Technology

Tech Hiring: An Oxymoron No More


In 2004, the tech industry labor market picked itself off the canvas -- bloodied and scarred after two years of heavy beatings. While this year looks to be another step in the right direction, don't expect a return to the knockout growth last seen during the tech boom. Indeed, tech employment is becoming increasingly vulnerable to the same globalization and consolidation pressures that have jarred the rest of the labor market for decades.

It's an odd time for tech workers. While hiring has picked up, salaries remain stagnant. Last year, the industry added about 35,000 jobs, reports Economy.com, a forecasting and consulting firm in West Chester, Pa. And about 10,000 of those jobs were created in December, according to government labor data released Jan. 7.

"ABLE AND WILLING." "We're picking up the pace as we enter 2005," says Mark Zandi, chief economist of Economy.com. "Tech companies have cash, capital, and confidence. They're both able and willing to hire." This year, Zandi estimates the industry will add about 214,000 new jobs. That would be the largest increase since 2000, but it still leaves the sector with about 6.85 million workers on tech payrolls -- around where it was in 1999. The industry peaked in 2001 with a total of 7.4 million jobs.

Yet concerns are rising because jobs aren't translating into higher wages, partly because of outsourcing and increasing competition from lower-cost tech hubs like Bangalore, India, and parts of China. Those fears were stoked on Dec. 22, when the U.S. branch of the Institute of Electrical & Electronics Engineers released results from a survey that showed the first drop in technology professional salaries in 31 years. The poll of more than 12,000 respondents revealed that median income for IIIE members dropped 1.5%, to $99,500 in 2003, from $101,000 in 2002.

Other government surveys and research show wages for most skilled technology workers continue to climb, albeit at a slightly lower rate. The mean hourly rate for an electrical and electronics engineer was $37 in 2003, up 9% since 2000, according to the U.S. Bureau of Labor Statistics. That compares to a 16% rise from the previous three-year period, when the Internet boom helped fuel hourly mean wages to $33.94 in 2000, up from $29.24 in 1997. "What really drives engineering and technical pay is new technology," says Dick Ellis, a labor market sociologist who consults with the IEEE and other foundations.

PATCHWORK PATTERN. Why the disconnect? The problem for many folks in the industry is that they keep comparing the current situation to the tech bubble, which most economists say was a once-in-a-generation anomaly. During the boom period from 1996 to 2000, the sector created an eye-popping 350,000 jobs per year, while wages increased by at least 5% to 10% annually. Economy.com's Zandi forecasts job growth in the tech segment over the next five years to average 145,000 annually, with wages rising in the low-single digits.

Those new jobs will be unevenly distributed throughout different tech sectors. Constrained by consolidation and productivity gains, computer manufacturing and telecommunications will continue to pare their work forces or keep them flat. IBM's (IBM) recent sale of its PC business to Chinese giant Lenovo can be seen as a sign of this trend.

The $558 billion info-tech services market, the largest tech sector, is expected to grow 5.7% this year, up from 3.3% in 2004, according to Kennedy Information, which tracks the consulting industry. Accenture (ACN), for instance, is expected to increase its staff from 15% to 20% in 2005, about the same as 2004. "We'll continue to see some growth," says Brad Smith, Kennedy vice-president.

THINKING GLOBALLY. The other hot areas include software engineering and Internet services. Microsoft (MSFT) says it expects to hire 6,000 to 7,000 employees this year, with around half in the U.S. Google (GOOG) has not released official hiring projections for 2005, but it has hundreds of openings listed on its Web site. Last year, the search-engine kingpin almost doubled its headcount to 3,000, up from 1,600 at the end of 2003. E-commerce site Priceline.com (PCLN) expects its staff to grow 20% this year, boosted by new hiring and recent mergers designed to push the name-your-own-price travel leader into selling hotel rooms at fixed rates.

However, like most other corporations, tech outfits -- both large and small -- are operating on a global basis. In order to tap the best talent and the most promising markets, they're moving many activities overseas. This is why growth rates for tech services companies based in places like India are so much greater than for their U.S counterparts.

The market for offshore tech services is expected to rise 25% this year, to $24.2 billion, according to Kennedy Information. In 2004, the sector grew 26%. Says Zandi: "The whole outsourcing and offshoring phenomenon is a factor that will put a lid on [U.S.] job creation."

"A HUGE SECTOR." The silver lining in all of this is that today's tech job market is twice as productive in terms of growth than it was before the boom, when it was adding about 69,000 jobs per year. The industry has grown so large that just maintaining what already has been built up and "keeping existing innovations in place will provide employment for a lot of people," says IEEE consultant Ellis. "Tech is a huge employment sector now."

That's not so bad, as the industry wipes the blood off its chin and begins throwing some punches again. By Spencer E. Ante in New York


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