Is There Really an IT Labor Shortage?

 
 
By Ericka Chickowski  |  Posted 2008-03-05
 
 
 

Over the last several years a number of IT industry executives and analysts have consistently promoted the idea that there exists an ever-present shortage of skilled IT workers in the market to fill the industry’s demand. High-profile executives such as Bill Gates of Microsoft and Craig Barrett of Intel have weighed in on their opinions about this shortage of good help in the server room and at the keyboard.

Most recently the theory of a growing shortage was bolstered by a December 2007 Gartner report entitled “The Quest for Talent – You Ain’t Seen Nothing Yet.” One of the report’s authors, Andy Kyte, went so far as to say in a statement that “(t)his is a massive and devastating skills shortage, and it is coming when there is a surge in the number of projects that are required from IT.”

But there is a growing resistance to this “common knowledge” of IT labor shortages—a number of economists, academics and industry experts refute these claims, stating that there simply isn’t any hard evidence to support the idea that there is or soon will be an IT skills shortage.

“It seems like every three years you've got one group or another saying, the world is going to come to an end there is going to be a shortage and so on,” said Vivek Wadhwa, a professor for Duke University’s Master of Engineering Management Program and a former technology CEO himself. “This whole concept of shortages is bogus, it shows a lack of understanding of the labor pool in the USA.”

Wadhwa has been studying the IT labor market since his transition to the academic world, when he began hearing student anxiety over the availability of jobs in the wake of increased offshore outsourcing and onshore hiring of foreign guest workers. He’d heard all of the business claims of skills shortages to justify these practices, but these assertions didn’t jibe with students’ perception of diminished job prospects in technology. His findings have so far shown no indication of skills shortage.

For example, in one study Wadhwa illustrated the disconnect between industry leadership’s opinions about skills shortfalls and the quantitative facts that contradict these opinions. He and his students at Duke went straight to the hiring source, the human resource department, at a number of top companies employing IT workers.

They asked HR professionals a number of questions that would speak to the availability of qualified workers, about topics such as the number of applicants received for IT jobs, the speed with which these positions are filled and the overall satisfaction with the employees eventually hired.

The portrait painted by the question’s answers were very different from their executive’s opinions on skills shortages, Wadhwa says, explaining that each indicator showed there was no lack of qualified applicants.

Wadhwa’s most recent research (download) released in January bolstered his opinion that there is no shortage of IT workers here in the U.S. as compared to the outsource havens of India and China.



These studies done at Duke aren’t alone in their assessment that there is in fact no skills shortage. They’re backed up by other studies conducted by RAND Corporation, The Urban Institute and Stanford University, among others, all of which settle upon the same conclusion: There is no shortage of educated IT workers.

“No one who has come to the question with an open mind has been able to find any objective data suggesting general 'shortages' of scientists and engineers,” said Dr. Michael Teitelbaum, vice president of the Alfred P. Sloan Foundation, in testimony to Congress last fall. “The RAND Corporation has conducted several studies of this subject; its conclusions go further than my summary above, saying that not only could they not find any evidence of shortages, but that instead the evidence is more suggestive of surpluses.”

Dr. Ron Hira agrees there is no shortage of skilled IT workers. In his capacity as a professor of public policy at the Rochester Institute of Technology, a fellow at the Economic Policy Institute and co-author of the book Outsourcing America, he has pored through Bureau of Labor Statistics data and university graduation rates and found that the United States has consistently graduated more than enough computer scientists and engineers to fill the IT jobs available in the country. Similarly, there he has seen no in unemployment rates to indicate any kind of IT worker shortage

“I don't think there’s a lot of surplus of workers, but I don't think there’s any shortage,” he said.

Hira believes the most telling pieces of evidence are the IT wage statistics, which haven’t risen dramatically in years.

 “Wages have been basically pretty flat,” he said, “and that’s where we would see numbers spike if there was any kind of shortage. You would see signing bonuses and so forth.”

Wadhwa echoes his sentiments.

“It doesn’t add up,” Wadhwa said. “We live in a free economy. If we were sitting in a government controlled economy it would be one thing, but in a free economy what happens is that when shortages begin to develop is that prices rise and the money compensates for the shortage.”

Added to the hard data offered by government and university statistics is the empirical evidence coming from seasoned IT workers who, like Wadhwa’s students, increasingly complain of worsening job prospects in the IT market.

