Tech tumble took high-paying jobs

Glory days may never return, but sector is still an economic force in Central Texas

By John Pletz

AMERICAN-STATESMAN STAFF

Sunday, August 18, 2002

In 2001, Austin awoke with a nasty hangover from a decadelong party with high-tech.

The heady buzz that came from Austin's emergence as a technology powerhouse -- one to be mentioned in the same sentence as Silicon Valley and Boston -- started wearing off in late 2000.

By early 2001, tech layoffs were swift and far-reaching. They revealed just how much Austin had come to rely on the tech triad of semiconductors, computer hardware and software.

Losing the jobs hurt. But even worse was losing the high-octane paychecks that accompanied them.

In 2001, the Austin-San Marcos region lost nearly one of every five of its 85,000 high-tech jobs. But the region lost $1 of every $3 of its $2.2 billion in quarterly high-tech wages, according to the most recent data from the Texas Workforce Commission.

The 15,013 high-tech jobs that were lost in 2001 represent a relatively small part of the overall labor pool -- just 2.2 percent of the area's jobs. But fourth-quarter wages were $707 million lower than those in the first quarter -- a hefty 10 percent of the region's total wage pool.

The wage decline is probably understated because year-end bonuses tend to drive up fourth-quarter wages. (Annual wage comparisons are not available because of a change last year in the way employment statistics are counted by state and federal governments.)

Hardest hit were the semiconductor and computer industries, where 10,679 workers lost jobs and paychecks totaling $160 million per month.

The semiconductor industry, which is the single largest source of tech employment locally, shed 18 percent of its 25,000 jobs last year while its monthly payroll of $117 million dropped 27 percent. Semiconductor manufacturers Advanced Micro Devices Inc. and Motorola Inc., along with suppliers such as Applied Materials Inc., cut 2,500 jobs.

Some of the tech cutbacks are part of the normal ebb and flow of business. But in other areas, such as semiconductor production, the losses may be permanent. No part of the high-tech economy is being hit harder than semiconductors, which account for one of every four tech jobs in Austin.

Although semiconductor design continues to thrive, chip makers have shut down at least three factories in town, called "fabs," and no new ones are being built. That's bad news for thousands of highly paid, semiskilled workers.

"Those jobs are gone," said David Ashmore, 56, who was laid off from AMD this year after 14 years with the company and six more years with others in the semiconductor industry.

It's a scene reminiscent of the auto and steel industries that dominated the Rust Belt in the 1970s, the defense contractors of California and Dallas in the '80s and textile mills of the Northeast and mid-Atlantic before that.

"We saw lot of investment and lot of jobs created here, but we've seen a lot of fabs shut down and jobs go away," said Mark Hazelwood, president of the Greater Austin Chamber of Commerce.

Few options

"I'm in my 30s, and there's a group of us who . . . all work in tech, and 75 percent of us have been laid off in the past year," said Chris Baker, who has been pink-slipped twice in less than a year by employers that either cut back severely or closed.

Baker, a laid-off computer-network administrator, doesn't have to look any farther than his friends to know just how far tech has tumbled.

The most severe layoffs occurred last year. Data for 2002 isn't available yet, but informal tracking by the Austin American-Statesman shows the number of jobs cut so far in 2002 is just 12 percent of last year's total.

The U.S. economy remains weak, however, and already there's speculation that another wave of layoffs is possible if it slips further. Already, many who predicted a rebound in business spending this year are now saying it'll come in 2003.

The prognosis for high-tech is slightly worse, with even optimistic observers betting that a recovery is unlikely until late next year at the earliest. Others say it won't happen until 2004.

There are options -- but not many -- for these former tech workers.

There are some opportunities for semiconductor fab workers in San Antonio and Dallas. Texas Instruments Inc., which operates six factories in Dallas and North Texas, has hired 100 fab technicians and operators and about 60 engineers from Austin this year.

"Austin has typically been a tough market for us to attract people from," said Pamela Ferrell, a TI recruiting manager. "But we've had quite a bit of success."

Ferrell stopped short of saying it's a buyer's market, but added: "There's a willingness for people to rethink opportunities. We're still paying sign-on bonuses. But it isn't as competitive. We don't have to go back and forth and do as much negotiating."

Ashmore, who was born in Austin and has lived here for three decades, doesn't want to move.

"I'll have to transition into another job, probably in a manufacturing industry of some sort," he said. "My guess is probably a smaller company in the electronics industry."

Many former fab workers are using education benefits from their severance packages to learn new skills, such as software and networking. St. Edward's University and Austin Community College both report that a noticeable number of semiconductor workers are taking continuing education courses, such as computer systems administration.

If they're successful at moving into other areas of high-tech, those workers can hope to maintain their standard of living. In 2001, workers who lost their jobs in the semiconductor industry took home an average weekly paycheck of more than $1,400, which was 76 percent higher than the average paycheck of $796 for all Austin workers. But the semiconductor manufacturing jobs themselves, and their above-average paychecks, might never be replaced.

