Date: Wed, 23 Jan 2008 22:13:33 -0800 From: Norm Matloff To: Norm Matloff Subject: Microsoft lets the cat out of the bag on the age issue To: H-1B/L-1/offshoring e-newsletter Enclosed is Vivek Wadhwa's latest column, on the difficulty that older (i.e. 40+) programmers and engineers have in getting work in their field. (I'll refer to this as age discrimination below, but as you'll see, it's just as much a price issue as it is fear of the graybeards.) As he says, it is a subject on which I feel strongly, as I have always stressed the point that H-1B is really about AGE. The employers want to hire the younger, i.e. cheaper, H-1Bs instead of the older, i.e. more expensive, Americans. For whatever reason--and I have no idea what it is--my point about age often simply doesn't register. Just last Friday, for instance, at the Sloan conference on H-1B, an official with the California state employment office said to me, "I don't know why you're saying your students aren't getting jobs. My daughter's fiance', a new graduate, got a really nice job offer." I replied, "I made no statements about new graduates in my talk. On the contrary, if you'll recall, what I kept saying repeatedly was that the core of the H-1B issue is that the visa is used as a tool for age discrimination, that young H-1Bs are being hired in lieu of older Americans." Well, I can hardly blame that state bureaucrat for not getting it, when a lot of the programmer/engineer activists against H-1B don't understand the role of age either. I put Microsoft in the Subject line of this message, and I'll get to that presently. But first, I want to address that well-worn excuse given by the industry lobbyists, that the reason older programmers and engineers can't get work is that their skills are out of date. Of course, this is in fact true in some cases, but it is patently false in general. I go into the skills issue in great detail, a dozen pages or so, in my University of Michigan article, http://heather.cs.ucdavis.edu/MichJLawReform.pdf showing that the skills issue is just a pretext for avoiding the older workers. But if you want a sound bite answer, try this: Just look at the numerous instances in which firms, some of them well-known ones like the Bank of America, have admitted that they laid off Americans and replaced them with H-1Bs or L-1s--and then forced the Americans to TRAIN their foreign replacements. It should be clear to anyone that it was the H-1Bs/L-1s who lacked the skill sets, not the Americans. Here is a better answer, not a sound bite but one that sheds much more light: Even if the 40-year-old programmer does have the latest skills, he is too expensive, period. Here's an example from another article of mine, linked to by Vivek's piece below, referring the mother of all "shortage studies," the 1997 ITAA report: # "In fact, the industry's claim that the older workers' problems were # due to skills deficits can be seen to be disingenuous in other # ways. Consider a report by the Information Technology Association # of America, one of the leading organizations lobbying for H-1B # increases. The report complained that, while older programmers # and engineers could be retrained, this made them flight risks: # # 'You take a $45,000 asset, spend some time and money training him, # and suddenly he's turned into an $80,000 asset,' says Mary Kay # Cosmetics CIO Trey Bradley...[the problem being that the retrained # workers] become highly marketable individuals . . . attractive to # other employers." # # It is clear that Bradley was not willing to pay the salaries paid # by other firms. The real issue was money, not skills. Jim Bennett, the person in Vivek's article, got another job after retraining, but he's the exception, and by the way, note that the job he got in the end was basically in sales and marketing, not in engineering. Good for Jim Bennett, but Pete Bennett in the Bay Area could not even get that. Jim Bennett works for Microsoft (and may well have been suggested by them as an example for the article, as their poster boy for the industry claim that the older people would get jobs if only they kept their skills up to date). That brings me to the title of my posting here, "Microsoft lets the cat out of the bag on the age issue." Here is the key passage: Microsoft (MSFT) is known for the high quality of its hires. Senior Vice-President and Chief Technical Officer David Vaskevitch...acknowledges that the vast majority of Microsoft hires are young, but that is because older workers tend to go into more senior jobs and there are fewer of those positions to begin with. Vaskevitch didn't know it, but he has now revealed the dirty little secret--careers in software development are short. "THERE ARE FEWER OF THOSE POSITIONS TO BEGIN WITH." That's it in a nutshell, folks! The industry just doesn't have many jobs for the 40-year-olds. The industry has devolved into a situation in which the industry PLANS to squeeze the older software developers out of the business, by having a very narrow jobs funnel at the Senior Software Engineer level. And what ENABLES the employers to do this? The answer: H-1B. This is what underlies all the shortage shouting. The employers want to have a large supply of young workers, who are 40% cheaper on average. (That figure is for young Americans; young H-1Bs are even cheaper still.) BCIS data show that the computer-related H-1Bs in general have a median age of 27.4. And for those of you who might say, "Well, isn't this true in general, that there aren't many jobs for people after age 40 in most professions?", just look at my civil engineering example that Vivek cites. The fact is that in the old days software developers had longer careers too. But then India decided that its niche would be software, exporting programmers to the U.S., and the rest is history. If India had decided to go for the civil engineering labor market, then we'd see the impact there too. Norm http://www.businessweek.com/technology/content/jan2008/tc20080115_576235.htm Viewpoint January 15, 2008, 8:00PM EST High-Tech Hiring: Youth Matters In IT engineering, young hires tend to be more energetic and up to date. Older workers need to keep skills fresh, or aim for management posts by Vivek Wadhwa In the engineering globalization debate, the battle lines are drawn. Companies like Microsoft (MSFT), Intel (INTC), and Oracle (ORCL) say there are severe shortages of skilled workers and they need more visas to bring in foreign workers to stay competitive. Unemployed engineers say this push for more visas is a plot to suppress wages. My own research at Duke