8/.9/99 PM PILED HIGHER AND DEEPER by Edwin S. Rubenstein For more than forty years Americans have been warned of an impending shortage of scientists and engineers. It started with Sputnik, and gained momentum during the race to the Moon. President Kennedy made a personal appeal to America’s youth to pursue a career in engineering. During the Vietnam War, President Johnson supported the National Defense Education Act to provide additional fellowships in science and engineering. Educators bemoaned the decline in the number of college students studying science. Scientific societies launched major programs to attract more students into scientific careers. And almost everyone blamed the alleged shortage for declining American competitiveness in the global economy. The alleged shortage changed to a glut in the 1970s, following the Vietnam War and the drop in federal support for space science following the moon landings. The job situation was so bad that some scientific societies took out ads in professional journals advising students to avoid getting a PhD. Anecdotes about PhDs in English driving taxi cabs became popular about this time. By the late 1980s the tide turned again. The scientists who had received their degrees in the boom years of the 1950s and 1960s were approaching retirement age. This was supposed to create an unprecedented boom for new PhDs. William Bowen and Julie Ann Sosa in their 1989 book, Prospects For Faculty in the Arts and Sciences, used rigorous analysis to project academic supply and demand over the 1987 to 2012 period. Their principal finding: substantial faculty shortages starting around the year 2000, with particularly severe shortages predicted in humanities and social sciences. In the late 1990s we again hear that America’s colleges and universities are neither attracting nor producing enough scientists, engineers, programmers and information workers to meet the needs of business and universities. With U.S. unemployment at 4.3% and the economy increasingly relying on computers, many believe the skills gap goes beyond high-tech industries. “We are not just talking about a shortage of qualified engineers and scientists of our top software [and] semiconductor firms,” said Secretary of Commerce William M. Daley in the Congressional Quarterly. “Every nook of our economy now depends on technology.” My colleagues at Hudson Institute agree. In Workforce 2020, Senior Fellows Richard Judy and Carol D’Amico predict that the labor shortage could result in a 5% drop in economic growth – about $500 billion in lost output. Executives in high tech companies claim they have to scour the world for exceptional talent. They have lobbied vigorously - and successfully - to increase the number of skilled workers who can enter the country using H-1B visas. The controversial visas are supposedly designed to allow employers to fill emergency vacancies quickly on a temporary basis. Several executives have told Congress that not being able to import foreign workers forces them to cut back on programming projects, delay new products and trim expansion plans. They claim that the high-tech worker shortage threatens America’s technological superiority. Denying U.S. industry a crack at foreign-born PhDs is like “sending the first-round draft choices of the high-tech world to play on other countries teams,” writes T.J. Rogers of Cypress Semiconductor Corp. Obviously, U.S. businesses should be able to hire “best and the brightest” of any nationality. About a third of the new engineering graduates Microsoft hires each year are foreign students. Microsoft Vice President Michael Murray told the Senate Immigration Subcommittee in 1998. Currently more than half all Ph.D. students in electrical and computer engineering at American universities are foreign-born, he pointed out. “If companies cannot find homegrown talent, and if they cannot bring talent to this country, a large number are likely to move key operations overseas, sending those and related American jobs with them,” said Senator Spencer Abraham, Republican from Michigan. Last year Congress responded to the “crisis”, raising the H1-B ceiling to 115,000 from 65,000. Reality Check No one objects to U.S. companies hiring irreplacable, creative workers, regardless of their nationality. But that’s not the majority of H-1B workers. “The geniuses are only a tiny fraction of the H1-Bs,” says Michael Teitelbaum, a demographer and former vice-chairman of the National Commission on Immigration reform. “Most H1-Bs are programmers being brought in several hundrad at a time.They are code writers [and] they are doing the kind of things any well-educated American with the proper training can do.” Industry claims of a “desperate software labor shortage” are a myth, according to Norman Matloff, a computer science professor at UC Davis. For example, Microsoft hires only about 2% of its applicants for software positions. This rate is typical of the industry as a whole: Microsoft 2% Deltanet 4% Broderbund 1% ECbridges 2% Access to cheap labor is the ‘hidden agenda’” behind the skills shortage campaign, Matloff charges in an on-line report on the controversy. Indeed, reports by high-tech trade associations seem to support the notion of a phony crisis. Take the study by the Information Technology Association of America (ITAA) which explored ways to increase the pool of available workers. One ITAA task force found that high-tech companies subtly discriminate against older men and women with families because they are perceived as “less valuable for the overtime and weekend work.” As one Silicon Valley manager said in an interview with Congressional Quarterly: “The top management of our company has directed us to focus our hiring on new or recent graduates only. These are people who have no family and can work long hours. These are people who have no family and can work long hours. Yes, salary is a major factor...You work the