Economic News 1999

1999 Fall
Franklin D. Latin _Illinois Labor Market Review_
High-Tech Skill Shortage or Low-Cost Labor Policy?: Are skill shortages so severe in America that we must import labor from abroad?
"there are numerous experienced professionals who are overlooked in favor of younger college graduates.   Gene Nelson, a 47 year old IT professional with a doctorate in biophysics, testified before Congress that he is constantly told that he is overqualified.   Nelson believes employers simply find it easier to hire young employees who are willing to work long hours without adequate compensation or to use H1-B workers rather than train older workers.   An AFL-CIO official who also testified before Congress noted that the unemployment rate for engineers over 40 years old is 5 times higher than for their younger counterparts.   Another opponent of the H-1B program stated, 'If there were really a major shortage of IT professionals we would expect wage rates to soar, companies to offer on-the-job training programs, and very little unemployment among software engineers.   Instead we find very modest growth in wages for programmers and other IT professionals, virtually no company-sponsored training and extraordinarily high unemployment among specialists over 40.'"

1999 Fall
Craig Willse _MakeZine_
Contingently Yours
"Contingent labor, sometimes euphemistically called 'non-traditional' labor, has become a standard way of life for millions of Americans.   Contingent employees include temps, industrial day laborers, and contract employees.   In the past, contingent workers have tended to do administrative support in office settings, construction jobs, health care in nursing homes, and child care.   However, since the economic recession of the 1970s, American corporations have aggressively 'down-sized' their staffs of regular, full-time employees, and have increasingly relied on contingent labor.   This means that many jobs that were formerly performed by full-time employees are now being filled by contingent laborers, either through temporary help agencies or contract systems.   Unlike regular employees, contingent workers usually receive no health care, no benefits, no paid vacations or sick leave, no chances for promotion, and no job security...   while companies benefit from contingent arrangements, employees largely suffer.   A Department of Labor study found that 59% of temps would prefer a traditional, permanent arrangement...   Finally, 'perma-temps' who work for years at big companies as contingent employees commonly find that their requests to be hired into regular, full-time positions are systematically denied."

1999 Fall
Susan N. Houseman _W.E. Upjohn Institute for Employment Research_
Policy Implications of Non-Standard Work Arrangements
Flexible Staffing Arrangements
"From 1982 to 1998, the share of non-farm pay-roll employment in help supply services increased from 0.5% to 2.3%.   The overall share of the work-force in part-time jobs increased only slightly in the 1980s and has been stagnant in the 1990s...   indirect evidence suggests that the share in these arrangements is growing.   Some researchers have cited the rapid growth in business services as evidence, on the grounds that many contract company workers are classified in this sector.   Moreover, several employer surveys provide qualitative evidence that other types of nonstandard work arrangements have grown significantly in recent years (Abraham 1990; The Conference Board 1995; Abraham and Taylor 1996; Houseman 1997)...   A lack of benefits is a problem for workers in all nonstandard arrangements.   These workers are much less likely than regular full-time workers to have health insurance or a retirement plan through their employer or from any other source even after controlling for worker and job characteristics.   In fact, evidence from employer surveys suggests that savings on benefit costs is often one reason employers use non-standard work arrangements."

1999 Fall
Edwin S. Rubenstein _American Outlook_/_Programmers Guild_
Piled Higher and Deeper: The alleged shortage of highly educated workers in the U.S. is a myth. In fact, we're suffering from a chronic surplus of Ph.D.s

1999
Amity Shlaes
The Greedy Hand
"The IRS audits people with small businesses far more frequently than it does those who choose to be employed by someone else.   By now, the nation's entrepreneurs are forced into a sort of bunker mentlity.   'There is one predominant, ever watchful adversary (enemy) of every self-employed indvidual.   Said adversary is government.', [wrote] Holmes F. Crouch, the author of a vehement little hand-book, _Being Self-Employed: Prepare for IRS Surveillance & Audit Strikes_.   Crouch adds, 'Within 5 to 10 years after being self-employed, we can virtually guarantee that we will be after you with fang and tong.'...   audit rates confirm it...   Under a recent law, the IRS persecues companies who hire computer programmers as independent contractors.   It makes hiring an independent contractor -- as opposed to an employee [or a bodyshopped] -- an invitation to trouble.   'Who do you know who would hire someone who will bring with them trouble from the IRS?', Harvey J. Shulman, the lawyer for the national Association of Computer Consultant Businesses, asked the NY Times.   This law was passed by a congress that thought it could cattle-prod more independent types into working as regular employees [or bodies shopped], who are easier to collect taxes from than independent businesses." --- Amity Shlaes 1999 _The Greedy Hand_ pp189-190

