'Skills Shortage' Debate Misses the Point
from the competition-is-good dept
Business Week has a lengthy article about the controversy over "worker shortages" and immigrants in the IT industry. The tech industry argues that they're unable to find enough workers with the appropriate high-tech skills. Industry critics counter that the worker shortage is overhyped, and that companies are really just trying to drive down wages for high-tech workers. Frankly, I think both arguments exhibit a woeful ignorance of basic economics. In a competitive market, which the IT labor market certainly is, there's no such thing as a "shortage." Rather, there's a shortage at a particular price. If the number of jobs exceed the number of workers at a given wage, wages will get bid up and some employers will choose to let some non-essential jobs go unfilled. Conversely, if there are more workers than jobs, wages will fall, causing some firms to expand more aggressively than they would have at the higher wage. The number of jobs isn't fixed, it varies depending on how high salaries are.
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Filed Under: competition, h1-b, immigration, wages
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If you raise the pay today, it will still take quite a while for supply to catch up. Doesn't help you much if you need to get a product out the door tomorrow.
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The Great Inconsistency
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Re: The Great Inconsistency
http://www.techdirt.com/articles/20070226/145058.shtml
http://www.techdirt.com/articles/2 0070515/110016.shtml
http://www.techdirt.com/articles/20070313/134417.shtml
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I agree...
$53,051 is a lot of money to make straight out of college with a 4-year degree. To expect a higher income is silly. Most doctors and lawyers start at about that amount of money and they attend 8-years of schooling (they will eventually make more money in the long-term). I would be more worried about the next generation who are the most tech-savvy generation we have seen yet. Once they graduate and begin flooding the industry tech wages will drop.
I say if companies feel they need H1B visa applicants to fill their demand, then that is fine with me. The major corporations may have money to sponsor them, but the thousands of smaller businesses would not and will keep their jobs open for native citizens (probably at a slightly reduced pay, but still enough to live comfortably).
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Re: Re: The Great Inconsistency
It shows that Techdirt is about partisan interests, not about principle.
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at lest I do!
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53k exaggeration.
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Re: I agree...
What we're seeing is the number of jobs increase (due to an increase in demand because people are more tech-savvy), a decrease in the number of students graduating with a computer science (or related) major, and a number of older employees unable to fill the jobs because their skills are not up-to-date or because they're retiring.
The problem here may be the computer science programs. Only the brightest and/or the most determined get through. Many others are frightened away by the workload or because they just don't understand the material. This leads to an interesting problem: do you make the programs easier and allow more people through at the cost of poorer overall abilities, or do you continue to keep the tough programs and continue to experience this CS major drought with greater overall quality? I prefer the latter.
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Re: 53k exaggeration.
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Re: Re: I agree...
Children, the ones that are still in Elementary school or younger.
This leads to an interesting problem: do you make the programs easier and allow more people through at the cost of poorer overall abilities, or do you continue to keep the tough programs and continue to experience this CS major drought with greater overall quality?
Well personally, I think most CS programs are very under-developed and many colleges treat the degree as a "one-size-fits-all" sort of solution.
I think to get more qualified (college graduated) individuals into the workforce you need to offer more 4-year degrees in different parts of the industry. Keep computer science for programmers, but then have System Administration, Network Administration, Business Technology, etc. as other degrees of study. Many colleges have a few of these programs of study, but for the most part these degrees are not properly accredited or may not be recognized at other colleges or universities.
Also, colleges need to rethink the classes and education that goes into the degree. Many technology companies have been whining that 4-year degree holders are already behind on technology because the colleges do not adapt quickly enough. That leaves them the cost of training the individual and getting them up to speed. When I was in school, they had us program in Java 1.4 for three years while Java 1.5 had been released the whole time. It does not make any sense to teach your students on old technology.
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Wrong
Absolutly not. The savings are kept for the company, and the prices offered to the consumer is exactly what the market will bear. You need to temper your rehotirc with some study and basic Econ 101
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Re: Re: Re: The Great Inconsistency
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what's worse?
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Re: I agree...
go slightly east to Arizona (just outside phoenix) though, and it's enough to have a small house and nice car.
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Re: Wrong
Absolutly not. The savings are kept for the company, and the prices offered to the consumer is exactly what the market will bear. You need to temper your rehotirc with some study and basic Econ 101"
Sure, because no company ever used a better margin position to undercut their competition and increase their own market share.
