Workforce Innovations - Feature - After the Bust: SPEHRE Institute Study?

They came to the valley in the 1990s with dreams of gold – stock-option gold. Some made their fortunes, but many others were left with only worthless paper certificates. Who were these modern-day prospectors? Where did they come from and where did they go when Silicon Valley's boom went bust?

The answers lie in the SPHERE Institute's 2005 study: "The High-Tech Downturn in Silicon Valley: What Happened to All Those Skilled Workers?" Commissioned by the NOVA Workforce Board, in partnership with three neighboring workforce investment boards, and funded by a grant from the California Employment Development Department, researchers tracked the employment history of one million California workers over an eight-year span and the firms that employed them.

Focusing specifically on those employed in high-tech industries at the beginning of 2000, the peak of Silicon Valley employment, the study traces these individuals' work histories back to 1995 and forward to 2003, following their movements into and out of the high-tech sector, and examines the growth and decline of high-tech companies throughout the state.

Researchers asked the following questions:

• How did this business cycle of boom and bust compare to previous cycles experienced in California?

• How has the composition of Silicon Valley's high-tech firms changed over the course of the rapid economic expansion and abrupt downturn?

• What were the characteristics of the firms that led the boom? Were these the firms most affected in the bust?

• Where did employees come from to fuel the boom? Where did they go in the bust?

• How were wages in the high-tech sector affected by the downturn?

Some of the major findings include:

• The growth in "new" firms (formed in 1995 or later) powered the boom and still represents a large share of high-tech employment.

• Among California tech workers employed in the first quarter of 2000, only 41 percent were employed in California tech industries in 1995 (pre-boom).

• Only half of the workers who had been employed in high-tech firms during the first quarter of 2000 remained employed in high-tech firms in California by the end of 2003 (post-boom).

• Of those still employed in California but outside of the high-tech sector, most suffered wage losses, and large numbers showed primary earnings from temporary employment agencies at some point between 2000 and 2003.

• About 23 percent of all peak-period tech workers experienced at least one full quarter with zero wages between quarters with wages.

• San Francisco Bay Area workers experienced both the boom and bust more extremely than the rest of the state.

The conclusions drawn from this landmark study affect the manner in which laid off workers approach their reentry into the workforce and provide direction to workforce development organizations, such as NOVA, in working with unemployed individuals and local businesses to get through this lingering slump in employment.

Some conclusions from the study include:

• New firms as a group remain a large and important source of employment for tech workers in California. Workforce investment boards should make a concerted effort to connect with these firms to promote employment and training services.

• Displaced workers from the technology sector should modify their job-search strategies to encompass a wider range of industries than in the past, given that demand for high-tech occupations has expanded into non-tech industries and many high-tech occupations have moved out of the area with no indication of a return.

• Employment strategies should focus on distinguishing between workers who are more likely to transition back into the same or related fields at comparable wages and those who must develop alternative strategies. Assisting workers at all levels to upgrade old skills or acquire new skills must be a central component in any discussion of how best to sustain the talent of Silicon Valley's workforce.

The SPHERE Institute, located in Burlingame, is a nonpartisan, nonprofit policy research organization established in 1996 by scholars from Stanford University. For more information on the SPHERE Institute and to review their other publications, please visit their Web site at www.sphereinstitute.org. The report itself can be downloaded from NOVA's Web site at www.novaworks.org/whats_new.

Feature

After the Bust: SPHERE Institute Conducts Study of California's Technology Industry

After the Bust:
SPHERE Institute Conducts Study of California's Technology Industry