Information Technology: Assessment of the Department of Commerce's Report
on Workforce Demand and Supply (Letter Report, 03/20/98,
GAO/HEHS-98-106).

Pursuant to a congressional request, GAO provided information on the
Department of Commerce's analysis of the information technology (IT)
labor market, focusing on: (1) Commerce's analysis of IT worker supply
and demand; and (2) the basis for its conclusion that a shortage of IT
workers exists in the United States.

GAO noted that: (1) Commerce's report has serious analytical and
methodological weaknesses that undermine the credibility of its
conclusion that a shortage of IT workers exists; (2) however, the lack
of support presented in this one report should not necessarily lead to a
conclusion that there is no shortage; (3) instead, as the Commerce
report states, additional information and data are needed to more
accurately characterize the IT labor market now and in the future; (4)
the report appears to appropriately establish that the demand for IT
workers is expected to grow, but it does not adequately describe the
likely supply of IT workers; (5) although Commerce reported that only
24,553 U.S. students earned bachelor's degrees in computer and
information sciences in 1994, Commerce also stated that the Bureau of
Labor Statistics projects increasing job growth--an annual average of
95,000 new computer programmers, systems analysts and computer
scientists and engineers will be required to satisfy the increasing
demand for IT workers between 1994 and 2005; (6) pointing to the
disparity between these two numbers and referring to evidence from other
sources, Commerce concludes in the report's title and introduction that
there is a shortage of IT workers; (7) Commerce did not, however,
consider other likely sources of workers, such as college graduates with
degrees in other areas; and (8) as a result, rather than supporting its
conclusion that a shortage of IT workers exists, the data and analysis
support the report's observation that more needs to be known about the
supply and demand for IT workers.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-98-106
     TITLE:  Information Technology: Assessment of the Department of 
             Commerce's Report on Workforce Demand and Supply
      DATE:  03/20/98
   SUBJECT:  Information technology
             Labor force
             Labor statistics
             Economic analysis
             Labor supply
             Statistical methods
             Projections

             
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Cover
================================================================ COVER


Report to Congressional Requesters

March 1998

INFORMATION TECHNOLOGY -
ASSESSMENT OF THE DEPARTMENT OF
COMMERCE'S REPORT ON WORKFORCE
DEMAND AND SUPPLY

GAO/HEHS-98-106

Information Technology Workers

(205361)


Abbreviations
=============================================================== ABBREV

  BLS - ABC
  IT - ABC
  ITAA - ABC

Letter
=============================================================== LETTER


B-278899

March 20, 1998

The Honorable John D.  Dingell
Ranking Minority Member
Committee on Commerce
House of Representatives

The Honorable George E.  Brown, Jr.
Ranking Minority Member
Committee on Science
House of Representatives

Subject:  Information Technology:  Assessment of the Department of
    Commerce's Report on Workforce Demand and Supply

Industry reports and various newspaper and magazine articles predict
that severe shortages of information technology (IT) workers could
have a crippling effect on the growth of the economy.  In conjunction
with cosponsoring a convocation on the supply of IT workers, the U.S. 
Department of Commerce prepared a report to explore the possibility
of a shortage of IT workers in the United States.  As requested, we
are providing information on Commerce's analysis of the IT labor
market presented in its September 29, 1997, report, America's New
Deficit:  The Shortage of Information Technology Workers.\1

Specifically, you asked us to assess Commerce's analysis of IT worker
supply and demand, and the basis for its conclusion that a shortage
of IT workers exists in the United States. 

In conducting our work, we reviewed Commerce's report and interviewed
officials at the Departments of Commerce and Labor.  To assess
Commerce's analysis of IT worker supply and demand and to evaluate
the basis for its conclusion that there is a shortage of IT workers,
we compared the data presented in the report with other available
data from sources such as the Bureau of Labor Statistics (BLS), the
National Science Foundation, and the Information Technology
Association of America (ITAA).  As agreed with your offices, we did
not perform any independent analysis to determine whether a shortage
of IT workers exists in the United States.  Rather, we limited our
work to analyzing the methodology used by the Department of Commerce
in reaching its conclusion.  We performed our work from December 1997
to February 1998 in accordance with generally accepted government
auditing standards. 

