Making Engineers Low Priced Commodities
   Stephen H. Unger 4/15/00
 
Introduction
Even in what are generally regarded as exceptionally good times, many
engineers (this term as used here includes other technical
professionals who might be members of societies such as the IEEE) are
having difficulty in finding satisfactory jobs.  Those with fifteen or
more years of experience often have the most trouble.  This is true
despite widespread complaints by industry about a shortage of
engineers and computer experts.  What is going on?  What will happen
when times become less good?  What can we do about it?
 
Perhaps the best way to summarize what is happening is to say that
many employers of engineers are adapting what might be called the
"just-in-time" concept to engineers.  The idea is to "rent", at a
minimal price, engineers with the specific skills needed for a project
and then to dispense with them upon completion of their tasks.
Engineers are pitted against one another in a race to the bottom as
jobs are parceled out, on a global basis, to the low bidders.  The
process began perhaps five to ten years ago and has been developing in
various ways ever since.  An early glimpse of some key features of
this process emerged in a 1996 roundtable discussion [1].
 
Temporary Work
One aspect is the replacement of all or parts of in-house engineering
staffs with temporary workers.  In other fields these are called
"temps".  In engineering they may be called "contract workers" or are
sometimes given the more exalted title of "consultant".  These
engineers sometimes contract directly with the employer, but more
often are engaged through agencies called "job shops" (hence the term
"job shoppers").  They generally are paid at a per diem rate,
receiving no medical insurance, vacation time, sick leave, or other
benefits.  Periods of employment with any one company may range from a
few weeks to many months.  A considerable range of situations is
included here.  At the high end are much sought after specialists who
operate as true consultants and who do very well financially (at least
while their specialties are needed).  At the other extreme of this
continuum are people hired to do relatively routine work, for modest
pay--especially considering the insecurity and lack of benefits. 
 
For many people, at least for some periods of their lives, working in
the above mode may be very desirable.  One may enjoy the variety of
work and the opportunity to acquire different skills and knowledge.
Seeing different parts of the country and meeting new people
frequently might also be considered an advantage.  It might be
considered a good way to experiment with different kinds of
engineering work in different types of organizations, so that one may
later make a more intelligent choice about a permanent job.  Those who
succeed as independent consultants have the satisfaction of being
their own bosses and, as mentioned above, are likely to earn a lot of
money.
 
But for many engineers, the prospect of spending their careers as
temporary workers is very unpleasant.  (This group includes some who,
for a limited time, regarded this as a good thing for one or more of
the reasons mentioned above.)  Many, perhaps most, who enter the
engineering profession do so because they are fascinated with
technology and want to spend their time learning and applying
technical knowledge.  Having, every few months, to adapt to new work
environments, adjust to different computer language dialects, and
learn to get along with different sets of co-workers is something that
many engineers would find most distasteful.  Many who, in a stable
environment would attain a deep mastery of the technology they are
working on, are very uncomfortable having to be "the new kid on the
block" three or four times a year.  Another reason many are unhappy in
this mode is the financial insecurity.  Continual concern about where
their next assignment will come from is a source of great anxiety.
Sometimes weeks or even months of inactivity may occur between jobs.
Finally, particularly for those with families, the need to relocate
frequently to different parts of the country can be very disturbing as
they and their families are unable to sink roots in any community.
Obviously this is very hard on children.
 
In the past, companies employing significant numbers of engineers
chose them carefully, regarding them as important assets.  It was
common to encourage and, at least partially, finance their efforts to
educate themselves further, e.g., to obtain masters degrees.  In-house
training programs, seminars, lecture series, etc. were common, and
engineers were encouraged to attend professional conferences.  When
the need arose for different engineering skills, for example, when a
new computer language became important, it was taken for granted that
these skills would be acquired by members of the engineering staff.
Usually, such learning processes were of an informal nature,
self-study and/or engineers helping one another.  Sometimes one or
more company engineers were sent to take special (often very
intensive) courses.
 
The result of this approach was that many engineers remained with the
same company for a substantial part of their careers--sometimes never
changing employers.  They became very valuable to their employers as
they acquired a deep understanding of the employer's products and were
well situated to deal with problems that arose and to contribute to
the development of new versions.  An example of the value of retaining
experienced engineers is given in a recent article about the
development of the DEC Alpha processors [2].  Those companies that
have abandoned this approach in favor of relying heavily on transient
engineers often find that when troubles arise with their products,
there is nobody on hand capable of dealing with them because those who
did the design work are gone.  Taking the low road with respect to
engineering staffs may lead to short run cost savings, but it also
frequently leads to disaster, as illustrated by the experience of NASA
[3].
 