young ones for five years and then replace them.” (Footnote 1) The industry’s reputation for working young employees grueling hours and then pushing them out after a few years to make room for entry-level or foreign workers discourages prospective employees interested in a lifetime career opportunity, the task force said. “I call it the vampire industry.” says a congressional staffer who worked on the H1-B issue. “Every day they need fresh blood.” Not surprisingly, the industry disagrees. “It’s not an age-discrimination thing. It’s a skills thing. We need people right away with the latest skills,” one industry lobbyist says. But if it is a “skills thing,” wages would be going up disproportionately in the computer industry and other high-tech fields. They aren’t. In fact, the premium paid for Ph.Ds in the computer industry lags that for other science specialties. [Chart 1] The reason? Foreign-born computer professionals work for salaries 15-20% lower than those received by natives of the same age and experience. (footnote 2 ) Most, if not all, of the high-tech industry’s labor problems are “self inflicted,” created by short-sighted human resource practices - especially a stubborn refusal to retain and train experienced workers. When recruiters “can’t find workers” it usually a sign they’re looking for them in the wrong places.. “You could train a person who literate in computer programming but doesn’t know a particular language and he can become proficient in about a month,” Teitelbaum says. “But when you say you’ll only take people with two years’ experience in Java, when Java is such a new language, you’re not going to find them.” Teitelbaum says there’s a “gold mine” out there of technically oriented Ph.D.s in related fields - such as unemployed mathematicians and physicists - who could become systems analysts with minimal training. John Rohde, president of FirsTel Co., a Silicon Valley software firm, says he would hire any Ph.D. who walked into his office as long as he had some computer experience. “Why should I train a new employee?” he said to a Congressional Quarterly reporter. . Numbers, Please Allegations of a high-tech labor shortage simply are not reflected in the world of labor statistics. As seen in Chart 2, the current production of Science and Engineering (S&E) PhDs is at an all-time high - having reached 26,515 in 1995 from 18,799 in 1975. [GET UPDATED FIGURES}Foreign students account for about half of the increase. In 1990 over 50% of the engineering PhDs in the United States were awarded to foreign students. The figures are almost as high in mathematics, physics, chemistry, and computer science. More than eight of every ten foreign graduate students in the U.S. is in an S&E program, with over half of these students coming from just four countries: Taiwan, China, Korea, and India. As foreign enrollment skyrocketed, native U.S. enrollment stayed flat, holding at around 13,000 annually over the past 25 years. Earning a PhD entails an enormous investment of a student’s time and effort. Science and engineering students spend a median 6.9 years of their life in pursuit of a doctorate. Students incur opportunity costs ranging in the hundreds of thousands of dollars, and a substantial fraction dip into savings or go into debt to cover tuition and living expenses. In 1995 85% of US students reported some reliance on their families and personal savings for support. This educational investment is a risky one. Just look at newly minted Math PhDs. [Chart 3] Their unemployment rate been in double digits for much of the past three decades, and is only recently fallen below the national average. They are not alone: surveys of science and technology PhDs reveal both outright unemployment and rampant involuntary temporary employment: Chart 4: A Degree of Unhappiness: PhDs Without Real Jobs Involuntary Temporary Average Time Unemployment Employment to Find a Job Mathematics 3.8% 27.1% 5 months Engineering 2.7 10.6 4 Biochemistry 4.0 13.4 3 “ Computer Science 2.4 6.1 3 “ Physics 1.8 34.5 4 “ Chemistry 4.6 33.1 6 “ Earth and Space Science 3.9 34.5 5 “ Source: Commission on Professionals in Science and Technology. (Survey reflects employment conditions of 1996-1997 PhDs as of mid-October 1997) More disheartening still is the rate of involuntary temporary employment - the percentage of new PhDs reporting they couldn’t find a suitable permanent post - which ranges from 6.1% in computer science to as high as 34.5% in Physics and Earth Science. A sizable fraction of this group are employed outside science and engineering altogether. Not always a bad thing - but arguably not what their expensive educations were designed for. Seasoned professionals are faring no better. An unemployment rate of 17% is reported among computer programmers over the age of 50. (Matloff) Most don’t make it that far. Data from the National Survey of College Graduates show that only 19% of those with a computer science degree are still in the field 20 years after graduation, compared with 52% in civil engineering. Sun Microsystems, a leading voice in the movement for a higher H1-B quota, classifies as “senior” anyone with six years of experience – a 28-year old, for example. (Matloff) Employers claim they shun such people because their skills are outdated. But as noted above, any competent programmer can master a new software in a month or so. The “real” problem is that older workers are just too expensive. That creates a “revolving door” in which computer professionals 35 and above cannot find suitable work. The PhD Machine A permanent glut of PhDs? Economists say it can’t happen. If markets operate properly the price of something in over-supply will fall. A PhD glut should reduce salaries paid to PhDs, thereby reducing the number of entering grad students and increasing the demand for their services. Eventually the glut will be soaked up. But the PhD market is far from “perfect.” Universities influence both supply and demand. Rather than allow market forces to work, U.S. universities expand the supply by accepting more and more foreign students into their graduate programs, and then subsidizing their tuition with Federal R&D grants state subsidized tuition. This keeps Ph.D. salaries low and makes a science graduate education less attractive, especially for U.S. natives. Universities also “demand” Ph.D. students teach undergraduate courses. A Rand Corporation study of the academic labor market found that the number of doctoral students admitted depends less on the private labor market than on the needs of graduate departments to provide teaching assistants for undergraduate courses. Put differently, academic departments admit as many grad students are needed for their own internal teaching and research needs. Future employment prospects of PhDs are not a consideration. The Rand study suggests too many doctorates are being produced in engineering, math, and some sciences. Even worse, the academic market is permanently out of kilter. When the supply/demand system reaches equilibrium, 22% of new science and engineering will fail to find suitable employment. (Footnote 3.) Many PhD students want to spend their careers in academia, even if it means less pay. Unfortunately, the universities aren’t cooperating. Between 1987 and 1992, for example, the number of part time faculty grew by 47.7%; part time faculty now comprise about 45% of all teaching staff.. As few as 38-40% of faculty appointments made in recent years are “traditional” in the sense of being full time and wither tenured or tenurable. (Footnote 4) By using these so-called “gypsy scholars,” the schools save money. But it has produced a wasteful overproduction of PhDs and underconsumption of scholarship. Liars Figure In many respects, the “shortage” scare is the work of special interest groups whose well-being depends on maintaining the perception of such a shortage. A major offender: the National Science Foundation. Peter House, head of NSF’s Policy and Research Analysis Division in the 1980s, did NSF’s first “shortage” study. In it he assumed that the average number of science and engineering bachelors degrees awarded annually from 1984 through 1986 - about 211,000 per year - was the number of America would “demand” each year thereafter. House then asserted that the supply would decline precipitously because of the post Baby Boom bust, during which the number of college students would decline across the board. By the year 2000 the study predicted a “shortage” of 600,000 scientists. House’s methodology was criticized both inside and outside of the NSF; for example, the agency’s own Office of Legislative and Public Affairs refused to approve the study for formal presentation as an NSF document. Much of the criticism focused on the highly dubious notion of using a peak period of past supply as a measure of future demand. NSF’s prediction, say many young scientists, was self serving, intended mainly to nudge Congress into providing more funding for the agency. Norman Matloff, writes that “The National Science Foundation actually planned this to happen, planned to bring in foreign students to hold down salaries. Moreover, the NSF realized that this would discourage all but the most idealistic American students from pursuing doctoral work, an irony in view of the much lamented reluctance of American students to pursue advanced degrees in science and engineering.” A few young scientists are so embittered by the job market that they believe the time and effort invested in pursuit of their degree was pointless. “ The only thing clear is that there are fewer jobs for physicists because there is less economic need for physicists,” Murray Arnow of Skokie, IL wrote in a letter to Physics Today. “The current commitment of the American Physical Society to promote science education is almost folly given the declining demand for physicists.” High tech employers agree: Virtually all will tell you that their ideal workers have just a BS or MS degree. There are only a small number of jobs in which employers insist on a PhD. Moreover, many commercial laboratories that once employed full time scientists now prefer postdoctoral students working as temporary employees. “What surprises me is that even those young people with outstanding research records are having difficulty finding permanent employment,” writes Kevin Aylesworth, a physics postdoc, in Physics Today. Some students have decided to delay graduation - and continue their fellowship stipend - rather than face the exploitation that often accompanies temporary employment. THE GLUT Somehow Japan manages to generate as many patents as we do while having only a miniscule number of S&E PhDs. The Taiwan government, although anxious to become a major player in the high-tech arena, is actually downsizing its graduate programs. Why does that seem to be a contradiction to Bill Clinton or Al Gore but not to Taiwan President Lee Teng-Hui? One reason seem to be that Japan and Taiwan can meke decisions based on national interest, while the U.S. policy is apparently et by special interest groups in industry and acedemia. The oversupply of PhDs is not an accident. It is the result of a deliberate policy choices made by the Federal government and the science establishment. It has been a boon to many employers. Science and engineering firms have saved on wages, benefits and commitments. But it is bad public policy. END 1. Kathy Koch, “High Tech Labor Shortage”, Congressional Quarterly, April 1998. 2. Norman Matloff, “A Critical Analysis of Arguments Supporting High Levels of Immigration,” March 14, 1999. (internet download) 3. William F. Massy and Charles A. Goldman, “The Production and Utilization of Science and Engineering Doctorates in the United States,” August 1995, RAND Institute for Education and Training and the Alfred P. Sloan Corporation.