The Changing Face of the Texas Labor Market and Information Technology

Welcome to Leaner, Texas! TASSCC Conference

Corpus Christi, TexasAugust 4, 2003

Richard Froeschle, DirectorCareer Development Resources(CDR)rich@cdr.state.tx.us(512) 491-4941

Harry Truman is purported to have said,

All my economists say, “on the one, or

on the other hand”…what I really need is a

one-handed economist.

What do labor economists agree on?

1. There will be no shortage of opportunities in the knowledge sector for those with the education and intelligence to perform in it

2. All jobs, even the most low-skilled, will require higher levels of basic education, math, communication and technology skills…for survival and growth

3. Those without some specialized knowledge or skill are likely to suffer declining real wages

What do labor economists agree on? (II)

4. The Digital Divide exists and those on the wrong side will have limited hiring and advancement opportunities

5. Jobs requiring “human touch” will continue to be in demand e.g. health services and nursing, construction…no robot plumbers!

6. Workplace settings and business practices and knowledges will change rapidly, making lifelong learning essential e.g. life after “paving the cow path”

Global Labor Market of the 21st Century

and Unfettered Global Capitalism

Creative destruction—The process of simultaneous job creation and job destruction as new skill sets are required and old skills become outdated. The same employers will be both hiring and laying off continually regardless of labor market conditions to enhance productivity and competitive edge. Joseph Schumpeter

See “Churning in a Hypothetical Economy” from Technology Workers in the New Texas Economy

A Changing Texas Labor Market (6)

Globalization is changing economic theory, business practices and labor supply options

How Globalization Impacts the

Labor Market—The Basics• Globalization & new digital technology opens

producer/consumer markets around the world• Increased customer access to producers leads

to global price competition, driving employer need for greater productivity, lower prices

• Increased price competition leads to cost containment pressures

• Cost containments leads employers to new supply chain practices, concerns over labor costs, alternative labor options

Everybody’s Talking About IT

"By 2004, more than 80 percent of U.S. executive boardrooms will have discussed offshore sourcing, and more than 40 percent of U.S. enterprises will have completed some type of pilot or will be sourcing IT (information technology) services."

Gartner Inc., a technology consulting firm

Everybody’s Doin’ IT…

IBM's top employee relations executives said that

three million service jobs were expected to shift to

foreign workers by 2015 and that IBM should move

some of its jobs now done in the U.S., including

software design jobs, to India and other countries.

"Our competitors are doing it and we have to do it," Tom Lynch, IBM Director for Global Employee Relations

An I.T. MegaTrend

"It's a very important, fundamental

transition in the I.T. service industry that's

taking place today," said "It’s a megatrend

in the I.T. services industry."

Debashish Sinha, principal analyst for information

technology services and sourcing at Gartner Inc.

Digital Technology Makes it Possible

“Companies are moving more service jobs overseas because trade barriers are falling, because India, Russia and many other countries have technology expertise, and because high-speed digital connections and other new technologies made it far easier to communicate from afar.

Bruce P. Mehlman, Commerce Department assistant secretary for technology policy

ITAA Notes Demand Changes

“Failing a dramatic turnaround in the national economy a recovery in the IT sector in 2003 will most likely continue to be a “jobless” one.”ITAA predicted 1.6 million job openings in 2000

ITAA predicted 1.1 million job openings in 2002

ITAA predicts 493,000 job openings in 2003

In May 2003, ITAA survey says 67% of hiring managers thought demand would stay the same or decline over he next 12 months.

Offshoring Doesn’t Just Affect IT

"Over the next 15 years, 3.3 million U.S. service industry jobs and $136 billion in wages will move offshore to countries like India, Russia, China and the Philippines," Forrester analyst John McCarthy predicted in a report last year. "The IT industry will lead the initial overseas exodus."

Dilemma for Business…

• "One of our challenges that we deal with every day is trying to balance what the business needs to do versus impact on people."

• "This is one of these areas where this challenge hits us squarely between the eyes." Tom Lynch, IBM Director for Global Employee Relations

Business Knows the Consequences

The American economy is in an "anemic" state, the

difficulties and backlash from relocating jobs could

be greater than in the past.

"The economy is certainly less robust than it was a

decade ago and to move jobs in that environment is

going to create more challenges for the re-

absorption of the people who are displaced."

Tom Lynch, IBM

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U.S. Consumer Confidence Index

Consumer Confidence Index

A Slower Growing European Economy

Business Knows the Consequences (part II)

"Once those jobs leave the country, they will never come back."

"If we continue losing these jobs, our schools will stop producing the computer engineers and programmers we need for the future."

