Date: Tue, 9 Aug 2005 22:37:42 -0700 From: Norm Matloff To: Norm Matloff Subject: "U.S. losing lead in science and engineering"--a variation To: H-1B/L-1/offshoring e-newsletter I was surprised when I first skimmed through an article a couple of weeks ago which was similar to the one enclosed below, which seemed to give the party line standard for lobbyists from industry and academia these days--"China and India are producing far more new engineers per year than the U.S. is, so we've got to drastically increase our own production." As I've said, it's ridiculous reasoning, with the absurd implication that the solution to our problem of unemployment and underemployment of engineers (i.e. engineers who've switched professions because they can't find engineering work) is to produce even more engineers. The reason I was surprised is that the article seemed to attribute such attitudes to Richard Freeman, a Harvard economics professor who has done good work in the past on topics related to H-1B. So I read Freeman's paper, and of course it turns out that the original article did a terrible job of summarizing the paper. The article enclosed below is much better. (Freeman's paper is available at www.nber.org/papers/w11457.) It turns out that one of the biggest themes of the paper is that classical international trade theory doesn't apply well in today's world. That makes Freeman one of the few top economists to make such a statement. One of the points he stresses is that China and India, by developing a small portion of the population into S&E while allowing wages in their broader economies to stay low, can achieve low-cost the S&E that is currently bedeviling us in the U.S. This makes classical economic models of trade obsolete. It certainly is an interesting analysis. But unfortunately I believe that policymakers who read Freeman's paper will ignore his most important conclusions, simply because he whispers them instead of shouting. (And in many cases even the whispers come late in the paper.) Sadly and ironically, his paper will be cited by the crowd that says that we should increase H-1B quotas etc., even though he explicitly is critical of that. One of Freeman's biggest contributions is something that ought to be obvious but is NEVER mentioned in these discussions: If you want American students to study S&E, then make the salaries attractive, which Freeman shows in detail is not currently the case. And if you want Americans to pursue PhDs, make that financially attractive for them too. (I've of course discussed the latter point at length, e.g. in http://heather.cs.ucdavis.edu/Archive/ ProposedMSPhDExemption.txt) S&E jobs in the U.S. have been attractive to foreign nationals because the U.S. standard of living is higher than in their home countries and they generally don't have access to the U.S. jobs which pay more than S&E wages, such as lawyers. Interestingly, Freeman states as a given that the foreign national S&E workers provide cheap labor for U.S. industry. Needless to say I agree, having written a lot on this issue, but I was surprised that he did not give any references for this. He does point out that by bloating the labor supply, wage growth is held down, but of course that is only part of the picture. Sadly, his list of possible remedies does not include reform of the H-1B and employment-based green card laws. Indeed, on the contrary, he recommends giving the foreign students a fast track to a green card. And he is several years behind the times in his assumption that foreign students still WANT to come to the U.S. to study. Considerably fewer of them have that desire these days, mainly because job opportunities in the U.S. are so weak and opportunities back home are growing rapidly. (http://heather.cs.ucdavis.edu/Archive/ForeignGradStudents.txt) For similar reasons, his claim that the number of women in S&E has been rather inelastic to the job market is out of date too, again at least in the case of computer science; enrollment in university CS majors has dropped for both genders, but the drop has been much sharper for women. On the contrary, his "remedy" is to increase graduate stipends so that more American students are attracted to doctoral programs in science and engineering. But since he concedes that opportunities for careers in those fields are insufficient to attract Americans, then what good does it do to increase the graduate stipends? One point which I believe Freeman misses is that university production of S&E people doesn't equate to people actually working in those fields. I believe he has addressed this issue on the U.S. side in the past, e.g. on unemployment of physics PhDs, but in writing about the large numbers of engineers produced by China and India, he seems to assume that they ARE employed in their fields. Certainly in the case of China, this is not true. As I've mentioned, an engineering graduate may be working as a technician, a building inspector, a factory supervisor etc. A lot of the fear he has of a huge army of engineers in China and India should be toned down for this reason. Another point of disagreement I would have is Freeman's premise that a nation needs a lot of doctorates in S&E. Again, see my posting, http://heather.cs.ucdavis.edu/Archive/ProposedMSPhDExemption.txt for why this is not the case, at least in areas like computer science, math, statistics etc. Given that immigration plays such a role in this discussion, I wish that Freeman had been more careful in his discussion of immigration. For example, after he goes through the obligatory statistics on the percentage of U.S. S&E workers who are foreign born, Freeman says, "Since neither the CPS nor the Census ask where someone earned their degree, these data do not distinguish between international students who chose to stay in the US and immigrants who come with foreign degrees." This statement ignores the fact that a large portion of foreign-born S&E