But even assuming you are right, what happens to that extra money? Hint - companies don't take their extra dough and hide it in a mattress someplace. That money will either be spent somewhere within the company to improve operations in some other area or it will be dispersed to investors. Either way, it is going back into the economy as a whole.
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Re: Re: Re: I agree...
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Re: Re: Wrong
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Re: Re: Re: I agree...
Business is just whining that they have to train a person a bit. Unfortunately for them they don't realize that they are molding the next developer specifically for the tasks they need completed.
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Re: Re: Re: The Great Inconsistency
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Re: 53k exaggeration.
>> Michigan was $32,000. I don't buy it.
And when I graduated in '89 with a CS degree I started at $31.5k/year, and that was downstate NY.
I guess it's all in where you live...that's why averages are so meaningless. For every $70K metro job you have a $30K podunk job.
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Re:
>> train the next generation of technology workers.
Which I guess is why India and China wants to send all their best and brightest here to the US to attend 4 year institutions.
The basics and the fundamentals don't change. What was CS fundamental 20 years ago still applies today.
The problem with IT is there are TOO FEW people with 4 year degrees from GOOD schools.
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Re: Re: Re: Wrong
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Apparently the intersection of Economics and Engin
Does anyone here remember Brook's "Mythical Man Month"? Just bringing in someone with the title engineer is not really going to help those companies. PARTICULARLY if it the lowest cost they can find. Remember the old saying "When you're lucky you get what you pay for!"
Unfortunately the business people making the decisions don't seem to understand this. Having been involved with a few outsourcing projects I can tell you it's not nearly as easy as buying lead tainted toys from China, though it seems to have similar results.
The differences in language and culture is a huge gulf to cross and is frequently cross poorly if at all.
Personal experience has shown me a team in India following the rules exactly and getting no useful work done. On the other hand, I was able to ignore the script and ended up doing my work and their's, in the end. The PM commented to me how nice it was to be able to give an assignment to someone and have it completed. The really ironic part about this was, wait for it, she was Indian.
Before I get accused of being racist I would like to say that I've worked and gotten along with people from all over the world. My criticism was not of people from a particular place but rather of the idiot business people who seem to thing they are getting a bargain when they the cheapest damn person they can find. It's just not the case. This whole outsource scam is just hiding how poorly qualified the people doing the work are. Unfortunately it takes a long time for people to figure it out.
Now there is a real insight.
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best article I have read
I think the H1b visa should be expanded, but with very stringent due diligence of qualifications and salary levels to prevent abuse - which is undoubtedly happening - perhaps by giving any PhD/MS from a US univ a 5-year temporary "green card". We need the best & brightest here!
If you want to see the situation first-hand try starting your own business and interviewing from the existing labor pool. The current lot should not be programming a VCR or Tivo, let alone work a programming/engineering job.
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Re:
Don't get me wrong, I think tech schools are a great idea. But just because alternative A works doesn't mean that alternative B does not. They offer different things.
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I hate this line of thinking personally. I've been a software developer for almost 10 years, and I frequently have to interview people for development positions. WAY too much emphasis is placed on where someone went to school. I've seen people from "GOOD schools" that amaze me with how little they know, and people from lesser known schools that I would trust to write a compiler.
I don't care where someone went to school, it's all about what they learned there. It comes into play even less the further along in your career you are. I don't even ask where someone went to school for a senior level position...because honestly I don't even care. What matters to me is their experience and level of knowledge.
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Re: Re: Re: I agree...
Point is: it should not matter what technology you learn on, as it is the concepts that count. I don't care what form your conditional loop takes, I know how to use a conditional loop and when I learn the grammar of the language, I will be able to use it appropriately.
Furthermore, while it is the employer's responsibility to teach the system being used, it is the employee's responsibility to learn whatever language(s)/technology(s) is/are necessary.
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Article is bogus
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Re: Re: Re: Re: I agree...
For all my time spent in school, I have not used a bit of the theory they taught me. I don't program, I am a Systems/Network Administrator. I don't need to know any of the theories they taught me in college. Everything that I know now and use everyday in my job I learned outside of the classroom because they were not teaching it to me.