In summary, Commerce's report has serious analytical and
methodological weaknesses that undermine the credibility of its
conclusion that a shortage of IT workers exists.  However, the lack
of support presented in this one report should not necessarily lead
to a conclusion that there is no shortage.  Instead, as the Commerce
report states, additional information and data are needed to more
accurately characterize the IT labor market now and in the future. 

The report appears to appropriately establish that the demand for IT
workers is expected to grow, but it does not adequately describe the
likely supply of IT workers.  Although Commerce reported that only
24,553 U.S.  students earned bachelor's degrees in computer and
information sciences in 1994, Commerce also stated that BLS projects
increasing job growth--an annual average of 95,000 new computer
programmers, systems analysts and computer scientists and engineers
will be required to satisfy the increasing demand for IT workers
between 1994 and 2005.  Pointing to the disparity between these two
numbers and referring to evidence from other sources, Commerce
concludes in the report's title and introduction that there is a
shortage of IT workers.  Commerce did not, however, consider other
likely sources of workers, such as college graduates with degrees in
other areas.  As a result, rather than supporting its conclusion that
a shortage of IT workers exists, the data and analysis support the
report's observation that more needs to be known about the supply and
demand for IT workers. 


--------------------
\1 Washington, D.C.:  Department of Commerce, Office of Technology
Policy. 


   BACKGROUND
------------------------------------------------------------ Letter :1

ITAA, a trade association, issued a report entitled Help Wanted:  The
IT Workforce Gap at the Dawn of a New Century in February 1997 that
focused on issues relating to the IT labor market.\2 Responding to
this report, the National Economic Council and the Departments of
Commerce, Education, and Labor began to discuss the workforce
requirements of the IT sector; subsequently, federal officials agreed
to cosponsor a convocation on the IT worker issue.  The convocation,
cosponsored by the Departments of Commerce and Education, the
University of California at Berkeley, and ITAA, was designed to bring
together leaders from industry, academia, and government to develop
new educational strategies and forge partnerships that would increase
the quantity and quality of the American IT workforce.  Federal
officials noted that the convocation would support the
administration's goals for lifelong learning. 

Commerce's Office of Technology Policy was assigned the lead federal
role in working with ITAA on the IT worker issue.  The Office of
Technology Policy's mission is to work with the private sector to
develop and advocate national policies that maximize technology's
contribution to U.S.  economic growth, the creation of high-wage
jobs, and improvements in Americans' quality of life.  In preparation
for the January 12-13, 1998, convocation, the Department of Commerce
issued its report, America's New Deficit:  The Shortage of
Information Technology Workers, examining the potential for shortages
of IT workers. 


--------------------
\2 Arlington, VA.:  ITAA. 


   DEMAND FOR IT WORKERS
------------------------------------------------------------ Letter :2

In its report, Commerce presented BLS projections that between 1994
and 2005 the United States would require slightly over 1 million
additional IT workers.  BLS projections, based on surveys conducted
for the Occupational Employment Statistics program and on the Current
Population Survey, estimate future occupational needs resulting from
expected national growth and separations from employment over time. 
Although there is no single, universally accepted definition of the
occupations that should be designated as IT occupations, Commerce
based its analysis of demand on job growth projections for the three
IT occupations used by BLS--computer programmers, systems analysts,
and computer scientists and engineers.\3

BLS projections for new IT workers over the 11 years from 1994 to
2005 include IT workers to fill newly created jobs (820,000) in the
three occupational categories and to replace workers (227,000) who
are leaving these fields as a result of retirement, change of
profession, or other reasons.  The report noted that, according to
BLS, of the three IT occupations, the greatest job growth is
predicted for systems analysts (92 percent).  (See table 1.) The
number of computer engineers and scientists is expected to grow by 90
percent, while the number of computer programmer positions is
expected to grow at a much slower rate (12 percent).  The projected
job growth for all occupations between 1994 and 2005 is 14 percent. 
Since the report was issued, Commerce has issued an update with
revised BLS projections showing an even stronger growth.  Between
1996 and 2006, there will be over 1.3 million projected job openings
as a result of growth and net replacements; about 1.1 million of
these job openings will be due to growth alone. 



