The Memphis IT Skill Shortage and Its Impact on Local Mid-Sized Firms

Dennis Wilson, Ph.D., Senior Global Technology Researcher,  Sparks Bureau of Business and Economic Research at the University of Memphis

Recruiting and hiring technology professionals is challenging. There are special characteristics that define this segment of the labor market that relate to supply and demand, demographics, and constant changes in technology. According to a recent article from the Society for Human Resource Management (SHRM), the dynamics of this labor market environment consist of:

High demand. According to the 2014 SHRM Survey, more than three-quarters (77.0%) of the surveyed organizations said candidates did not have the right technical skills, and almost two-thirds (64.0%) were concerned about competition from other employers.

Short supply. Jobs in the science, technology, engineering, and mathematics (STEM) fields are expected to grow by approximately 17.0 percent between 2008 and 2018. This is nearly double the growth rate for all other fields. At the start of 2013, there were 1.9 job openings for each unemployed worker in these fields.

Lack of graduates. SHRM also states that by 2020, there will be an estimated 1.5 million shortage of workers with college or graduate degrees in the United States. Graduating high school and college students are unprepared for work in a knowledge economy, and fewer students are pursuing undergraduate and graduate degrees in STEM disciplines. Survey data from SHRM indicate that many students believe that they cannot handle the requirements for these degrees.

A predominantly white, male labor pool.  Data obtained from SHRM indicate that the STEM workforce is almost 82.0 percent white and more than 75.0 percent male. Women and minorities make up three-quarters of the U.S. population but occupy only one-quarter of technical and scientific jobs. Although the wage gap between women and men is narrower in STEM fields, the higher salaries are not attracting more women to these areas, according to the U.S. Department of Commerce. Among the reasons women do not seek technology and other STEM jobs are a lack of female role models, gender stereotyping, and less family-friendly flexibility in these fields.

Continuous technological advances. Technology is changing swiftly.  This rapid change requires that employees have more training, more frequently, often on ever-evolving platforms. Technology has automated and thus eliminated many jobs—especially in manufacturing—but technology has also been a driving force behind greater job specialization and the need for employees with more technical skills.

This outlook is further supported by the Occupational Outlook Handbook of the U.S. Bureau of Labor Statistics which states that demand for information technology (IT) workers is high and should continue to grow (about 6.0% annually) as firms invest in newer, faster technology and mobile networks. Employment of database administrators (DBAs) is especially high and is projected to grow approximately 11.0 percent from 2016 to 2026, faster than the average for all occupations. Employment of DBAs in the computer systems design and related services industry is projected to grow 20.0 percent from 2016 to 2026. The median annual wage for a DBA in 2017 was $87,000, with the top 10.0 percent earning more than $132,000 per year.  Growth in this occupation will be driven by the increased data needs of companies in all sectors of the economy. The increasing adoption of cloud services by small- and medium-sized businesses that do not have their own dedicated information technology (IT) departments could increase the employment of DBAs in establishments in this industry. Database administrators will be needed to organize and present data in a way that makes it easy for analysts and other stakeholders to understand.  However, database administrators are in high demand, and firms sometimes have difficulty finding qualified workers.   Additionally, according to the U.S. Department of Labor, the median wage for software developers in Tennessee for the year 2015 was $82,500 (and that figure was for those candidates holding a bachelor’s degree).

Discussions with local human resource professionals suggest that, based upon quality of resumes received and compensation required to retain IT workers, there is a shortage of IT talent in the Memphis labor market.  Exacerbating the problem is the fact that it is very difficult for mid-sized firms ($750 million to $1 billion in annual sales) located in the Memphis area to entice millennials with IT skill sets to relocate to the Memphis area to alleviate the shortage.  The result of this situation is that the same people move from the IT department at one firm to the IT department at another firm, each time increasing their salary but not necessarily their competency or skill sets.  Competition for talented development and technical support specialists in the Memphis labor market is forcing wages to frequently exceed the median, and that is for talent holding only certifications and not bachelor’s degrees.

