About WTS Prof. Clair Brown Faculty, Students and Affiliates Research Areas Online Research Reports Working Papers




The Semiconductor Industry
The Standard of Living
Outcomes for Children and Families
The Role of the Corporation
Mobility, Careers, and Wages in the U.S.

The Semiconductor Industry
Prof. Clair Brown; Prof. Melissa Appleyard
Graduate students: Ben Campbell; Greg Pinsonneault

Employment Systems and Fab Performance

Management of human resources and the restructuring of work in the semiconductor industry holds important lessons for the future, since this industry is already experiencing the competitive forces and technological innovation that most industries are expected to face in the 21st century. This Competitive Semiconductor Manufacturing-Human Resources (CSM-HR) program, which is funded by the Sloan Foundation and is part of the CSM program run jointly by the Engineering School and the Institute of Industrial Relations, explores what determines long-run competitiveness in the semiconductor industry. This industry is characterized by rapid technological change and global competition that result in short product cycles, declining prices, and volatile markets. The continual technological change and automation require a flexible and skilled work force. Although labor costs are a small proportion of total cost, the management of human resources potentially has a big impact on performance because of the role of labor in determining the life and productivity of the costly capital equipment. How technological change, automation, and global competition are affecting wages and working conditions, along with educational requirements, are examined in this study.

The final phase one CSM-HR report, which is based on detailed data collection, and extensive data manipulation, from surveys, interviews, and observation at sixteen fabrication facilities (fabs), looks first at the role of HR in fab performance, which is determined by manufacturing efficiency and quality. A statistical analysis of data is used to identify key variables in effective HR systems and to explore how the component parts of these HR systems fit together. An analysis of qualitative case studies examines how employment systems actually operate in three key areas--skill development, problem solving and innovation. The semiconductor industry is compared to other industries to see to what extent the semiconductor results are transferable to other industries. We also examine the wage structures in the semiconductor industry at both the national level and at the fab level to see how wage inequality has grown in the U.S. semiconductor industry since the late 1970s and to compare these changes to national trends. We use detailed personnel data that spans sixteen years at one major company to see to what extent internal compensation policies are mirroring the national trends. This company's pay and promotion system for managers and professionals is further explored in a subsequent focus study. A final focus study examines knowledge sharing and innovation across company lines in the development of equipment. An executive summary highlights the findings.

The Globalization of Semiconductor Manufacturing: The Implications for Skill Development, Knowledge Diffusion and Earnings Distribution

A pilot study of offshore fabs is underway in order to understand international patterns of knowledge and skill diffusion and how the globalization of the semiconductor industry has affected the distribution of earnings internationally. Although the semiconductor industry often is referred to as a global industry, the true meaning of its "global" label merits deeper investigation. For over two decades, semiconductor operations have been located in both developed and developing countries, but only cursory attention has been given to the changes in composition of international operations. Historically, leading U.S. and Japanese semiconductor companies have located low value-added operations, such as packaging, offshore and primarily in Southeast Asian countries. Over the last ten years, leading U.S. companies have located some high value-added design and manufacturing operations offshore, for example in Ireland and Scotland, and Taiwanese and South Korean companies have developed state-of-the-art foundries and memory fabs, respectively. More recently, foreign manufacturing operations have begun in China. These trends suggest that initially a cheap pool of low-skilled labor was sought, followed by increased demand for a relatively high-skilled labor force, followed by the desire for market access. A careful investigation is needed to uncover the actual forces behind these trends and the long-term effects that these apparently very different offshore operations have on a region's skill and knowledge base as well as the global earnings distribution in the semiconductor industry.

Skill Requirements and Development. The location of manufacturing operations in a country requires that a certain set of skills is either directly available or can be developed in a reliable and efficient manner. This includes the full range of skills spanning engineering, operations, and management. The characteristics of the manufacturing operations including the sophistication of the technology, the nature of competition and the use of automation and information systems will dictate the required skills of the work force. The education and experience of the work force coupled with the employment system will determine how the required skills are developed and deployed in the manufacturing process. Our previous research indicates that the knowledge of the engineering workforce is essential to the success of the operations, and so the use of engineers, both citizens and foreign nationals, trained in countries such as the United States and Japan may be an important part of the required skill mix. Our research has also indicated that if trained engineers are easily available, then the reliance on skilled technicians and operators can be reduced.

