Griping about a jobless economic recovery? Blame IT spending

Griping about a jobless economic recovery? Blame IT spending

Summary: Information technology spending may be allowing companies to put off hiring and prolonging the jobless economic recovery, according to Forrester Research.

TOPICS: CXO, IT Employment

Information technology spending may be allowing companies to put off hiring and prolonging the jobless economic recovery, according to Forrester Research. If IT spending does start taking some of the employment blame, tech vendors may want to tone down their cost savings rhetoric because a political backlash may ensue.

Those are some of the high-level takeaways from Forrester's report. Andrew Bartels, a Forrester analyst, makes the following case:

  • From 2003 to 2007 IT spending and employment went together.
  • The most recent recession changed all of that as enterprise IT spending surged 11 percent in 2010, corporate profits jumped 28 percent and the employment rate was unchanged.
  • A study of 62 industries shows that industries with the highest growth in IT investment have seen the biggest declines in jobs.
  • Two-thirds of industries raised IT spending and cut workers. In one-fifth of industries, IT investment was way up and employment way down.

In other words, technology isn't putting people back to work. It's eliminating their work.

Bartels writes:

It is much more likely that there is a causal connection between IT investment growth and employment growth. One scenario is that a reluctance to hire given uncertain future sales growth caused an increase in tech investment to support whatever growth was occurring. Another is that an investment in technology allowed companies to grow without hiring new employees. But either way, the affect is the same — tech investment is likely to have contributed to the jobless recovery we have seen so far in the U.S.

The Forrester argument is fascinating on a few fronts, but the findings aren't that surprising. Anyone who has listened to any of the big tech vendors talk about automated data centers and self-healing networks knows there is an unemployed admin on the other side of the equation. The other factor to add to the mix. IT spending may be going up, but so is the globalization of employment. Companies may be hiring more workers offshore. That hiring wouldn't show up in U.S. employment data.

Bartels' political argument is also notable. The technology industry could ultimately be seen as a job killer and you can almost hear the populist rhetoric now. More ironic: President Obama had dinner with tech bigwigs about innovation and putting folks back to work. What innovation takes away employment?

Forrester's data is an analysis of government data from the Bureau of Economic Analysis and Bureau of Labor Statistics.

Topics: CXO, IT Employment

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  • Take the "I" out of "IT" and you have a century-old story

    "Technology spending may be allowing companies to put off hiring and prolonging the jobless economic recovery"<br><br>That could have been a headline in 1890, 1930, 1970, or 2010. There's nothing new in deploying technology to make existing workers more efficient, whether it's a sewing machine, automated assembly line, computer, or robot.
    terry flores
    • RE: Griping about a jobless economic recovery? Blame IT spending

      @terry flores

      Yep. Technology has ALWAYS been a job killer. 1890, heck it goes back way further than that. :)

      Same with trade. You get an initial shock to a particular job market due to trade or new tech. If you are sitting in that shockwave it sucks. But long term things shift and new opportunities open.

      However, once we figure out decent machine vision and generalized world-dexterity, that will be the end of jobs getting re-absorbed in other places after they are lost. Unskilled labor will be completely screwed.
    • Doesn't this technology have to be built by someone?

      @terry flores

      Never mind. I forgot the people who build this stuff live in China.
      John Zern
    • RE: Griping about a jobless economic recovery? Blame IT spending

      @terry flores <br>During an economic downturn in the mid 1970's I was programming in California. I'll never forget a comment by then Governor Jerry Brown. Concerning high employment he said "Not everybody can be a computer programmer" a pretty secure job at the time.<br>With the rapid advent and proliferation of desktop computers a great demand for knowledgeable people provided many IT jobs. A degree not required. But give a programmer a job to do once he will grumble and do it. Give him the job twice and he'll program it. Why not just let the computers manage IT? It doesnt require a degree and not doesn't need to be offshored.<br>Now that Jerry Brown is Governor again have we gone full circle?
      • RE: Griping about a jobless economic recovery? Blame IT spending

        @techrepublic@... I don't think you understand that the modern technology is very complex. Millions of people turn on their phones or iPads or some other gadget and expect them to work, but behind the scenes people are working very hard to design and build the information technology to support that. It is no longer true that anyone can work in information technology. The field requires very high IQ, ability to adapt quickly, communicate at most efficient rate and method and be able to create very complex financial models. Most people coming from the poor education system in the US just don't cut it. It is hard to accept, but most people working in IT in the US today are as bright as a bag of rocks and colleges are not producing any rock stars. This is the main reason that jobs are going off shore. If a manager wants to hire some people to do X, why would he pay $100K for a person in the US who can barely meet the needs, when $30K in India get the same level of incompetence?

