IT Helps Drive Recovery

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After two years of retrenchment, IT industries are showing some signs of resuming the “dynamic role” they played from 1996-2000, according to a report released Tuesday by the U.S. Department of Commerce. Employment growth in IT industries and IT occupations, however, have yet to recover.

Digital Economy 2003 is Commerce’s fifth annual report on the performance of American industries that produce IT goods and services and the effects of IT on the U.S. economy.

“IT-producing industries are once again at the forefront of national economic growth and, on average, industries and firms that have invested most heavily in IT equipment achieve faster productivity growth than those that do not,” Commerce Secretary Donald L. Evans stated in a letter accompanying the report.

With IT output increasingly concentrated in IT services, Commerce predicts future growth in the IT sector will be “more modest and less volatile than in the past.” The report says computer and semiconductor manufacturers are rebounding from major losses occurred during 2000-2001, but communications equipment makers continue to show signs of weaknesses.

IT job growth and salaries, the report states, remain problematic. Since 2000, the number of workers in IT-producing industries declined by 11.2 percent, as compared to a decline of 2 percent in all private industries. The IT job losses were initially concentrated in manufacturing and low skill occupations, but recent losses have been more widespread across all IT industries and skill levels.

IT salaries also fell 1.3 percent in 2002, the most recent year with available statistics. The average annual wage for workers in the IT industry was $67,440 last year, down from $68,330 in 2001. By contrast, the average annual salary for all private industry workers in 2001 increased 1 percent to $36,520.

“Declining IT investment and retrenchment among IT producers were among the reasons for IT-related job losses throughout the economy,” the report states. “Job losses in the IT-producing sector are part of a larger picture of job losses and slow employment growth economy-wide that has been the conundrum of the post-recession period.”

The report also attributes the IT job losses to “churn” and a trend by “some companies” to move jobs overseas.

“Layoffs in one industry are often offset by new hires in another. Employment in the bioinformatics field is a case in point,” the report says. “Even in the current, relatively slack job market, firms in this field — which merges IT capabilities with life science research and development — continue to seek workers.”

According to Commerce, proof of IT job losses to foreign countries is hard to prove.

“Anecdotal evidence now suggests communications costs and increasing IT skills abroad enable the off-shoring of some services,” the report states. “Many U.S. call centers, for example, are now located in countries like India that have a highly-skilled, English-speaking labor pool. Although there are widely ranging estimates of this phenomenon, hard statistical evidence is lacking.”