If there's a tech skills shortage, why are so many computer graduates unemployed?

Parents Forum
21

“They should look into emerging economies that are on the upswing and prepare themselves for a career there.”

This is my suggestion: students today should understand the risk and potential disruption of outsourcing involved in their future professional career. They could avoid those professional careers that are highly exposed to outsourcing risk. Or they should internalize the risk into a higher risk premium, that is, require higher expected pays for bearing such a high risk of being fired when age is approaching upper 30 or higher.

Of course, there will be always people who enjoy their professional career so much that they can care less about possible ageism and career disruption. If so, my suggestion is not reverent to them.

22

@Gator88NE - yep, the bean counters, board members, etc. are unaware that they’re laying the groundwork for their jobs to “outsourced”, in a sense, as well. I know at least three people on my street whose tech companies have been bought by large German companies in the past decade.

23

My experience is that corporate decision makers are usually (1) thinking in the short term – they want costs down because it helps their stock price in the short term, and (2) are extremely ham handed in the IT area – they don’t know a router from a server. They have no idea if it is risky to allow someone offshore with limited experience and knowledge of their business to design their active directory tree structure, or plan an upgrade to a major component in their system. Let alone to carry out building custom software that has to execute business functions that they know nothing about. I remember one CEO at one of my clients who asked if he could have the desktop in his office without the keyboard because it was unsightly – you can guess how much that guy knew about computers. Even the CIOs often are narrowly focused – they tend to know a couple areas of technology well, but not across the board. And sometimes their knowledge is old-school and not up with current technologies.

I recently started work at my first client in several years without outsourced functions, and it is a much more efficient shop. I can talk directly on the phone (or even in person) with the people I need to deal with. No time zone shift! No stumbling with the language barrier on complex topics. No documenting every single detail down to the pixel level. Minimal shadow testing needed. It was a breath of fresh air after struggling for years with the difficulties of offshore technical teams. We got stuff done faster, too. We put in two major technical upgrades in less than 3 months – no way that could have been done in the shops with significant offshoring. The pace is just slower – you have to document more, account for repeated attempts at things in the schedule, and double check the work when it is done.

I recently moved from a state that had some companies that did outsourcing to more remote areas of the state; happens to be an area on a big lake in the northern part of the state, and they would advertise “offshore to the north shore!”. I worked with a couple of clients that used them, and that worked better. Companies could pay less for talent, but still have fewer language and culture barriers. It was good for the more remote area economy, too. It wasn’t a big city, but still a fairly desirable place to live (lots of natural beauty). I’d like to see more of that. I also wonder if maybe locating some functions in retirement areas where people might want to work part time could work out as well. Some of these jobs could be split between job sharers.

24

Whenever something is outsourced, there are costs in design, development, and communication. Many of these may be deferred costs so that a comparison ends up apples and oranges. Suppose that you are pricing the cost of a box. Internally you ask for a bid on the cost to build a box and the engineers go off and spec and draw and do a check for UL/CSA, TUV/GS, FCC, and any other agencies that might be impacted by the use of the box. Based on all of this they come up with a design and then a cost for the box. They then give the design to box makers A, B and C and get a quote back. This quote does not include the design component so it is almost always less so the box is outsourced.

Here is a song from 2006 that you might all enjoy.
http://redmp3.su/22793842/stan-and-paul-bangalore.html

25

@1wife1kid, just wait until that “1 kid” succumbs to your advice and is living half way across the world from you, maybe for a very long time. There will come the day that you are too old to travel all the time, or maybe even the cost of doing so will become prohibitive.

We need to stop looking at the bottom line in terms of pure economics, and focus on quality of life for our children and their children. There has to be a happy medium.

26

It is important to be specific in that globalization is not necessarily a “global” thing - it can go one way and have a very specific beneficiary when it comes to employment.

For example, NAFTA and a couple other later trade agreements made it economically unfeasible for my company to look at US graduates in tech. There was no point because we could get twice the talent at the same or less cost by importing foreign workers. The next trade deal, TTP, makes it even easier to hire foreign workers.

The trade deals actually promote this activity by: 1) not having to enroll foreign workers in Obamacare or any other healthcare plan - saves at least 7K per employee right there and 2) do not have to pay any FICA taxes on those foreign employees for three to five years (and that can easily be extended fro another three years after that. In total, it is not uncommon to get the same or better talent at a $15 - 20K savings per employee replaced.

