As the amazing expansion of the 1990s roars along, labor-market conditions continue to tighten throughout the country. The unemployment rate has been below 4.5% since November of last year, and nearly one-half of all Americans live in areas with unemployment rates below 4%. According to the Federal Reserve's most recent Beige Book, limits on labor supply are now impeding employment and output growth in an increasing number of sectors and regions.

Nowhere have labor-market conditions been tighter than in the information-technology sector. Since 1993, this sector has added more than 1 million net new jobs with wages that are on average about three-quarters higher than the rest of the economy. The unemployment rates for information-technology workers, including electrical engineers, computer scientists, and programmers, are below 2%, forcing regional employers to mount national searches to fill open positions.

In part, the strong demand for information-technology workers reflects the economy's overall strength. Efforts to head off Y2K problems have also intensified the search for such workers this year. But it's a mistake to conclude that the increase in demand for computer scientists, systems analysts, and computer programmers is temporary. Spending on information technologies has risen steadily since 1992 and now accounts for more than half of total business spending on producer-durable equipment. New information technologies are changing business operations from supply-chain management to human-resource management to marketing strategies. According to a recent Commerce Dept. report, the nation will require at least 1.3 million new information-technology workers over the next decade to create new systems. More will be needed to operate them.

BIG JUMP. As a result of the intense scramble to hire information-technology workers, the number of H-1B visas for skilled foreign workers available for this year has already been used up. This is less than one year after passage of legislation nearly doubling that number to 115,000. The Clinton Administration initially opposed an increase in the number of H-1B visas because of concerns about possible negative effects on American workers through immigration.

But a recent study by Professor Annalee Saxenian at the University of California at Berkeley for the Public Policy Institute of California indicates that immigration of information-technology workers has a positive economic impact. Drawing on a detailed analysis of Silicon Valley's experience over the past 20 years, Saxenian demonstrates that such immigrants have been a major source of new job and wealth creation, bringing skills, creativity, capital, and links with global markets to the region.

Today, immigrants account for at least one-third of the scientific and engineering workforce in the Valley and occupy senior executive positions in at least one-quarter of its new technology companies. Many have advanced degrees in computer science and engineering, fields in which the number of degrees granted by U.S. universities to American students has been declining.

LIFT THAT CAP. Over time, employment opportunities in information technology will stimulate more American students to acquire the necessary skills. They will be helped by the numerous educational initiatives of the Administration, including programs to upgrade basic skills in math, science, and reading in primary and secondary schools; to increase college enrollment and retention rates; and to provide retraining. State and local governments are responding to the skill demands of the new economy, often working with private companies to develop youth apprenticeship programs and specialized community-college training options. Numerous companies in the information-technology sector, such as Cisco Systems Inc. and Autodesk Inc., have introduced their own programs to attract and train students for information-technology jobs.

For many programming jobs, the necessary skills can be acquired in a matter of months. For others, however, the gestation period for skills lasts years and requires substantial improvements in math and science education even before college. In the meantime, immigrants who possess the requisite skills should be allowed--indeed encouraged--to fill the gap. Conditions in the information-technology sector indicate that it's time to raise the cap on H-1B visas yet again and to provide room for further increases as warranted. Silicon Valley's experience reveals that the results will be more jobs and higher incomes for both American and immigrant workers.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE