Wednesday, July 27, 2005

The future of US scientific leadership

NBER working paper by Harvard economist R. Freeman: Does Globalization of the Scientific/Engineering Workforce Threaten US Economic Leadership?

Some basic observations: fewer and fewer Americans want to be scientists and engineers (S&E). US S&E compensation growth has lagged that of doctors, lawyers and other professionals in the last ten years. Other nations, particularly in Asia, are catching up, with Asia now producing more S&E PhDs per year than the US, and China to surpass the US in PhDs per year in 2010. Freeman points out that lack of interest in S&E by native-born US students is rational - their career prospects are diminished by foreign (outsourcing) and foreign-born (immigration) competition.

Note Freeman's Proposition 2: Despite perennial concerns over shortages of scientific and engineering specialists, the job market in most S&E specialties is too weak to attract increasing numbers of US students. Nevertheless, US S&E pay rates are still high enough to attract talented foreigners. This competition further reduces the attractiveness of S&E careers to US students.

For related commentary, see my previous posts Don't become a scientist!, history repeats, brain drain slowdown and Tale of two geeks.

Abstract: This paper develops four propositions that show that changes in the global job market for science and engineering (S&E) workers are eroding US dominance in S&E, which diminishes comparative advantage in high tech production and creates problems for American industry and workers: (1) The U.S. share of the world's science and engineering graduates is declining rapidly as European and Asian universities, particularly from China, have increased S&E degrees while US degree production has stagnated. 2) The job market has worsened for young workers in S&E fields relative to many other high-level occupations, which discourages US students from going on in S&E, but which still has sufficient rewards to attract large immigrant flows, particularly from developing countries. 3) Populous low income countries such as China and India can compete with the US in high tech by having many S&E specialists although those workers are a small proportion of their work forces. This threatens to undo the "North-South" pattern of trade in which advanced countries dominate high tech while developing countries specialize in less skilled manufacturing. 4) Diminished comparative advantage in high-tech will create a long period of adjustment for US workers, of which the off-shoring of IT jobs to India, growth of high-tech production in China, and multinational R&D facilities in developing countries, are harbingers. To ease the adjustment to a less dominant position in science and engineering, the US will have to develop new labor market and R&D policies that build on existing strengths and develop new ways of benefitting from scientific and technological advances in other countries.

From the paper:

Enrollments in college or university per person aged 20-24 and/or the ratio of degrees granted per 24 year old and in several OECD countries (Australia, New Zealand, Netherlands, Norway, Finland, the United Kingdom, and France) exceeded that in the US. 5 In 2001-2002, UNCESCO data show that the US enrolled just 14% of tertiary level students – less than half the US share 30 years earlier. 6 In most countries, moreover, a larger proportion of college students studied science and engineering than in the US, so that the US share of students in those fields was considerably lower than the US share overall. In 2000, 17% of all university bachelor’s degrees in the US were in the natural sciences and engineering compared to a world average of 27% of degrees, and to 52% of degrees in China.

...Overall, the U.S. share of world S&E PhDs will fall to about 15% by 2010. Within the US, moreover, international students have come to earn an increasing proportion of S&E PhDs. In 1966, US-born males accounted for 71% of science and engineering PhDs awarded; 6% were awarded to US-born females; and 23% were awarded to the foreign-born. In 2000, 36% of S&E PhDs went to U.S.-born males, 25% to U.S.-born females and 39% to the foreign-born. 8 Looking among the S&E fields, in 2002, international students received 19.5% of all doctorates awarded in the social and behavioral sciences, 18.0% in the life sciences, 35.4% in the physical sciences, and 58.7% in engineering. 9

...Whichever indicator one examines, the evidence suggests that the job market for most scientists and engineers in the US has fallen short of the job markets in competitive high level occupations. Exhibit 3 records levels of pay and rates of change in pay from the Census of Population. It shows that scientists and engineers earn less than law and medical school graduate, and that rates of increase in earnings for science and engineering in the 1990’s fell short of the rates of increase for doctors and lawyers and for persons with bachelor’s degrees. The Census comparisons of the income between S&E doctorates and persons obtaining medical or law professional degrees understate the lower income associated with the PhD trajectory. Doctoral graduate students typically spend 7-8 years earning their PhD – a quarter of their post-bachelors working life – during which they are paid stipend rates. In some disciplines, notably the life sciences, most spend 3 or so years doing postdoctoral work, again at stipend incomes that fall far below alternative salaries available to bachelors degree holders or those with professional degrees. Since postdocs work many hours, their pay is particularly low on an hourly basis for someone with their years of education. Given their lengthy training and post-doctoral work, many S&E doctorates do not enter the “real job market” until they are in their mid-30s, by which time many of their undergraduate classmates who chose other careers are well-established in their work lives. The comparison with managers with 2 years of post-bachelor’s training does not adequately reflect the payoff to MBAs since the post-bachelor’s education refers to any sort of further education, not to that degree.

...In 1973, roughly 73% of new PhDs obtained faculty jobs within three years of earning their degrees. By 1999, just 37% of new PhDs obtained faculty jobs within three years of earning their degrees.


Anonymous said...

Isn't the depression of wages a natural result of globalization?

Wage pressures on doctors and lawyers is admittedly less, as location is more important in these fields than, say, software. However, their wages will be indirectly affected since they depend on the earnings of rest of the local population whose wages are directly affected by globalization.


Anonymous said...

Presumably the wage differential is supported by a high differential in our economic output and other places in the world. At the moment drinking a cup of coffee in a NYC coffee shop is more valuable then doing so in most places in Bangladesh. Provided this remains true, we will feel the affects of outsourcing and immigration on our wage structure. This will give a relative advantage to jobs that cannot be outsourced and that an immigrant population (presumably willing to work for less money) cannot supplant. There will still be a lot of money to be made, but one suspects that it will go to fewer people.

IMOP the greater “threat” is that other countries’ output is showing signs of catching up with that of the US. This happened to some extent to the British when the other Europeans caught up with them, and then to Europe as a whole when we (and then Japan) caught up with them. Of course if the end result is 30 days a year vacation like the Europeans seem to get, maybe that wouldn’t be such a bad thing.

Steve Hsu said...

I think one way to say this is that over the last 20 years S&E jobs have come closer to becoming "tradeables" than professional jobs (MBA, JD, MD, CPA). There are numerous reasons, ranging from language requirements (not as essential for S&E), regulatory issues (no AMA for EEs) and government intervention (no Federal support for importing large numbers of foreign students to obtain MBA/JD/MD/CPAs at taxpayer expense, as opposed to S&E graduate support), etc. Also, chip design can be done abroad, whereas surgery and small claims court are local.

However, as we move forward professional services are becoming more and more tradeable, thanks to technology. So, perhaps this differential trend will moderate.

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