                          Table 1
          
            BLS Projected Job Growth for Systems
              Analysts, Computer Engineers and
            Scientists, and Computer Programmers

                    Numbers of workers in
                          thousands
                  --------------------------
                                        2005    Percentage
Occupation                1994   (projected)        change
----------------  ------------  ------------  ------------
IT occupations           1,365         2,184            60
Systems analysts           483           928            92
Computer                   345           655            90
 scientists and
 engineers
Computer                   537           601            12
 programmers
All other              125,649       142,524            13
 occupations
Total, all             127,014       144,708            14
 occupations
----------------------------------------------------------
Source:  BLS. 


--------------------
\3 BLS descriptions of these occupations are as follows:  (1)
computer programmers write and maintain the detailed instructions,
called "programs" or "software," that list in logical order the steps
that computers must execute to perform their functions; (2) systems
analysts use their knowledge and skills in a problem solving
capacity, implementing the means for computer technology to meet the
individual needs of an organization; (3) computer scientists
generally design computers and conduct research to improve their
design or use, and develop and adapt principles for applying
computers to new uses; and (4) computer engineers work with the
hardware and software aspects of systems design and development. 


   SUPPLY OF IT WORKERS
------------------------------------------------------------ Letter :3

Commerce identifies the supply of potential IT workers as the number
of students graduating with bachelor's degrees in computer and
information sciences.  The report presents data from the Department
of Education showing that 24,553 students earned bachelor's degrees
in computer and information sciences in 1994, a decline of more than
40 percent from 1986.  While the Commerce report highlights the
supply of IT workers as those with bachelor's degrees in computer and
information sciences, Commerce does note that IT workers may also
acquire needed skills through other training paths--master's degrees,
associate degrees, or special certification programs.  Commerce's
report also includes information from BLS that indicates, in the case
of computer professionals, there is no universally accepted way to
prepare for such a career but that employers almost always seek
college graduates. 

Commerce's analysis of the supply of IT workers, however, did not
consider (1) the numerical data for degrees and certifications in
computer and information sciences other than at the bachelor's level
when they quantify the total available supply; (2) college graduates
with degrees in other areas; and (3) workers who have been, or will
be, retrained for these occupations.  Regarding these other sources
of workers, the report sometimes acknowledges their relevance to a
definition of supply but does not include estimates of workers from
those sources in its overall estimate of supply.  For example,
Commerce reported that in 1994, 15,187 degrees and awards were earned
in computer and information science programs below the bachelor's
level, but this number was not included in the supply number for IT
workers when Commerce compared the IT worker demand with the
available supply. 

Commerce also noted that, although employers almost always seek
college graduates for computer professional positions, there is no
universally accepted way to prepare for a career as a computer
professional.  According to the BLS Occupational Outlook Handbook,
which defines qualifications for jobs and careers in terms of
education and experience of IT workers with a bachelor's degree, some
workers have a degree in computer science, mathematics, or
information systems, while others have taken special courses in
computer programming to supplement their study in other fields such
as accounting or other business areas.  According to the National
Science Foundation, only about 25 percent of those employed in
computer and information science jobs in 1993 actually had degrees in
computer and information science.\4 Other workers in these fields had
degrees in such areas as business, social sciences, mathematics,
engineering, psychology, economics, and education.  The Commerce
report did not take this information into account in any way in
estimating the future supply of IT workers.  The report also stated
that IT workers acquire needed skills through various training paths,
but it provided no analysis of the extent to which companies are
training and retraining workers. 