I'm sure if I programmed, I would use what they taught me. It seems like a waste of money to me know though.
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Supply and Demand
In the main article I disagree with the idea that more H1B is 'good' for your average tech guy. It really depends on which side of the fence you sit on - management obviously wants to have to pay the same person less, while that person would like to be more valuable.
From the perspective of the programmer, India is a poverty stricken place. People come over here from India and are willing to perform 'the job' for less than your average American born citizen - as they are perhaps not so demanding of a higher lifestyle.
If someone suddenly realized that people from, say, Congo were natural stock pickers, all the stockbrokers would be bitching because their salaries would be going down as we started to import more people who would do the job for less.
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Re: Re: Re: Re: Re: I agree...
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To; supply and demand
You are paid what you are worth, simple as that. If you think you are worth a $200k salary- then you should prove your value. Don't you do the same when you comparison shop for your HDTV, or your Thanksgiving trip, or the Hawaiian vacation or shopping at wal-mart? Aren't you the same kind who complains when gas prices rise a few cents? ("ohh! the exxon,BP,Mobile are squeezing supply to raise prices"), but you want to squeeze supply from your side?
You are a classic example of "having it both ways".
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A few different issues
Real wages in the industry are still lower than they were seven years ago. Wages may be higher than more mundane areas, but that hardly says they are too high. The number of entrants in the field pretty much says the opposite. Rather they are high because of the shortness of the career. Sure lower pay may produce a more innovative industry, but if the industry can't afford to pay higher wages, than how innovative is it really? Increased immigration leads to more inequality, lower pay for labor and higher returns for capital in a system which has already reached extremes. Enough! If companies want to move abroad, then go ahead and be quick about it since they aren't contributing their fair share here. It may even be doing investors a favor by forcing them to diversify.
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Economics
Does cheap labor lead to a net better life for the people? Compare the wage rates of New Orleans (before the storm) with New York. New York had the higher wages and the higher standard of living. Even better consider Hinton Rowan Helper’s study of the impact of the ultimate in cheap foreign labor (slavery) on the economy. In 1857 he published a book titled “The Impending Crisis of the South” in which he argued that slavery hurt the economic prospects of non-slaveholders, and was an impediment to the growth of the entire region of the South. In the South, Hinton Helper says: “We want Bibles, brooms, buckets and books, and we go to the North; . . . we want toys, primers, school books, fashionable apparel, machinery, medicines, tombstones, and a thousand other things, and we go to the North for them all.
Around the world low wages equals low standard of living for most of the people. Cheap labor kills innovation. Cheap labor concentrates wealth to the few. The fall of Rome and the start of the Dark Ages began with the Roman quest for cheap labor. The cheap labor, the Visigoths, having tasted the wealth of Rome decided that they were ENTITLED to a share of that wealth. (Just as the H-1Bs and illegal aliens DEMAND today) When Rome did not agree they sacked Rome and started the Dark ages. The Dark Ages continued until plague killed off so many people that labor became valuable again.
Our experience with free trade is that one industry after another is lost to foreigners and wages are declining. Consider the government economic statistic Average Weekly Earnings. Average Weekly Earnings are the “earnings of production or non-supervisory workers on private non-farm payrolls.” It is about 80% of American workers. The Rosie Scenario applauds the fact that it is up about 1.4% from a year ago to $280 (1982 constant dollars) for May 2007. (See http://www.bls.gov/news.release/realer.t03.htm). The problem is it last hit an all time high in 1973 of $332 (1982 constant dollars). (See http://www.workinglife.org/wiki/Wages+and+Benefits:+Real+Wages+(1964-2004)) From 1973 to 2007 80% of American workers have experienced a declining wage.
To put that decline in prospective check out the inflation calculator at http://data.bls.gov/cgi-bin/cpicalc.pl
1973 wage of $332 (1982 constant dollars).... 715 (2007 dollars)
2007 wage of $280 (1982 constant dollars).... 603 (2007 dollars)
The difference is $112/week or $5824/year.
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Re: Re: Re: Re: Wrong
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What about companies that abuse their H1-B's
What do you say to this situation. I for one am in the processing of leaving this company, and while I wish theH1-B people well, I wish the CTO and CEO would get killed in auto accidents real soon. The H1-B population is 8 out of a company of 17 that is 47% so you can see that this situation is ripe for abuse. Especially since in order to find another job these people would have fnid a job in an area where there are only 2 large companies that would be willing to take them, and those companies are not hiring because of the economy. UI fortunately found a company that performs work on Government contracts and so has all US citizens working for it.
