The Software and Engineering Industries: Threatened by Technological Change?

Goodman, William C., Monthly Labor Review

The computer services industry, which includes the makers of computer software, and the engineering industry, which designs a vast range of physical products, are similar in that both partake of the important role of originating and changing technology. Therefore, jobs in the two industries depend, to a great extent, on technological progress. Ironically, technology also may reduce the number of careers in these industries, as advanced computer tools decrease the amount of labor required to design a product, be it largely intellectual (as in the case of a software application) or physical (as in the case of a new weapon, a household appliance, or an office product). A variety of advanced computer tools are already widely used in the two industries and in some cases drastically reduce the requirements for labor. Jobs in the two industries, then, depend on technological progress for their existence, yet are vulnerable to technologically enhanced efficiency.(1)

At least one additional consequence of technological progress is highly relevant to job growth or loss in the two industries: advances in communications technologies, including links between computers, now make it much more practical to have programming or engineering performed overseas; as a result, both foreign competition for the business of U.S. clients and sales of U.S. services abroad have increased.

Certain social and political changes also have a considerable impact on the number of jobs in the two industries. For example, during the cold war, the development of advanced weapons contributed strongly to increasing demand for engineering and computer services.(2) With the end of the war, advanced weaponry became less of an influence on demand. Recently, corporate downsizing has been a major influence on the number of jobs in the two industries,(3) but not in the way one might think initially, as a later section will explain.

Since 1972, the combined number of jobs in the engineering and computer services industries has increased by more than 300 percent, to about 1.9 million. Jobs in engineering and architectural services (primarily engineering) increased by about 140 percent, to a level of 800,000. Jobs in computer services increased to about 1.0 times their number in 1972, reaching 1.0 million in 1995. But trends during the period of more than two decades have not been steady, with a severe slowdown in growth occurring in recent years.

This article describes the nature of the two industries in some detail, explains the major developments that affect employment in the industries, and examines the impact of those developments on the number of jobs in engineering and computer service firms.

What the industries produce

Engineering services exhibit great variety. Engineering firms may design ships, boats, machines of any kind (including machine tools used in factories to produce other products), advanced weapons, public works such as bridges or public utilities, petroleum extraction systems, airplanes, or any of the components of such products.(4) The engineering industry derives income, employment, and growth from a broad range of services for a broad range of clients.(5) Table 1 indicates the distribution of the industry's sales among the various types of clients.

Table 1. Demand for computer services and engineering
         services, by purchaser's industry, 1993

[In billions of dollars]
                                      Purchases of
    Purchasing industry
           group                  Computer    Engineering
                                  services    services

Mining                              $0.4        $0.8
Construction                          .0        37.9
Manufacturing                        6.0         5.8
Transportation,
  communications, and utilities      9.0         2.2
Wholesale trade                       .8          .4
Retail trade                         5.2          .2
Finance, insurance, and
  real estate                       34.3         1.4
Services                            45.6         5.9
Defense(1)                           3.2         6.1
Government enterprise(2)              .5         3.5
State and local government(1)        9.1         (3)
Personal consumption(1)              2.1         (4)

(1) Final demand, as opposed to use in making a product or
service.
(2) Includes only those government entities, such as the
Postal Service,
which sell a product or service.
(3) Not available
(4) approximately zero.

Source: Derived from tables provided by the Office of Employment
Projections, Bureau of Labor Statistics.

Variety also characterizes the computer services industry, which includes custom computer programming for specific clients, typically from the corporate or government sector. The industry also includes prepackaged software companies, which develop and mass-produce software sold in stores or installed in computers prior to sale, for business or individual use. Widely sold, mass-produced software ranges from amusements for children and adolescents to high-powered business applications. Computer integrated systems design, which entails both selecting hardware and developing software to make a custom system, is included as well, as are information retrieval systems for quickly disseminating news or specialized information (for example, the Dow-Jones News Retrieval Service and companies such as CompuServe, which provide public access to the Internet). Computer-related consulting, custom data-processing services, …

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Publication information: Article title: The Software and Engineering Industries: Threatened by Technological Change?. Contributors: Goodman, William C. - Author. Journal title: Monthly Labor Review. Volume: 119. Issue: 8 Publication date: August 1996. Page number: 37+. © 1999 U.S. Bureau of Labor Statistics. COPYRIGHT 1996 Gale Group.

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