High-skill Jobs Grow in Silicon Valley

Posted on Thu, Mar. 02, 2006

High-skill jobs grow in Silicon Valley

By Pui-Wing Tam
WALL STREET JOURNAL

Five years after the dot-com bubble burst, job growth has returned to
Silicon Valley. But it's a different kind of growth than in past
recoveries, favoring higher-skilled workers.

Netflix Inc.'s hiring shifts are typical. During the tech boom, the
online movie-rental service created 100 customer-service jobs near its
Los Gatos headquarters in the heart of Silicon Valley. After the tech
bust in 2000, Netflix eliminated half of those positions. But the total
head count at Netflix's Silicon Valley offices has grown 20 percent, to
nearly 200 staffers in the past few years.

That's because Netflix, while shedding some lower-end jobs, has
aggressively created new, higher-level jobs. It's adding jobs in
departments such as Web engineering and product development: Those
groups' hiring of engineers jumped 20 percent to more than 50 people in
2005 alone. "Our new engineers have an average of seven to 15 years
experience," says Patty McCord, Netflix's chief talent officer. "Five
years ago, we hired people with three to five years of experience."

Past tech recoveries tended to bring new lower-skill jobs as well as
high-skill jobs. This time, tech firms -- from big companies such as
Hewlett-Packard Co. to mid- and small-sized firms such as Netflix,
Adobe Systems Inc. and SanDisk Corp. -- have moved lower-skill jobs out
of the Silicon Valley area to cheaper locations, or outsourced them to
foreign countries. The new jobs they are creating locally often require
specialized skills in engineering and design. Young companies such as
web-search Inc. are simply starting out hiring at the high end, further
shifting the overall balance.

A study last month by Joint Venture Silicon Valley, a nonprofit group
representing businesses and government agencies in the area, found the
nation's tech capital had a net increase in jobs in 2005 for the first
time in four years. Most of the growth came in the category of creative
and innovation services, including firms in research and development,
scientific and technical consulting and industrial design. In total,
the number of Silicon Valley jobs in these areas grew 4 percent from
2002 to 2005, reaching 72,734. At the same time, the number of jobs in
electronic-component manufacturing -- which tend to involve assembly
and other repetitive tasks -- dropped 28 percent to 23,772, while jobs
in semiconductor-equipment manufacturing fell 23 percent to 58,133.

Overall, 14 percent of all the jobs in Silicon Valley today belong to a
sector called core design, engineering and science. That exceeds the
comparable 9.3 percent slice of the work force in Austin, Texas; 8.7
percent in Seattle; and 8.3 percent in San Diego, according to the
study.

Doug Henton, an economist and co-author of the report, says with the
growth in these creative engineering jobs, a new face of Silicon Valley
is emerging. "Ten years ago, this was an engineering valley that pumped
out chips and computers," he says. "Now it's all about creative tech
and staying on the cutting edge."

The shift highlights how Silicon Valley is working to establish a
competitive advantage, as lower-cost geographic rivals chip away at its
strongholds. The Silicon Valley region has taken the tack of moving up
the skills curve before: As competition in chip making became more
heated in the 1970s, Silicon Valley chipmakers relocated their assembly
and manufacturing overseas but retained their core design facilities in
the region. Today these chipmakers, such as Intel Corp., remain
dominant.

Silicon Valley's changing employment makeup does have its downside.
Wages are once again creeping up, making it more expensive to do
business in the already pricey area. Average annual pay in Silicon
Valley hit $69,455 in 2005, up 2.7 percent from 2004, though it remains
below the heights of the average $80,000-plus that the region's workers
earned in 2000, according to Joint Venture Silicon Valley.

What's more, as operations and lower-skill tech jobs leave the region,
Silicon Valley has a narrower base of industries. That makes the area
more vulnerable should another downturn occur, says Steve Levy, an
economist at the Center for the Continuing Study of the California
Economy in Palo Alto. "Los Angeles has a far more diverse economic
base, with Hollywood, biotechnology, plastics and toys," says Levy.
"But high-skill tech is all we're left with."