However, the reverse is not true for foreign companies that hire US workers and the foreign companies as there are no incentives to hire American workers. Thus, it is really a one-way street in terms of hiring when it comes to tech.

Essentially, what is happening is every 6 to 9 years a new crop of foreign workers are hired and the ones who were here go back to their countries with much better skills and get paid handsomely with the expanded experience garnered in the US - experience which they could not receive in there own country without costing those foreign companies an arm and a leg in comparison.

27

The age of 40 is irrelevant. What is relevant (applies to any age) is the employee does not learn and improve with the new languages and tech architecture. Any employee willing to keep up his skills and learn the new ways of doing things will do fine in his job.

However, what happens is that after 35 people get married, have kids etc. Then, they devote less time to “improving” their skill set because (and understandably so) they have other duties. Literally impossible to get a married 40 year-old to go off to a two-month training session to learn to do something new. In the end, a young, single person takes this opportunity and essentially the “skill sets” required slowly passes by the 40+ year-old.

In contrast, all the older tech people I know who took the opportunities afforded them are all still working and getting paid very well because their experience is invaluable. But, that experience must be combined with the new for without the new, experience gets old and less useful and cannot keep up with the competition.

28

“The educated are no longer insulated from wage competition brought on by globalization.”

It depends. Can you imagine that the US film/movie market will be easily taken away by global competition? When was the last time we watch a movie in which most actors do not speak English? By the same token, marketing/advertising career tends not be taken away from global competition because their jobs require a good understanding of local culture, the use of local language, and direct, face-to-face communication with clients. This makes it hard to outsource to say India even though many of them speak perfect English. The list goes on.

In contrast, there are some industries and jobs that are less insulated from wage competition globally. Based on my reading of this thread and many popular press articles, it appears that IT is quite subject to it. Also holding other factors constant, older IT professionals are more subject to it because they are more “expensive” due to their seniority in their firms. At least this is want my neighbors who were laid off by IBM in their 40s told me.

29

“If there’s a tech skills shortage, why are so many computer graduates unemployed?”

Because employers can find cheaper laborers elsewhere. As globalization goes, until everyone on earth is equally poor or rich, there is always cheaper alternative somewhere to any job here, including doctors. But, the latter is not open to foreigners. Many of the outsourced jobs don’t have to either, if the capitals that drive globalization is tied to Americans’ well-being rather than the few’s. Citizens are entitled to national resources and wealth generated within.

30

Prospect1, I am not sure I understand your point. I will never ask my kid to take a low paying job and stay close to home. He should go where he will have the best opportunities.

Momwithminifigs, If you think that corporate executives do not consider the total cost of ownership, then you are wrong.

intparent, When I read your post, I get two points. One, you life would be easier if jobs stayed locals. Two, Americans will be richer if jobs stay local. I readily concede that both points are correct. But that is not part of the corporate charter, so those two points are really irrelevant in corporate decision making. This is the part most IT people who are getting displaced by foreign labor don’t understand. If they want to maintain their jobs, they would have to be willing to get lower pay.

There is a lot of talk about H1B abuse. An H1B job posting mentions role, responsibilities, and wage. If Americans would have been systematically willing to work at that wage, and could meet the roles and responsibilities, then there would be no need for a H1B program. But they are not.

31

@1Wife1Kid – executives make huge mistakes all the time in the pursuit of perceived profits. The computer world is littered with them. The infamous “Osborne Effect”, IBM’s PS/2 Micro Channel architecture, Intel’s Itanium, Windows 8 (the WinRT walled garden), etc.

Anyway, given enough time, the exporting of decent jobs will kill any chance of making a profit here in the USA … because the bulk of their US customers won’t have any money to spend on their products!

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Droppedit, If your point is that executives are not 100% right all the time, that’s trivially true. But American businesses as a group have been FAR more right than wrong in making business decisions.

Export of manufacturing jobs didn’t kill profits. Why would export of white collar jobs kill profits? What will happen is this - everything will become cheaper AND Americans will earn less, so revenues will take a hit but profits will grow. Globalization is a deflationary force as it always leads production to be done at the most efficient and cheapest place.

