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Is the tech contractor to salaried employee ratio a sign of the tech business cycle?

Nat Torkington seems to think so: “…when the clever contractors head for salaried positions then bad times are coming.” (The last paragraph is cut off due to an HTML error, but basically asks if a shortage of engineering talent affects this indicator in one way or another.)

It is a complicated problem because there are a lot of other factors influencing whether being a contractor or an employee is a better fit for a person’s situation: need for income stability, contacts in the industry, demand for a given skill set, even preference for new situations. Even so, it’d be interesting to look back and see what the ratio was over the last, say, 20 years.

I took a look at the BLS web site, but couldn’t find any reports delineating contract employees and salaried employees.
Via Infectious Greed.

[tags]contracting, business cycle indicators[/tags]

2 thoughts on “Is the tech contractor to salaried employee ratio a sign of the tech business cycle?

  1. Doug says:

    A lot of people like to make predictions based on “insider behaviour”. For example, in financial markets, many people use company director buy/sell decisions (on company shares) as an indicator of future stock market performance.

    My experience, having worked in forecasting for many years (including doing my PhD in Business Administration, on forecasting) is that industry insider actions are very poor indicators of economic trends and events. Specifically, a software designer knows about software, but is unlikely to be better than the next person in predicting the future economic direction of the computer industry.

    Dr. Doug Stewart

  2. moore says:


    Sure, a software designer isn’t likely to be better at predicting the future economic direction of the industry, but isn’t the aggregate of the actions (employees jumping to contracting for money, contractors joining companies for security) somewhat useful? After all, while each individual may have no idea about the future of the software industry, doesn’t the aggregate behavior mean something? Individuals leaving companies, at least, tend to have a view into that company that isn’t widely shared.

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