technical professionals currently in the US, whoever they are and however they came to be here. The people who come here under the H-1B program are, as a whole, decent, hard working people, often pressured into working long hours at substandard (for the US) pay rates. They are not the cause of the problem--often they are among the victims. Many currently out-of-work technical professionals are themselves former H-1B people who achieved permanent resident status. Consider, at least briefly, what this situation looks like from outside the US. Where are the H-1B engineers coming from, and why? What is the effect on the countries exporting engineers to the US? It is not hard to see why an engineer in an impoverished country would want to come to the US. Most want to remain here permanently to enjoy a higher living standard. Others plan to return home with an amount of money that would make them relatively wealthy there. Is this good for their countries as a whole? Although the exporting country, in many cases, receives an influx of valuable foreign exchange thru remittances by the engineers, they are losing a great many bright young people who have been educated at great expense. Perhaps consideration should be given to how the US might help these countries utilize these often talented people to help build the industrial infrastructure that could lift their fellow citizens out of poverty. 9. Conclusions There are millions of computer and other technical professionals in the US. These, with their families, constitute a substantial political force if properly organized. There are no good practical or moral reasons why they should not use their own societies to protect their careers. Once the effort is properly initiated, it should be possible to gain support from other organized groups to enact appropriate legislation to prevent the destruction of the technical professions in this country. It is clear that the economic boom of the nineties is over. If, during the height of this boom competent, experienced forty year old computer professionals and engineers had trouble finding good jobs, what can we expect if the recession deepens? References [1] Bell, Trudy .E., Employment Roundtable: Survival Calls for More than Technical Fitness, IEEE Spectrum, March 1996, pp. 20-31. [2] "Designing the DEC Alpha Family of Microprocessors", IEEE Computer Magazine, July, 1999, (p. 27) [3] Oberg, James, "NASA's Not Shining Moments", In Focus Column, Scientific American, Feb., 2000, pp, 13-16. [4] Matloff, Norman, "Debunking the Myth of a Desperate Software Labor Shortage", http://heather.cs.ucdavis.edu/itaa.html [5] McNeil, Jr., Donald G., "Opportunities in a Rusting Romania: U.S. Companies Tap Engineering Talent to Work for Low Wages", New York Times, 12/25/99, P. B9. [6] Ricardo, David, Principles of Political Economy and Taxation, 1817. [7] Unger, Stephen H., "Is IEEE-USA Facing an Ethical Dilemma?", IEEE Institute, December 1998, p. 2. ..........