1999
Judith Harkham Semas _High Technology Careers Magazine_
High-Tech Worker Shortage: Reality or Rhetoric?
"a CEO made 20 times the average worker pay in 1965; but in 1997 that multiplier had escalated to 115.7...   major technology firms, including some screaming 'shortage' the loudest, hire only a tiny percentage of applicants.   This controversy has become increasingly heated, especially now when the economy has begun to evidence symptoms of Asian 'economic flu' and word of new lay-offs -- over 200K in 1998 alone -- hits the news-stands daily.   Citing those many thousands of lay-offs in the high-tech industry, organized labor also pointed to recent data from the Bureau of Labor showing that the unemployment rate for electrical engineers has increased 8-fold since the beginning of 1998 to 3.4% -- the highest since 1994...   Problem is, there is no definitive figure for the pool of US workers available for hire in the IT field; workers are hidden in a variety of other reported job/skill categories for the most part.   And no one knows how many H-1B visas are held by high-tech workers because none of the agencies track how many H-1B workers are in which fields.   Still, there is no shortage of older US programmers and engineers claiming they CAN'T EVEN GET INTERVIEWED for jobs they feel qualified to do.   Recent surveys by the Institute of Electrical and Electronics Engineers Inc. found 11-12% of members had been asked to retire early, and 19% said they had suffered age discrimination.   In addition, Matloff and others refer to a 17% unemployment rate for people over 50 years old in the computing industry.   Shocking if true.   But, despite its frequent citations, that stat doesn't jibe with Labor Department figures, which put the unemployment rate for over-55 mathematicians, computer scientists and engineers at within a fraction of a percent of the rate for ALL US workers."

1999
Marney Cox _San Diego Metropolitan UpTown Examiner & Daily Business Report_
The Economy Slows
"The softened demand for high-tech products has slowed employment growth in these sectors.   Statewide, employment growth in high-tech has slowed from an average of about 5% in 1997 to just 0.1% as of 1998 August.   Employment growth in most other manufacturing sectors fell by about 1 percentage point over the same time period...   There is a strong correlation between the economic health of the region and its population growth.   From 1985 to 1990 nearly 191K jobs were created and the region's population grew 400K persons.   Between 1990 and 1995, during an economic recession, just 10K jobs were created while population grew by 119K.   More recently, with the end of the recession, the region has added 72K new jobs and 112,500 persons.   The local unemployment rate in 1998 November fell to 3.2%, a rate not seen in nearly 30 years.   Population and labor force growth will out-pace job creation, pushing the unemployment rate above 4% during 1999."

1999
Lawrence Chimerine, Theodore S. Black, Lester Coffey, Martha K. Matzke, Alexis M. Herman, Raymond L. Bramucci, Grace A. Kilband & Esther R. Johnson
Unemployment Insurance as an Economic Stabilizer: Evidence of Effectiveness Over 3 Decades
"Another related trend is indicated in the comparison of the insured unemployment rate over time with the overall civilian unemployment rate.   The 2 unemployment rates began to diverge at the beginning of the 1960s, and the gap began to widen after the recession of the 1970s.   At the height of that recession, 1975 May, the civilian unemployment rate peaked at a seasonally adjusted rate of 9% and the insured unemployment rate reached 6.9%.   Since that time, the insured unemployment rate has been on a downward trend-line, while the civilian unemployment rate exceeded its 1975 high in 1982, peaking at 10.8% in December of that year, more than double the rate of insured unemployment then.   In general, the total unemployment rate has remained more than double the insured unemployment rate since the beginning of the 1980s, with some narrowing of the gap occurring in the mid-1990s.   Bassi and McMurrer (1997) note that the ratio of the insured unemployment rate (those covered by the UI system) to the total civilian unemployment rate (all unemployed workers, including those not covered by UI) and the ratio of UI claimants to the total number of unemployed (the 'recipiency' rate) have both declined over the past 3 decades.   Bassi and McMurrer ascribe these declines in the insured unemployed and recipiency rates to 4 primary factors: (1) Federal and State policy changes, (2) population shifts to States with traditionally low UI claims rates, (3) the decline in the unionized percentage of the work-force, and (4) the decline in the manufacturing sector of the economy.   They also agree with the earlier findings of Burtless and Saks (1985) that the changing composition of the work-force -- with growing numbers of women and young workers, as well as 2-wage-earner families -- has influenced the recipiency decline.   And it has been noted by Blaustein and others that some of the largest insured sectors (government employees, for example) are also the most stable, while the growing low-wage service sectors are both more volatile in employment patterns and have a larger proportion of uninsured workers."