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Re: What about companies that abuse their H1-B's
I would wager the majority of companies who hire H1-B visa holders follow the rules and do not try to take advantage of the program.
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A bowl of rice.
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Re: Economics
If you didn't think that there was competition from outside workers before the h-1b program, you are mistaken. You seem to want to define the market in a way that simply isn't realistic. Do the people who are kept out of the US not get jobs? No, they get jobs working for competitors. If those competitors are able to take down US companies, then all those US jobs will disappear. Is that worth it?
Cheap labor kills innovation.
Do you have some evidence to back that up? Because it's not true. Let's take the cheapest labor of all: automation. After all, if you replace workers with robots, your labor costs go to zero. And most people consider that to be quite innovative.
Furthermore, you, like way too many people, seem to be viewing jobs as a zero sum game -- which they are not. The creation of new opportunities leads to new jobs. Think of how many agricultural jobs were "lost" in the US, but that didn't harm the economy, instead it only made our economy much, much stronger. Why do you suddenly fear the same advances being made in other jobs?
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The problem is that H1Bs aren't equivical!
Can somebody working under an H1B readily change jobs? No. H1Bs are pretty much indentured servants. Relax the rules of H1Bs to that of a citizen, and I think you'll find that the real price of an H1B job isn't going to be that much cheaper than using native employees. You will have a greater pool to choose from, so wages will have downward pressure, but the H1B "advantage" will disappear.
H1Bs are not immigration papers either.
Offshoring is another thing altogether.
Arguments like this simply have no merit because you are not comparing oranges to oranges. I think you are more comparing oranges to carrots. They may both be the same color, but that's where the comparison ends.
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Not at my company
Only reason I can think of is that they come at a lower $$ rate. Not any smarter.
Sorry to see that at least my company doesn't want to grow a new crop of IT personnel.
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Re: Re: Re: Re: Re: Wrong
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Sucking skills from developing countries
What worries me is that nobody seems to care about the unfairness of sucking skilled workers out of developing countries. Sometimes this is outright inhuman, like when medical doctors leave a country in droves to go to an industrialized country. But nobody seems to even mention it, neither the article itself, nor a single one of the 47 comments.
Does nearly everybody want to get richer on the basis of making other people poorer? This doesn't have to be, because the economy, particularly the world economy, is not a zero-sum game, but in this particular case this is what happens.
There's a saying in lower German, "De Düwel schit bij de größte Hauf." Roughly: The devil shits on the biggest heap. But it seems that we want to help him quite a bit along the way.
Hans-Georg
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Unexamined assumptions
I'm not at all anti-immigration or anti-outsourcing: My wife is an immigrant and, as an engineering manager, I outsource our software development. There are many excellent reasons to encourage immigration and permit outsourcing, not the least of which is that it's good business to encourage the rest of the world's economic development.
On the other hand, simplistic economic arguments that fail to employ any concepts more sophisticated than the law of supply and demand of fungible elements in an elastic market are unworthy of serious consideration.
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To Bryan Price
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Re: Unexamined assumptions
The horror stories from off shoring will be a few years down the road and by then there will be a different but equally idiotic bandwagon to jump on.
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Re: To; supply and demand
I do realize that tech isn't a smart place to be for the future... It's quickly becoming a blue collar profession, which ain't a great place to be to make a lot of money. Hey, a good auto mechanic knows a lot of things about cars that your average person doesn't - but that doesn't entitle him to be wealthy.
Where I get confused is when people start throwing around the reality that kids aren't going to school for math and science anymore and how this is a big problem. Is it a problem or isn't it? If it's a problem, then shut off the H1Bs and keep the price of tech artifically inflated. If it's not a problem, then don't have the kids waste their time in math and science - unless they like to do really hard things and not become wealthy.
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skills shortage
If you are American, just don't enter these fields. If you were entering college today, would your goal be to become an engineer specializing in manufacturing processes? Of course not. If you have children reaching college age, make sure they don't enter these fields. Even if there are current "shortages" of CS graduates in the U.S., what happens when the limits are raised or eliminated for H1B and L1 visas? These are not good, long term careers in the U.S. and won't be until the U.S. standard of living and the global standard of living equalize.