Through site visits to operations in China, Singapore, Malaysia, and possibly Indonesia and Thailand, which will supplement our data collection already underway in South Korea, Taiwan, Japan, and Europe, we will collect data through questionnaires and interview on the education, training and specific job tasks of operators, technicians, and engineers. These data will allow us to document the skills required and how they are developed and used across countries. Then we will turn to the question of how these skills are compensated across countries.

Distribution of Earnings. Our interest in the globalization of the semiconductor industry is partially motivated by the impact of earnings distributions across countries and across occupations within countries, especially the United States. So far our work has focused only on the latter question, and we have found that the increased inequality in the United States has only partially been replicated in semiconductor industry. We have found that the returns to experience have not increased while the returns to education and professional occupations have increased. In the process of globalization, we will document the distribution of employment and earnings internationally for operators, technicians, engineers and managers. These data will allow us to show how relative labor costs vary across trading partners, how earnings vary across education levels and occupations in different countries, and where U. S. workers are located in the international earnings distribution.

Knowledge Diffusion. The other primary motivation for studying the globalization of the semiconductor industry is to examine the diffusion of process and product knowledge internationally. The location of offshore operations has changed as higher-value added activities constitute a larger share of offshore activity. Even though leading U.S. and Japanese producers established operations in developing countries as early as the 1960s, their more recent offshore activity has been concentrated in developed countries. Our research will uncover whether this shift was driven by the skill and education level of offshore workers as higher value-added operations were moved offshore or whether considerations such as strong intellectual property right protection, tax incentives, well-developed distribution systems, and macro-economic policies such less-restrictive trade rules increased the attractiveness of developed countries. In order to predict patterns of economic development, it is imperative to understand why established companies would choose to locate high-valued added operations in regions that could produce competitors in the future versus transferring advanced semiconductor knowledge to existing operations in regions where home-grown competition would be less likely.

Linking the sophistication of the technical knowledge with the skills required to undertake successful semiconductor design, process development and manufacturing, will permit us to assess whether the international earnings distribution is consistent with the activities of particular plants. We will compare the level of sophistication of knowledge employed in offshore operations located in developing regions of the world versus developed regions and how process and product knowledge diffuses to offshore operations over time.

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The Standard of Living
Prof. Clair Brown
Graduate students: Dale Self; Phil Oreopoulis; Sally Woodhouse

In her book American Standards of Living, Prof. Brown focuses on the relationship between the standard of living, work roles, and economic growth in the United States over the years 1918 to 1986. This study carefully documents the consumption patterns of three classes (laborers, wage earners, salaried) at five points in time (1918, 1935, 1950, 1973, 1988). Consumption patterns for other important groups, including black families, seniors, and the poor, are also analyzed when possible. The work of American institutional economists, especially Veblen, Duesenberry, and Sen, is used to construct a framework for analyzing changing consumption as either a response of emulation, which maintains consumption norms, or a response to innovation, which requires adjusting consumption to evolving technology. During periods of strong economic growth, families are able to combine emulation with innovation and thus feel more satisfied with their living standard. During periods of weak economic growth, families must restructure their consumption to incorporate new market goods and services and cannot achieve the expected pattern of emulation. This process makes them feel less satisfied with their living standard.

Consumption patterns provide the structure for everyday material life, and this structure creates economic distance across classes, which is analyzed in this book. Following Marshall, consumption is divided into three categories corresponding to the provision of basics, variety, or status. These categories are socially determined and change over time. Basics are required for healthful living and for integration into the society and economy; variety is consumption that reduces drudgery, provides comfort, or makes other tangible improvement; status is consumption that marks one's social position. Both variety and status increase the family's consumption options; as such, both improve the family's control over its daily life.

