Making Computer Professionals and Other Engineers Low-Priced Commodities

Stephen H. Unger 9/14/03

Abstract

Careers of computer (and other technical) professionals are threatened by employer efforts to cut short-term costs by finding, for each project, people that they can engage, on a temporary basis, for the least pay. Those employed might be from anywhere in the world, preferably from regions where salaries are minimal. The work might be done in such a low-pay region, or the worker might be imported. The mechanisms involved are examined, the consequences to all concerned are considered, and some possible responses are explored.

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 are adapting what might be called the "just-in-time" concept to computer professionals. The idea is to "rent", at a minimal price, people with the specific skills needed for a project and then to dispense with them upon completion of their tasks. Technical professionals 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 about fifteen 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 technical staffs with temporary workers. In other fields these are called "temps". Those who are technical professionals may be called "contract workers" or are sometimes given the more exalted title of "consultant". These people sometimes contract directly with the employer, but more often are engaged through agencies called "job shops"--or sometimes, "body shops". They usually are paid at a per diem rate, with 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 might 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 technical 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, 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 cited above.) Many, perhaps most, who enter technical professions 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 would find most distasteful. People who, in a stable environment would attain a deep mastery of the technology they are working on, are often 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 or other technical professionals 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 graduate degrees. In-house training programs, seminars, lecture series, etc. were common, and staff members 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 staff members would acquire these skills. Usually, such learning processes were of an informal nature, self-study and/or people helping one another. Sometimes one or more employees were sent to take special (often very intensive) courses.

The result of this approach was that many technical professionals 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 an article about the development of the DEC Alpha processors [2]. Those companies that have abandoned this approach in favor of relying heavily on contractors 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 technical 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 technical staffing is that employers insist on hiring only people 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 technical talent. Thus, since those 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 People

Apart from recent graduates of American Schools, the largest pool of technical professionals that can be hired at minimal rates is outside the borders of the USA. Several Asian countries graduate significant numbers of computer professionals and engineers, and since pay scales in these countries are a fraction of American rates, many of these people 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 technical professionals have great difficulty finding work.

This has led to pressure by employers to amend US immigration laws to allow the importing of computer professionals and engineers 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. This number is scheduled to revert to 65,000 in 2003. (As a result of a growing outcry resulting from significant unemployment among technical professionals, it seems now as tho the reversion will indeed occur.) 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 programmers or engineers.

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 supposedly guard against the incoming engineers being grossly underpaid by American standards. In practice, these provisions apply only in a small subset of cases, are ineffectual, or rarely enforced. Those 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 [4]. There are examples of companies that have discharged most of their technical staffs, replacing them with H-1B people at a significant payroll savings. In a number of cases, as a condition for receiving severance pay, displaced programmers have been required to train their replacements.

The H-1B program was justified as being necessary to meet a severe shortage of technical professionals, particularly in the computer field. There was indeed a shortage. But it was a shortage of people with very narrowly defined skills who were willing to work long hours for modest pay. Evidence for this is the fact that employers of such people interviewed only a small fraction of the people who applied for jobs, and then made offers to a small subset of this group. While high salaries and other inducements were offered in some special cases, for the most part, average compensation (including non-salary forms) of engineers and other computer professionals barely rebounded to the levels they were at 15 years ago, and never increased at a rate significantly faster than compensation in most other occupations. Many competent, experienced computer professionals sent out scores of resumes without ever being called for interviews. Of this group, many left the field, to become, for example, real estate salespeople. Others were 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 were desperate to find programmers or engineers. More detailed information, with extensive references can be found in an excellent online paper by Norman Matloff [5].

More recently, another mechanism has surfaced for bringing in technical professionals, the L1 visa. This was ostensibly to allow companies with overseas employees, to bring them to the US. There are no limits on the number of L1 visas that can be issued annually.

5. Exporting the Jobs

Bringing in people from abroad to work at lower pay scales is one way to drive down 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, a person 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 [6] 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 technical professionals. 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, there is a growing trend to contract out work to companies overseas, as well as for the parent company to open offshore facilities. When entire projects are carried out overseas, the communications problems are lessened, as is also the case when manufacturing is outsourced. Eventually, a tipping point is reached where communications problems are lessened by moving additional jobs to the offshore facility. It seems likely that, over the years, we will see increased exporting of technical work [7]. IBM, for example, is planning to greatly expand its offshore facilities in places like India [8].

