The Great Tech Worker Divide - "Not a shortage of talent, just cheap talent"

By Moira Herbst Wed Oct 10, 8:08 AM ET
With a B.S. in computer science, an M.A. in information systems management, and 20 years of experience, Rennie Sawade would appear to be a strong candidate for a job as a software development engineer. But all the 44-year-old can find these days are short-term, temporary jobs -- like the 15-month contract he's currently on at a Seattle-based medical device company. At Microsoft, the most prominent employer in town, he's had contract jobs and even interviews for permanent positions. But after several failed attempts, he's given up on trying to land a staff position at the software giant. "I feel like my time is being wasted," he says.

Just across town at Microsoft headquarters, in suburban Redmond, Wash., Kevin Schofield is grappling with what he calls a severe shortage of qualified workers. Schofield's job is to help develop recruiting strategies to stay ahead of rivals like Google (NasdaqGS:GOOG - News), IBM (NYSE:IBM - News), Yahoo! (NasdaqGS:YHOO - News), and SAP (NYSE:SAP - News). The 40-year-old says Microsoft is desperate to fill 3,000 core technology jobs in the U.S., and there are so few Americans with the specialized skills required that the company needs to bring in more workers from overseas on temporary visas and permanent green cards. "There just aren't enough people," says Schofield.
Reform Likely
Sawade and Schofield's contradictory viewpoints highlight a deepening fault line in the technology industry. While American tech companies say they can't find enough qualified people, many tech workers say there aren't enough good jobs. Employers point out that the unemployment rate in the sector is extremely low, a mere 1.8% in the second quarter of this year. Workers counter that salaries in the sector are still below their level in 2000, adjusted for inflation, a sign that companies haven't had to bid up wages to get staff.
The frustration is growing on both sides. Bill Gates, Microsoft's founder and chairman, testified in Washington earlier this year (BusinessWeek.com, 3/7/07) that he feels "deep anxiety" over the competitiveness of the U.S. and says that the country needs to do more "to attract and retain the brightest, most talented people from around the world." Meanwhile, John Miano, founder of the Programmers Guild, which represents tech workers, calls the idea of a labor shortage in technology the "big lie" that U.S. employers are trying to use to hold down labor costs.
Is there any way to satisfy both sides? It may seem like an impossible task, but that's precisely the challenge ahead for Congress and public policy experts. The Senate and House of Representatives are considering whether to try to overhaul the immigration policies for high-skilled workers. The question is whether there's a way to help U.S. tech companies recruit the talent they need to stay competitive, while also easing American workers' anxiety. Representative Zoe Lofgren (D-Calif.), chair of the House subcommittee on immigration whose district includes Silicon Valley, says "there is a greater willingness to move forward on immigration reform" (BusinessWeek.com, 9/11/07).
Outsourcing Abuses?
Radical options are on the table. One reform could be to ban outsourcing companies from using temporary visas (BusinessWeek.com, 5/25/07), since the firms have been accused of using the U.S. program to send American jobs overseas. Another could be to eliminate temporary visas altogether and allow high-skilled workers to come to the U.S. only on permanent green cards. There's even talk of limiting visas to positions in which a demonstrated shortage exists so the market isn't flooded with workers and wages driven down. "The question is how the workers will be brought in," says Ron Hira, assistant professor, public policy at the Rochester Institute of Technology. "Are we just increasing the supply of workers or increasing a particular kind of supply?"
The distinction is crucial. While the political debate often seems like one between those for and against immigrant workers, reality is much more complicated. There is no single "tech job market," but rather a collection of markets for workers with different kinds of skills. There may be shortages for certain kinds of workers, but there are way too many with other skills. For example, demand for network systems analysts, the people who design and set up computer networks, is surging. But the number of computer programming positions in the U.S. has tumbled 25% since 2000.
While the differences among tech workers are growing as jobs become more specialized, public policy hasn't kept up. For one popular visa, known as an H-1B, any worker from overseas with an undergraduate degree qualifies. There's no need to try to hire an American first or demonstrate that such workers are in short supply. In addition, the visas are doled out to the first companies that ask for them, not those most important to the U.S. economy.
Questionable Searches
The loose criteria have opened the door to potential problems. Earlier this year, senators Dick Durbin (D-Ill.) and Chuck Grassley (R-Iowa) launched an investigation (BusinessWeek.com, 5/15/07) into how companies have been using the H-1B program for temporary visas. They disclosed that the most active users of the visas are Indian outsourcing companies, led by Infosys Technologies (NasdaqGS:INFY - News) and Wipro (NYSE:WIT - News). The senators said the visas were being used not to make the U.S. more competitive but to save money by hiring cheaper workers from abroad and to facilitate the outsourcing of jobs to other countries. Grassley cited the "high amount of fraud and abuse" in launching the investigation. Wipro and Infosys say they are simply helping their clients become more competitive and have done nothing wrong.