Hit the Ground Running
An essential part of the "just-in-time" approach to engineering is
that employers insist on hiring only engineers who, immediately after
being put on the payroll are able to begin working directly on the
company's problems.  Thus, they hire only contractors or job shoppers
with precisely the skills needed on the current job.  For example, a
company may filter out all job applicants who do not have experience
with Oracle 8i.  Experienced software engineers who have worked with
closely related systems and who would have no trouble in mastering the
required system or language in a matter of weeks are rejected without
even being interviewed, if their resumes do not include the magic
words.  Instead of focussing on the most capable people, the emphasis
is placed on the precise skill set of the applicant.
 
Extensive general experience is, in effect, considered a liability.
It is clear that a major consideration is to pay as little as possible
for engineering talent.  Thus, since engineers with several decades of
experience would be more costly, the tendency is not to hire them
unless their experience precisely fits the immediate needs of the
company.  This is the essence of age discrimination.  As indicated
above, altho it may lead to benefits with respect to the next
quarterly earnings report, the long term consequences, in many cases,
are harmful to employers--and to the public when the consequences are
defective products.
 
Importing Engineers
Apart from recent graduates of American Schools, the largest pool of
engineers that can be hired at minimal rates is outside the borders of
the USA.  In particular, several Asian countries graduate significant
numbers of engineers, and since pay scales in these countries are a
fraction of American rates, many of these engineers are happy to come
here to work.  Another source is the former Soviet Union and other
Eastern European countries where a similar situation prevails.
Furthermore, in places like Russia, the economic situation is such
that large numbers of able, experienced engineers have great
difficulty finding work.
 
This has led to pressure by employers to amend US immigration laws to
allow the importing of engineers (and computer programmers) from
abroad under a temporary program called H-1B.  Each year, 115,000 H-1B
visas are issued, each at the request of a specific employer.  There
is pressure to increase this number.  In some cases, these permits are
issued to outstanding individuals with excellent credentials.  But the
great majority of those admitted under the H-1B program are very
ordinary engineers or programers.
 
Various provisions in the law ostensibly ensure that H-1B visas are
issued only when it is not possible to find US residents capable of
filling an employer's needs, and to guard against the incoming
engineers being grossly underpaid by American standards.  In practice,
these provisions are ineffectual or rarely enforced.  The engineers
with H-1B visas are essentially tied to their employers (often job
shops), are generally underpaid, and are easily induced to work long
hours without extra compensation.  There are examples of companies
that have discharged most of their technical staffs, replacing them
with H-1B people at a significant payroll savings.
 
The H-1B program has been justified as being necessary to meet a
severe shortage of technical professionals, particularly in the
computer field.  There is indeed a shortage.  But it is a shortage of
people with very narrowly defined skills who are willing to work long
hours for modest pay.  Evidence for this is the fact that employers of
such people interview only a small fraction of the people who apply
for jobs, and then make offers to a small subset of this group.  While
high salaries and other inducements are offered in some special cases,
for the most part, average compensation (including non-salary forms)
of engineers and other computer professionals have barely rebounded to
the levels they were at 12 years ago, and have not been increasing at
a rate significantly faster than compensation in most other
occupations.  Many experienced engineers send out scores of resumes
without ever being called for interviews.  Of this group, many have
completely left the field, for example to become real estate
salespeople.  Others have been forced to accept positions such as
salespeople in computer retail stores.  Twenty years after graduation,
most computer science graduates are no longer in the computer field.
These factors do not seem consistent with the claim that employers are
desperate to find engineers or programmers.  More detailed arguments,
with extensive references can be found in an online paper by Norman
Matloff [4].
 
Exporting the Jobs
Bringing in people from abroad to work at lower pay scales is one way
to drive down engineering salaries in the US.  A complementary
technique is to export the work to places where people are paid a
fraction of what they would get here, even as H-1B visa holders.  In
India, for example, an engineer can live very well on a salary one
fifth of what he or she would receive in the US.  Hence many American
based companies have arranged to have software written in places such
as India, or the Philippines.  Teams of engineers in Russia have been
engaged by US firms to design chips.  An article in the business
section of the New York Times about Romania [5] states, "For less than
$5000 a year, a foreign company can hire the best and brightest
[engineers] here to do work for which it would pay at least $60,000 a
year in the United States."  This article mentions a satellite
facility built by Raytheon in Romania that employed 300 people, with
plans to increase that number to 500.
 
