Prism Magazine September 2001



An Economy in Turmoil

- By David Brindley


In The Picture of Dorian Gray, the moral fantasy novel by Oscar Wilde, the title character retains his youth and handsome looks over the years while a hidden portrait of him records every blemish and evil deed, morphing into someone who looks truly hideous.

More and more, Wilde's classic pact-with-the-devil tale is a metaphor for the New Economy, which was supposed to have replaced the ups and downs of economic cycles of yore. There are clear signs that the Old Economy is rearing its ugly head. And it's not a pretty picture.

Over the past year, U.S. manufacturers have laid off more than 675,000 employees; dying dot-coms alone have put an estimated 100,000 people out of work. The longest economic expansion on record may have come to an end. Last June, the National Bureau of Economic Research, the official arbiter of business cycles, reported that there is now "the possibility that a recession began recently."

It's clear that high tech, hit with a one-two punch of a broader slowdown and retrenchment in the telecom sector, has suffered the most. But the effects of a slowing economy are rippling through every sector of the economy--making it a little tougher for new engineering grads.

Just ask Nathan Campeau what a difference a year can make. Last fall the bright, enthusiastic and self-assured civil engineering senior at George Washington University in Washington, D.C. approached his job search with high expectations. And why not? After all, he had seen previous graduates garner offers by the bucketful and had heard rumors of signing bonuses that would make non-techies bitter with envy.

"When my friends in the class of 2000 applied to companies, they were given an interview on the spot." Campeau says. "Basically the interview was just to make sure that they weren't going to blow the place up, because every place needed warm bodies."

As such, the valedictorian thought he had it made when he started sending out resumes. But as Campeau quickly learned, when high-tech fever catches a serious cold, everyone sneezes. Campeau's thirty-odd job inquiries led to only a handful of interviews, and even fewer offers.

"I didn't get as many job offers as I would've liked, but I did get a job offer for the job that I wanted," Campeau explains. That was with Accenture, which included a signing bonus and a position in Minneapolis, his hometown, starting in July. He was all set--or so he thought.

In June, Campeau learned that Accenture had pushed back his starting date until as late as next February. Three days later, due to a slowdown in client spending and a decrease in its attrition rate, the company announced layoffs. At that point, Campeau decided that it wasn't such a good idea to start his career with a company that was laying off people. "When I spoke with Accenture and turned down the offer, their response was "Oh, good," Campeau says with a shrug.

"I didn't get as many job offers as I would've liked, but I did get a job offer for the job that I wanted," Campeau explains . . . He was all set--or so he thought.



Even so, engineering schools across the country are actually taking the slowing economy in stride. Most schools contacted for this article reported only a mild impact on job prospects for their students. Some even welcomed the cooling off as a chance to step back from the hurly-burly pace of a roaring economy.

"The overheated technology economy can create short-term distortions that are hard to deal with," says Dick Yue, associate dean of engineering at the Massachusetts Institute of Technology. "A much more reasoned growth rate is better. So the slowing economy is a positive development in that we can think in the medium- to long-term and allocate resources more wisely." Rick McClintic, associate director of Penn State's engineering co-op, says that there were fewer signing bonuses this year and stock options weren't as attractive, but there were still good options for open-minded students who didn't wait until the last minute to start looking for jobs. "Students are focusing more on traditional engineering companies rather than dot-coms and consulting, because a lot of those opportunities dried up." In general, McClintic says that engineers are the most aggressively recruited students at Penn State.

Marva Gumbs, executive director for George Washington University's career center, says that technical fields continue to have an overwhelming need for new talent. "Technology is continuing to grow--it's not stopping. The perks were not as generous as they were in the past, but I think, quite frankly, that some of them were over the top." Gumbs points out that the federal government is anticipating a big loss of the baby boomer workforce by 2005, so it's looking to colleges for new talent. "The federal government could become the new big employer," Gumbs says.

As for job prospects, many firms anticipate hiring in the fall. Job fairs during the coming semester at universities across the country are booked to capacity. And while companies could cancel if the economy doesn't improve, their plans for on-campus recruiting belie any reservations they may have in this economic climate. They want to be prepared for when the economy turns around.

