2004 Annual Meeting - President's Remarks

It is an immense honor to welcome once again our new members and foreign members. This talk each year gives me an opportunity to reflect on problems and opportunities for engineering. In reviewing the possibilities this year, I realized that there is an elephant in the living room, and I had better not ignore it. I am referring to the outsourcing (or offshoring) of engineering jobs to India and China and other places. The outsourcing issue is connected to other issues that, taken together, form a “mosaic,” an image of troubling proportions for our society, not just for engineering. So before I turn to outsourcing per se, let me put it in context.

First, everyone who has looked into the problem agrees that the data on outsourcing are poor! Last year, at an NAE “summit” on the engineering workforce, an incredible range of opinions were expressed—from shortage to oversupply—and each opinion was supported by the selective use of data. A Rand report released this June makes the same point, namely, that the data are inadequate. As a result, the situation is now rife with hype, the sort of situation the media love to amplify. Let’s try to avoid that.

Second, the physical arrangement today, that is, me at the podium and you in the audience, is not conducive to a dialogue. But dialogue is what we need, specifically a dialogue about what we are going to do (or not do). It’s too easy to fob this problem off onto politicians. As the most respected assembly of engineers in the United States, NAE should be front and center on this issue, which is critical to our profession. Today, I am setting a context for that dialogue, a “discussion database" on our website, with a link at the top level. I encourage you to engage in the discussion.

Third, I refer you to the 20 Greatest Achievements Project. For the benefit of new members and guests, this is a project we undertook in 1999 to come up with a list of the 20 greatest engineering achievements of the twentieth century; “greatest” was defined in terms of impact on our quality of life. The full list is available on our website, and a “coffee table” book is for sale by the National Academies Press. The important point for this discussion is how profoundly engineering has affected society in the last 100 years—arguably more than any other single thing. Remember, in 1900, few people had electricity or telephones or automobiles. There were no airplanes; the average lifespan in the United States was 46, whereas it is now 77 (it has been estimated that clean water added 20 of those 31 years); 50 percent of the U.S. population lived on farms, whereas now only 2 percent do because of the increase in productivity brought about by mechanization; there were no antibiotics, radios, TVs, Internet, and so on.

Fourth, I am not an economist—whether that’s a good thing or not we’ll have to see—and this is clearly an economic issue. So I won’t pretend that I can see all of the policy levers that may be applicable here.

In that context, I will tell you some of the things I know and then move on to some of the things I believe but can’t prove. I will then suggest some things we ought to be doing and some linkages to other issues that form the “mosaic” I referred to earlier.

Some Things I Know

First, I know that the plural of anecdote is not data! The popular press likes to tell stories about individuals: “John Jones says he spent four years being educated for a three-year engineering career, but now he is leaving engineering ….” That’s not data. The story is meant to suggest that the problem is rampant and to make you feel personally threatened. But, in fact, it provides no basis for knowing anything.

Second, I know that conflicting definitions of “engineer” by the National Science Foundation (NSF) and the Bureau of Labor Statistics confuse the situation. In my view, the term “computer science” further confuses things (even though it is called a science, I believe it is [mostly] an engineering discipline). We need to be very careful to use consistent, comparable data.

Third, I know much of the hard data we have is reported two years late. That really matters in the current context because of the “dot com” boom/bust.

Fourth, I know that the number of new engineers per year in the United States declined from about 85,000 in 1985 to about 65,000 in the mid-1990s; it is back up to about 75,000 in the latest data. To put this in context, the number is more than 200,000 per year in China and India, and about one million per year worldwide. Thus, new U.S. engineers account for only about 7.5 percent of the world total.

Fifth, I know we were importing engineers on H1B visas, about 20,000 to 25,000 per year at the peak. I have seen this figure reported as 195,000 in some places, but that is the total for all professions, not just engineering. This is the sort of hype that annoys me.

Sixth, I know we are creating engineering jobs in India and China; one need only drive down a road in Bangalore to see that. The question is to what extent these jobs are replacing jobs in the United States. Surely they are to some degree, but I have seen no reliable data on numbers. There are reports of good and bad experiences with outsourcing, and there are also cases of “insourcing,” in the pharmaceutical industry, for example.

Seventh, starting salaries for new bachelor-level engineers are not moving up significantly (which would imply a shortage) nor down significantly (which would imply an oversupply). They are 1.5 to 2 times the starting salaries for new B.A.’s, and the average engineering salary is comparable to the average salary of a starting lawyer. This suggests to me that employers see value in U.S. engineers.