--------------------
\4 This information was cited in a January 1998 update report by the
Commerce Department. 


   COMMERCE'S CONCLUSION REGARDING
   SHORTAGE OF IT WORKERS
------------------------------------------------------------ Letter :4

The Commerce report cited four pieces of evidence that an inadequate
supply of IT workers is emerging--rising salaries for IT workers,
reports of unfilled vacancies for IT workers, offshore sourcing and
recruiting, and the fact that the estimated supply of IT workers
(based on students graduating with bachelor's degrees in computer and
information sciences) is less than its estimate of the demand. 
However, the report fails to provide clear, complete, and compelling
evidence for a shortage or a potential shortage of IT workers with
the four sources of evidence presented.  First, although some data
show rising salaries for IT workers, other data indicate that those
increases in earnings have been commensurate with the rising earnings
of all professional specialty occupations.  Second, the ITAA study
gives some indication of a shortage of IT workers by providing
information on unfilled IT jobs.  However, in our view, ITAA's survey
response rate of 14 percent is inadequate to form a basis for a
nationwide estimate of unfilled IT jobs.  Third, although the report
cites instances of companies drawing upon talent pools outside the
United States to meet their demands for workers, not enough
information is provided about the magnitude of this phenomenon. 
Finally, while the report discusses various sources of potential
supply of IT workers, it used only the number of students earning
bachelor's degrees in computer and information sciences when it
compared the potential supply of workers with the magnitude of IT
worker demand. 

Commerce stated that upward movement in salaries is evidence of a
short supply of IT workers and cited several surveys and newspaper
articles illustrating salary increases.  For example, the report
cited a survey conducted by the Deloitte & Touche Consulting Group
showing that salaries for computer network professionals rose an
average of 7.4 percent from 1996 to 1997.  The report also cited an
annual survey by Computerworld, a weekly newspaper covering the
computer industry and targeting IT workers and managers, showing that
in 11 of 26 positions tracked, average salaries increased by more
than 10 percent from 1996 to 1997.  Increases in starting salaries
were also reported in the Wall Street Journal and the Washington
Post. 

These wage increases, however, may not be conclusive evidence of a
long-term limited supply of IT workers, but may be an indication of a
current tightening of labor market conditions for IT workers. 
According to BLS data, increases have been less substantial when
viewed over a longer period of time.  For example, the percentage
changes in weekly earnings for workers in computer occupations over
the 1983 through 1997 period were comparable to or slightly lower, in
the case of computer systems analysts and scientists, than the
percentage changes for all professional specialty occupations.  Thus,
salary increases for these occupations have been consistent with the
salary increases for other skilled occupational categories over time. 
What is uncertain is whether the recent trend toward higher rates of
increase will continue. 

Regarding unfilled jobs, Commerce cited the ITAA report,\5 which
concluded that about 190,000 U.S.  IT jobs were unfilled in 1996
because of a shortage of qualified workers, and that these shortages
were likely to worsen.  According to the ITAA survey, 82 percent of
the IT companies responding expected to increase their IT staffing in
the coming year, while more than half of the non-IT companies planned
IT staff increases. 

The Commerce report should have cautioned readers, however, that the
ITAA survey has a major methodological weakness.  While the ITAA
study provides useful information on unfilled jobs among the firms
responding to its survey, the findings cannot be generalized to the
national level.  ITAA surveyed a random sample of 2,000 large and
midsize IT and non-IT companies about their IT labor needs and
received a total of 271 responses--a response rate of about 14
percent.  We consider a 14-percent response rate to be unacceptably
low as a basis for any generalizations about the population being
surveyed.  In order to make sound generalizations, the effective
response rate should usually be at least 75 percent\6 for each
variable measured--a goal used by many practitioners.\7