And while some job offers have been postponed--or even rescinded--the offers are still coming, if only at a slower pace. Rather than getting six or seven offers, as students in previous years have, the members of the class of 2001 may be getting three or four.

"The impact of the economic slowdown has been relatively insignificant," says Kathy Sims, director of the career center at the University of California at Los Angeles. "Students are still considering multiple offers." Sims also notes that the school had its best recruiting year ever, with 250 organizations participating in career fairs this year, 10 percent higher than the previous year.

While the slowing economy has impacted students in computer science and electrical engineering fields at MIT, "most of the other engineering fields have not been affected," says Chris Pratt, director of career services. Nearly 600 employers attended Penn State's full-time technical recruiting job fair this past year, and the waiting list had 100 companies.

A report issued by the Information Technology Association of America last April concurs, showing that while demand for some high-tech jobs had slowed this year, companies are still looking for workers who possess a strong grounding in technology.

Those findings are also borne out in the experience of two recent engineering graduates who found that while some opportunities dried up, there are still jobs to be had in many engineering fields.

Take Nandi Cooper, who graduated with a bachelor's in mechanical engineering from UCLA this year. Feeling burned out after years of arduous classes, Cooper says she "was looking at everything but engineering," and had her eye on a consulting career. But when it came to interviewing in the winter quarter, Cooper was out of luck since consulting companies were only recruiting for summer positions. Instead, Cooper took a full-time position with Boeing Satellite Systems in El Segundo, California, where she is currently working as a dynamics analyst. "A lot of my peers were considering not going into engineering but pretty much all of us have ended up going that route."

It's a route that Kristy McDonnell is taking as well. After graduating with a master's in civil engineering from George Washington University, McDonnell was all set to start working at a small energy consulting firm in Annapolis, Maryland, only to learn that the company had just gone through a merger that left her position in jeopardy. "I haven't written them off yet," says a wary McDonnell. "I'd like to work for them if it's stable, but I'm not sure that I want to start there and a couple of weeks later get laid off." In the meantime, she started looking for a new job. Still, McDonnell remains optimistic on her chances: "Starting over again, I'm more frustrated than I am worried. Engineers have a little easier time getting jobs even in a slowing economy than other students. They seem to be more marketable and more diverse in the jobs they can accept."



While that may be true, in a tightening labor market, new graduates may have to work a little harder to land the plum jobs--especially as they find themselves competing with more experienced engineers caught in the recent wave of layoffs.

MIT's Chris Pratt says that "students will need to be more proactive and focused in their job search--knowing what it is they are interested in doing. Having projects that have an industry connection is a plus."

Having a backup plan is a good idea, too. After Nathan Campeau's job fell through with Accenture, he decided to enroll in a master's program at George Washington. "Luckily, I had an offer on the table to go to grad school. I'm one of the fortunate ones in that I had a backup plan, even though I didn't realize I had a backup plan."

It's not just students and schools that need to get smarter, though. The same goes for companies that have to learn new ways to deal with the ups and downs of the New Economy, not least of all in managing the engineering workforce. That is a lesson that Cisco Systems, the San Jose, California-based Internet hardware manufacturer, had to learn the hard way.

Just last year, Cisco reigned as the most valuable corporation on earth, but it was slow to react after orders started tapering off last fall. Mistakenly anticipating higher sales, the company boosted its ranks by 5,000 workers between last November and March this year. But as business worsened, Cisco reversed gears and announced 8,500 layoffs, 18 percent of total employment, in April and is reported to be paying severance to college students who decline promised job offers. In a rare burst of corporate honesty, chief executive John Chambers conceded in a Wall Street Journal article that he probably could have avoided layoffs if he had implemented a hiring freeze last fall.

But even as it is cutting costs by slashing its workforce, Cisco has implemented an unusual program that seeks to keep employees within its family--the easier to lure back valuable workers once its fortunes rebound. In lieu of a severance package, employees can opt to receive one-third their salary, all benefits and stock options for a year if they work at a nonprofit group already associated with Cisco. So far, more than 200 employees have expressed interest in the alternative package.