These arrangements are, ironically, made more feasible by the enhanced
communications facilities developed in large part by US based
engineers.  Altho these facilities do make it possible to outsource
certain projects, in many cases there are serious problems associated
with coordinating work done abroad with other parts of a project being
carried out in the US.  However, given the enormous potential savings
in salaries, and given the rapid pace at which long distance
communications facilities are being developed, it seems likely that,
over the years, we will see increasing use of job exporting in the
engineering field.
 
What is now in the early stages for engineers has been carried
virtually to completion for people in the manufacturing field.  Long
ago, shoe manufacturing, the clothing industry, and electronics
manufacturing, to give just a few examples, largely vanished from the
US.  These industries have relocated to places in the world where
wages are extremely low.  In cases where workers in those places
succeeded, perhaps thru organizing themselves, in raising their pay
scales significantly, the manufacturers simply pulled out and moved
elsewhere.  A good case can be made that many social problems in the
US stem largely from the outflow of good manufacturing jobs.  Note
also that many engineering jobs went with the exported factories.
 
What Is the Basic nature of the Problem?
The core of the problem is the concept of treating engineers as
commodities to be rented at the lowest price, arrived at via a free
market operating globally.  (A similar statement might be made about
people in other occupational categories, but let us leave this for
another forum.)  If this concept were fully implemented in practice, a
relatively small number of "superstars" would prosper, while most
engineers in this country would be driven out of the profession or
faced with living on near minimum wages. Over the long haul, there
would likely be great fluctuations world-wide in the supply of
engineers as student's choices of profession swung wildly in response
to current market conditions.
 
If this concept were implemented only within the borders of the US,
and one might argue that something like this HAS been in effect for a
long time, the instability would be much less, because the general
living standard here is relatively high.  Should the importing of
engineers and the exporting of engineering work outlined above be left
to grow in an unchecked manner, then it is hard to see how most US
based engineers (including those who came here originally on H-1B
visas) would be able to remain in the profession.
 
What Can We Do?
Individuals might try to understand the system and maneuver as best
they can to survive professionally.  One might spend a lot of time
studying various technology trends to try to guess what skills are
likely to be important over the next few years and then make sure one
acquires those skills.  The trick is, at all times, to be one of the
relatively few engineers  who cannot easily be replaced.  Those who
can succeed at this ought to do well, but a lot of very good, hard
working engineers might not be good enough (or lucky enough) at the
guessing part.  Almost by definition, most people would not be winners
in this race.  Even many of those who succeed are likely to find
themselves leading stressful lives quite different from what they had
in mind when they became engineers.  Individuals, with few exceptions,
can't do it alone.
 
Large organizations are doing the damage, and real solutions are going
to require action by other large organizations.  Rather than pleading
with corporate managers to act responsibly toward their employees and
communities, we must see to it that legislation is enacted that will
protect more farsighted and responsible managements from being
handicapped in the short term with respect to less scrupulous
organizations.  What is needed are changes in the terms of
international trade and of national tax laws to discourage making
engineers (and, for that matter other working people) into commodities
commanding minimal prices.
 
Why can't we just let the "free market" take care for the problem?
Blind trust that somehow the "invisible hand" will make things come
out all right is not likely to be rewarded.  The corporations that
influence government policy and that  implicitly cooperate on such
matters as salary standards for engineers, display no such blind
trust.  In order to protect their careers, engineers will have to work
thru their professional societies, who in turn may have to ally
themselves with other groups, in order to redress the balance.  And we
shouldn't be distracted by those who express horror at the idea of
interfering with "free trade".
 
In an idealized economic model, Ricardo [6] showed how free trade
benefits all participants when each trading partner exchanges what it
produces most efficiently for what other participants produce most
efficiently.  If, for example, due to differences in climate and soil
conditions, the US produces corn more efficiently than it produces
bananas, and Guatemala produces bananas more efficiently than it
produces corn, then both the US and Guatemala benefit when Guatemala,
in effect, trades bananas for US grown corn.  It is this theory that
underlies the valid arguments for the benefits of free trade.  Using
this model to argue that it is also socially desirable for US
companies to be encouraged to set up semi-conductor factories in
Malaysia in order to take advantage of the fact that workers in
Malaysia are paid far less than American workers is in no way
justified by the Ricardo theory.
 
