Workers & Jobs
Employment Patterns in North Carolina
The burst of the technology bubble in 2001 created enormous shifts in the information technology (IT) employment landscape in the United States as well as within North Carolina. Both computer and peripheral manufacturing and semiconductor manufacturing in North Carolina closely followed national employment trends. In the case of computer and peripheral manufacturing, after dramatic gains in employment in the period 1995-2000 (13% for computer and peripheral manufacturing), the growth flattened out in 2001. Since then, 18,000 workers, or 37% of those working in IT manufacturing in 2001, have lost jobs. In addition, the total number of plants has declined, though less severely. This might suggest that much of the job losses can be accounted for with rising productivity (see Table 2a).
The information service sectors of IT have also lost jobs, but in even larger numbers. Overall, the three sectors of information services - software programming, telecommunications and ISPs/data processing services - have lost more than 21,000 jobs, or 42% of employment. Yet these job losses have not been even. Telecommunications have been badly hit, losing 63% of employment between 2001 and 2006. Yet software programming has risen steadily, nearly doubling its North Carolina employment between 1996-2001 and gaining an additional 8% between 2001 and 2006. One reason might be that new software is one of the few ways to improve productivity of existing hardware, and will generally be in relatively strong demand even during a downturn, when corporations' capital spending accounts dry out.
The only sector that has faced few job losses is R&D, along with computer system design. This is not surprising considering that competitive pressures from low-cost manufacturing locations in recent years has shifted the industry focus in the United States towards the more creative, intellectually and technologically demanding sectors of the value chain, especially research. The trend is likely to accelerate together with the progressive decline of even relatively high-level manufacturing. This offshoring trend in relatively low-value manufacturing segments of IT is exemplified with the 2004 sale of IBM's unprofitable personal computer (PC) business to the Chinese PC manufacturer, Lenovo.1 Yet even this trend may not be as simple as it first looks, as evidenced by Lenovo's continued substantial operations in Morrisville, North Carolina.
Global Outsourcing of Jobs
North Carolina's IT industry has lost many jobs due to global outsourcing, but the state also benefits from the jobs created by US subsidiaries of foreign corporations.2 In the last couple of years, IBM has shed jobs in RTP, their largest worldwide site, as the company has moved most of its manufacturing to overseas locations.3 IBM is only one of the top corporations to have suffered job losses. India has become increasingly important in North Carolina's globalizing IT economy. All four companies listed above, as well as a number of smaller companies in North Carolina, use the services of at least one of the three giant software services companies in India: Tata Consultancy Services, Wipro and Inosys.4
Although job loss due to outsourcing (whether foreign or domestic - see endnote 3) is certainly a cause for concern, the benefits of insourcing have been lost in the heated debates surrounding outsourcing. Insourcing is defined here as jobs created by the U.S. subsidiaries of foreign companies. According to the Organization for International Investment, insourcing has created 5.4 million jobs nationwide in all industries.5 Of this total number, 212,700 jobs went to North Carolina, making the state the 9th in the nation in terms of the total number of insourced jobs.6
Approximately 43% of insourced jobs in North Carolina are in manufacturing industries.7 Job growth due to insourcing also affects the IT industry in the state. For example, Infineon Technologies is a German semiconductor company that purchased a facility in Cary, North Carolina. The benefits of Infineon's Cary subsidiary include the employment of 400 North Carolinians with an average salary of $75,000 a year and an $8 million investment in land, building, equipment and other infrastructure facilities.8
Wages in North Carolina
The wage data (Table 2b) paints a picture consistent with that of employment figures. Specifically, the growth rate for wages was extremely high during the boom years in the 1990s, but has slowed to a crawl since 2001. Along with the fall of employment during the same period, the trend is indicative of depressed labor demand. The shift has been most pronounced in manufacturing: wages grew by a total of 50% between 1996 and 2001, versus 22% between 2001 and 2006. The respective figures for software development are 44% and 16%, and 34% and 12% for computer system design.9
Immigration of High Skilled Workers into North Carolina
Most of the attention on North Carolina's emergence as an immigrant-receiving state has focused on low-skilled immigration, primarily from Mexico, to supply the labor needs of traditional industries such as agriculture and hog farming (see the Workers and Jobs section of the Hog Farming industry). What is less known is that North Carolina has also witnessed a concomitant growth in the numbers of immigrants who arrive to work in its high-technology sectors.
According to the 2000 census, India is now the second leading country (behind Mexico) sending immigrants into North Carolina.10 Highly educated and skilled Indian immigrants have significantly impacted the hi-tech economy of Silicon Valley in California, both as professionals and entrepreneurs, and this has been well documented in the literature.11 A similar labor flow of skilled workers from India has converged around North Carolina's hi-tech hubs, moving into the Research Triangle Park area and around Charlotte.12
Changing Skill Requirements
The 21st century workplace is very different from the 20th century workplace. Part-time, temporary and contract work are becoming commonplace in the organization of work arrangements.13 In our research for this project, the question of changing skill requirements in the IT industry was posed to three people intimately tied to the industry - a manager at IBM,14 an employee at SAS Corporation,15 one of the leading technology companies based in North Carolina, and a former employee at a top company in RTP.16 Their responses summarize how work patterns are changing in this knowledge-based sector of the economy. For more on this, see our notes from previous interviews with IT sector managers.