At Accenture, rather than laying off its professional staff, the company announced last June that it was encouraging up to 800 consultants to take voluntary sabbaticals for up to one year and receive 20 percent of their salaries plus full benefits. In addition to saving substantial amounts on wages, the program allows the company to save on recruiting and training costs down the line, while avoiding morale-killing layoffs. Accenture reports that more than 1,500 employees are interested in the program.

Of course, the slowdown hasn't affected all companies equally. And those companies with a longer track record already have ways to deal with economic swings. According to David Swain, senior vice president for engineering and technology and chief technology officer at Boeing, the fallout from a slowing economy will be small. "Even if there is an impact, it won't be felt for a couple of years, and that will only affect the delivery of our airplanes. Our need for engineers is more driven by our development cycles."

In practice, that means that even though Boeing announced 600 layoffs at its commercial-aircraft plant in Long Beach, California, in May, it had already moved its staff of engineers on the project to other Boeing locations.

One major factor, however, remains unknown: Is the New Economy dead? If so, how severe and how long will an ensuing downturn last? Even Alan Greenspan, Chairman of the Federal Reserve Board, doesn't know the answer. And while history holds no sure answers, one need only turn the clock back a decade to see the effects: less corporate sponsorship on campuses, less R&D funding from the government, and fewer job prospects for students.

The general consensus, however, is that the economy is only going through a mild slowdown and that it will pick up by the end of the year. After all, it's easy to imagine that the economy could turn around this year just as quickly as it took a downturn last year.

Then again, a pessimist would point out that Greenspan missed the start of the last recession, in 1990-91. Not to mention the fact that when Dorian Gray destroys the painting at the end of Wilde's novel, his face takes on the hideous features of the portrait and he dies.

"A lot of my peers were considering not going into engineering but pretty much all of us ended up going that route." Nandi Cooper

David Brindley is a freelance writer based in Los Angeles.


With today's global economy, one country's loss doesn't always equal another country's gain. Take, for instance, the brain drain in developing countries, that is, the loss of skilled workers and students that leave for better opportunities in developed countries. The corollary for this drain is a brain gain in the United States. But is this necessarily a good thing?

There's no doubt that the U.S. benefits from being a magnet for the world's smartest people. In fact, the benefits have been dramatic. It is estimated that roughly one-third of the economic growth in America has come from information technology. And according to B. Lindsay Lowell, director of research at the Institute for the Study of International Migration at Georgetown University, 20 percent of I.T. workers in the U.S. are foreign born. Of those, about half are here on H-1B visas, which allow skilled foreigners to be employed in the U.S. for up to six years.

Foreign talent also plays a major role on campuses. According to government figures, in 1998, the most recent year available, 35 percent of all high-tech master's degrees at U.S. universities went to foreign nationals, as did roughly half of all high-tech doctorates. Those figures have many people worried. Dick Yue, associate dean of engineering at MIT, says that many engineering school administrators are concerned with an inability "to attract American students into graduate programs, either master's or doctorates and I'm not sure that I've seen that trend bottom out yet; it's not clear that we've seen a turnaround."

But relying on a steady stream of foreign talent to fill a gap in technical positions is a risky long-term strategy at best. A recent study by the National Science Foundation found that many countries, from China and South Korea to Chile and Argentina, are implementing programs to retain students and young scientists. Continuing economic development in underdeveloped countries will also play a hand in keeping talent home. Since 1995, the number of Taiwanese graduate students in American universities has fallen by 40 percent.

"We used to get lots of students from South Korea," Yue says, "but that has not been the case for many years—probably because they built up their own universities. We might be too sure of ourselves that they will come."

If foreign students don't come, who will take their place? For Rick Ainsworth, director of UCLA's Center for Excellence in Engineering and Diversity, the answer is obvious: "If black and Hispanic students were proportionately represented in engineering schools, we wouldn't have a shortfall." Ainsworth points out that as the proportion of students of color entering college increases, engineering schools will need to attract those students to their programs or the overall pool of talent will automatically shrink. It's worth noting that at UCLA, minorities comprised ten percent of the graduating class while foreign student visa holders made up twice that amount.

Neglecting that segment of society could prove to be a costly mistake. "It's very shortsighted not to invest in programs geared toward minority students," says Ainsworth. "We need to develop domestic talent and not just import it."

- D.B