Electronic Design

Engineers Give Back Gains In 2009

The news media is constantly hyping the latest poll. Whether it’s what people think about healthcare, Afghanistan, or the latest contestants on So You Think You Can Dance, someone somewhere is always telling us what somebody else is thinking.

But here at Electronic Design, we know what really matters to you. That’s why we conduct our engineering salary and opinion survey every year. Our annual survey provides the industry’s most complete assessment of current salary and compensation trends from the perspective of those on the front lines so you can make more informed decisions about your career.

This year, close to 2500 engineering professionals took part in our survey. Respondents came from a cross section of industries, including industrial controls (11%), communications systems (8%), government and military contractors (8%), and R&D firms (7%). Survey respondents also came from companies of all different sizes, ranging from those with gross annual revenues of more than $1 billion (24%) to those with less than $5 million (32%).

We expanded our survey this year to include questions about the recession as well. We wanted to understand the impact the economic downturn has had on your organization’s revenues, profits, and expenditures. We asked you to let us know about the steps that were taken to control costs and what effect you think the recession will have on the future of your organization.

And, in light of the administration’s initiatives to address energy efficiency and conservation, we thought we’d find out what kind of commitments your company has made to the use of alternative energy technologies and reducing its carbon footprint, as well as its plans to take advantage of emerging market opportunities by developing its own eco-friendly products. In addition, we were interested in any environmentally conscious practices you might be engaging in personally both at work and at home.

UNEMPLOYMENT SOARS FOR EEs
We didn’t need our own poll to tell us this was a rough year for the engineering profession. According to figures released by the Department of Labor’s Bureau of Labor Statistics (BLS), the unemployment rate for U.S. electrical and electronics engineers (EEs) hit a new record in the first half of 2009, while the rate for all engineers increased for a second straight quarter.

The fact that the 8.6% unemployment rate for EEs remains slightly below a national average that’s hovering around 10% is little consolation for those who are out of work or concerned about possible layoffs.

That record high of 8.6% in the second quarter of 2009 for EEs was an especially dramatic jump because it was more than twice the 4.1% rate recorded for the first quarter of the year. It was also significantly higher than the previous quarterly record of 7%, set in the first quarter of 2003.

For all engineers, the unemployment rate jumped from 3.9% in the first quarter to 5.5% in the second quarter. The rate for computer professionals steadied at 5.4%, after a significant jump in the first quarter. In comparison, the second-quarter unemployment rate for all professional workers showed a relatively modest uptick, from 3.7% to 4.3%.

The BLS reported that 29,000 EEs were unemployed in the second quarter, up from 13,000 in the first quarter. On a small positive note, the total number of employed EEs seems to have stabilized, actually rising 2.3% quarter-to-quarter—but at levels well below those of the past decade.

“Technology drives our economy, which means engineering unemployment is a bellwether for recovery and job creation,” said IEEE-USA president Gordon Day. “These new data suggest we’ve got a long way to go as the United States attempts to regain its economic footing.”

 

THE FALLING RAISE
As the economy plunged, so did engineering salaries. Raises for engineering professionals were few and far between in 2009. Barely a third of our survey respondents saw growth in their paychecks this year, and for those that did the average increase was just below 5%. Nearly 36% of participants said their 2009 wages would remain at 2008 levels, while a remarkable 30% said that their total compensation was being reduced.

For those seeking a silver lining, though, the inflation rate has for the first time in half a century been hovering at something a little less than zero. This means that even relatively small raises may have been more meaningful than previous larger ones in terms of real buying power.

The downturn seems to have changed the rules of the compensation game considerably. In previous years, salary levels closely correlated with company size, job experience, and specific areas of expertise. This year, on the other hand, differences in compensation also were strongly more influenced by industry and geographic region, apparently because those attributes helped determine how much companies have been affected by the recession.

Across the country, survey respondents report an average total compensation in 2009 of $102,443—a 3.6% decrease from last year’s $106,271 and essentially a return to 2007 income levels. This decrease contrasts sharply with 2008, when wages for design & development engineers rose 1.2% and those for engineering managers rose 2.1%.

Executive/operating managers received $113,354 in 2009. By comparison, engineering managers averaged $125,766 and design & development engineers made $101,083. VPs of engineering topped the money list by job title at $141,211, followed by directors of engineering and R&D ($139,034), chief/principal engineers ($116,471), software engineering managers ($114,797), and project managers/group leaders ($114,576).