Eighth, engineering unemployment is up from 0.5 percent to around 6 percent—at least in some fields. That is comparable to unemployment in the rest of the workforce—which is unusual and worrisome because historically engineering unemployment has been lower than in the workforce as a whole! Does that tell us something has changed structurally? We must be careful in interpreting this because of the crazy economic boom/bust we’ve experienced. It’s also worth noting that 6 percent unemployment used to be considered full employment and that less than 6 percent was considered to cause inflation. Is the situation today an anomaly, or was the situation in the 1990s an anomaly? It’s hard to tell!

Finally, I know we need to keep things in perspective. Six percent unemployment among engineers is about 120,000 individuals. That should be compared to the 500,000—half a million—Americans who lose their jobs each week. In a healthy economy, jobs “churn,” and that’s a good thing because that’s how things improve, how we lose low-end jobs and acquire high-end ones.

Here’s an example. In 1970, there were 421,000 switchboard operators supporting 9.8 billion phone calls. Today there are 78,000 operators (less than one-fifth as many) supporting 98 billion calls (10 times as many). Should we have protected those jobs? I don’t think so. Although we can have empathy for those who lost their jobs, and we perhaps have a societal responsibility to retrain them, consumers are the big winners—a 40-fold decrease in the cost of telephony and a host of new services.

Some Things I Believe

First, I believe that engineers are not telephone operators! U.S. prosperity, security, and health depend on technology created by engineers, and that dependence is evident in the 20 great achievements I mentioned earlier. I also believe that this dependence will increase. And, this dependence on engineering should change the fundamental nature of the discussion, from empathy for individuals to concern for our economy, our security, our health, the environment, etc.

Second, I strongly believe two things that are superficially incompatible. One is that human capital is precious—when we lose an engineer we diminish that stock. The other is that leaving engineering is not, in itself, a failure of either the individual or the profession. An engineering education is great preparation for many careers. In fact, I wish we had more engineers in other professions; from where I sit these days, I especially wish we had more engineers in politics!

Third, I believe that the aggregate data and discipline-specific data are quite different. That matters because engineering is changing, and we need to be able to disaggregate the trends.

Fourth, I don’t believe in a protectionist approach to solving the problem of access to engineering talent. Protectionism might be OK in the short run, but it’s not in the long-term interest of the country. It would not have been good for the country to protect those telephone operators’ jobs I mentioned earlier, for example. We need to think of positive, constructive alternatives to ensure the nation’s access to the engineering talent it needs.

Finally, I believe that, for the most part, managers make rational decisions. If they can get comparable talent at one-fifth the cost in India, and if the start-up cost is small, and if the cost stays small, and if the productivity per unit cost is high enough, and if they can manage from 10,000 miles and 12 times zones away, then they will outsource—and they should! The problem is the nation’s access to engineering talent, and the individual manager in an individual company is not responsible for solving that problem. But those are all big “ifs,” and there is some evidence that each has been wrong in specific cases.

What bothers me most is the long-term protectionist approach advocated by some, even some professional societies. Some form of protection might or might not be appropriate in the short term, but it is not a long-term solution in my view. The world is changing—or, perhaps more accurately, has changed. The familiar and comfortable world of mass production manufacturing by predominantly nationally owned and operated companies is gone. In the long term, we have to prepare our engineers to operate in this new environment in a way that the “ifs” I listed are not true. We must also have empathy for those who are displaced from their jobs and help them prepare for new ones.

The Mosaic

The proposed protectionist approach as a long-term solution to the problem of outsourcing is part of the mosaic I mentioned earlier, a mosaic I think presents an image of increasingly short-term thinking and a lack of balance. Let me suggest some other pieces of the mosaic that relate to engineering.

First, the absolute number of engineering graduates has declined. As I said earlier, we graduated about 85,000 in the mid-1980s; the number dropped to about 65,000 in the mid-1990s, but has recently risen to about 75,000. One must remember, however, that the total number of undergraduates has increased in the intervening 20 years. So, although the absolute number is up somewhat, it is still a decreasing fraction of the total number of undergraduates.

Second, the percentage of undergraduates in engineering (between 4 and 5 percent) is the second lowest in the developed world. By way of contrast, the percentage is 12 percent in the United Kingdom and more than 40 percent in China.

Third, as NAE members already know from my newsletter, I am deeply concerned about the increasing difficulty of students and senior scientists and engineers getting visas to enter the United States. Very briefly, in the wake of 9/11, the U.S. government instituted new policies for issuing visas, which was both inevitable and appropriate in some ways. However, I believe the way this has been done has been counterproductive.

In the past, the best and brightest in the world came to the United States to study, and many remained here to contribute their talents to improving our way of life. In the past, senior and respected scholars came to visit U.S. universities, to lecture, and to share their knowledge. In the past, major international conferences were hosted in the United States, giving our scientists and engineers privileged access to the most recent developments around the world. In the past, the image of the United States was of a free and open society—a land of opportunity.