There are, of course, situations where imports of manufactured goods
are fully justifiable on other grounds.  For example, Japanese
automobiles are popular in the US because they are high quality
products, NOT because they are produced by low paid workers or
designed by low paid engineers.  Similarly, altho Danish engineers and
factory workers are at least as well paid as their American
counterparts, wind turbines produced in Denmark are highly competitive
in the US due to their excellent technological features.  These are
examples of fair competition based on efforts to produce good products
at reasonable prices, rather than on taking advantage of people living
in poverty.
 
Xenophobia?
One might ask if the above discussion is basically a xenophobic
diatribe directed against our colleagues in other countries.  The
short answer is no [7].  The basic problem is not with the engineers
who come here, or who work for US based companies abroad, but rather
with the system that permits companies to operate in this fashion.
Clearly the companies are not motivated by a desire to improve the
well being of engineers in India or Russia.  If the people of the
United States decide that justice requires that we do something to
raise living standards of engineers in India or Russia, then the
burden of this ought to be born by our country as a whole, and not
imposed arbitrarily on those in this country (via birth or
immigration) who chose to go thru the arduous educational process
necessary to become an engineer.  The "one" who asked the question at
the start of this paragraph might, in turn, be asked if he or she is
in favor of dismantling all restrictions on entry to the US, and then
whether ALL international borders ought to be obliterated.
 
While this discussion has been focussed on the situation in the US, it
should be recognized that, in varying degrees, the same problem exists
in many other nations--or would exist if their laws permitted it.
What other industrialized countries today permit foreign nationals to
enter freely and take jobs as engineers?
 
Protecting the livelihoods of American engineers by legislating taxes
on the import into the US of software (or other products) produced by
people paid far less than American engineers and programmers is a very
reasonable idea that should be debated on its merits.  Attacking it
with slogans based on the words "free trade" is not a constructive
contribution to the discussion.  Similarly, allowing corporations to
bring in large numbers of engineers from low-wage countries in order
to depress salaries for American engineers must be justified by real
arguments, not by references to the Statue of Liberty, or by spurious
claims that there is a severe shortage of engineers in the US.
Arguments against the H-1B visa program do not constitute an attack on
people based on nationality, but rather a defense of the careers of
engineers currently in the US, whoever they are and however they came
to be here.
 
It is interesting to consider, at least briefly, what this situation
looks like from outside the US.  Where are the H-1B engineers coming
from, and why?  What is the effect on the countries exporting
engineers to the US?  It is not hard to see why an engineer in an
impoverished country would want to come to the US.  Most want to
remain here permanently to enjoy a higher living standard.  Others
plan to return home with an amount of money that would make them
relatively wealthy there.  Is this good for their countries as a
whole?  Although the exporting country, in many cases, receives an
influx of valuable foreign exchange thru remittances by the engineers,
they are losing a great many bright young people who have been
educated at great expense.  Perhaps consideration should be given to
how the US might help these countries utilize these often talented
people to help build the industrial infrastructure that could lift
their fellow citizens out of poverty.
 
Conclusions
There are over two hundred thousand US based IEEE members.  These,
with their families, constitute a substantial political force if
properly organized.  There are no good practical or moral reasons why
they should not use their own society to protect their careers.  Once
the effort is properly initiated, it should be possible to gain
support from other engineering societies, and other organized groups
to enact appropriate legislation to prevent the destruction of the
engineering profession in this country.  Finally, we may ask, if many
forty year old engineers have trouble finding good jobs now, what will
happen when the current economic boom comes to an end, as it
inevitably must? 
 
References
 
[1] Bell, Trudy .E., Employment Roundtable: Survival Calls for More
than Technical Fitness, IEEE Spectrum, March 1996, pp. 20-31.
 
[2] "Designing the DEC Alpha Family of Microprocessors", IEEE Computer
Magazine, July, 1999, (p. 27)
 
[3] Oberg, James, "NASA's Not Shining Moments", In Focus Column,
Scientific American, Feb., 2000, pp, 13-16.
 
[4] Matloff, Norman, "Debunking the Myth of a Desperate Software Labor
Shortage", http://heather.cs.ucdavis.edu/itaa.html
Click here
 
[5] McNeil, Jr., Donald G., "Opportunities in a Rusting Romania:
U.S. Companies Tap Engineering Talent to Work for Low Wages", New York
Times, 12/25/99, P. B9.
 
[6] Ricardo, David, Principles of Political Economy and Taxation,
1817.
 
[7] Unger, Stephen H., "Is IEEE-USA Facing an Ethical Dilemma?", IEEE
Institute, December 1998, p. 2.
click here