Of special interest is the standard of living index that shows relative growth of basics, variety, and status in the U.S. during this century as living standards improved dramatically. The differentiation of improved living standards into three categories sheds new light on the social consequences of economic growth. After 1973, when higher incomes were used by families largely to purchase more variety and status, the social consensus to distribute income to the less fortunate began to break down. The desire for more economic distance across classes grew as differences in living standards became more visible. At the same time that the family's ability to purchase basics had become secure, the drive to purchase variety and status resulted in an increase in paid work at the sacrifice of leisure and family time.

Prof. Brown is now using the newly-released 1994 Consumer Expenditure Survey to update her standard of living study in order to analyze the changes that have occurred as wages continue to stagnant and as inequality continued to increase even as the economy recovered. The division of living standards into basics, variety and status as well as a measure of the economic distance across classes will be documented and will be used to analyze how economic recovery has affected American living standards in the 1990s.

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Outcomes for Children and Families
Prof. Clair Brown; Prof. Nada Eissa; Prof. Sheldon Zedeck
New research initiatives in several areas are being developed. Professors Brown and Eissa are looking at the access to resources of low-incme households. Consumption expenditures of low-income families are much higher than their reported incomes, including income from work and from government programs. This fact is well-documented, and extends across all types of low-income families, including those receiving welfare as well as seniors. However, the source of the discrepancy is not well-understood. For example, to what extent low-income families have access to resources from other family members or friends, to what extent they can draw on assets, or to what extent they have unreported earned income is unknown. Also, to what extent the resource base for their expenditures affects what they consume and how they live is unexplored. In this study, we propose using the Consumer Expenditure Survey coupled with SIPP panel data to estimate the relationship between expenditures and sources of income (including estimates of unreported income, income in kind, gifts, and dissaving). Once the resource base of low-income families is determined, we will then analyze how the sources of income affect consumption and living standards of low-income households.

They will also explore the impact of family instability on living standards. The actual living standards of children who do not live with both parents, the living standards of their absent fathers, and the relationship between the two is not documented or understood. However, we do not know to what extent income is shared within families and to what extent the resources of the father are (potentially) available to the children. The Consumer Expenditure Survey and the SIPP panel data to estimate the resources available to children living with only one parent and the potential resources available from both parents. The results of this study will provide an economic foundation for policy discussions of how to improve the living standards of children living with only one parent.

Prof. Zedeck is studying the work-family linkage and how it affects behavioral and affective variables such as satisfaction (job and marital) and behavior (job performance and family performance). His concern is that the groups that have studied work-family relationships have focused on one side of the "hyphen" - either work or family. He views work as occurring both in an employing organization and in a family organization. Consequently Zedeck have been working on developing a questionnaire that taps interest in and involvement in activities (tasks) that can occur in both environments - the family and employing organization. He plans to identify a common set of task dimensions, as well as dimensions that are unique to either environment in order to use the questionnaire to study work-family theories.

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The Role of the Corporation
Prof. Clair Brown; Prof. Teresa Ghilarducci; Prof. David Levine; Prof. Nikolai Rogovsky

Professors Brown, Ghilarducci, Levine and Rogovsky are working on developing a research program on the role of the corporation from the perspective of corporate responsibility in a global economy.

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Mobility, Careers, and Wages in the U.S.
Prof. Clair Brown; Prof. Steve Raphael

According to recent press reports, the stability of employment relationships in the U.S. has eroded considerably, especially for professional employees and for those working in large companies. However, economic research to date does not find evidence of a secular erosion of the stability of employment relationships for skilled occupations or for workers overall. High mobility is an important characteristic of the U.S. labor market, which reflects desired adjustments by both workers (quits) and employers (layoffs). Mobility results in substantial wage declines for a large proportion of job losers and a substantial wage gain for a large proportion of job quitters. Overall, the increased wage dispersion from mobility adds to the already high earnings dispersion in the U.S. Professors Brown and Raphael plan to study mobility patterns in the United States over the past fifteen years in order to see how career paths and wages have changed by type of worker.

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