    I work in IT and for the past 8 years we have moved thousands of jobs offshore to reduce costs, the work still there just not done here anymore. For example my current project we are going to the Filippines to hire 40 analysts for a project here in TX... Blame offshoring not tech!
    • RE: Griping about a jobless economic recovery? Blame IT spending


      Offshoring CREATES jobs. In the Fortune 50 company where I worked, we hired 2 offshore employees for every job that we moved offshore.
    • Cheap IT skills


      True, most jobs in the US are outsourced into other countries. This is because of cheap labour. I even heard that Intel, which is a US company, have an intel cpu factory in manila, but that was also closed and transfered to China lately. Building CPUs in Manila is cheap but building it in China is cheaper.

      The issue here is cheap labour. Well if Americans can accept cheap salary while at the same time having amazing skills in IT (like programming, graphics designing etc) then outsourcing jobs to other countries won't happen.

      come to think about it.
  • It's far worse than 'just IT' Larry

    There has been a profound wholesale exodus of manufacturing jobs from the U.S. over a large span of years.

    Accelerants to that exodus include:

    o WTO
    o Free Trade (no such thing, ex. China Trade deficit)
    o NAFTA
    o CAFTA
    o Off-shore labor tax shelters
    o Outsourcing
    o Chinese currency manipulation
    o Heavy currency borrowing from China

    To put it bluntly, there is NO other way to get back those 'good paying jobs' unless we tilt back the playing field in our direction. And it won't happen overnight either. It will take determination and years to do. How?

    o Free Trade
    o Resign from WTO
    o Rescind NAFTA, CAFTA, Korean Free Trade agreements
    o Close off-shore tax loop holes
    o Make a criminal offense outsourcing any American Job
    o Allow employees in all States to freely join organizations to represent collectively, promote and defend their rights
    o Legislate 'Self Sufficiency' as a National Security Mandate
    o This last one is most important: Apply scaled Tariffs on imports against those countries who don't allow our entry into their markets.

    Money obtained from Tariffs would be strictly funded to new incubator business industrial development.

    Time for a big change.
    God Bless America!
    Dietrich T. Schmitz, ~ Your Linux Advocate
    • RE: Griping about a jobless economic recovery? Blame IT spending

      @Dietrich T. Schmitz, Your Linux Advocate

      Personally seems a bit excessive and has other costs that aren't obvious.

      Personally, I think that we should just refuse to allow companies that use employees at below US standards (read: minimum wage, health benefits, etc) to sell products or services in the U.S. We want to be competitive, not anti-competitive.
      • Excessive?


        Ask the millions of unemployed how they feel about it.
        What is excessive is the short-term profit taking mindset that has driven corporate American greed and lined the pockets of an elite few at the expense of hard-working people.

        You don't know what you are saying.
        God Bless America.
        Dietrich T. Schmitz, ~ Your Linux Advocate
      • RE: Griping about a jobless economic recovery? Blame IT spending


        "Ask the millions of unemployed how they feel about it."

        You are assuming that by doing the things you are talking about we would be better employed and wealthier, but there doesn't seem to be much historical basis for that. Refusing to trade in an effort to keep jobs going locally usually just results in everybody getting poorer.

        I'll grant you that companies current path is incredibly short-sighted and that some of the items you list are correct. But we also don't want to shut off companies from growing internationally, or shelter american companies from having to compete with international companies. Just look at the god-awful cars that the Russian and Iranian car industries built because there was no legal competition to get an idea of where that leads.

        I'm all for competing head-on with the world, so long as my competitors don't get to play with a loaded deck.