“Some people will reject that as anecdotes or they'll blame those workers for not keeping up with their skills, so there are ways of dismissing it,” Hira said. “But who's to say that when Bill Gates gets up or Craig Barrett gets up to say that there's a shortage that that’s not an anecdote either? I mean, nobody's really pressed them on providing data to support their statements. We're sort of taking it on faith that what they're saying is right; when in fact they get hundreds of thousands job applications for positions pour into their companies every year.”

Skills shortage or hiring difficulties?
Hal Salzman at the Urban Institute believes that part of the disconnect between employer’s view of a shrinking pool of solid recruits and employees views of a shrinking job market comes by way of unrealistic expectations from IT industry leaders.

“What tends to get mixed up in this discussion is the idea of a shortage versus a hiring difficulty,” Salzman says. “In my studies we tend to find that some of the it industry is new its growing and has unrealistic expectations of a mature labor market in most industries understand that it takes some time to train workers to become productive and there has been an expectation in the IT industry that you should be able to hire people off the street and day two or three they should come up to speed.”

He believes that many hiring managers complain that there is a shortage of eligible skilled IT workers because their vision of eligibility is impractical.

“I once had a manager talking about difficulty in finding a Java programmer with ten years java experience and who he wanted to come into a mid-level Java position,” Salzman said. “Java's been around for what, 12 years now? There are probably not a lot of these folks around who have that much experience and who are willing to work at that level.”

Last fall Salzman and Lindsay Lowell of Georgetown University produced a paper for The Urban Institute that showed that general science technology engineering and math ( STEM) enrollment at American universities was at least double the net increase of jobs each year. It noted that the IT industry in particular was unique in that up to 40 percent of IT workers have no STEM degree at all, many of whom came from the business side and learned the technology on the job. This only further widens the pool of eligible workers, he said.

Which is why he was troubled by Gartner’s claims of an impending shortage based on the raw graduation rate decline over the past several years. In their December 2007 paper, Gartner analysts used the argument that businesses are finding it hard to find “hybrid professionals” trained in technology and possessing business savvy due to a 39 percent drop in computer science enrollment since 2002.

“Yes that is true, but also the market crashed, right?,” Salzman said. “The absurdity of that statement is that they expect students to be blind to the market. The industry collapsed and a year later enrollment declined. That’s a problem? I mean wouldn't you be worried if students kept enrolling without any jobs? Would you want to hire people like that? They say they want these hybrid professionals who understand business and markets and yet they want them to make a career decision without taking into account the market?”

Salzman said that in his many years at the Urban Institute he has found that students are smart—enrollment rates go up when salary rates go up. He believes enrollment in IT-related degrees has gone down because there isn’t as much financial incentive to enter the IT career path. But that doesn’t mean that there aren’t enough graduates to go around. On the contrary, he says that the proportion of graduates to available jobs is still rising.

“Firms who once attracted the best and the brightest are having trouble doing that now that salaries aren’t as impressive,” he said. “Is that because there is a shortage or is it that because they are not as attractive as they once were and other firms are more attractive?”

Not only are there more than enough new graduates pumped out of universities each year to fill the country’s available technology jobs, but some like Wadhwa believe that there are many more experienced IT workers out of the market who are unemployed or underemployed or unemployed due to age discrimination or those who left IT during a period of unemployment following a bust cycle. Additionally, there are many more business users who could be trained in IT skills if necessary. Wadhwa believes these workers could be easily “skilled up” in the event of temporary shortages.

“If the demand was really there, if these critical shortages that Gartner is forecasting started to happen, guess what? Businesses would start sending some of their experienced users to technology school and a few months later they'd become technology experts who understand the business very well,” Wadhwa said. “So it’s a very shallow, very biased perspective that they've presented and I’m surprised that Gartner put something like this because there is a very deep pool of experienced talent out there which can be trained and which can understand the business side of IT.”

Motives behind shortage promotion
So if there is no quantitative evidence pointing to a skills shortfall, why are there so many claims to the contrary? Teitelbaum asked that rhetorical question in front of Congress last fall.

