Reversal of Fortune

Date: Sunday, January 12, 2003 3:05 PM

H-1B and JOB DESTRUCTION NEWSLETTER

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Stanford University has is an avid advocate of H-1B and Charles M. Pigott
Professor of Management Science and Engineering, is no exception. He doesn't
seem to think H-1B and outsourcing are anything to worry about. Here are
some key points from his cover story on IEEE's Spectrum Magazine.

* He said that he hasn't seen evidence that suggests that H-1Bs get paid
less. If he hasn't seen evidence then he isn't qualified to speak on the
subject of H-1B.

* Pigott said that H-1Bs will move to other companies if their salaries
aren't comparable to their American counterparts. He ignores the indentured
aspects of H-1B and apparently doesn't understand the relationship of
glutted labor markets to the laws of supply and demand.

* Pigott claims that there is a looming shortage because "the data pretty
clearly show that the rate at which industry is creating a demand for
scientific and technical workers is rising faster than the supply of
American students entering these fields." He said this gap is being filled
by foreign students because American children refuse to choose science and
engineering. He thinks that the reason this is happening is that Americans
have a "social problem". He never considered the fact problems these kids
are facing because their jobless parents can't find engineering and
scientific jobs.

* Outsourcing is not a factor for engineers according to Pigott. He said the
only jobs going overseas are those boring "rote-oriented programming" jobs
that Americans shun for more challenging work. Perhaps he thinks that
filling out unemployment forms is a challenge that Americans prefer.

http://www.spectrum.ieee.org/WEBONLY/publicfeature/jan03/tlude.html

Reversal of Fortune

Once in high demand, engineers now struggle to find work

No question, times are tough for many working engineers. But is the current

job market really worse than previous ones? And what are the effects of an
increasingly global workforce on the engineering profession? IEEE Spectrum's
senior associate editor Jean Kumagai spoke with Stephen R. Barley, the
Charles M. Pigott Professor of Management Science and Engineering and
codirector of the Center for Work, Technology and Organization at Stanford
University's School of Engineering, to get his thoughts on what's going on
in the engineering workplace.

Let's start with the current downturn, which started a couple years ago and
isn't showing many signs of improving. Is this just a cyclical thing, or a
sign of something more permanent?
No one can know for sure, but what I would say is that in the past,
engineering employment has risen and fallen with the rise and fall of cycles
in the economy—particularly in aerospace, where employment was subject to
the ups and downs in military budgets and funding that NASA got or did not
get over the years. These ups and downs play out in the engineering labor
force pretty much across the board.

Now, IT [information technology] and computer science occupations, in
particular, have grown more than have other fields, and it may be that for
many of these folks, this is their first downturn, so it seems worse than it
might otherwise. Also, the demand for IT people in the 1990s was driven not
by the military or NASA, but by dot-coms and the emergence of the Web and by
the spread of computer technologies, which upped the demand for networked
infrastructures, like chips and routers and so forth.

And has that demand now dried up?
Well, it's dried up, yes, but a similar thing happened in the 1980s. Back
then, the problem was that the Japanese had really learned how to make
chips, and they were dumping large numbers of them into the U.S. market,
which drove a lot of people out of work. But the industry as a whole
eventually recovered.

What about the concern among U.S. engineers that the "good" jobs are moving
overseas?
There is definitely more work being done by developers overseas than 15
years ago, and that trend will continue. But in any field, insiders tend to
think about some work as being more exciting and challenging than others,
and my sense is that what's mostly getting moved offshore is more
rote-oriented programming.

Companies will encounter limits on how much they can move overseas. It's the
same problem every technical company faces when it has people working on
complex systems, on subcomponents of subcomponents that all need to be
integrated. Integration is always the Achilles' heel in developing any
complex technology, and so the more distanced people are from talking to
each other, the more likely you are to have interface problems when you
start putting things together.

What about things like virtual collaboration, which some companies are
trying to get around this problem?
Companies are certainly experimenting with virtual collaboration. On this
topic the research literature speaks in a single voice. The data
overwhelming suggest that virtual collaboration between people who don't
know each other is very difficult and that virtual teams are are more likely
than face-to-face teams to be hampered by coordination and communication
problems.

What about the effect of H-1B visas on job prospects for U.S. engineers?
[Editor's note: An H-1B visa permits non-U.S. engineers and others in
"specialty occupations" to work temporarily in the United States, provided
they have a sponsoring employer.]
I suspect there are firms who have hired H-1B workers because they're
cheaper. But no data I know of shows that that's the general practice.

What about from the H-1B holders' perspective?
For them, it's the classic immigrant story. Why did the Irish come here? Why
did the Slavs? In part to escape persecution, but largely because they could
make tremendously more money here.

And it doesn't take H-1B holders long to figure out that they're getting
paid less than the average U.S. employee. Most of these workers are brought
in by staffing agencies that specialize in providing H-1B contractors, and
usually there's some kind of agreement that says in return for coming over,
the individual will work for the agency for some period of time, and that
agency holds the sponsorship for the H-1B. In order to go to work for
another firm, the contractor has to find one that's willing to sponsor him.
So what'll happen is that the contractor will figure out he's working for
less, he'll find another firm, the transfer will take place, and then his
salary will go up.