Furthermore, ITAA's estimate of the number of unfilled IT jobs is
based on reported vacancies, and adequate information about those
vacancies is not provided, such as how long positions have been
vacant, whether wages offered are sufficient to attract qualified
applicants, and whether companies consider jobs filled by contractors
as vacancies.  These weaknesses tend to undermine the reliability of
ITAA's survey findings.\8

Commerce cited support for an emerging shortage in its observation
that some companies are drawing upon talent pools outside the United
States to meet their demands for IT workers.  For example, the
Commerce report stated that India has more than 200,000 programmers
and, in conjunction with predominantly U.S.  partners, has developed
into one of the world's largest exporters of software; in 1996 and
1997, outsourced software development accounted for 41 percent of
India's software exports.  Commerce also cited a Business Week
article, "Forget the Huddled Masses:  Send Nerds," to illustrate that
companies are searching for IT workers in foreign labor markets such
as Russia, Eastern Europe, East Asia, and South Africa. 

However, the Commerce report stated that some professional
engineering societies believe information regarding a short supply of
IT workers in the United States is exaggerated and that it is not
necessary to recruit foreign workers to fill IT jobs.  Additional
systematic information about the magnitude of the phenomenon of
companies meeting their demands for IT workers outside of the United
States would be useful. 

The report identified the decline in the number of computer science
graduates as a factor contributing to an inadequate supply of IT
workers.  The introduction to the report stated that evidence
suggests that job growth in information technology fields now exceeds
the production of talent.  Commerce reported that between 1994 and
2005, an annual average of 95,000 new systems analysts, computer
scientists and engineers, and computer programmers will be required
to satisfy the increasing demand for IT workers and that only 24,553
students earned bachelor's degrees in computer and information
sciences in 1994.  Because there is a disparity between these two
numbers, Commerce concluded that it will be difficult to meet the
demand for IT workers. 

Commerce did not adequately explain why the decline in conferred
bachelor's degrees in computer science would reflect a short supply
of IT workers.  As stated in the section on supply, IT workers come
from a variety of educational backgrounds and have a variety of
educational credentials such as master's degrees, associate degrees,
or special certifications.  In addition, Commerce reported on the
decline from 1986, although that year represents a peak in the number
of computer science degrees conferred, which had risen steadily from
the 1970s but has remained relatively stable in the 1990s. 

Commerce's conclusions about the IT workforce are inconsistently
reported in separate segments of its report.  First, the title of the
report states that America's new deficit is a shortage of information
technology workers.  The introduction also states that there is
substantial evidence that the United States is having trouble keeping
up with the demand for new information technology workers.  However,
the report notes that current statistical frameworks and mechanisms
for measuring labor supply do not allow for precise identification of
IT worker shortages and, in its summary chapter, Commerce concludes
that more information is needed to fully characterize the IT labor
market.  We agree with Commerce's conclusion that more information
and data are needed about the current and future IT labor market. 


--------------------
\5 Feb.  1997. 

\6 GAO, Developing and Using Questionnaires (Oct.  1993). 

\7 By effective response rate, we mean the percentage of people who
return the questionnaire and answer the variable in question.  Small
to moderate differences between the respondent and nonrespondent
populations will usually have little or no bias effect on the
results.  High or disproportionate nonresponse rates can threaten the
credibility and generalizability of the findings.  The reason some
nonrespondents do not complete a survey may be related to important
differences between them and the responding group; for example,
respondents may be motivated to complete the questionnaire because
they have particular experience with the survey issue. 