Implications for North Carolina
The changing skill demands within the IT industry needs careful consideration by educators and policy makers in North Carolina. The state, especially through the North Carolina Community College system, has played an important role in retraining laid off workers in the traditional sectors of the economy, such as textiles, furniture and tobacco, as well as for new jobs in the emerging bio-manufacturing industry (see Biotechnology Industry's 'Workers and Jobs' section). However, white-collar job loss requires a different set of priorities. As IT companies in North Carolina compete in the global economy by focusing on the core competencies of research and development (see Value Chain section), workers' skills have to similarly reflect the industry's needs. If corporations are cutting their internal skills upgrading programs for employees, and if employees now bear the responsibility of managing their own careers, then it is the state, through its educational system, that must provide ways for the state's workforce to be equally competitive in the global marketplace of IT jobs.
- Robert Cringely, "The China Syndrome." PBS, Aired on December 9, 2004. Last accessed January 20, 2005. [http://www.pbs.org/cringely/pulpit/pulpit20041209.html]
- Outsourcing is the transference to a third party the performance of functions once administered in-house. Thus, if functions within a corporation are assigned to a third party within the United States, that is an example of domestic outsourcing. The terminology used in the discussion here refers to 'global' outsourcing, where the third party is located outside the United States.
- Emery Dalesio, "IBM in NC Hums at Center of Outsourcing Debate." USA Today, March 17, 2004. Last accessed on January 21, 2005. [http://www.usatoday.com/tech/news/2004-03-17-ibm-outsource_x.htm]
- Anne Krishnan, "Wipro Extends Outsourcing Boundaries," Durham Herald Sun, November 14, 2004 [http://www.wipro.com/pdf_files/Wipro_extends_outsourcing_boundaries_Herald_Sun.pdf]
- Organization for International Investing (OFII), "Jobs Supported by 'Insourcing' Expected to Grow." News Release, March 12, 2004. Last accessed on January 21, 2005. [http://www.ofii.org/newsroom/news/040312ofii.cfm]
- OFII, "Top 20 States with the Greatest Number of Insourced Jobs." 2004. Organization for International Investing. August 2004. Last accessed on January 21, 2005. [http://www.ofii.org/insourcing/top_twenty.cfm] OFII, "North Carolina Ranks 9th in the Nation by 'Insourced' Jobs". October 19, 2004. Last accessed on January 21, 2005.[http://www.ofii.org/newsroom/press/041019nc.doc]
- OFII, "Investing in American Jobs: State by State." 2004. Last accessed January 22, 2005. [http://www.ofii.org/statebystate/north_carolina.cfm]
- The average annual wage found in the annual data is computed by dividing total wage payments by the average insured employment. These figures are not true average wage scales because (1) the wages, but not employment, of all the different persons on the payroll are reflected, and (2) the assumption is made that workers worked the full quarter or year although a number of workers are not employed the whole year or quarter, and certain plants may stand idle a portion of the quarter or year. These average wages should be considered merely as indicators of wage trends rather than actual wage rates.
- Federation for American Immigration Reform, "Extended Immigration Data for North Carolina."Last accessed February 13, 2005. [http://www.fairus.org/site/PageServer?pagename=research_research8875%20]
- Annalee Saxenian, Local and Global Networks of Immigrant Professionals in Silicon Valley. San Francisco, CA: Public Policy Institute of California, 2002; Rafiq Dossani, "Chinese and Indian Engineers and their Networks in Silicon Valley." Working Paper, Asia-Pacific Research Center, Stanford University, 2002. Last accessed on January 4, 2005; Monica Biradavolu, "Globalization from 'Above' or Globalization from 'Below'? The Emergence of Transnational Indian Entrepreneurs in the Software Industry." Unpublished Dissertation, Duke University, 2005
- Joel Kotkin, "Immigration Spreads Throughout Nation," Wall Street Journal Real Estate Journal, 2001. Last accessed on February 13, 2005.
- For a review of the literature on new work arrangements, see Arne Kalleberg, "Nonstandard Employment Relations: Part-Time, Temporary and Contract Work." American Sociological Review, Vol. 26, 2000. pp. 341-365.
- Personal interview conducted by Monica Biradavolu. September 27, 2004. Name of interviewee withheld upon request.
- Personal interview conducted by Monica Biradavolu with Sridhar Sourirajan, Solutions Architect, SAS Corporation, Cary, NC. September 27, 2004. Disclaimer: The views expressed in the statement reflect the personal opinions of the interviewee and not company policy.
- Personal interview conducted by Monica Biradavolu. September 27, 2004. Name of interviewee and company withheld upon request of interviewee.