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.
Back to Top
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.
Back to Top
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.
Back to Top
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.
Back to Top
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.
Back to Top
|