1999
_PS&P_
Merger Job Cuts Soar
"merger and acquisition-related job cuts through September 1999 were 35% ahead of those reported in the first 9 months of 1998, according to a report by international outplacement firm Challenger, Gray & Christmas Inc.   M&As resulted in 60,282 job cuts through 1999 September, up from 44,742 merger-related cuts announced through 1998 September.   Since Challenger et al. began tracking merger job cuts in 1995, the record was set in 1998 with 73,903 lost jobs.   With an average of 6,698 merger job cuts per month, however, 1999 is on pace to set a new record."

1999
Timothy W. Brogan _American Body Shopping Association_
Body Shoppers Thrive Amidst Job Churn (with graphs)
"The average number of temporary employees working each day rose by more than 100K in 1999.   And staffing firms increased temporary help sales by 9.6% to $64.3G...   Corporate profit margins also increased at the end of last year, [as] compensation costs [rose only] 3.4%...   From 1992 to 1995, temporary help employment grew at an average annual rate of 17%.   Since 1995, growth has slowed to an annual rate of 8.4%.   In 1999, the number of individuals employed daily in temporary help jobs increased 3.9% to 2.9M...   In 1999, the average length of time a typical temporary employee worked with a staffing firm rose to 10.3 weeks, up from 9.5 weeks in 1998...   Economists Lawrence Katz of Harvard and Alan Krueger of Princeton concluded in a 1999 study that the growth of [bodyshopping] was responsible for approximately one-half of the drop in the unemployment rate during the 1990s...   Only 12% of businesses say that saving on wage or benefit costs plays an important role in their decision to use temporary help...   A 1998 ASA survey revealed that expenditures for [low level] skills training increased to $720M in 1997, more than doubling the $260M spent in 1995.   The number of individuals receiving skills training also more than doubled to 4.8M in 1997, up from 2.2M in 1995.   In all, about 90% of staffing firms [bodyshops] report offering free skills training to their employees...   more than 675K job cuts were announced in 1999, according to the out-placement firm Challenger, Gray & Christmas.   These job cuts follow a record number announced in 1998 and remain an unexpectedly high percentage of the work-force...   Many companies created and eliminated jobs at the same time.   As a group, companies created 5 jobs for every 3 they eliminated, according to AMA [American Management Association]...   In 1998, the executive managerial, professional specialty, and technical occupations comprised nearly 15% of staffing services employment.   The administrative-clerical, service, and marketing-sales areas accounted for nearly 50% of staff.   And operators, fabricators, and laborers made up just over 30%."

1999
_BLS_ Economic liberalization
"Real wages have slowly, if at all, recovered their 1960s levels...   It is true that Maquiladoras have evidenced vigorous growth in output and employment, but real wages have continued to decline."

1999
"Melissa" quoted in Chris Benner, Bob Brownstein & Amy B. Dean
Walking the Life-Long Tight-Rope: Negotiating Work in the New Economy: A Status Report on Social & Economic Well-Being in the State of California (pdf)
"I never chose temp work voluntarily, but I had to, since I got laid off & couldn't find permanent work.   The time I've spent as a temp ruined my financial situation, my self esteem, & destroyed any sense of my career direction.   The credit card debt that I racked up would have easily been a decent savings account if I didn't have to do that bout of temping.   There is psychological damage in having to constantly 'learn' the same old thing over & over.   The need to constantly learn can be very stressful, & actually eats away at my creative energy, since I have to become short-term, rather than long-term oriented."
Working Partnerships USA
Economic Policy Institute
At Work Project