We have not completely eliminated those “in the past” items, but we are coming perilously close! In an attempt to make ourselves safer, we have both prevented the world’s best and brightest from attending our universities and alienated them and senior scientists and engineers in the process.

Fourth, after three decades of steady progress in engineering for women and underrepresented minorities, in the early 1990s, the percentage of women and underrepresented minorities declined. It then rebounded a bit … but has essentially been flat for more than a decade now.

Fifth, for most of our history, higher education was considered a public good, that is, it was considered good for the country to increase the number of educated citizens. Before becoming president of NAE, I was a professor at the University of Virginia, which was founded by Thomas Jefferson. Jefferson founded the University because he believed that we could not have a democracy without an educated citizenry. In the middle of the nineteenth century, our national leaders created the land grant colleges, because they felt we could not have prosperity without an educated workforce. Until recently, states have supported state universities, provided scholarships, and kept tuitions low to make higher education accessible to all.

But something has changed! We no longer seem to consider higher education a public good, but a private one. State support for universities is dropping like a stone, tuitions are rising, and student loans have replaced scholarships in many states. All of these trends reflect a largely unstated view that shifting costs to students is OK because only students benefit from higher education. It’s the “only” in that last sentence that worries me.

Sixth, funding at NIH has doubled to almost $30 billion; at the same time, funding at NSF is $4.25 billion. The last yearly increase at NIH was bigger than the entire NSF budget. As I grow older, I do not begrudge NIH a nickel of that. But I think the imbalance reflects a lack of appreciation of how much our society—even medical technology—depends on the contributions of the physical sciences and engineering. I also think the growing imbalance reflects a short-term focus on the “disease du jour” and a failure to appreciate the impact of long-term increases in knowledge and skills in all of the sciences on our quality of life, including the eradication of disease.

Finally, we live in the most technologically dependant society that has ever existed. Yet the vast majority of our population is technologically illiterate—not dumb, just uninformed. I mentioned Thomas Jefferson’s opinion about the need for an informed citizenry—well, I think he would be worried. Sitting, as I do, at the nexus of science, engineering, and public policy, I am worried!

Despite our efforts here at the National Academies, I see policy makers every day expounding on national and homeland security, energy, and dozens of other technical issues about which they haven’t a clue! I interact with journalists who, in my view, miss the real issues in a story because they have no knowledge of its technical dimensions. I put up with advocates of all stripes proposing technologically nonsensical solutions to very real problems. I worry about people having to make personal decisions—whether or not to disarm an air bag, for example—about which they have fragmentary information and no disciplined thought process on which to rely. Mostly, these are good, intelligent people who want to do the right thing, but they simply do not have the knowledge they need to function in a technological society.

I could describe more pieces in my mosaic, but I will get too depressed.

The Whole Picture

Each piece in my mosaic tends to be treated as a separate problem—and taken alone is, perhaps, not all that important a problem. But they all have one property in common, short-term thinking. None of them addresses the long-term ramifications of the overall problem. For me, viewing them in this overall context makes them all seem urgent.

Some of these problems we can do something about and some we can’t—at least not directly. For example, we can help make engineering more attractive to U.S. students. NAE has established the Public Understanding of Engineering Program to create a better (and more accurate) image of engineering. We can also do something about engineering education to improve the curriculum and pedagogy. It is a disgrace, for example, that only about half of the students who enter engineering programs finish them. The students who leave are not poor students; in fact, in terms of GPA, grades in math and science, SAT scores, and rank in high school, they are indistinguishable from those who stay. They are being driven out by our curriculum and pedagogy. And that is entirely fixable!

We have little direct leverage over the visa situation, but we have direct and personal knowledge of the benefits foreign students and scholars bring to the United States. As an organization, NAE is trying to convince policy makers of that. In addition, each and every one of us can write to our representatives and demand action.

We can do much the same with respect to other issues, like the imbalance in funding between the life sciences and the physical sciences and engineering. And each of us, in our companies or schools, can take ownership of the diversity issue.

I want to make a special plea on the issue of technological literacy. Engineering schools tend to see themselves as professional schools, and they only offer courses for engineering majors. So just how do we expect the other 95 percent of students to become technically literate? I believe engineering schools must accept the responsibility for the technological literacy of all students on campus. We cannot force them to take engineering courses, of course, but we can at least make the courses that are available accessible to the average liberal arts major. In fact, I think we have an obligation to do so.

Conclusion

Although I have touched on a broad range of topics and not gone into depth on them individually, I see them as pieces of a mosaic. And the composite image of the mosaic is one of disinvestment in the future. Each piece of the mosaic raises a topic of concern to engineers, and directly or indirectly, we can do something about them. Engineers have had a profound impact on society through the products, processes, and infrastructure we developed. Now it is time for us to contribute in another way.