Wage Capitulation and Demand for Remedial Skills Result in Decrease in the Yoh Index of Technology Wages

PHILADELPHIA—October 14, 2010—As struggling employment market continues to drag down the overall American economy, the latest findings from the Yoh Index of Technology Wages, which since 2001 has been benchmarking technical wages in information technology, life sciences, engineering, health care, aerospace and defense, show that the quarter wrapped up with a 7.8 percent year over year decline in actual wages (Figure 1). The Quarterly Index average of 108.57 is the lowest since September of 2006 (Figure 2). Ironically, the dip comes after the first two quarters of 2010 showed a slightly improving job market, as expressed by wage rates for skilled employees.

“We see this quarter’s decline as further evidence of a sluggish recovery that continues to impact demand for skilled workers, and has forced job seekers to lower their wage expectations—even for highly skilled positions,” Lori Schultz, President of Yoh. This wage capitulation, or the willingness of job seekers to accept a job offer today because they do not expect tomorrow’s opportunities to hold much in the way of increased pay, was reported on extensively in Yoh’s Q2 Index Report.

Necessity and Regulatory Uncertainty

According to Yoh analysts, the Q3 decline was amplified by a shift away from strategic projects that demand higher level skill sets toward more commoditized projects focused on lower level objectives. For instance, on the technical side, demand for high level programmers and engineering positions fell as companies focused on simply solidifying their market positions by enhancing call center services or help desk capabilities. At the same time, skilled positions in health care and clinical research have suffered as organizations work to make sense of health care reform and delay investments in skills and people until the regulatory environment takes focus. Impact was also being felt by the quickly approaching mid-term elections, which many employers hope will provide greater guidance into the government’s approach to taxes and open markets.

Continues Schultz, “This shift in demand, to positions lower down on the technical ladder, negatively impacted the Yoh Index and is supported by a number of other leading economic indicators.”

For instance, consumer confidence, which had improved in August, retreated in September, according to The Conference Board, surprising many market watchers. “Employment is closely tied to consumer confidence on both ends of a burning candle,” says Schultz. “As confidence wanes, employers delay expansion and hiring. Fewer jobs, especially for skilled workers, negatively impacts purchasing, which can lead to further suppression of job creation. Despite these conditions, the need for maintenance projects, as opposed to higher paying growth initiatives, has led to steady demand for lower level technical temporary professionals whose wage demands skew lower.”

Technology Cash on Hand Breeds Hope

The news, however, is not all bad. Regionally, demand for higher skilled temporary employees was strong, as measured by wage rates reported in the Yoh Index. In the Pacific Northwest, for instance, wage rates for temporary highly skilled workers led the nation at $59.12 an hour. Similarly, the New York Metro area recorded wage rates for temporary highly skilled employees at $56.09 an hour.

Furthermore, there is evidence that corporations will be forced to move more boldly in the future as the economy turns and delayed or mothballed projects come back online. Corporate cash reserves, an indicator of the industry’s pent up ability to invest when presented with opportunities, are among the highest ever measured for select sectors of the economy. For instance, many technology companies are flush with cash, which places them at a unique advantage in a labor market where wages of highly skilled workers have been suppressed during an extended economic downturn.

“Ironically, those companies now sit in the enviable position of being able to purchase highly skilled workers at 2006 wages, according to the Yoh Index,” says Schultz. “As shareholder expectations for profits escalate, and those expectations become increasingly difficult to achieve through cost cutting, growth will be a primary driver of value, which will require highly skilled labor to manage more sophisticated initiatives. As has historically been the case, temporary labor will play a critical role in the economic reversal, as companies turn to a more agile and flexible workforce to benefit from early opportunities that present themselves in a rebounding economy.”

Yoh’s Recommendations:
• Exploit Quality: The current wage advantage suggests there is value to be uncovered by taking inventory of the current use of temporary professionals and increasing the investment where measured success has been well documented.
• Accelerate Strategic Projects: Technology companies that find themselves rife with cash should consider accelerating timetables for more strategic projects. This will allow them to capitalize on the current suppressed temporary technical wages.
• Workforce Composition Analysis: The current wage advantage for consumers of temporary staff must be considered in strategic workforce planning within the next six months. Managing temporary staff terms aggressively against co-employment regulations will have significant, positive fiscal benefits to overall labor expense.

For more information, please visit yoh.com/yohindex or www.theseamlessworkforce.com.

For over 70 years, Yoh has provided the talent needed for the jobs and projects critical to our client’s success, by providing comprehensive workforce solutions that focus on Aerospace and Defense, Engineering, Federal Services, Health Care, Life Sciences, Information Technology and Telecommunications. Yoh fulfills immediate resource needs and delivers enterprise workforce solutions, including Managed Services, Recruitment Process Outsourcing, Vendor Management Systems, Independent Contractor Compliance, and Payroll Services. For more information, visit yoh.com.

Yoh is a part of Yoh Services LLC, a Day & Zimmermann Company.

Day & Zimmermann’s 24,000 employees provide industrial, defense and workforce solutions to a broad base of commercial and government customers. Operating from more than 150 worldwide locations with 2.2 Billion USD in revenues, the Day & Zimmermann family of companies is currently ranked as one of the largest private companies in America by Forbes and is a former winner of the U.S. National Family Business of the Year award. Founded in 1901 and headquartered in Philadelphia, PA, Day & Zimmermann companies today provide engineering, construction and maintenance services, and staffing services to the commercial and government sector, and munitions products, security, logistics, equipment maintenance and facilities management services to the Department of Defense, other government groups and defense industry contractors. For more information, visit http://www.dayzim.com.

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Figure 1: Yoh Index of Technology Wages by Quarter: http://www.gregoryfca.com/blogs/yoh/images/Q3YohIndexTechWagesQ3.jpg

Figure 2: Yoh Index of Technology Wages Q3 2010: http://www.gregoryfca.com/blogs/yoh/images/Q3YohIndexbyQuarter.jpg