1999
Chris Benner, Bob Brownstein & Amy B. Dean
Walking the Life-Long Tight-Rope: Negotiating Work in the New Economy: A Status Report on Social & Economic Well-Being in the State of California (pdf)
(citing Paul Osterman 1996 _Broken Ladders: Managerial Careers in the New Economy_;
Baumol & Wolff 1998 _Side Effects of Progress: How Technological Change Increases the Duration of Unemployment_;
Gus Koehler & Rosa Moller 1998 _Business Capital Needs in California: Designing a Program_)
"With unemployment at the lowest levels in a generation, inflation in check, & even some signs of rising wages after years of stagnation or decline, the U.S. economy was often described as 'the envy of the world'.   Nevertheless, 1998 was also a record year for corporate lay-offs & down-sizing.   According to a regular survey from the out-placement firm, Challenger, Gray & Christmas, companies announced a total of almost 700K lay-offs in 1998 -- 56% higher than in 1997 & the highest since the survey began in 1989, prior to the last recession...  
In a study of lay-offs over the last 6 years, Challenger, Gray & Christmas, a job placement firm, found that the computer industry is a leader not only in job growth but also in job loss.   The study found that from 1993 to 1998, companies in more than 30 industries announced a combined total of 3.1M lay-offs.   Seven industries accounted for more than half of this amount.   The computer industry ranked third in down-sizing, while telecommunications ranked fourth, out-paced only by aerospace & retailing...   As skill demands change more rapidly, large numbers of people need to learn new skills, go back to school, or switch careers entirely.   When a firm changes technology, it may permanently lay off workers with certain skills & hire new workers with different ones.   This is true for workers at all levels.   In recent years, middle managers have faced some of the largest numbers of lay-offs.   Some workers... may be unable to take advantage of new job opportunities, & thus face long-term unemployment.   More critically, even when a firm makes incremental changes in technology, it may not want to retrain some types of workers.   For example, many firms believe it is not cost-effective to retrain older or less-skilled workers, either because the retraining costs are higher or because firms believe workers may not be sufficiently productive or on the job long enough to recoup the cost of training.  
This employer strategy increases the share of the unemployed labor force made up of workers with relatively higher retraining costs.   It also threatens these unemployed workers with a long job search or even permanent unemployment.   As a result of these changes, people who are unemployed remain unemployed for longer periods of time than in the past.  
For example, in the 1970s the average duration of unemployment for men was 13.1 weeks, while in the 1990s it was 17 weeks, an extra month of joblessness.   The increase in unemployment is particularly dramatic for older workers: unemployed men aged 55 to 64 were unemployed an average of 19 weeks in the 1970s, 23.8 weeks in the 1980s, & 25.3 weeks in the 1990s.   Even more disturbing, there has been a noticeable increase in the proportion of displaced workers who are unemployed an exceptionally long time.   In 1998 for example, 14% of the unemployed were out of work 27 weeks or more, compared to only 9% in 1979 & less than 5% in 1969."
Working Partnerships USA &
Economic Policy Institute
At Work Project

1999
Chris Benner, Bob Brownstein & Amy B. Dean
Walking the Life-Long Tight-Rope: Negotiating Work in the New Economy: A Status Report on Social & Economic Well-Being in the State of California (pdf)
(citing Dale Belman, Erica Groshen, David Stevens & Julia Lane 1998 _Small Consolation: The Dubious Benefits of Small Business for Job Growth & Wages_;
Clair Brown, Ben Campbell, & Greg Pinsonneault 1998 _The Perceived Shortage of High-Tech Workers_)
"From 1993 to 1997, large businesses lost 277,443 more jobs than they created, while firms with fewer than 100 employees created more than 1.3M net new jobs in California.   Firms with fewer than 20 workers accounted for 65% of this growth...   A recent national study of employment in small business (less than 50 employees), for instance, found:

• Employees of large firms (1K or more employees) are better compensated than small business employees, earning on average 39% more.
• Workers at large firms receive better benefits than their counterparts at small firms: 68.7% of employees at large firms are covered by pension plans, compared to only 13.2% at small firms.   Also, 78.4% of employees at large firms have health insurance, but only 30% of workers at small firms receive health insurance.
• Job security at large firms is also better, with job tenure averaging 8.5 years at large firms, but only 4.4 years at firms with fewer than 25 employees

