Information Technology: Assessment of the Commerce Department's Report on
Worker Demand and Supply (Testimony, 04/21/1998, GAO/T-HEHS-98-144).

Industry reports and various newspaper and magazine articles have
predicted that severe shortages of information technology workers could
have a crippling effect on the growth of the economy. The Commerce
Department prepared a report intended to bring attention to the issue
and to encourage stakeholders to examine the potential shortages and to
take the steps needed to avoid them. This testimony discusses GAO's
recent report (GAO/HEHS-98-106, Mar. 1998) on the Commerce Department's
analysis of the supply and demand for information technology workers and
its conclusion that a shortage of such workers exists in the United
States.

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

 REPORTNUM:  T-HEHS-98-144
     TITLE:  Information Technology: Assessment of the Commerce
	     Department's Report on Worker Demand and Supply
      DATE:  04/21/1998
   SUBJECT:  Information technology
	     Labor force
	     Labor statistics
	     Labor supply
	     Projections
	     Statistical methods
	     Human resources utilization
	     Education or training

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GAO/T-HEHS-98-144

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

Before the Subcommittee on Immigration and Claims, Committee on the
Judiciary, House of Representatives

For Release on Delivery
Expected at 9:30 a.m.
Tuesday, April 21, 1998

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

Statement of Carlotta C.  Joyner, Director
Education and Employment Issues
Health, Education, and Human Services Division

GAO/T-HEHS-98-144

GAO/HEHS-98-144T

(205373)

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

  BLS - Bureau of Labor Statistics
  IT - information technology
  ITAA - Information Technology Association of America

INFORMATION TECHNOLOGY:
ASSESSMENT OF THE COMMERCE
DEPARTMENT'S REPORT ON WORKER
DEMAND AND SUPPLY
============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss our assessment of the
Department of Commerce's report on the demand and supply of
information technology workers.

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 intended to bring attention
to the issue and to encourage stakeholders to examine the potential
for shortages and to take the necessary steps to ensure an adequate
supply of IT workers.  That report, issued September 29, 1997, is
titled America's New Deficit:  The Shortage of Information Technology
Workers.\1

Today, I would like to discuss our recent report on the Commerce
Department's analysis of the demand and supply of IT workers and its
conclusion that a shortage of IT workers exists in the United
States.\2 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).  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.

In summary, we found that Commerce's report has serious analytical
and methodological weaknesses that undermine the credibility of its
conclusion that a shortage of IT workers exists.  However, it is
important to note that the lack of support presented in this one
report does not 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, 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.

\2 Information Technology:  Assessment of the Department of
Commerce's Report on Workforce Demand and Supply (GAO/HEHS-98-106,
Mar.  20, 1998).

   BACKGROUND
---------------------------------------------------------- Chapter 0:1

ITAA, a trade association, issued a report titled 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.\3 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.

--------------------
\3 Arlington, Va.:  ITAA.

   DEMAND FOR IT WORKERS
---------------------------------------------------------- Chapter 0:2

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.  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.

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

   SUPPLY OF IT WORKERS
---------------------------------------------------------- Chapter 0:3

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 it quantifies 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
---------------------------------------------------------- Chapter 0:4

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.

      SALARIES FOR IT WORKERS
-------------------------------------------------------- Chapter 0:4.1

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 with 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.

      REPORTS OF UNFILLED
      VACANCIES
-------------------------------------------------------- Chapter 0:4.2

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

--------------------
\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).

      OFFSHORE SOURCING AND
      RECRUITING
-------------------------------------------------------- Chapter 0:4.3

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.

      ESTIMATED SUPPLY COMPARED
      WITH ESTIMATED DEMAND
-------------------------------------------------------- Chapter 0:4.4

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 IN
      THE REPORT
-------------------------------------------------------- Chapter 0:4.5

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.

-------------------------------------------------------- Chapter 0:4.6

Mr.  Chairman, this concludes my prepared statement.  I will be happy
to answer any questions that you or Members of the Subcommittee may
have.
*** End of document ***