As a former tech CEO, I learned to sleep with one eye open. Competition is always looming and it doesn't take much to lose your edge. So I found you need to focus on your strengths and force the competition to battle on your own turf.
And as a professor researching engineering and globalization, I am baffled by how the U.S. seems to be doing the opposite. Instead of honing our own strengths, we're focused on the strengths of our new global competitors. The reality is India and China will always have an advantage in their numbers. But we have the freest markets, the most highly trained workforce, the resources and ability to innovate, and the best universities in the world.
In a previous column, I wrote about a study that my students completed at Duke University (see BusinessWeek.com, 12/13/05, "About That Engineering Gap…"). This study showed that the some of the most cited statistics in the outsourcing debate are inaccurate.
A common argument is that we graduate just 70,000 engineers a year vs. 350,000 in India and 600,000 in China, therefore we're in trouble. We reported that the U.S. is actually graduating more engineers than India, and the China numbers aren't quite what they seem. In short, we showed that the U.S. is in much better shape than most people think.
I was surprised by the attention our study received. In addition to extensive media coverage, it caused the National Academies to issue a small revision to a report they recently published on U.S. competitiveness. The New York Times columnist and author Thomas Friedman added a page to the 2006 update of his book The World Is Flat, discussing our report. I was asked to submit written testimony to the U.S. House of Representatives Committee on Education and the Workforce.
Still, the House Democrats' Innovation Agenda from Nov. 15, 2005, called for graduating 100,000 more engineers and scientists. In his Feb. 2, 2006, State of the Union address, President Bush called for hiring 100,000 additional teachers for math and science. Intel's (INTC) Craig Barrett and Microsoft's (MSFT) Bill Gates routinely lament the shortage of engineers and scientists and say their companies have problems hiring domestically and therefore we need drastic measures.
Commenting on our study, Friedman writes he would bet many of the engineering degrees being granted by U.S. universities are going not to U.S. citizens, but to foreign students, who will return to their home countries. And he adds a caveat: Within the next 20 years, the average quality of undergraduate engineering degrees in China and India will start to mirror the U.S. quality.
There are many opinions about what is happening in the engineering field, but here are some of the facts that routinely get lost in the debate:
1. Shortages usually lead to price increases. If there were a shortage of engineers, salaries should have risen. Yet in real terms, engineering salaries have actually dropped (see BusinessWeek.com, 9/15/05, "Good Time to Learn Accounting").
2. Twenty-five to 40% of engineering graduates don't become engineers. At Duke, I noted that 40% of our Masters of Engineering Management students were accepting jobs in fields such as investment banking and management consulting. Our researchers called other engineering schools and found this was common. Don Giddens, dean of engineering at the Georgia Institute of Technology, says that this is by design—U.S. schools provide a broad education that prepares students for careers other than "strictly" engineering.
3. Quantity usually comes at the cost of quality. China has increased the number of engineers it graduates by a staggering 126% over the last five years with a factory-like approach to education. Degree quality can't be maintained unless academic staff and facilities grow with student populations. According to the Chinese Ministry of Education, from 1999 to 2004 the number of technical schools in China actually fell from 4,098 to 2,884. During that same period, the number of teachers and staff at these institutions fell 24%.
4. Graduate too many and you'll create unemployment. China's National Development and Reform Commission recently reported that job openings in China have dropped 22% over the last year and that 60% of China's upcoming university graduates will be unable to find work. Media reports say that in an effort to "fight" unemployment, some universities in China's Anhui Province are refusing to grant diplomas until potential graduates show proof of employment. And Premier Wen Jiabao announced that China would be cutting university enrollment levels.
5. We've got enough qualified computer programmers. The Wall Street Journal reported that Microsoft received résumés from about 100,000 graduating students in 2004, screened 15,000 of them, interviewed 3,500, and hired 1,000. It said that Microsoft receives about 60,000 résumés a month for its 2,000 open positions.
6. The vast majority of engineering undergraduates aren't foreign nationals. According to the American Society of Engineering Education (ASEE), the percentage of undergraduate engineering degrees awarded to students with U.S. citizenship or permanent residency has remained close to 92% for the past seven years.
7. U.S. students don't gain enough financial benefit from postgraduate engineering education. The proportion of domestic to foreign students completing graduate degrees in engineering dropped from 60.3% in 1999 to 57.4% in 2005, and doctoral degrees from 54.4% to 40.4% in the same period, according to the ASEE. In a National Bureau of Economic Research working paper, Harvard economist Richard Freeman says this is because salaries for scientists and engineers are lower than for other professions, and the investment that students have to make in higher degrees isn't cost-justified.
Doctoral graduate students typically spend seven to eight years earning a PhD, during which time they are paid stipends. These stipends are usually less than what a bachelor's degree-holder makes. Some students never make up for this financial loss. Foreign students typically have fewer opportunities and see a U.S. education as their ticket to the U.S. job market and citizenship.
8. The majority of foreign engineering students come here to stay. A report prepared for the National Science Foundation showed that the number of foreign-born doctorates who chose to stay in the U.S increased from 49% to 71% from 1989 to 2003. While these numbers are likely to decline, I'd bet Friedman that they don't decline to 1989 levels.
This is not to say that engineers aren't important or that we shouldn't graduate more of them—today, a sound knowledge of technology and engineering is essential in almost any area. Richard Benson, dean of engineering at Virginia Tech, points out that engineering graduates find their way into professions such as law, medicine, and business.
MAINTAIN THE LEAD.
He says we would do better as a nation to have more engineers working on the critical problems of the day: energy, environment, security, communications, and health. Yet he emphasizes the importance of making distinctions across the different engineering disciplines: We could simultaneously have too many computer engineers and not enough civil engineers.
We must maintain our lead in research and encourage our best minds to gravitate towards engineering and science. But instead of requiring our scientists to make economic sacrifices, perhaps we should pay them salaries equal to those of doctors and lawyers. If researcher salaries were at market levels, we wouldn't be dependent on foreigners to fill our graduate programs. And if we paid scientists as well as we pay investment bankers, we would see students tripping over each other to study math and science.
We could also be doing a lot more to encourage U.S. companies to expand U.S.-based research, to provide ongoing education and training for their employees, and to work more closely with universities in commercializing research.
Bottom line: Let's be really worried about looming competition, but let's focus on the right things—and make more effective of use of our strengths. Because after all, Friedman is right, in the future India and China may catch up to where we are today.