1999
Chris Benner, Bob Brownstein & Amy B. Dean
Walking the Life-Long Tight-Rope: Negotiating Work in the New Economy: A Status Report on Social & Economic Well-Being in the State of California (pdf)
(citing Clair Brown, Ben Campbell, & Greg Pinsonneault 1998 _The Perceived Shortage of High-Tech Workers_)
"High-tech industries tend to be dominated by younger workers, either those recently out of college or in their early years as a professional.   Companies would rather hire younger workers with the latest university training than invest in retraining of their current, older workers, even if they are highly skilled workers with university educations."
Working Partnerships USA
Economic Policy Institute
At Work Project

1999
Chris Benner, Bob Brownstein & Amy B. Dean
Walking the Life-Long Tight-Rope: Negotiating Work in the New Economy: A Status Report on Social & Economic Well-Being in the State of California (pdf)
"Since 1985 the average wage for union members has declined by only 3%, compared to a decline of 6% for non-union workers.   Most of this decline occurred in the private sector, where union density is the lowest.   The average union wage in the private sector has declined nearly 10% in real terms since 1985 In the public sector, however, the average wage of union members has risen nearly 5% since 1985, while the wages of non-union public sector workers has remained essentially flat."
Working Partnerships USA
Economic Policy Institute
At Work Project

1999
Electronic Recruiting Index

• 28,732,786 Job Postings In 1998
• 9,375,000 on Job Boards
• 1,716,000 on Corporate Web Sites
• 17,641,786 on usenet

1999

1999 Winter
_Industrial Out-Look_
Manufacturing Blues (pdf with graphs)
"Manufacturing workers had reason to fear the worst in late 1998 as the ax man eliminated some 574,629 jobs...   By year's end, the number of lay-offs reached a record high, and are still growing...   The Labor Department's survey of displaced long-tenured workers, conducted in early 1998 brings good news to recently laid off employees.   The survey found that between 1995 and 1997, 67% of laid off workers were re-employed at full-time jobs, 14%-16% were working part-time or at home, and only 12%-14% had dropped out of the labor force.   The workers in this survey fared much better than in the 1993-1994 survey.   Only 38% of re-employed full-timers experienced pay drops (compared to 55% in the previous survey), while 21% suffered cuts of more than 20% (down from 38% in the preivious survey)...   After experiencing years of decline & negligible growth, the number of foreign students in the US increased 5.1% this year.   Moreover, Asian students, who make up over half of international student enrollment (57.6%), increased 6.4%.   Japan is the leading country of origin for all foreign students (47,073), followed by [Red China] (46,958) and Korea (North? South? 42,890)..."

1999
_Thomas Staffing_
14th Annual Survey (graphs & tables)
Member of the national association of bodyshoppers
"21% of respondents indicate employee retention is a problem in their company...   The greater the number of employees in a company, the more likely the respondents are to indicate the problem of employee retention exists within their company...   in Medical & Hi-tech companies, 34% report that highest turn-over is among those employed 6 months or fewer, 11% that it is among those employed 7 to 12 months, 24% that it is among those employed 1 to 2 years; 10% that it is among those employed 3-5 years; 3% that it is among those employed 5 to 10 years, 3% that it is among those employed 10 years or more...   and 11% report that job title is more significant than time employed...   Many respondent companies do not make any effort to reduce employee turn-over or find out why employees leave...   Amongst Medical and Hi-tech firms, 40% do nothing to retain employees, 29% try to offer attractive benefits, 13% talk to employees to try to retain them...   6% offer more intensive training...   4% raise salaries..."

1999
Tom Nadeau
7 Lean Years: America's New High-Tech Under-Class

1999
Karen Schmidt _Science_ 285 (5433) pp 1517-1519
"Will the Job Market Ever Get Better?"

1999
_American Association for the Advancement of Science_
S&E Employment (pdf)

1999 Winter
David C. Bjorkquist & Jaap Kleinhesselink _Education Resources Information Center_/_Journal of Industrial Teacher Education_
Contingent Employment and Alienated Workers
alternate link (pdf)
"Describes the state of contingent employment in the United States and Europe; identifies economic, psychological, and social consequences..."

1999
_Monster_
Trend Toward Temps Continues
"The employment consulting firm Challenger, Gray & Christmas reports that the number of 'alternative' workers rose from 12.1M to 12.5M between 1995 & 1997 and continues to grow."

1999
William Buchanan _Social Contract_
HR73: protecting USA's sovereignty

1999
Megan Burns _Carnegie Mellon U, Computer Science_
information warfare
 

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