Phil Friedman, chief executive of Computer Generated Solutions, a 1,200-employee computer software company

Corporate Employment Alternatives

Even When Business Picks up…

• Work existing workers more hours

• Employ temporary or leased workers

• Use contract workers for fixed periods

• Merge with support services company

• Outsource all non-core functions

• Take advantage of H1B and L1 visas

• Add full-time domestic employees

“Off-shoring” May Be Short-sighted

“It's a bad thing because high-tech companies like I.B.M., Microsoft, Oracle and Sun, are making the decision to create jobs overseas strictly based on labor costs and cutting positions.” “It can create huge downward wage pressures on the American work force.”

Marcus Courtney, president of an affiliate of the Communications Workers of America.

It’s Largely About the Money…

Another important reason for moving jobs abroad is lower wages. “You can get crackerjack Java programmers in India right out of college for $5,000 a year versus $60,000 here." "The technology is such, why be in New York City when you can be 9,000 miles away with far less expense?"

Stephanie Moore, vice president for outsourcing at Forrester Research

But Also About a New Business Model“The expansion of operations in India was "additive" and was not resulting in any jobs losses in the United States. Our aim here is not cost-driven, [it’s] to build a 24/7 follow-the-sun model for development and support. When a software engineer goes to bed at night in the U.S., his or her colleague in India picks up development when they get into work. They're able to continually develop products."

David Samson, an Oracle spokesman

And Getting Value in Return

A February survey of 145 U.S. companies by consultant Forrester Research found that 88 percent of the firms that look overseas for services claimed to get better value for their money offshore while 71 percent said offshore workers did better quality work.

U.S has not been creating jobs between 2000 and 2003

• -624,900 total payroll jobs were lost between January 2000 and March 2003

• Of 258 industry sectors, 164 (63.5%) lost a total of 4.71 million jobs. “Bottom 10” lost 2.2 million jobs

• Of 258 industry sectors, 93 (36.0%) gained a total of 4.09 million jobs. “Top 10” added 2.4 million. “Top 5” added 1.64 million new jobs

U.S. Industries as Job Losers 2000-03• Employment Services -508,767• Cut and Sew Apparel -151,567• Grocery Stores -150,667• Semiconductor Mfg. -149,267• Motor Vehicle Parts -129,400• Comptr Equip Whlsalrs -84,200• Plastics Products Mfg -81,533• Wired Telecom Carriers -77,467• Aerospace Product Mfg -75,700• Computer Equip Mfg -72,900• Print Publishing -71,400

Others of Note:• Machinery Whlsalrs• Computer System

Design• Air Transportation• Communications

Equip Manufacturing• Electric/Electronic

Goods Wholesalers• Advertising Services• Fabric Mills

U.S. Industries as Job Gainers 2000-03• Local Government 753,000• General Hospitals 239,933• Full-service Restaurant 237,700• Offices of Physicians 211,767• State Government 201,333• Colleges/Universities 199,433• Family Social Services 124,667• Limited-service Eatery 105,333• K-12 Schools 90,900• Accounting Services 80,300• Nursing Care Facilities 76,100

Others of Note:• Mortgage Financing• Eldercare Facilities• Amusemnt/Recreation• Commercial Banking• Home Health Care• Legal Services• General Merchandise

Stores• Offices of Dentists• Mgmt Consult Srvcs

Opportunities: More Jobs in Services… Texas Absolute Job Growth 1999-2002

• Educational Services• Food Services/Drinking Places• Ambulatory Health Care Services• Professional and Technical Services• Local Government• Specialty Trade Contractors• General Merchandise Stores• Hospitals• Heavy and Civil Construction• Motor Vehicle and Parts Dealers

Job Declines in Goods Producing SectorsTexas Industries Losing Most Jobs 1999-2002• Agriculture/Forestry Support• Computer/Electronic Manufacturing• Apparel Manufacturing• Transportation Equip Manufacturing• Fabricated Metal Manufacturing• Chemical Manufacturing• Oil & Gas Extraction• Food & Beverage Stores• Administrative Support Services• Federal Government

Occupational Growth in Texas Fastest Growing 2000-2010

1. Computer Support Specialists

2. Computer Software Engineers, Apps

3. Network & Systems Administrators

4. Desktop Publishers5. Computer Software

Engineers, Systems6. Network & Data

Communications Analysts

7. Computer Specialist, NEC

8. Database Administrators 9. Medical Records

Technician10. Social Services Assistants11. Special Education

Teachers12. Computer Systems

Analysts13. Medical Assistants14. Physician Assistants15. Information Systems

Mgrs.

Occupational Growth in Texas Most Jobs Created 2000-2010

1. Customer Service Representatives

2. Food Prep and Serving Workers, Fast Food

3. Child Care Workers4. Retail Salespersons5. Registered Nurses6. Cashiers7. Computer Support

Specialists8. Office Clerks, General

9. Waiters & Waitresses 10. General and Operations

Managers 11. Elementary School

Teacher 12. Teacher Assistants 13. Secondary School

Teacher 14. Janitors and Cleaners 15. Truck Drivers, Heavy

and Tractor Trailer