But I've read these horror stories in the newspapers about H-1B holders
who've been exploited by their employers.
I'm sure there are people like that, and it makes for a good story, but
that's not the modal experience.

You recently wrapped up a study of contract engineers.
Yes, it was a three-year study of contractors, staffing agencies, and
project teams that employed both full-time and contract workers. All the
workers were in high-tech occupations—developers and programmers, technical
writers, quality analysts, chip designers, and system administrator types.
About a quarter were from outside California, but there were no real
differences in the kinds of things we heard from Silicon Valley or Austin or
Atlanta or D.C. or New York City or Toronto or Seattle.

What kinds of things did you hear?
One thing we found was that firms often use contractors as a way of securing
expertise that they don't have inside the company. The second thing was the
incredible amount of time that contractors put into maintaining themselves
on the cutting edge. They always have to worry about their marketability, so
they're constantly updating what they know.

How do they go about that?
Just about any way you can think of. Some take courses. A lot of them use
the Web, which is actually very good for technical information, although it
can be horrible for other types of information. They also develop extensive
networks that include practitioners in the same or related occupations, whom
they not only go to for job referrals, but for technical advice. And of
course they read books, they subscribe to magazines, the whole schmear.

Any other findings?
They make pretty good money. If you read the literature on contingent work,
you get the sense that people who do it are paid much less than full-time
employees. That's because the category is so overpopulated by people in
clerical, administrative, and light industrial jobs. But with high-tech
contractors, it's the other way around: on average, the group we looked at
were paid between 1.5 and three times what they'd made as full-time
employees.

So these were people who had moved from full time into contract work by
choice?
Yes, largely by choice. What they all had in common was they did not like
working for large organizations. The way they'd put it is they "got tired of
playing corporate politics." It wasn't really a matter of wanting more
leisure time—the vast majority of these guys work their tails off.

What's their motivation for working that way—delayed gratification?
It's a combination of things. Part of it is they do make good money, and
many of them enjoy their work. But the key reason is that they have a real
sharp sense of what an hour is worth. Remember, they get paid by the hour,
so they can put a dollar figure on the opportunity costs of not working.

Are high-tech contractors becoming more common? Will companies some day hire
most of their engineers and programmers as contractors rather than fulltime
employees?
There is no doubt that the use of contractors grew during the last decade,
but I seriously doubt if firms will ever come to rely primarily on
contractors. This would cause too much instability in a firms work force. I
think it's more reasonable to expect that contractors will continue to
comprise a small but significant percentage of a firm's labor force. It's
difficult to estimate exactly what that percentage will be because it will
vary from firm to firm and because firms don't like to talk about how many
contractors they use. We do know that during the late 1990s contractors
accounted for 15 to 30 percent of the technical labor force in some of the
largest high-tech firms in the Silicon Valley. Small startups also
frequently relied on contractors because doing so minimized the rate at
which they burned their funding.

These days more people are consultants by default, because they lost their
jobs. Do your conclusions still hold true for them?
Well, our data were collected before the downturn, so one might assume the
findings are no longer relevant. I'm not so sure. Among the people we
interviewed, there was always a triggering event, like a layoff or a merger,
that caused them to go into contract work. The main difference between then
and now may be that the guys we interviewed could have gotten a full-time
job if they'd wanted one, simply because it was a tight labor market. But
the fundamental work experience doesn't change. We're now following up to
see if that's the case.

With fewer students choosing to go into science and engineering, there's
been a lot of talk about a looming shortage in the engineering and
scientific workforce. Is there in fact such a shortage on the horizon, and
if not, why do science policymakers continue to talk about it?
The data pretty clearly show that the rate at which industry is creating a
demand for scientific and technical workers is rising faster than the supply
of American students entering these fields. Some data also suggest that
American children are less likely to choose science and engineering than in
the past. The gap is partially being filled by foreign students who come to
the United States to study science and engineering and who remain here after
finishing their degrees.

Many people think the problem lies with our primary and secondary education
system, which does not provide adequate education in science and math. But
I'm not so sure that schools are really at fault. Even if you grant that
schools are providing less adequate science and math training than in the
past, it's still possible that this is just another symptom of a much larger
cultural problem. In India, Taiwan, and China, engineers and scientists are
held in high esteem. In the United States, engineers and even scientists are
not granted the such social status, and in fact, images of engineers and
scientists are often negative. Remember the movie "Revenge of the Nerds"?
That's how engineers are portrayed in our culture. Attitudes have changed
since the 1960s, when engineers were revered for putting men on the Moon and
leading the United States to victory in the space race.

The question is how do you get kids to want to study math and science when
the culture offers greater status and greater monetary rewards to other
occupations—doctors, lawyers, and successful guitar slingers, for instance.
It's no secret that managerial salaries in industry are much higher than
salaries for scientists and engineers. This is true in the universities as
well: business school faculty typically make 1.5 times more than engineering
faculty. If you look at it this way you can see that engineers and
teachers—another occupation perpetually thought to be in crisis—have a lot
more in common that most people think.

If we want our children to become engineers and scientists, then we have to
send the message that we value those pursuits. One way to do this would be
to put our money where our mouths are.

Care to make any predictions about when the downturn will end?
No. On this point, I think we're all relatively equally ignorant.

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