workers (at least at the Bachelor's degree level) came to the U.S. through a very different immigration category, namely as children via family immigration. By the way, to deal with this, my own analysis of census data has focused on recent immigrants in the S&E workforce, i.e. people whose entry into the U.S. was around college age. A funny side note is that in his opening remarks, where Freeman lists the accomplishments of S&E and intellectual pursuits in general, he states that 17 of the top 20 universities in the world are in the U.S. His source for this statistic is a study by Shanghai Jiaotong University in China. I had seen the study before and didn't really pay any attention to it, but I looked at it again upon seeing Freeman's citation. The criteria it uses are questionable of course, as any set of criteria for such a survey would be, but interesting in the set of universities which are NOT listed. For example, there are NO Chinese universities listed in the top 100. This is quite remarkable in that the U.S. computer science lobbyists were just recently trying to tell us that the U.S. is slipping, in that it did not place in the top 20 in the international programming contest--which was won by this same Chinese university, Shanghai Jiaotong University. (See my article, http://heather.cs.ucdavis.edu/Archive/ACMProgContestMain.txt) So the very university that we are told by lobbyists has surpassed us does not even rank itself in the top 100. Norm http://www.boston.com/business/technology/articles/2005/08/08/us_could_lose_high_tech_edge_study_says?mode=PF The Boston Globe US could lose high-tech edge, study says By Robert Gavin, Globe Staff | August 8, 2005 China and India are educating so many scientists and engineers that it is all but certain that the United States will lose some of its technological advantage and will suffer difficult economic adjustments, according to a recently published paper. By 2010, Chinese universities will graduate more students with science and engineering doctorates than their US counterparts; India will also gain ground, according to the paper, by Richard Freeman, a professor in Harvard University's economics department. And once these countries achieve a large enough pool of technical talent, they can challenge established trade patterns in which the United States exports advanced technology and developing nations produce commodities. Freeman argues that the growing legions of scientists and engineers, underpinned by huge labor forces, could allow China and India to produce both cutting-edge products and low-cost commodities. He warns that the outsourcing of technical jobs is a harbinger of US economic dislocations. ''When you combine low-wage workers with the ability to compete with your technology," Freeman said in an interview, ''then you have a problem." Freeman's paper, published in June by the nonprofit National Bureau of Economic Research in Cambridge, came to light as US corporations warned again of shortages of technical talent -- particularly American-born talent. Last week, 15 business groups called for a commitment to double by 2015 the number of bachelor's degrees in science technology, engineering, and mathematics; to strengthen math and science programs in public schools; and to encourage students to pursue careers in these fields. The nation today relies heavily on foreign-born scientists and engineers, who make up more than half of the doctoral-level scientists and engineers younger than 45, according to Census data cited by Freeman. But businesses have voiced fear that strict immigration policies following the Sept. 11, 2001, terrorist attacks and expanding opportunities overseas will deplete this pool. In the 2003-04 academic year, for example, foreign enrollment in US colleges and universities fell for the first time in more than 30 years, the Institute of International Education in New York said. ''Foreign workers have allowed us to remain competitive, and businesses across the board are very, very worried," said Chris Goode, senior director of public policy at EMC Corp., a Hopkinton data storage company. ''We need a sense of urgency like after Sputnik," the Soviet satellite that was a catalyst in the space race. Freeman said businesses need more than a sense of urgency: They must pay more. In his paper, Freeman argues that fewer American-born workers pursue science and engineering not only because they have more career choices than foreign workers, but also because some choices offer better wages. Average annual salaries for lawyers, for example, amounted to more than $20,000 above those for doctoral-level engineers and $50,000 more than those for life scientists with doctorates, according to Census data that Freeman cites in the paper. In contrast, science and engineering offer many foreign workers earnings that few occupations in their countries can match, not to mention ''a ticket to the US job market" and even higher comparative earnings, Freeman says. US companies, he added in an interview, have been quite willing to encourage a foreign supply of technical workers. This has allowed them to pay lower wages, but it has also created conditions that make science and engineering less attractive to Americans. ''You can't say, 'I want more visas' and 'I expect more Americans to enter the field,' " Freeman said. ''The thing that always strikes me about these business guys is they never say, 'We should be paying higher salaries.' " Increasing financial incentives is just part of the solution, Freeman said. The technological preeminence of the United States will erode because a country with 5 percent of the world's population cannot have an indefinite hold on a third of the world's scientific and engineering researchers. The spread of technology around the world will prove a benefit, but US workers are likely to suffer lost jobs, Freeman writes. Robert Gavin can be reached at rgavin@globe.com.