At the same time, the founders of technology startups in Silicon Valley say that their single biggest obstacle to success—after they have obtained funding—is a shortage of talent. They simply can’t find people with the skills that they need.
Big companies such as Google and Facebook buy startups at ridiculously high prices—not for their products, but for their people. The tech industry has a name for this: the “acqui-hire.” There are frequent bidding wars for top talent, with big companies offering big money and startups offering big stock.
So is there a glut of technical talent in the United States, or a dire shortage? The answer is: both. There are indeed tens of thousands of unemployed engineers—and there are shortages. The mismatch is between skill, location and need.
One of the biggest problems that software developers face is that technology changes rapidly. It is very hard to stay current. Over the past 20 years, we have witnessed a technology shift from mainframe computers to mini-computers (or servers) to personal computers and now to tablets. The languages and architectures for programming these devices keep changing—as does the way the technology is used. The younger generation is very comfortable with apps and social media and has an intrinsically different way of doing things with its tablets and smart phones. So recent graduates with the latest skills are always in high demand. Older workers with obsolete skills are not.
Some engineers are able to adapt to new technologies and are well worth the higher salaries that they demand. But they are often in the wrong parts of the country. Many are burdened by home ownership and the difficulty of relocating a family. To make matters worse, tech centers with the greatest demand—Silicon Valley and New York City—have the most expensive real estate and the highest costs of living. So these tech workers can’t move there.
The Brookings Institution documented this mismatch by analyzing the demand for foreign workers in metropolitan areas. It found that supply and demand for skilled labor varies by region. Demand for foreigners is highest in tech centers such as New York, Silicon Valley, Los Angeles, Washington, D.C., Virginia, Chicago and Boston. And, not coincidentally, these are the places with the lowest unemployment rates for engineers.
Ultimately, we shouldn’t be debating whether there is a shortage or a glut. Hiring foreigners is more expensive and more difficult than hiring locals, because of the visa fees and long lead times for visa processing. And companies face a backlash from anti-immigrant groups for hiring foreigners.
So they do it only because they have to.
There is a problem caused by the shortage of permanent-resident visas for people from high-population countries, such as India and China—which causes wait times to stretch into decades. While these workers wait for their visas, they are essentially stranded in the companies that sponsored them. They often receive lower salary increases than workers who can readily switch jobs. This is what creates the salary distortion that anti-immigrant groups complain about. It can easily be fixed by increasing the numbers of permanent-resident visas—so that the backlog is cleared and foreign workers aren’t tethered to the employer for too long—and letting the free markets do their magic.
It is best to let U.S. companies hire the best talent wherever they can find it and pay what they think their employees are worth. If workers are underpaid but are free to change jobs, they will leave and join companies that pay market wages. Supply and demand will find a balance if we remove the regulations that are creating the problems.
Vivek Wadhwa is an entrepreneur turned academic. You can follow him on Twitter at @vwadhwa and find his research at www.wadhwa.com. First published in The Wall Street Journal.