Nearly 40% of our survey respondents said they feel underpaid, while only 18% said their compensation packages were superior to what they thought they could get elsewhere. “At my company, the owners’ focus is on growing the business, rather than providing the salary and benefits I would expect from similar companies,” one engineer complained. “With the economy the way it is, I have little choice but to stay here.”

But in today’s anxiety-inducing economic environment, dissatisfaction with compensation isn’t enough to turn people against their employers. People are happy just to be working. Most respondents (52%) said they were either extremely satisfied or very satisfied with their current jobs—up slightly from last year.

“Engineering offers a lot of variety and interesting challenges, and the work environment tends to be more pleasant than in fields such as medicine or finance,” observed one survey respondent. “Naturally, I’d love to earn as much as a doctor or lawyer. But compared to most other occupations, engineers do very well.”

Reflecting the realities of the current job market, only 10% of the respondents to our 2009 Salary Survey said they would be actively seeking a new position this year. About 60% said they would follow up if they heard about an interesting opportunity or were approached with an offer, while the remaining 30% couldn’t envision changing jobs in the foreseeable future.

According to our survey results, the chances of getting hired are best at companies that have less than $50 million in annual revenue; are in the government/military contractor, R&D, avionics/marine, or industrial controls industries; or are located in Texas, Massachusetts, or New York—or just about anywhere on the West Coast.

STILL THE RIGHT JOB?
Engineers aren’t immune from the jitters being felt across all markets. Last year, 86% said they felt secure in their jobs. Today, only 47% do, while 36% characterize themselves as being “somewhat concerned” and another 14% are “very concerned.”

In fact, the recession is testing the faith engineering professionals have in their ability to make a future living in their chosen profession. Last year, a majority said that a career in engineering and the potential for salary growth was as promising as it was five years ago. This year, less than half gave that same answer.

“Demand for engineering design has fallen over the past decades because the sources of engineering demand have fallen as manufacturing has moved offshore, the space program has peaked, the Cold War has ended, and Moore’s Law has wound up in the ICU,” one respondent opined.

Others expressed similar sentiments: “Companies seem to be using the uncertainty of the economy as an excuse to curb engineering wages. Even before the recent setback, they were trying to cut back. Additionally, they are requiring engineers to handle tasks outside their normal purview. I personally feel that an engineer dedicated strictly to engineering gives the company more bang for the buck. A lower-paid technician can handle a lot of tasks engineers are being asked to do.”

 

Some respondents were more optimistic: “Obviously, five years ago the economy was not in the state it’s in today. Because of the global economic meltdown, companies have been tightening their budgets, and in turn R&D spending and salaries have suffered. But going forward, I think this will without a doubt change and things will become more promising.”

Then again, money must not be everything because a whopping 84% of engineering professionals still say they would recommend engineering as a career path to a young person looking to choose a profession.

“Engineering is more than just a job. It’s a training that prepares you for a wide scope of understanding of the sciences, as well as the world around you,” declared one particular enthusiast. “If your only interest is making money, then engineering is not for you. But if you enjoy solving problems from numerous angles and views, then engineering can be very rewarding, both financially and personally.”

One reason engineers remain so high on the profession is the satisfaction they get from the challenge of designing and delivering new products that can benefit society. Most of those surveyed still find themselves sufficiently challenged intellectually with the engineering projects they work on. In fact, only 10% say they are not challenged enough on the job.

“Engineering is still a very exciting career. There are always new challenges that keep the work fresh. In addition, I can see a real potential for shortages of good talent in the future, so I don’t think job security or advancement will be an issue. Plus, in many ways, engineers are uniquely able to shape society and improve the quality of life,” one respondent said.

It’s worthwhile to note that the economic downturn hasn’t had an excessive impact on the kinds of skills engineering companies value most. There continues to be a premium on power design, military electronics design, consumer electronics, safety and security, and software engineering. Wages improved or remained steady in these areas in 2009.

Unfortunately, companies appear less anxious to hold onto seasoned engineering talent in the current economic climate, perhaps forgetting from the layoffs that took place during the 2001-2002 recession that such expertise isn’t easily replaced or outsourced. A disturbing 73% of those surveyed said they believe their organization is less focused on employee retention this year compared to a year ago. That’s a pretty significant change from last year’s survey, when about two-thirds of the respondents felt that way.