33

How can you not see that gutting the workforce in the USA will eventually result in reduced profits here? Look at any destroyed inner city and you can see the results of jobs leaving an area. Is anyone making “profits” in those areas? In some cases, US entities will step in and redevelop the area using funding from outside. Who’s going to do that when the devastated area is the entire USA? The Chinese? The Germans? Do you want them deciding who wins and who loses here???

34

Total ownership cost is the holy grail in business.

If one does not have total cost under control, one is out of business sooner rather than later. And with labor costs being 60 - 70% of total ownership costs, a small percentage impact on employment costs has a large, often compounding longterm effect, on lowering total ownership costs.

35

@1Wife1Kid, it isn’t just that my job would be easier. My current client would start paying a fine to an industry association next Monday if we had not finished the upgrade projects I just managed to completion on a tight schedule. No way could those have been done in the timeframe they were with offshore resources.

My guess is that you recommend the offshoring and then go home. You aren’t stuck dealing with the consequences. And cost accounting is non-existent in most IT departments. Companies have no idea if they actually save money or not. On the surface it looks like it. But quality and throughput suffer. Time is money in many projects. If you can provide a more seamless experience or more functionality to the customer, customers notice. If your competitors beat you to those, you suffer in the marketplace.

36

Hm… the US is a vast country, so not sure what “local” really means here and local to most is within a 40-mile radius.

Anyway, the above is not true if the job and production methods are obsolete.

What has happened to many US companies is better, more modern production facilities have been built in other parts of the world or other US states, and it simply makes no sense to keep inefficient production plants open. In short, closing a plant with outdated production methods stops known expense and profit drains.

The closed plants frees up capital for new investment in other things, but getting employees to re-train, move, and adopt to a new way is much harder than people think. Thus, there are many new jobs in other states that cannot be filled because the people are not training for them and/or are not moving to take advantage of the opportunity.

Getting employees who have been doing something for 10 - 20 years to change is almost impossible. A very cultural (American) thing in that we like stability and the way things are. Even when offered money, you would be shocked at how many people refuse and do not want to retrain for another job and a higher percentage would refuse to move.

In the past, when I hit this retraining/will not move roadblock, which I have many times, guess what? In comes the foreign workers. In some cases, the foreign workers where actually not as skilled, but I can teach someone a skill. However, I cannot make a product without the necessary number of employees.

(The trade deals made this decision for me in many respects. It just made no sense to pay for employee retraining, moving costs and the like when there is huge tax break for not keeping those employees)

The employment cultural view in other parts of the world is very different. The people are just happy to even have a job, so a company can ask them to retrain, change the production methods and even move the factory a hundreds of miles away and the people just up and move with the company. Can you imagine that in the US people just up and moving with a company? Part of this is that home ownership is so low in other parts of the world, or better said, there is little value placed on the structural home, as it is in the US.

Basically, the affluence of the US has led to behaviors that entrench immobility and culturally other countries are just more adaptive to change. It is not that Americans do not want to do the work; it is often they do not want to do the work elsewhere or in a different way, i.e., do not want to move or do not went to spend the effort learning a new skill. Globally, moving is par for the course for most, as is learning something new - hey, they are just happy to have a job.

In a nutshell, it is very hard to compete with the drive and will of someone who is just happy to have a job, any job. And they do their best to make sure they maintain that job to.

37

The initial question was about tech jobs, though, not manufacturing. Knowledge work is not the same.

38

Economically, there is nothing such as exporting a job because if an employe or a job is meeting or exceeding its production value there is no reason to hire another person to do the job or to change the production methods. However, an employee or a job that is inefficient (for whatever reasons) becomes a drag on a company and cannot be maintained, as the competition will destroy it anyway - better to cut losses early. Such jobs are not exported; they only become obsolete and should not exist anyway.

39

Intparent, And for that critical project they didn’t offshore the work, right? See, corporations are not idiots. They know what to ship out and what to keep here. But you can’t make an argument about how keeping it here helps you or the country. That’s not the corporation’s charter. If you can prove that it helps the corporation, then of course the corporation will keep it here. It’s the profit motive. So, why can’t IT folks prove that it is better to kill offshoring and keep jobs home at large? I have never seen a cogent argument made to the effect.

No, I don’t really advice in the area of offshoring. I am not an IT or a strategy consultant. My line of work is entirely different. But I have run across it quite a bit.

40

“Knowledge work is not the same.”

Yeah. Right.