Larger firms with significantly large IT departments such as Federal Express, International Paper, AutoZone, and some of the larger hospitals have the financial ability to pay either significantly larger salaries or offer attractive relocation packages to obtain some of the IT talent they seek, but this is not a solution.   These firms also suffer from the same talent recruiting difficulties, but perhaps to a minimally lesser degree.

In fact, to fill the skill shortage, many mid-sized firms hire contract labor from Nashville and Atlanta through consulting firms paying rates from $150-$300 per hour depending upon the skill set being sought.  As information technology is becoming increasingly important for the success of all firms as the result of the increasing role of ecommerce, the shortage of IT talent in Memphis is stifling the growth of existing mid-sized firms.  The high cost of importing contract help from Nashville and Atlanta is also hurting the profitability and competitiveness of the mid-sized firms located in Memphis.

Training talent in-house with employment contracts that call for repayment of the training investment if the individual does not stay for a specified number of years also seems to be an ineffective solution.  Having successfully completed expensive training in highly-sought-after skill sets such as information security, larger local companies or companies outside Memphis will pay the employee’s penalty since it is a more cost-effective alternative for them than the time and training costs to grow the talent internally.

The type of IT talent required by mid-sized firms in Memphis is not going to be generated in a University environment.  Universities are not vocational schools.  Selection of the vast majority of operational IT talent required by mid-sized firms in Memphis is driven by the need for individuals with certifications and experience.  These include such highly-sought-after certifications as Certified Information Systems Security Professional (CISSP), Cisco Certified Network Associate (CCNA), Microsoft Certified Solutions Expert (MCSE), Cisco Certified Network Engineer (CCNE), Tripwire Certified, VOIP Training (Voice over IP) and Palo Alto firewall expertise, among others.

Part of the problem Memphis faces is that IT talent, especially millennial-aged talent, is seeking to live in an environment with amenities that Memphis does not yet offer.  Yes, Memphis has low-cost housing and no income tax.   But, Memphis lacks an abundance of fine arts, a vibrant downtown with museums and multiple night spots, an assortment of professional sports teams, and an abundance of readily-accessible recreational areas.  (Beale Street and the Grizzlies are a start, but Nashville is more of an example of the night life, cultural amenities, and recreational activities that IT professionals—especially millennials—are seeking.)   In addition, for several decades Memphis for various reasons has not attracted new, large firms with a significant need for technology professionals.   Whether the city will attract such firms in the future depends upon Memphis addressing those deficits that have held it back while other cities have succeeded.  IT professionals are enticed to move to cities where there is a dynamic technology labor market in addition to prized amenities.  Memphis is currently at a recruiting disadvantage when IT professional candidates consider their long-term employment diversity opportunities, as well as the community’s quality of life.
What is the solution?   Nationally, the nation needs to invest heavily in updating science and math education programs and attracting students to these fields of study.  In the long run, Memphis needs to develop a larger base of firms that IT professionals find to be attractive. Until that employment environment is developed, we must identify local talent, entice them to have an interest in the IT field, and find ways to keep that talent from leaving Memphis.  Extensive use of internships at vocational schools located in the Memphis area with subsidies provided by a pool of funds co-funded by both the private sector and local government may be a good first step in solving this growth-stifling issue.  In addition, Memphis must continue to invest in those quality of life factors, such as recreation, arts, etc., that enhance the community’s ability to attract and retain talent.

About Dr. Dennis Wilson

Dennis Wilson, Ph.D., is an economist who also has over 40 years of experience in information technology.  He has served as CIO of multiple companies, including some serving international markets.  In these roles, Dr. Wilson has been actively involved in the recruitment and oversight of IT talent in multiple countries.  Most recently, Dr. Wilson joined the Sparks Bureau of Business and Economic Research at the University of Memphis as a Senior Global Technology Researcher.