Tough in the Trenches

Although employed U.S. engineers are starting to see their salaries rise, outsourcing has them fearing for their jobs

4 min read

No one needs to tell Chris Parkes that times are tough for engineers. The Silicon Valley circuit designer lost his job when the tech industry collapsed in 2001. After a fruitless year of job hunting, he figured his engineering career was over and started taking nursing courses.

But things have started to turn around for Parkes: earlier this year he was thrilled to land a job designing circuits for about the same salary he had at the end of the tech boom. Holding steady is a real plus in an era when just having a job is considered a boon and fears about a jobless recovery mount. "There's not a high demand for people yet," says Steve Patchel, senior consultant at the human resources and financial management firm Watson Wyatt Worldwide, in Santa Clara, Calif. The U.S. Department of Labor paints an even grimmer picture: the first three months of this year have seen the EE unemployment rate rise from 4.5 percent to 5.3 percent.

Though he's back in engineering, 46-year-old Parkes wonders whether he'll be able to remain in this field until his retirement. "I'm concerned about any profession that looks only at the economics and decides that work can be done overseas," Parkes says. "If this job should vaporize, I don't see any other option than to go back to nursing."

And it's the thought of losing jobs to low-wage countries that has many U.S. engineers worried. A senior software engineer in India earned an average of US $11 400 last year, according to Payscale Inc., of Seattle, which collects salary information. In contrast, the median income of a U.S. software engineer was about $100 000, according to the latest IEEE-USA salary survey.

As the trend to a truly global economy continues, observers say that the only sure way to create jobs is to pioneer new ground. Companies at the leading edge will have more job openings than those that compete on price. "It's a mixed bag," says Ray Alderman, executive director of the VMEbus International Trade Association, in Fountain Valley, Ariz. "Some are hiring, mostly companies involved in advanced designs. Those that make commodity products aren't hiring."

There's concern for the future, too, that offshore competitors will move into leading-edge segments, just as countries that once took manufacturing jobs from U.S. workers have now moved up to taking jobs involving more technical work. "We've always had the edge on innovation, and we've faced competition in the area of efficient production," says Nick Corcodilos, founder of the Ask The Headhunter Web site ( "But what's coming is competition [from around the world] in innovation."

Unlike The H-1b Visa Issue , which has concerned many U.S. engineers in recent years, the fear of outsourcing is an international phenomenon. "Scotland has seen manufacturing and general IT jobs move to India and China," says Hazel Sinclair, who is project manager at, a government-funded agency that helps create jobs. This concern has helped keep a lid on salaries in Scotland. "Over the last year, it's been fairly flat," Sinclair says. But a glimmer of hope is on the horizon: individual performance-based bonuses are returning, she notes.

Things are a little better on the U.S. side of the Atlantic for those who managed to hold onto their jobs through the downturn. Pay freezes are finally starting to thaw. "Unlike the last few years, now most companies are granting modest salary increases," says Patchel. Annual raises are generally averaging 3 to 4 percent, he adds.

"If this job should vaporize, I don't see any other option than to go back to nursing"--Chris Parkes

In contrast, salaries in India are rising sharply. A representative of the Hong Kong branch of Hewitt Associates, an outsourcing and consulting firm, says that raises for professionals and technologists rose 12.6 percent in 2003, with expectations of a 13.4 percent increase this year. Though the percentage increase is based on a comparatively low salary, double-digit rises are a good indicator of a hot job market.

Even though raises are returning, many surveys show that U.S. engineers are generally making less now than they did at the end of the high-tech boom. And the most recent college graduates in engineering and computer science still make less than their counterparts in 2001, despite seeing increases in average salary offers over 2003, according to the National Association of Colleges and Employers in Bethlehem, Pa.

Wages aren't the only area where engineers are starting to see some signs of improving income. As corporate balance sheets shift from red to black, wealth is being shared.

"I think we're seeing a return of cash incentives like profit sharing and bonuses," Patchel says. Those bonuses are close to past amounts of 2 to 7 percent of salaries, he notes.

There's also been a resurgence in the desirability of stock options, which took a hit when share prices plummeted below the value of the options. Questions about how corporations treat taxation of stock options are being raised, but options are still popular at many companies, especially as a way to retain employees. However, the days when stock options were given out almost as freely as coffee are long gone. Options are being doled out selectively, with eligibility for options back to what it was in the late 1990s, before the roaring economy made stock options common at all levels. "What's different is that we're seeing smaller amounts go to fewer people," says Patchel.

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