Letters-to-the-Editor

Date	Author	Subject
12/05	Eugene I. Gordon	IEEE-USA Urges Congress to Extend R&D Credit
2/05	Mark Carangi	Outsourcing or Just Bad Management?
10/04	Mark Carangi	New Jersey Works to Protect America jobs for Americans (Maybe!)

IEEE North Jersey Section

IEEE-USA Urges Congress to Extend R&D Credit

By: Eugene I. Gordon

IEEE Life Fellow

To the Editor:

I want to comment on the item: IEEE-USA Urges Congress to Extend R&D Credit. Washington (27 October 2005) - IEEE-USA joined with the Information Technology Association of America, the American Electronics Association, the Electronic Industries Alliance and others in urging Congress to extend and strengthen the Research and Experimentation Tax Credit (R&D credit) before it expires on 31 December. It endorsed bills pending before the Senate (S.627) and House (H.R. 1736) that would significantly strengthen the current R&D credit.

It was stated that the credit allows companies to devote more money to research and development than they would otherwise. As noted in the letter, R&D contributes many positive economic benefits to the United States, including "increased revenue streams to U.S. companies that enhance their ability to hire employees, purchase capital goods, pay dividends to shareholders and contribute to a strong U.S. tax base."

The points made are valid but the key points were missing. Strong R&D activity historically has been the basis for the strong innovative state of the U.S. I argue that most innovations leading to enhanced industrial base, job creation, incentive for young people to follow a career in science and/or engineering, and improvement in quality of life have come from industry, not academia. Moreover, in contrast to industry the government mostly supports the R&D work in academia. Indeed continued production of PhDs by academia in the face of reduced R&D activity in industry is wasteful and does not serve the U.S. We have far too many PhDs as it is, given the current level of R&D and job availability.

Increased R&D, the resulting increased incentive for students to train for newly available jobs and new products and capabilities will bring manufacturing and jobs back to the U.S. It will greatly strengthen our economy, our ability to deal with terrorism, our military, our ability to deal with infectious and other diseases, our ability to anticipate natural disasters, our standing in the world, and improve our quality of life.

As a member of an NAE panel circa 1980 I can state that we were advocating increased tax incentives for R&D. AT&T Bells research was mostly supported by a 1% tax on telephone bills. We all know how effective that was. It is certainly arguable that increased R&D tax credits for industry would be more fruitful than reduced tax rates for the wealthy.

Outsourcing or Just Bad Management?

By: Mark Carangi

IEEE Senior Member

The recently completed IEEE-USA Salary & Fringe Benefit Survey calculated the median income for Electro Technology and Information Technology Professionals (defined as electrical and electronics engineers, computer hardware and software engineers, and computer scientists and system analysts) declined for the first time in 31 years.

Why the decrease? IEEE-USA President John Steadman stated, "A host of factors, from off shoring and increased use of guest worker visas, to rising health insurance costs and global competition, are putting downward pressure on wages for U.S. high-tech workers. This is certainly true, but possibly other factors are at work and may be even a more significant cause.

A look at the Occupational Employment Statistics (OES) Survey data from the US Bureau of Labor Statistics (http://stats.bls.gov/

) may offer another possible cause for the US High-Tech employment slowdown. A summary of the BLS data based on the IEEE – USA definition of Electro Technology and Information Technology Professions (hereafter referred to as ETITP) is presented here.

According to the BLS data, and shown in the following charts, from 1999 to 2003 ETITP employment in the US Telecom industry went from a high of 766,000 in 2000 to a low of 540,000 in 2002. A difference of more than 225,000! It has since recovered some but is still down more than 50,000 from the high. Over the same period ETITP employment in all industries fell just slightly (probably due to the steep drop in Telecom) and, for 2003, is actually above the 1999 level!

Also shown is the ETITP median wage over the same period for all industries and telecom. The drop in wages for ETITP in Telecom is horrendous.