“There’s no serious effort to retain people,” said one engineer from the Midwest. “As a matter of fact, there was an across-theboard pay cut—not exactly a retention-friendly move.”

Clearly, engineers aren’t feeling the love during the current downturn. More than 40% have seen their travel budgets reduced and their direct reports slashed, and one-third have experienced contract staff reductions. Better than one in five have had projects scratched and/or working hours and salaries trimmed. Nearly as many have seen reductions in their 401(k) matching programs and in benefits like healthcare and continuing education. And, 12% were victims of furloughs in 2009.

“My company did away with tuition reimbursement, 401(k) matching, and raises, while also scaling back to a four-day work week at a 20% wage reduction,” said an engineer at a consumer electronics company. “All in all, it was a lot to deal with. But at least they didn’t shut the doors, which is more than I can say for many companies.”

The short-term employment outlook for engineering certainly doesn’t look too bright. Only 20% of survey respondents say their company plans to increase the number of engineering jobs in the coming year, and 17% say more cutbacks are on the way.

“Five years ago, companies were hiring anyone they could bring in the doors. Today, no companies are even looking to hire,” one engineer commented. “Senior management is looking at engineering as a commodity and at engineers as a tool that can be used until dull and then replaced. If you aren’t a high flyer and continuing your education, you are at risk of being let go because your skills are no longer current.”

Last year, 58% said their organization was having difficulty finding qualified candidates for open engineering positions. This year, with unemployment at record levels, that number tumbled to 38%. But certain types of positions, such as those that call for expertise in analog design, remain difficult to fill. That said, upper management still recognizes the importance of having qualified people on staff to keep the business operational.

“The economy has forced the company into a position where the only significant asset left is the engineering staff,” noted one engineer. “They want to keep us, but their hands are tied regarding compensation. Unless business picks up and salaries and benefits are restored, engineers are going to jump ship once things turn around.”

 

THE OUTSOURCING REALITY

Outsourcing has become a way of life in the engineering community as most OEMs continue to farm out work both domestically and overseas. With years of experience in outsourcing now under their belts, companies seem to have a better sense of where they’re willing to take the risk of handing over design, development, and manufacturing to others.

“Outsourcing is here to stay, but the extent to which companies outsource will ebb and flow as the right balance is found,” remarked one engineer. “Some will find outsourcing is not worth the hassle. Others will make it work, largely to fill holes in engineering staff.”

Companies have also been burned by outsourcing. “Many times, design outsourcing has been a waste of significant time and money,” said one critic of the practice. “Most outsourced designs have not met time schedules and have not provided a final or adequate output at the end of the expenditure. These projects were then brought back in-house, behind schedule and in an almost start-from-scratch state, creating new pressures on an already overloaded engineering team.”

In addition to its spotty track record, most survey respondents believe outsourcing makes fewer engineering jobs available and lowers employee morale. What’s more, better than four in 10 think outsourcing drives down salaries for new engineering hires and limits opportunities for advancement for those already on board.

“Outsourcing lowers engineering wages, devalues engineers, places unfair competition with vastly different economic cultures, and potentially forfeits IP to foreign competitors,” declared one disgusted respondent. “Plus, it costs more to manage and presents more problems than most companies realize—until it’s too late.”

Paradoxically, despite the fact that 56% of respondents said that outsourcing results in fewer engineering jobs, most deny that it has affected them personally. Seven out of 10 say they aren’t concerned with the prospect of losing their job to outsourcing, while 14% maintain their skills are valued more than before. Nearly 20% claim that outsourcing gives them the opportunity to work on more innovative projects, since more routine tasks have been moved out of the organization.

“When done for the right reasons—to get skills unavailable internally or to significantly reduce costs for the same or better quality of work over the entire product life cycle—outsourcing is totally appropriate,” noted one pragmatic observer. “When it’s done simply to save a few dollars so the company can meet quarterly numbers, I think that it’s ultimately damaging to a company in the long term.”

COPING WITH THE RECESSION
Whatever the impact of outsourcing may or may not be, it is clearly dwarfed by the magnitude of the current recession. Just over 40% of those surveyed say their pay has been frozen or cut as a result of the economic downturn, and 37% say their organization has instituted a hiring freeze. It’s no wonder that concern about the general health of the economy is now the #1 issue keeping engineering professionals up at night.

