“The Perceived Shortage of High-Tech Workers”

Clair Brown, Ben Campbell, and Greg Pinsonneault

When it comes to providing graduate education for engineers and creating a competitive and growing high-tech sector, the United States is the envy of the world. Now we hear that the future of our high-tech industries depends upon the hiring of foreign engineers and scientists. Do we, in fact, have a shortage of engineers and scientists?

If there is indeed a labor shortage, we would expect to see the earnings of high-tech workers increase more rapidly than earnings of other workers. Although average earnings for engineers have increased over the last ten years, the increased earnings for engineers have not been fully shared by the more experienced workers. Instead, high-tech engineers and managers have experienced lower wage growth than their counterparts nationally. The experience premium, which is earnings growth based on years of work, grew substantially for engineers and managers in the U.S. between 1985 and 1995. For example, a professional with 20 years of experience in 1985 earned 48% more than a professional with no experience, and by 1995 this increased to 73%. Meanwhile in the high-tech industries, an engineer or professional with 20 years of experience earned 55% more than a new hire in 1985 but only 59% more in 1995. Today high-tech engineers face a less favorable career outlook than engineers in other industries. This is strong evidence against the existence of a labor shortage.

Why hasn’t the growth of high-tech wages kept up? We believe that the large increase in graduate engineering students along with companies’ desire to hire engineers with the latest education dampens wage growth for experienced engineers. Foreign students are an important part of the story. As the leaders in graduate education, American universities graduated fifteen hundred PhDs and almost eight thousand MSs in electrical and communications engineering (“high-tech” engineers) in 1995. Approximately one-half of engineering PhDs and one-third of engineering MSs were granted to foreign-born students in the mid-1990s.

The data point out two potential education problems. The first is a possible lack of continuing education of experienced engineers. Companies have little incentive to train older engineers because they can hire from the large flow of newly-trained and cheaper engineers. Companies save money on training since the recent graduates already have cutting-edge knowledge. Foreign graduate students are particularly attractive: they are often bound to a company for several years while applying for a green card. Any decision to increase visas for foreign high-tech workers should be accompanied by the requirement that companies provide training for experienced engineers to ensure that the young engineering graduates are not simply displacing older engineers.

The other potential problem is the allocation of graduate engineering training to U.S. citizens. Since graduate training is subsidized and since this education guarantees a middle-class lifestyle, as a country we should ask to what extent we want to allocate this training to foreign students instead of U.S. students. If we decide to continue the current policy of admitting large numbers of foreign students for graduate engineering education, then we need to rethink our visa policy for these graduates. Our educational and immigration policies are not consistent, as foreign engineering graduates face major hardships in trying to receive visas. This presents our country with the untenable situation of providing the highest level of engineering education to foreign engineers and then treating them as second-class residents or sending them away. In addition, the inconsistent policies could be a major factor in the onset of a future high-tech labor shortage.

Who to provide with the most advanced education is an important decision in terms of social costs and individual rewards. The current debate over temporary visas for high-tech workers should be transformed into a debate about the continuing education of older engineers and the engineering graduate educational opportunities provided to U.S. students. Until these issues are resolved, we should allow our companies to utilize the talents of the foreign engineers who were trained by American universities at taxpayers’ expense.

Clair Brown is Professor of Economics and Ben Campbell and Greg Pinsonneault are graduate students at the University of California, Berkeley, where they are part of the Sloan Semiconductor Program. Brown is co-author of Work and Pay in the United States and Japan (Oxford, 1997).