You or your children should choose a field that has long term value to American corporations, like marketing, advertising, or retail management. These jobs require either a physical presence in the U.S. or cultural knowledge that overseas workers don't have. Teachers, auto mechanics, doctors, lawyers, plumbers, electricians are all jobs that are difficult to outsource and have excellent long term prospects and all are easier to learn than computer science or engineering. Why knock yourself out for nothing?
Leave all the technical "grunt" work to the foreigners. Who cares? We can simply buy the technology we used to invent. We don't manufacture computers anymore. Open your case, there is not one component in there that was manufactured in the U.S. even though the brand name is "American". That doesn't stop Dell from making tons of money, does it? Walmart doesn't sell anything American and they're doing great. Microsoft's operating system is created largely overseas, the same as Oracle and other large software vendors. We flock to buy Japanese and German cars and nobody worries about that.
Relax, there are no shortages of anything. Everything is fine.
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Lose skills, lose your country
If we lose the skills of manufacturing design and engineering to offshore "grunts", what happens when India and China no longer like American politics and throw an embargo at us? If we can't be self sufficient we are signing our own death certificates.
I have an M.S.C.S. from a decent school, and I would never make the mistake of thinking that becoming a doctor or a lawyer is easier than learning C.S. You seem to equate mechanics and plumbers with the medical profession. Do you realize that even a med lab technician has to have a dual B.S. major in chemistry and biology, plus 2 - 3 years of apprenticeship to get certified? A plumber barely needs a 2 year junior college degree and an entry level DeVry ITer not much more.
Also, take a look at modern marketing/advertising today. It most definitely can be and is outsourced all over the world. Lots of American campaigns are run from London or Milan and vice versa. Then look at your retail managers. In my part of the midwest most of them are Indian or Chinese. Wake up!
However you are right about the global economy and global supply of workers. Let's really equalize things. Let's drop the artificially convoluted state bar exams and medical licensing procedures that effectively close off jobs to most immigrants who would be qualified to perform them. Some asians can slip through the medical qualifications, but not many. Think of what would happen to health care costs if we could pay the average $200K/yr doctor 50-70K/yr in euros, like they do in Europe. 66% percent drop in doctors fees anyone?
If we really would let the marketplace equalize, then I wouldn't mind getting less for my skills, as it would be cheaper to get by. And how about those financial executives from Mexico? I bet they would work at a U.S. brokerage for less than a $10 million Xmas bonus!
Finally, the companies that don't make anything eventually dry up because their crap catches up with them. Dell and HP computers are mostly cheap crap. Apple has outsold them this year. Walmart and and the other big box stores are in the middle of massive, expensive recalls because they outsourced to the lowest bidder.
And why do we flock to Japanese and European cars? Could it be quality and innovation? Guess what: these countries respect their citizens a bit and protect their manufacturing jobs so that they are not caught in the self-destructive race to the bottom. People are standing in line to buy the expensive goods made by educated, skilled, highly paid workers who get 40 days vacation and 35 hour work weeks.
I think we can do better with our own work force.
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Re: Lose skills, lose your country
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"Almost everyone else has it better these days, than the private sector engineer."
If so, then why are the markets collapsing from bad debt? The non-technical jobs should be boosting real average income, but it's just not happening.
But my underlying points are these:
No one outside of the investor class really has it much better than an engineer (and even they've had their problems lately). A really good job is hard to find no matter what you do. Most of the CPAs, marketing, and sales people I run into are working as many extra hours as I am doing software design. The problem with engineers is that they had it really cushy for a while and now they are coming back down to earth. What's really needed are high quality but competitive engineering job shops that can take back a good sized chunk of the lost work.
Unless there is a genuinely large surplus, running away from technical skills is pointless in the short run and harmful in the long run. Judging by the amount of push back that's happening, outsourcing is getting close to the end of its tether. It is not really profitable unless it can be done on a large scale. The jobs are here, but engineering firms need to suck it up a bit and demonstrate their productivity.
When I see web development firms turning down contracts under $25K as not worth the effort, the problem is a reality check. Plenty of us could do quite nicely with a few of those contracts each year.
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