“So why, you might ask, do you continue to hear energetic re-assertions of the conventional portrait of 'shortages,' shortfalls, failures of K-12 science and math teaching, declining interest among US students, and the necessity of importing more foreign scientists engineers?” he said. “In my judgment, what you are hearing is simply the expressions of interests by interest groups and their lobbyists. Interest groups that are well organized and funded have the capacity to make their claims heard by you (in Congress), either directly or via echoes in the mass press. Meanwhile those who are not well-organized and funded can express their views, but only as individuals.”

Hira also believes that the promotion of what he calls the shortage “myth” supports several group’s political and business objectives, whether true or not.

“There’s no data that one can point to that indicates a shortage outside of the opinions of interested parties,” Hira said. “I don't know why they're making these statements outside of for political gain and for their own interests.”

In the case of industry business people, the motive is to get the Feds to loosen immigration restrictions for cheap foreign labor, to increase supply of workers in order to reduce labor costs and to justify offshore outsourcing efforts, Hira said.

“If industry would work cooperatively with worker groups in identifying real areas that are emerging where they believe there will be demand and working with universities then you could then have a more responsive system,” Hira said. “But instead they throw out the foreign guest worker thing every single time, so it’s hard to believe that they are serious about this when they use this for political gain. Adjusting the foreign guest worker program is the primary solution that they are looking for.”

He’s not alone in his beliefs about these motives.

“They want to justify whatever business actions they're taking or they want to take,"  Wadhwa said. “In this case you have companies are going over seas and they’re trying to say, 'Look it isn't us, it’s the fact that American education is not graduating enough engineers. This is why we are doing it.'”

Meanwhile, universities are also set on perpetuating the shortage perception because they themselves are promoting their business interests, Hira said.

During the last tech boom many universities staffed up in order to churn out enough students to meet IT’s then-growing demand for applicants. Now that that has leveled off many universities are overstaffed for the current crop of students. They want to put students in seats in order to keep the lights on.

“You've got a lot of faculty and university administrators that have a lot of faculty resources tied up in those fields and certainly not enough students and so they want to encourage people to get into those fields and attract students,” Hira said.

We’re hurting ourselves
No matter what the motives for promoting belief in an IT skills shortage, those who contradict that belief say that the perpetuation of such a myth will sting the industry in the end.

“What should NOT be done is to take actions that will increase the supply of scientists and engineers that are not intimately coupled with serious measures to ensure that comparable increases occur in the demand for scientists and engineers,” Teitelbaum told Congress.

Already job volatility is increasingly discouraging the best and the brightest from entering IT in favor of other more lucrative fields such as investment banking and medicine, Hira said.

“The risks in terms of job volatility is there, plus then you overlay things like outsourcing of jobs and the breakdown of employment relations between employer and worker and also if you believe that technological changes are happening faster then the risk obsolescence by the worker is even higher,” Hira said. “If you're out of work for six months or a year are you going to be obsolete or at least perceived to be obsolete by an employer and I think those risks have increased quite dramatically and if you think about risk and reward from an investment point of view, we don't see a concurrent increase in the reward side in the wages to justify those risks.”

Hira believes that the illusion of a shortage has already done harm by helping the industry sneak past politicians for increases in H1-B guest foreign worker visas in an immigration system that Hira believes is broken.

“We have a system with certain criteria set out—the H1-B has requirements—the problem is they're so loosely written that in fact those workers can be substitutes for American workers and in effect American workers can be forced to train the workers who are on H1-B to replace them,” Hira said. “So that certainly runs counter to both common sense in terms of what the programs are supposed to do; but also what the publicly stated goals are both by politicians as well as by the lobbies.”

In addition to this flood of temporary foreign workers on U.S. soil, there is also the offshore outsourcing effect to contend with, which has been largely justified as a way to work around the shortage.

“You've seen cases around where they've gone offshore, folks on shore either started to leave or been laid off people are highly demoralized and now they're finding things aren't working quite as well as they've hoped,” Salzman said. “The perception out there is that the future is uncertain.”

In both cases these efforts have flooded the market with lower-cost foreign workers who are supplanting an already ample field of home-grown IT labor. The result is that the myth of an IT skills shortage could just end up be self-perpetuating.

“The trouble is that it creates a disincentive for Americans to study these technical fields,” Wadhwa said. “We're hurting ourselves; computer science enrollment is dropping because the incentive is not there for students to study computer science.”