University has shown that there is no general shortage of engineers in the U.S. The globalization debate shouldn't focus on the issue of visas. Instead, it should examine an issue that tech executives don't like to discuss: age. Tech companies prefer to hire young engineers. Engineering has become an "up or out" profession—you either move up the ladder or you face unemployment. In other words, even though globalization has compounded the difficulties for aging engineers, it's not the culprit. Documenting Age Discrimination One of the staunchest opponents of foreign worker visas is Norm Matloff, a professor at the University of California, Davis, who says careers in the programming profession are notoriously short-lived. His research (flip to page 5 of the linked PDF) into attrition rates revealed that five years after finishing college, only 57% of computer science graduates were working as programmers; at 15 years the figure dropped to 34%, and at 20 years—when most were still only age 42—it was down to 19%. This was in sharp contrast to civil engineering, where careers lasted much longer. Matloff says age discrimination is rampant in the tech industry and the importation of foreign workers into the U.S. facilitates this. I know from my days as a tech chief executive that finding good engineering talent in the U.S. is always difficult. And hiring policies and skill needs vary significantly between companies. Some can only afford to hire young, inexperienced workers, while others can pick and choose. But age is still the issue. Startup firms are often the most cost-constrained. Consider former tech entrepreneur Jason Williamson, who is now a product manager at Oracle (ORCL). He says that during the six years he spent running BuildLinks, a software company focused on the construction industry, his strategy was to find young, impressionable workers who earned entry-level salaries and could learn on the job. He had limited capital and needed employees who could afford to work through the tough times when his company couldn't make payroll. Even the well-funded, venture-backed companies usually echo the experiences of JiNan Glasgow, chief executive officer of patent software firm Neopatents in Raleigh, N.C. She says she can afford to pay what she needs, but her best hires and most productive employees have been new college graduates. She explains they tend to be more familiar with the latest technologies, adapt readily to change, are more creative, and try new things. Middle-aged hires have not always worked out as well for her. She says most had dated skills and expected to be paid for experience that wasn't relevant to her firm. Limited Senior Management Berths The fact is that in tech, youth is an asset and is in great demand. Experienced engineers are needed mostly in senior architect positions and in management, where they are paid the highest salaries. Microsoft (MSFT) is known for the high quality of its hires. Senior Vice-President and Chief Technical Officer David Vaskevitch says younger workers have more energy and are sometimes more creative. But he adds there is a lot they don't know and can't know until they gain experience. So he says his company recruits aggressively for fresh talent on university campuses and for highly experienced engineers from within the industry. One is not at the expense of the other, he insists. For him, it is all about hiring the best and brightest—age and nationality are not important. He acknowledges that the vast majority of Microsoft hires are young, but that is because older workers tend to go into more senior jobs and there are fewer of those positions to begin with. There is lots of competition for these senior jobs. And globalization is making things worse. Companies are increasingly locating their research and development operations closer to growth markets (BusinessWeek.com, 1/18/07). Companies like IBM (IBM) are adding tens of thousands to their workforce in places like Bangalore and Shanghai. Some of these jobs would otherwise go to older and more expensive workers in the U.S. How Maturing Engineers Can Cope So the days of lifelong employment for engineers may be long gone. And they face decreasing salaries as they reach their fifties. Research by University of California, Berkeley, professors Clair Brown and Greg Linden shows that even those with masters degrees and PhDs have reason to worry. Their analysis of Bureau of Labor Statistics and Census data for the semiconductor industry revealed that salaries increased dramatically for engineers in their 30s but these increases slowed after the age of 40. After 50, the mean salary dropped by 17% for those with bachelors degrees and 14% for those with masters degrees and PhDs. They found that salary increases for holders of post-graduate degrees were always lower than for those with bachelor's degrees. The harsh reality is that as engineers progress in their careers, they need to stay current in new technologies and become project managers, designers, or architects. To keep their jobs, engineers need to build skills that are more valuable to companies and take positions that can't be filled by entry-level workers. Experienced engineers can also find rewards in entrepreneurship, teaching, and sales, as well as use their skills to excel in unrelated professions. And as Microsoft's Vaskevitch says, there are computer programmers "who become like rock stars and are unbelievably valuable (and well compensated) as they get older." Joe Bennett, 44, provides a great example of the approach engineers should take. After working as an engineer for 13 years at Microsoft and becoming senior director of its developer and platform division, he realized that he was losing touch with the technologies he was marketing. So he took a three-month sabbatical to brush up on programming languages and frameworks like C# and ASP.NET, and transferred into a job where he was touting the benefits of different Microsoft technologies. He says that he isn't leading people, but is having fun again and is more intellectually engaged in his work than he has been in 10 years. He believes he is now more valuable to the company. The bottom line is that we can't slow globalization or require companies to do things that aren't in their economic interests. Let's focus the debate on improving the skills of our existing workforce. Wadhwa is Wertheim Fellow at the Harvard Law School and executive in residence at Duke University. He is a tech entrepreneur who founded two technology companies. His research can be found at www.globalizationresearch.com .