What is now in the early stages for technical professionals has been carried virtually to completion for US manufacturing workers. 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 simply pulled out and moved elsewhere. Perhaps the first instance of such factory flight occurred a century ago in the US when the textile industry relocated from New England to the South in order to take advantage of cheaper labor. (See [6] for a brief account of this process.) When worker salaries in the American south began increasing, their jobs were exported to countries in Asia or Latin America where workers could be paid a good deal less.

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 higher level technical 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 technical professionals 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 computer experts and 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 technical professionals as students' choices of profession swung wildly in response to current market conditions.

If this concept were implemented only within the borders of the US, the instability would be much less, because variations in living standards within the country are far less than between the US and the poorer countries of the world. But, should the importing of technical professionals and the exporting of technical work outlined above be left to grow in an unchecked manner, then it is hard to see how most US based technical professionals (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 technical professionals who cannot easily be replaced. Those who can succeed at this ought to do well, but a lot of very able, hard working people 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 envisioned when they chose their professions. 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 technical professionals (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 programmers or engineers, display no such blind trust. In order to protect their careers, technical professionals will have to work thru their professional societies, who in turn will 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 [7] 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. But the argument 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 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 [8]. The basic problem is not with the computer professionals 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 technical professionals 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 a technical professional. 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?

Our tax system, which currently acts to encourage companies to establish offshore facilities, could be amended to penalize such behavior. Protecting the livelihoods of US based technical professionals 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 programmers from low-wage countries in order to depress salaries for US based programmers 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 such people 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 technical professionals 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. Many 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 H-1B holders, it is 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 people at home to 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.

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. ≥Skilled Workers--or Indentured Servants?≤, Business Week, Workplace, June 16, 2003, p. 54.

5. Matloff, Norman, "Debunking the Myth of a Desperate Software Labor Shortage",

http://heather.cs.ucdavis.edu/itaa.html

6. 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.

7. ≥Companies going offshore to outsource IT≤, Mary Hayes, InformationWeek, July 28, 2003

http://informationweek.com/shared/printableArticle.jhtml?articleID=12800945

8. ≥I.B.M. Explores Shift of White-Collar Jobs Overseas≤, Steven Greenhouse, NY Times, http://www.nytimes.com/2003/07/22/technology/22JOBS.html?hp

[9] http://www.myhistory.org/historytopics/articles/textile_industry.html

[10] Ricardo, David, Principles of Political Economy and Taxation, 1817.

[11] Unger, Stephen H., "Is IEEE-USA Facing an Ethical Dilemma?", IEEE Institute, December 1998, p. 2.

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About the Author

Stephen H. Unger is a Professor of both Computer Science and Electrical Engineering at Columbia University. Dr. Unger has been a summer and/or sabbatical year employee of GE, IBM, RCA Laboratories, the Western Electric Research Center, and Bell Laboratories, as well as a consultant for several organizations. He has published over 40 technical papers and reports on computer related subjects, as well as two books, Asynchronous Sequential Switching Circuits, and The Essence of Logic Circuits. He was awarded one patent. His current research is principally in the area of self-timed systems.

Professor Unger has also been active in the area of technology policy, writing and speaking on such topics as engineering ethics, secrecy, energy, and war. He has taught courses on technology and society for engineering and computer science students, and is the author of "Controlling Technology: Ethics and the Responsible Engineer". He was a founder and later president of the IEEE Society on Social Implications of Technology and continues to be an active member of its governing body. Dr. Unger was a member of the IEEE Board of Directors and chaired the IEEE Ethics Committee. He was a member of the AAAS Committee on Scientific Freedom and Responsibility, chairing a subcommittee on national security and scientific information. He has testified publicly on this topic before several bodies. He is a Fellow of the IEEE and of the AAAS, and received the IEEE USAB Distinguished Contributions to Engineering Professionalism Award for 1987.