“The focus on short-term, bottom-line results has produced an environment in which cost cutting is considered more important than long-term investment in innovative product creation,” a respondent declared. “This focus has devalued the contribution of engineering to a point that decision-makers are swayed more by some perceived need to drive down initial product development expenses than the long-term revenue generated by products over their entire lifecycle.”

A slight majority says the recession has forced their organization to curb or defer initiatives requiring capital expenditures in 2009. Many cited delays in facility upgrades, new construction, and manufacturing equipment and computer systems purchases as examples of belt-tightening.

“All capital purchases that can’t be justified as absolutely critical to a project’s success have been delayed by one year. Some projects have been cancelled altogether to avoid capital spending,” one respondent said.

In addition, 40% say the downturn put the brakes on operating budgets. “It’s not that expenditures are deferred for some specific time period, but rather that all expenditures are subject to more rigorous tests,” said one engineer. “If they are needed to produce revenue immediately, they’re easy to get approved. If they are for blue-sky dreams, forget it. The watchword is ‘Revenue now.’”

Some firms are in a better position than others. “Here, all projects continue to be funded with the assumption that by the time they are ready for the market, the economy will be ready,” said one engineer.

IS THERE GOLD IN GREEN?
With growing consensus that carbon emissions threaten the environment and the Obama administration’s push for a cap-andtrade system, many OEMs are positioning themselves as leaders in sustainability, even before new regulations materialize. More than one in four of our survey respondents said their company is currently involved in measuring and tracking its carbon footprint.

At those firms, the initiative for better carbon accounting may have come from corporate management (70%), employees (32%), customers (21%), or board members (12%). “We mostly burn coal to make electricity here,” said one reader. “We are pioneers in burning landfill gas and will do more of that, because methane is not as bad as CO2 in terms of global warming.”

Nearly 18% said their employer is in the planning or construction stage of installing alternative energy technologies such as solar, wind, or geothermal at their location, while 8% already have these types of installations in place. “A few key people really believe in it,” said one respondent. “Plus, we have a long history of social responsibility.”

More than one-third said they’ve encouraged their employer to adopt eco-friendly policies in the workplace, mostly by making suggestions to management or other employees on specific ecofriendly changes at work. But 12% have taken on a more active role by joining a group at work to try to influence company environmental practices.

Most (53%) told us their organization is designing or planning to design products that are more eco-friendly. These initiatives are being driven by customer interest (58%), marketing advantages (50%), power savings (44%), government regulations (42%), and competitive pressures (34%). Most respondents also claimed that any potential employer’s environmental practices would be somewhat or very important to them in choosing their next job.

Not all engineering professionals are in step with the green movement. “In general, most so-called ‘eco-friendly’ ventures are wasteful of resources and are based on highly unsound science,” one respondent grumbled. “Global warming is a myth, a hoax, an irrational fear designed by its most ardent advocates to destroy industrial society. I oppose all such practices. However, power conservation is a genuine cost-saver for the company and its customers, so I support that.”

LOOKING TO THE FUTURE
While current conditions may look grim, engineers have little choice but to grin and bear it. Younger professionals probably have too much invested in their educations to bail on the field now, and they have plenty of years ahead to make up for the present lean ones. Older professionals are typically too far into their careers to make a major change, so they too have to play the cards they’ve been dealt as well as they can.

To cope, engineers have to remain diligent about keeping themselves as marketable as possible. They may even have to become more intense about this by further cultivating their expertise and spending a little more time scouting new opportunities. After all, many will admit to having become complacent during the highgrowth years early in the decade.

At the same time, engineering professionals may also have to consider the kinds of lifestyle changes that many others are embracing during a period of diminished expectations. These include reduced dependency on credit and home equity, as well as a more conservative approach to household expenses.

If and when a better employment picture becomes part of the turnaround, those that have exercised such diligence will be better positioned to take advantage of it. On the other hand, if such a turnaround is slow to manifest, engineers can still take solace in the fact that their profession is healthier than many others—and that its intangible rewards remain significant.

Either way, the global economy will continue to depend on a diverse range of engineering disciplines for the foreseeable future. However events unfold over the next decade, some company somewhere will always need someone to come up with a way to make something that works a little better, can be made a little cheaper, and will meet the needs of a few more customers. And that is ultimately the best job security there is.

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