The human capital of those employed in the information technology industries is unique, and that uniqueness has grown more pronounced since 1995. In 2011, roughly two-thirds of those with an academic profession were employed in computer sciences, computer engineering, electrical and electronics engineering, practical engineers and programmers in the information technology industries, and just one-third were employed in the other industries in the economy.
Due to the uniqueness of the human capital, growth in employment in information technologies is based mainly on recruiting young employees completing a Bachelor's degree in engineering or computers, or completing programming courses. The long duration of studies creates a gap between the timing of the growth in demand for employment and the growth in the supply of workers.
The uniqueness of the human capital required in the information technology industries and the concentration of most of the employed persons possessing human capital of this type in these industries may increase the sensitivity of wages in these industries to external shocks. For instance, during the crisis in 2008-9, when there was a slowdown in global trade and real appreciation, companies in the industry were able to cope, inter alia, by decreasing real wages by a cumulative rate of close to 7 percent, compared to just 2.2 percent in manufacturing.
An article written by Dr.
One of the more interesting findings of the study is the growing uniqueness of the human capital (in aggregate terms) of those working in the information technology industries. Close to half of the workers in the information technology industries currently hold one of the following four professions: (1) systems analysts and those with a profession in the computer sciences; (2) computer engineers; (3) electrical and electronics engineers; and (4) practical engineers, technicians, and programmers. This is compared to just 30 percent in 1995.
The uniqueness of the human capital in the information technology industries is reflected in the long adjustment time between changes in demand for workers (for instance due to increased productivity) and the response of supply to these changes. One of the reasons for this is that about 65 percent of those with the aforementioned professions are currently employed in the information technology industries (see Table 1 below). The concentration of electrical and electronics engineers, computer science graduates, programmers and practical engineers in the information technology industries makes it difficult for these industries to expand at the expense of other industries, and the expansion of this industry is based mainly on young people, just entering the labor force after having completed studies for a relevant degree or completed an appropriate training course, joining the industry.
The article provides evidence of a lag of between five and eight years until the supply of workers adjusts itself to the sharp increase in demand. The number of those completing a Bachelor's degree in computer sciences, computer engineering, and electrical and electronics engineering (as a percentage of the young population) reached its peak in 2004, more than 5 years after the jump in yield on studies in these professions occurred. It was only in 2006-8, five to seven years after the dot-com crisis, that there was a decline in the number of those completing a Bachelor's degree in these professions (see Figure 1 below). It is also possible that the real appreciation of the shekel and the decline in global demand in 2008-9 contributed to the decline that took place in the number of candidates for studies in engineering and architecture, mathematics and natural sciences at the universities in 2010-11. The study also shows that the growth in the weight of employed persons with an academic profession in the information technology industries in the past 15 years--from 24 percent to 33 percent--is more significant than in the other principle industries, where it increased from 5.5 percent to just 9 percent.
The analysis in the article indicates that the uniqueness of the human capital in the information technologies industry and the concentration of most of those with the relevant human capital in employment in these industries may have ramifications regarding the development of wages in response to shocks. For instance, in 2008-9, when global trade declined and real appreciation of the shekel had a negative impact on the information technology industries, real wages in these industries declined by an aggregate rate of close to 7 percent, while they declined by 2.4 percent in the entire business sector (excluding the information technology industries) and by just 2.2 percent in the manufacturing industries (excluding the electronics industries).
See table and figure here: http://www.bankisrael.gov.il/en/NewsAndPublications/PressReleases/Pages/19-08-2013-ITResearch.aspx
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