In June, a startling video leaked out. It showed a corporate law firm coaching employers (BusinessWeek.com, 6/22/07) on how to get around the requirement of trying to hire an American before bringing in a worker from abroad for a green card. "(O)ur goal is clearly not to find a qualified and interested U.S. worker," said the firm's director of marketing in the clip.
Such cases are taken by American tech workers as confirmation of their worst fears. In Seattle, Sawade thinks many employers he talks to don't really want American workers; they just want cheaper labor from abroad. "It seems companies are going through the motions so they can be free to hire guest workers," he says.
Where Are the Jobs?
From the outside, it would seem tech workers should have little trouble finding jobs. The unemployment rate for computer and mathematics-related work occupations has dropped steadily, from 5.4% in second quarter of 2002 to the 1.8% in the second quarter, according to the Bureau of Labor Statistics. The total number of such jobs is higher than at any point in the last seven years.
The type of jobs being created, however, is shifting dramatically. As more technical jobs like programming are outsourced, new opportunities in the U.S. require additional or more specialized skills. The biggest job gains in information technology in the past year have been for software engineers, IT managers, and network systems analysts. IT management jobs are up more than 50% since 2001. Meanwhile, programmers and support specialists -- the easiest categories to outsource -- continue to shed positions. Computer programmer employment tumbled to 396,020 last year, from 530,730 in 2000.
The result is that even as some are thriving, other U.S. tech workers are falling behind. The mean salary for computer and mathematics-related jobs was $69,240 last year, or $850 per year less than in 2000 adjusted for inflation. Tech worker advocates and some economists say the reason for the stagnation is that U.S. tech companies have been able to manipulate the labor market by bringing in guest workers. "Employers are asking the government to intervene in the labor market to ensure they have a steady supply of cheap workers," says Marcus Courtney, co-founder and president of WashTech, a Seattle-based union with 1,500 members. "This is not about a labor shortage -- it's about political power."
Shortages Worsen
Microsoft's Schofield says that such assertions simply don't make sense. The company has one of the largest stashes of cash in the world and gushes profits every quarter. Saving a few thousand dollars in salary is much less important than finding the next hotshot techie who can help dream up a new billion-dollar business. Microsoft is one of the most active American companies in the H-1B visa program, receiving 3,117 certifications in fiscal year 2006. But Schofield says that H-1B workers are on the same pay scale as U.S. workers. Government records show that the median salary for Microsoft's H-1B workers was $82,500, typically at or above the prevailing wage for similar positions.
In the U.S., Microsoft is currently seeking employees in a handful of key areas: software development engineers, who design complex software; research software development engineers, who research advanced software design and theory; software architects, who design large-scale projects at the highest levels; and localization software engineers, who customize software for foreign languages.
Schofield is concerned that if Congress does not offer relief by raising the annual cap on H-1B visas and boosting the number of green cards, Microsoft will have to source more employees overseas. Microsoft, along with Intel (NasdaqGS:INTC - News), Texas Instruments (NYSE:TXN - News), Motorola (NYSE:MOT - News), and others, has been pushing for the H-1B cap to be raised from the current 65,000 a year to at least 115,000.
Schofield feels the shortages may get worse. Statistics show declining interest in tech degrees at all levels, and he is worried the hunt for talent will only get harder. In math, science, and engineering, for example, 50% or more of the post-graduate degrees at U.S. universities are now awarded to foreign nationals. "Enrollment in computer science and engineering is dropping like a rock," says Schofield. "There is already huge competition for people with really deep skills, and it will only get worse."
Change Needed
In addition to advocating for more visas and green cards, Microsoft is trying to boost enrollment in computer degree programs and help U.S. midcareer workers update their skills. Schofield says Microsoft representatives, including Gates himself, are visiting high schools and colleges in an attempt to dispel three myths: that offshoring means the future for tech work is bleak, that tech jobs are mundane and not "cool," and that there is little opportunity left to innovate in computer science. "We're sending the message that this is a vibrant industry doing creative things," says Schofield. "Exciting things are happening, and individuals can have a real, lasting impact."
Critics say the emphasis should be on public policy changes, not public relations. "The presumption is that American students are irrational, and that they are leaving great opportunities on the table," says Hira. "I find that hard to believe. Is there a shortage of investment bankers? No, because they are paid a lot of money. Wages do matter."
As advocates and politicians take up the issue of immigration reform for high-skill workers, the one thing that Schofield and Sawade can agree on is that the current situation needs to change. The question now is what additional common ground can be found between them.