\8 Since it published Help Wanted:  The IT Workforce Gap at the Dawn
of a New Century, ITAA has released preliminary findings from a
second study on the shortage of IT workers.  This report, Help
Wanted:  A Call for Collaborative Action for the New Millennium, was
done in collaboration with Virginia Polytechnic Institute and State
University and estimates 346,000 claimed vacancies for IT positions. 
This survey involved a random sampling of 1,500 IT and non-IT
companies with 100 or more employees, and the response rate was 36
percent (of 1,493 telephone interviews, 532 were successfully
completed). 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :5

In commenting on a draft of this correspondence, the Department of
Commerce's Acting Under Secretary for Technology said there were
several inaccuracies that the Department believed should be
corrected.  First, he said that we had inaccurately treated the
report as if it was intended to be a definitive, exhaustive analysis
of the labor market for IT workers.  Instead, Commerce presented the
study as an initial effort to explore a potential shortage of IT
workers.  Second, the Acting Under Secretary said that we
inaccurately characterized the report's portrayal of the supply of
new IT workers as consisting only of students graduating with
bachelor's degrees in computer and information sciences--overlooking
people with degrees and certifications in computer and information
sciences other than at the bachelor's level and college graduates
with degrees in other areas.  Third, he said that the report included
evidence indicating a tightening labor market for IT workers in
addition to the four indicators cited in our correspondence. 
Commerce also took issue with our characterization of the report
title (America's New Deficit:  The Shortage of Information Technology
Workers) and statements in the introduction as reflecting Commerce's
conclusion that there is a shortage of IT workers.  The Acting Under
Secretary said that the report does not conclude that a shortage of
IT workers exists.  Instead, he said that the report's only
conclusions were those contained in the chapter entitled "Summary and
Further Action." Commerce's comments on our draft are included in
their entirety in the enclosure. 

We made no changes to this correspondence on the basis of Commerce's
comments.  Regarding Commerce's first point, our correspondence
explains that the stated purpose of Commerce's report was to explore
the possibility of a shortage of IT workers in the United States; we
did not characterize the report as a definitive analysis of the labor
market for IT workers. 

Regarding our characterization of the supply of IT workers, we
acknowledged that the report contained other information on the
supply of IT workers.  Our point was that Commerce did not include
this information when citing the imbalance between the demand and
supply of IT workers.  Instead, Commerce focused on the gap between
the estimated annual demand for 95,000 new IT workers and the supply
of 24,553 students earning bachelor's degrees in computer and
information sciences, not including the 15,187 students who earned
degrees and awards in computer and information sciences below the
bachelor's degree in 1994. 

Regarding the third point, our analysis considered all of the factors
Commerce reported as evidence that a potential shortage of IT workers
may be emerging in the report's chapter entitled "Is There an
Adequate Supply of IT Workers?" While the report contained other
information indicating there was a tightening labor market for IT
workers, that information was presented elsewhere in the report and
only as anecdotal information reflecting the experiences of
individual companies, not the industry as a whole. 

Finally, we believe the report's title and the statements about the
magnitude of the IT worker supply and demand imbalance contained in
the report's introduction could reasonably be interpreted as
reflecting a conclusion that there is an IT worker shortage. 

We believe it is useful to now have Commerce's clarification that it
does not believe its report demonstrated that a shortage of IT
workers exists.  As this correspondence states, the Commerce report
appears to appropriately establish that the demand for IT workers is
expected to grow, but it did not adequately describe the likely
supply of IT workers.  For that reason, we agreed with the
Department's conclusion that more needs to be known about the demand
and supply of IT workers. 


---------------------------------------------------------- Letter :5.1

As agreed with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this
correspondence until 30 days from its issue date.  At that time, we
will send copies to the Chairmen of the Committee on Commerce and the
Committee on Science.  We will also make copies available to other
interested parties upon request. 

If you have any questions about this correspondence, please contact
me at (202) 512-7014.  Major contributors to this correspondence
include Sigurd R.  Nilsen, Assistant Director; Betty S.  Clark,
Evaluator-in-Charge; and Gene G.  Kuehneman, Jr., Senior Economist. 

Carlotta C.  Joyner
Director, Education and
 Employment Issues

Enclosure




(See figure in printed edition.)Enclosure
COMMENTS FROM THE DEPARTMENT OF
COMMERCE
============================================================== Letter 



(See figure in printed edition.)



(See figure in printed edition.)


*** End of document. ***