Yoh Index of Technology Wages Shows Significant Opportunity for Employers

PHILADELPHIA—July 28, 2010—The quarterly average of 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, rose in the second quarter of 2010 for the first time since the second quarter of 2009 (see Figure 1). But behind the quarterly numbers, a month-by-month analysis of actual wages (see Figure 2) reveals a less positive story for the economy as a whole, but one of tremendous opportunity for employers.

 

Overall, Yoh saw an April increase in the Index of 0.29 percent. This increase came on the heels of a March Index increase of 2.33 percent, which brought optimism to our first quarter report, issued in April of 2010. But like much of the American economy, wage indicators turned negative in May and June as volatility in the stock market, increased concern over European debt, and the expiration of government stimulus spending pushed down wages. Ironically, even as wages fell for May and June, overall demand for highly skilled technical workers increased, as seen across all Yoh industry sectors.

 

According to Lori Schultz, President of Yoh, “This Inverted Wage Curve, where demand for skilled workers is increasing while wages are decreasing, is extraordinarily rare, and requires a willing workforce. The circumstances open up strong opportunities for smart companies to increase productivity.”

 

 

Under normalized economic conditions, increased demand for highly skilled employees results in increased wages, as was the case in March and April of 2010. But the second quarter Index results show that even while corporations increased their use of highly skilled temporary employees, the rate they were willing to pay for this talent moderated and fell.

 

This decoupling of increased demand from the wage rate suggests an opportunity for companies to improve productivity, while positioning themselves for enhancing earnings due to predicated future increases in economic opportunity. With skilled employees willing to work for less, employers have the opportunity to lock in labor—even if it is on a temporary basis—at opportunistic wages and rates.

 

There is evidence that this may already be happening. In June alone, 13 of 18 industries reported increased growth, according to ISM’s Manufacturing Index. At the same time, three-quarters of companies are expected to beat last year’s earnings by double digits. To realize such earnings potential, companies must take advantage of this suppressed wage environment while it lasts by accelerating projects once moth-balled due to a deep worldwide recession. The deployment of temporary, highly skilled teams of professionals is one way to accomplish this goal while side-stepping the risks of long-term commitments in a still unstable economy.

 

 

Why would employees work for less when demand for talent is rising? Employee capitulation in the labor market is driven not just by real supply and demand, but also by expectation. Employees capitulate to lower wage offers today when they do not expect tomorrow’s opportunities to hold much in the way of increased pay. Their calculus is driven by the loss of today’s wages balanced against the chance that tomorrow’s job offer will come at an increased rate.

 

At the same time, insipient long-term joblessness has preconditioned many highly trained professionals to accept a suppressed wage rate under temporary circumstances as a first toe back into the employment water. This phenomenon is more than simple corporate desire to do more with less. Rather, in order to achieve real productivity and benefit from future earnings gains, a labor market must exist where offers for work at lower wages will be accepted by a level of talent necessary to realize corporate objectives.

 

Considering that temporary employees are being added to the workforce in record numbers (379,000 since September of 2009 and 20,500 in June 2010), this quarter’s Yoh Index suggests that conditions now exist that allow employers to hire talent at reduced fees, even as demand is increasing for this talent due to a strengthening economy. Employers in a range of industries can now play this hand.

 

For instance, Information Technology, which had been hit hard by the recent recession, now stands at the edge of an abyss. Delayed projects—in security, cloud computing and consumerization—are now affecting corporate ability to protect and comply, as well as capitalize on increased productivity and improved customer service. A capitulating labor force provides an excellent environment to instigate high value IT projects using the flexibility and less-riskier route of temporary talent.

 

Health care and life sciences face similar opportunities. The uncertainty of health care reform has delayed any number of projects that would have gone forward without government interference. Moderated wage expectation of talent workers provides a path to opportunity, whereby these programs can be deployed at lower wage rates, on a variable cost basis, sheltering the corporation from the risk of a changing regulatory environment where ground rules have yet to be set in stone.

 

 

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

 

ABOUT YOH
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, Healthcare, 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.

 

ABOUT DAY & ZIMMERMANN
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 architectural-engineering-construction services, power plant maintenance, modification and specialty services, security services and staffing services to businesses and government agencies, and munitions production, equipment maintenance and facilities management services to the Department of Defense. For more information, visit http://www.dayzim.com.