Tech subtracter

The $707 million in quarterly tech wages lost last year is a staggering loss of wealth by itself. But it doesn't take into account all the stock options, which figure prominently in high-tech compensation and provided plenty of purchasing power for the Austin economy in the past decade, that also have vanished.

It's the reverse of what used to be known as the tech-multiplier effect back in the days when the tech economy was growing. Every tech job added disproportionately to the region's wealth.

It's how Austin went from the 40th most wealthy of America's 50 biggest metropolitan areas to the 15th wealthiest in 2000, based on data from the U.S. Census Bureau. The average annual household income in Austin climbed 28 percent, when adjusted for inflation, to $48,950 between 1989 and 1999.

Dave Jameson, 43, rode that tech wave for seven years, surfing between Austin and Dallas while working as a technical-document manager, scooping up a high salary doing jobs for AMD, Dell Computer Corp. and Exxon Mobil Corp.

He was laid off from Exxon Mobil after the Sept. 11 terrorist attacks. He kept a paycheck coming in by selling men's clothing on commission, but it was just 20 percent of what he was used to making.

"The salaries are much, much lower now," Jameson said. "Nobody's willing to pay me what I was making before."

He quickly made up his mind to return to school, where he plans to pick up a doctorate and become a university professor.

Despite the steep downturn, Austin's tech sector remains an economic force. The layoffs only dented the gains made between 1995 and 2000, when the number of tech jobs rose 86 percent to more than 93,000 and corresponding wages mushroomed 265 percent, even when adjusted for inflation, to $6.4 billion annually.

Exact calculations of how many jobs and wages were lost since the mid-90s aren't possible because of the change in the way technology jobs are classified in government data beginning with 2001.

Still pumping

Overall, Austin's economy remains relatively strong by several measures. Median home prices have continued to rise; and unemployment rates, which hit a 12-year high of 6 percent in June, remain below the state average and equal to the national figure.

"The unemployment rate in Austin remains low by everybody but Austin's standard," said Lori Taylor, senior economist with the Federal Reserve Bank in Dallas.

One reason may be that tech workers have chosen to remain in Austin but take lower-paying jobs in other industries. Even though 15,013 tech jobs were lost, the net decline in all jobs was just 11,786. Although the tech wage pool shrank by one-third in 2001, the region's total wages fell just 3.9 percent.

"Austin has a work force that habitually has tried to stay put in this area and has been willing to be underemployed," said Phil Arnold, an information specialist with the Texas Workforce Commission.

"I don't think they're sticking around by choice," said Tux MacAuley, who worked at Dell and startup AgentGo before launching his own business a year ago. "I've got friends who've interviewed (with tech companies) in Dallas, Minnesota or with Microsoft. It's tough nationwide. A lot of them figure if it's going to be bad somewhere else, why not just stay here? A lot of them are single people who had saved enough money . . . so they can afford to wait."

Yet there are signs of strain in the Central Texas economy. Retail spending, as measured by sales tax receipts, has dropped about 6 percent in Austin, although it's down only 1 percent statewide.

Car dealers have felt the effect, too, but it varies, depending on how close they are to where tech employees live and work.

Sales of high-end homes in Austin, which was one of the most visible signs of the boom, declined with the tech job market. By mid-2001, sales of homes priced between $400,000 and $700,000 were down 25 percent from the year before.

Taylor, of the Federal Reserve, said Austin's economy needed a little cooling off.

"The kind of unemployment Austin had was unsustainable and undesirable," Taylor said. "It had reached a point toward the end of the '90s when there was a job for nine out of every 10 people in Austin. You wonder how (any company) can grow in that environment." Some state government agencies, unable to compete with rich private-sector paychecks and perks for tech talent when unemployment was just 2 percent two years ago, now report having full technology staffs.

But cutbacks are beginning to take hold in government, too, from schools to state agencies.

Many workers, meanwhile, are coming to grips with the idea that the high-tech boom that provided a huge step up in living standards for many might be over.

Bar and restaurant managers left $35,000-a-year jobs and found themselves earning close to $100,000 selling computers at Dell. Some of those have gone back to bars and restaurants. A few former Dell salespeople are now selling cars at Maxwell dealerships.

Those who were laid off are facing tougher job searches and smaller paychecks than many have seen in years.

"It used to be that you could just send out a résumé and just wait for the return phone call. That's gone," said Baker, an Austin native who returned from Dallas late last year, and has found and lost two jobs since then. "A friend of mine just got a technical program-management job and said the company told him there were 2,000 resumes for that one job." After the competition comes the sticker shock.

"I know a lot of people in sales who were making $100,000 a year because things were so hot," Baker said. "Sales jobs are paying 25 to 40 percent less now. That's been a real culture shock for people who got used to living on that kind of money. I know a lot of people who are selling houses."

-- Anonymous, August 18, 2002