Academic journal article Journal of Economics and Economic Education Research

Wages and Voluntary Labor Turnover: Comparing It Workers with Other Professionals

Academic journal article Journal of Economics and Economic Education Research

Wages and Voluntary Labor Turnover: Comparing It Workers with Other Professionals

Article excerpt

ABSTRACT

There is a body of literature suggesting that a new labor contract between employer and employee is emerging which places less value on loyalty and long term employment relationships. Some have argued that the use of computing technology contributes to this by making skills more common and transferable across organizations, thereby encouraging organizations to hire away the skilled workers of their competitors. Concern about voluntary job change specifically among IT professionals was heightened during the IT boom of the late 1990s.

This study examines monthly employment, wage, and job change data from 1998 through the beginning of 2001. IT professionals were compared to other technical and managerial workers. In addition, IT workers employed in the computer services industry (the sector which includes software companies and IT consulting firms) were examined as a distinct subgroup of IT workers. IT professionals who changed jobs were found to have gained a small wage premium, while other professional workers did not benefit from job change. In addition, voluntary job change rates were found to be high for IT professionals in the computer services industry, while IT professionals in other industries were no more likely to change jobs than other professional workers.

INTRODUCTION

During the late 1990's, U.S. IT employers expressed substantial concern over what they perceived to be a substantial shortage of skilled IT workers with rapidly escalating wage rates and high rates of voluntary job change among IT workers with critical skills. Not surprisingly, many IT workers and groups representing them expressed a very different view of the nature and magnitude of this problem. They argued that employers were using the perceived shortage of IT workers to justify visa exemptions to bring in foreign workers at wages that undercut those required to hire and retain experienced U.S. workers. They cited the lack of evidence of rapid wage increases or unusually rapid employment growth across the IT profession, arguing that rapid employment growth was occurring only at the highest skill levels (Bernstein & Hamm, 1998).

The performance of the IT labor market during this period of market stress is important since it is likely that similar pressures will occur in future periods of strong economic growth. Perhaps more importantly, IT wage and turnover behavior during this period are of interest for what they can tell us about the nature of the employment relationship in the IT profession and perhaps for what they can tell us about changes in the employment relationship across all professional occupations. The academic literature provides a number of potential explanations of and prescriptions for dealing with the high job turnover rates of IT workers. Theories range from those that focus on unique aspects of the IT worker and IT jobs to those that suggest that the changing IT job market simply reflects changes, and perhaps represents the vanguard of changes, that are impacting employment relationships across all industries and occupations. In addition, the economic theory of human capital suggests the nature of a worker's skill set (as determined by such things as formal education and formal and informal on-the-job training) is a key factor determining the likelihood of job turnover.

In this study, we will examine alternative theories postulated to explain IT job turnover and determine the extent to which these theories are competing or reinforcing in terms of expected labor market behavior of IT workers. Then, using data from the US Current Population Survey (CPS), we will evaluate the degree to which the alternative theories are supported by US labor market data.

HUMAN CAPITAL THEORY AND TRADITIONAL ECONOMIC THEORY

In a broad sense, wage structures and labor turnover can be explained by the theory of human capital as developed by Becker (1962). According to human capital theory, investments in skill acquisition come at a cost since time that could have been used in production is sacrificed to acquire the skills. …

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