The drop in telecom, in both ETITP employment and median wages, is certainly significant. But why did it happen? It’s unlikely that off shoring, guest workers or global competition combined could cause such a dramatic trend in such a sort period of time. So, what’s up? Well, the Telecom Act of 1996 opened the industry to a free for all and just like the deregulation of banking (remember the S&L mess) and the airline industry before it. Telecom deregulation exposed just how poorly managed the industry was. Once freed from predictable rules and regulations management of one telecom firm after another quickly demonstrated just how inept they were. And, no surprise, just like the S&L industry and the airline industry before it what’s left of much of the telecom industry is a financial and administrative mess.

You may not agree with this conclusion but for more information supporting this position you may want to read a book titled, “Optical Illusions: Lucent and The Crash of Telecom”, by Lisa Endlich. The hysteria that infected the telecom industry, but especially Lucent, in that late 1990’s was a tragedy that cost millions of Americas billions of dollars and lost careers.

New Jersey Works to Protect America jobs for Americans (Maybe!)

By: Mark Carangi

IEEE Senior Member

From an article by Allison Linn, AP Business Writer, date Sept 14:

“The U.S. information tech sector lost 403,300 jobs between March 2001 and this past April, and the market for tech workers remains bleak, according to a new report. Perhaps more surprising, just over half of those jobs -- 206,300 -- were lost after experts declared the recession over in November 2001, say the researchers from the University of Illinois-Chicago. In all, the researchers said, the job market for high-tech workers shrank by 18.8 percent, to 1,743,500 over the period studied”.

Meanwhile, the NJ sate legislator has proposed several bills to allegedly protect American jobs when government contracts are involved. In fact Gov McGreevey recently signed an executive order supported by organized labor “that strongly discourages state agencies from hiring contractors that rely on overseas workers” (the Star Ledger Friday Sept 10 pg 30). At least six other states (Alaska, Arizona, Michigan, Minnesota, Missouri and North Carolina) have signed executive orders either restricting or outright banning “outsourcing”. Many other states have similar proposed bills in progress. Is this good for engineers or does it just protect jobs for union members? Will it just cost tax payers more for the same service? And will it eventually result in less employment? My opinion? This is smoke and mirrors and will do nothing to reverse the decline in hi tech in the US.

It should be noted that legislation to impose similar restrictions passed the NJ senate twice but was held up in the state assembly each time. NJ State Senator Shirley Turner (D-Mercer) has proposed a bill (Senate, No 370, introduced Jan 13, 2004) to regulate call center activity. A few other state senators, including Bucco, B Smith, Allen and Baer, have signed on but it appears that there is no equivalent assembly bill. Sen. Turner believes legislation is needed since an executive order can be rescinded by a future governor. So, it looks like we have a case of feel good legislation that makes it look like the state is doing something to protect jobs when in fact it’s only a short term solution.

Does this legislation protect careers for engineers? I doubt it. In fact, in my opinion, it seems to be totally aimed at protecting union jobs backed by big labor unions such as the AFL-CIO. My guess is this order will increase costs to tax payers, will provide no increased opportunities for engineers, and may well result in less employment.

Some other bills on the subject of job protection proposed by the NJ state legislator include:

NJ Assembly Bill AR184 (introduced June 3, 2004): Creates a commission to study the loss of New Jersey jobs through outsourcing and off-shoring.

NJ Senate Bill S1452 (introduced April 29, 2004): Re-designates the state Department of Labor as the Department of Labor and Workforce Development.

NJ Senate Bill S494 as Amended (Feb 24, 2004): This bill as amended requires that every state contract primarily for the performance of services must include provisions that specify all services must be performed in the US.

NJ Assembly Bill A840 (introduced Jan 13, 2004): Provides for the regulation of certain call center communications by the Division of Consumer Affairs.

To identify your state legislators and for additional information on the legislative bills listed above go to:

http://www.njleg.state.nj.us and click the appropriate links.

Want a position in hi tech? Want an engineering career? It’s time for engineers to get involved. If we continue to sit on the sidelines and watch the parade go by engineering careers in this country will continue to decline.