        For example, the founder of Foxconn has stated that he thinks having automated factories in the US rather than hordes of people in China would be quite cost-effective except he didn't want to have to deal with the US legal system.
    • RE: Griping about a jobless economic recovery? Blame IT spending

      @Dietrich T. Schmitz, Your Linux Advocate
      Yea right.
      The reult is higher cost which is passed on as higer price, resultign in lower sales, and few jobs. Restricting trade will not bring jobs but at lest you will not have to worry about walmart. We all can go back to shopping at Good Will.
      • Some people aren't capable of looking at &quot;repercussions&quot; and they'll look

        at problems simply and will look for simple results. The big picture escapes them.
    • Look at my list in a post below, and you might be able to figure out

      the real causes and a real way to get back those jobs and IT spending.
    • Your arguemet ignores progress and automation.

      @Dietrich T. Schmitz, Your Linux Advocate

      Business looks for the lowest cost/most efficiency (be it through automation, outsourcing jobs/needs to lower cost countries/regions, etc.). Jobs go away in areas/markets due to things like (in manufacturing) automation, which changes the skills requirement and decreases the manual requirements. IT has always been something that can be done anywhere in the world: Chine, Dubai, India, etc. (depends where the skills are at the lowest price point). America became inefficient in auto manufacturing when it could not adapt to changing requirements from Washington and consumers, while Japan and other countries that used automation were able to change/retool much quicker and thus become more profitable.

      Your arguments (and later reference to Ross Perot, who owned EDS which was acquired by HP, which shed (may still be in process) some 24000 jobs. Not a good choice!

      One question, why are you so bent on causing increased unemployment and suggesting strategies to trash the American worker/business? Do you really wish to suggest we should have higher unemployment? How much do you really hate your and other people having jobs (the net result of your suggestions)?

      Perhaps you like the notion of a slow adapting, undereducated populace? Why not just say that you like Americans to be fat and lazy rather than competitive in a quickly changing market(s)? Go back to collecting your unemployment insurance and whining about Washington!
  • Other things with the same direct effect on employment...

    Things that cause more unemployment as those things go higher:<br><br>Higher Taxes<br>Regulations<br>Unionization<br>Government control<br>More government hiring<br>More social programs<br>More dependency by people on government<br>Higher real estate prices or rent<br>More dependence on foreign oil<br>More dependence on foreign labor<br>More people in government who don't understand the private sector economy<br><br>I'm pretty sure there are many others, but that's just a few for now...
    • Rise and fall of Rome

      @adornoe@... <br><br>I agree, the above is true and correct in my opinion.<br><br><i>Higher Taxes<br>Regulations<br>Government control<br>More government hiring<br>More social programs<br>More dependency by people on government<br>More dependence on foreign oil<br>More dependence on foreign labor</i><br><br>I really think it's all because of complacency.<br>The crashing of US economy has already been predicted by Walter Staples in one of his books. He already knew around 25 years ago, upon publishing his book, that the US economy will fall if Americans continue to be 'couch potatoes' and complacent. <br><br>Staples mentioned the case of Rome on how it fell. You must have heard about Roman soldiers being very powerful and Rome has the most advanced civilization during its rise. But there ruler once claimed he want to feed his people and give every Roman family a bread to eat so they won't work. Then everybody received governments support and there's no need to work, but the powerful bodies of the once powerful romans were gone. And the whole country fell in the ensuing wars. All because of complacency. <br><br>edit:<br>Heck I even heard porn browsing cases inside NSA and Pentagon, speaking of complacency.
  • Another reason, and a major one...

    As more companies hire overseas to handle what used to be done within our country, the needed IT expenditures and IT hiring, are being transferred to those overseas operations, because, there will still be a need "over there" for IT to manage the operations and employees.

    I'll bet the analysis by Forrester doesn't account for the additional hiring and expenditures in IT being done "offshore".
  • Rethinking society

    At some point how wealth is distributed needs to be reconsidered. As more and more things become automated and the need for workers continues to plummet, how can a society function where there is nothing for a huge percentage of the population to do? Who is going to earn the money to purchase items? There need to be some thoughtful discussions on how society can function when 20 to 30% or more of the population isn't needed to do any work. If you end up with society where such a small percentage is earning most of the money and high percentages have no way to earn a living, you are inviting extreme social unrest. The economy works best when money is flowing through as many hands as possible. Up until now, they way to get money flowing through your hands was to work, but when the need for work disappears, society needs to develop another way for money to flow through people's hands, and another way for people to have a purposeful living.