Friday, January 6, 2006

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There is no engineering gap

Last year there was a lot of hysteria among the business press over the fact that China and India were allegedly graduating hundreds of thousands of engineers a year, while the U.S. could only muster around 70,000 or so.

I blogged last October about how even outsourcing critics were skeptical of these numbers. Now, courtesy of Duke University's Engineering Management Program, there are some harder numbers on this subject -- and it turns out there's not much reason to panic (link via the Wall Street Journal's Carl Bialik). Here's the report abstract:

The effect of the dynamics of engineering outsourcing on the global economy is a discussion of keen interest in both business and public circles. Varying, inconsistent reporting of problematic engineering graduation data has been used to fuel fears that America is losing its technological edge. Typical articles have stated that in 2004 the United States graduated roughly 70,000 undergraduate engineers, while China graduated 600,000 and India 350,000. Our study has determined that these are inappropriate comparisons. These massive numbers of Indian and Chinese engineering graduates include not only four-year degrees, but also three-year training programs and diploma holders. These numbers have been compared against the annual production of accredited four-year engineering degrees in the United States. In addition to the lack of nuanced analysis around the type of graduates (transactional or dynamic) and quality of degrees being awarded, these articles also tend not to ground the numbers in the larger demographics of each country. A comparison of like-to-like data suggests that the U.S. produces a highly significant number of engineers, computer scientists and information technology specialists, and remains competitive in global markets.
And this is from the text of the report itself:
The outsourcing debate has been complicated due to conflicting definitions of the engineering profession....

Through our research, we have identified two main groups of engineering graduates: dynamic engineers and transactional engineers. Dynamic engineers are individuals capable of abstract thinking and high-level problem solving using scientific knowledge. These engineers thrive in teams, work well across international borders, have strong interpersonal skills, and are capable of translating technical engineering jargon into common diction. Dynamic engineers lead innovation. The majority of dynamic engineers have a minimum of a four year engineering degree from nationally accredited or highly regarded institutions.

Transactional engineers may possess engineering fundamentals, but not the experience or expertise to apply this knowledge to larger problems. These individuals are typically responsible for rote and repetitive tasks in the workforce. Transactional engineers often receive associate, technician or diploma awards rather than a bachelorís degree....

Graph 2 depicts the annual production of bachelorís and subbaccalaureate degrees in Engineering, CS and IT awarded per million citizens. These data imply that per every one million citizens, the United States is producing roughly 750 technology specialists, compared with 500 in China and 200 in India....

Outsourcing creates a clear threat to certain professions and it is likely that this trend will continue. It seems that the jobs of transactional engineers are easily outsourced and are routinely being taken by relatively low paid engineers in countries like India and China. However, the outsourcing of high-level engineering and IT professions is another story. These jobs often require specialized dynamic engineers: individuals with strong interpersonal skills, technical knowledge and the ability to communicate across borders....

The great majority of engineers involved in outsourced professions hold a minimum of a four-year degree. As a result, one could argue that approximately half of Chinaís and Indiaís annual engineering and IT graduates are capable of competing in the global outsourcing environment. However, a recent McKinsey global labor market study
argues that this estimate is far too generous. McKinsey concluded that only 10% of Chinese engineers and 25% of Indian engineers can compete in the global outsourcing arena.

So, to conclude, offshore outsourcing will take place when the tasks can be segmented into discrete, simple and rote tasks, and does not pose a threat to engineers at the B.S. level or above.

Damn, that sounds familiar.

posted by Dan on 01.06.06 at 03:44 PM


You may be right but, I think you also may be missing something more important. Of the US engineering students, how many are foreign? What percentage of graduate students are foreign? These are surprising numbers.

As an engineer, what I see is more and more manufacturing and development moving offshore. It doesn't matter if they're not up to par. If you put 10 "engineers" on each job at 1/20 - 1/50 the cost you will still see the movement.

P.S. An engineering degree is a B.S. not a B.A.

posted by: john on 01.06.06 at 03:44 PM [permalink]

My advice to any young American who is thinking of getting a degree in engineering: Think about it hard before making a decision. Think about competing with the very best of the best from China, Russia, Eastern Europe or India. Understand how fast the world is moving in the direction of cheap and easy data/knowedge transfer. If you go for engineering get into a position where your knowledge of American culture or business dynamics can't be matched by someone offshore. Or think of a field where face to face contact is required or there is a rent collecting barrier to foreign entry. Automechanics, plumbing, electrician stuff like that. No one soon is going to send their cars, houses or other stuff firmly bolted to the earth to China for repairs like airliners can be. We may import whole houses mfg'r in China but I don't think within a current working lifetime. Watch out for medical care as we may start offshoring that in a big way soon as a way of controlling costs. Offshoring medical care is starting at the high end now and the low end will follow. We may export aging boomers to India for retirement/assisted living also.
A lot of life changing events are going to occur in the next 50 years, if we don't screw up, some of those will bring great rewards to the winners and some will bring life on the streets for a lot of hard working people. Remember "you are on your own". Think about working for the "winners" like my step-daughter does. Good help, beyond gardening and housework, is hard to find
Good Luck All.

posted by: dilbert dogbert on 01.06.06 at 03:44 PM [permalink]

"So, to conclude, offshore outsourcing [...] does not pose a threat to engineers at the B.A. level or above."

How do you come to that conclusion? The article seems to indicate that U.S. engineers at the B.A. level and above are "threatened" by "10% of Chinese engineers and 25% of Indian engineers."

posted by: izzard on 01.06.06 at 03:44 PM [permalink]

The problem we have in this country is very simple and we are apparently unable to recognize it. The fight is not republicans against democrats, itís us vs the rest of the world. All of this partisan crap wonít do any real good for Americans. This is it guys, we either work together or we lose. Iím personally very tired of playing the party card, although I see here many arenít. We need to focus on REALITY! In spite of all the propaganda, we are in trouble here and need to act! This is not about political affiliation, itís about survival!

So, STOP blaming the ďotherĒ party and START demanding action from our elected officials. Maybe they should do their job for a change!

posted by: john on 01.06.06 at 03:44 PM [permalink]

@ John

Did you post your comment in 1906 rather than 2006? Despite all the demagoguery and bloodshed of the last century nobody actually disproved that free trade benefits all parties, and indeed, we're all much richer now than we were then. Trade is not war. Trade is mutual advantage. The problem is the temporary social disruption that can result from a more efficient allocation of resources. A society should not put itself on an 'us against them' economic war footing; a society should prepare itself, mentally, emotionally, and in terms of formal education, for dealing with shifts in resources as a result of efficiency gains. Spreading knowledge of what is going on, to prevent people like John making us worse off, is one important thing. Creating a climate of innovation and decentralized distribution of opportunity creation is another. A safety net, not just in the form of money, but as in training people to find their way in this sort of economy, is a third. Those are the economic policies suited for this century. Wish they had been implemented in 1906.

posted by: 2006 on 01.06.06 at 03:44 PM [permalink]

Dear 2006,

Yes, of course, just another naive complainer. In fact I do quite well in this NWO but know many who do not. You speak of education but support a government that has reduced educational opportunities. WE are competing with countries that HAVE universal healthcare, free and accessible higher education! WE continue to burden industry with the cost of providing these when our competitors donít. WE continue to burden our people with the cost of higher education where others donít. How are we to realistically compete with this? Where are the new initiatives for universal higher education? Where??? Oh, I forgot, thatís not whatís important now.

An interesting example of this can be found in the new Iraqi constitution where education and healthcare are considered a constitutional right. Imagine that!

Again, I am so happy your wonderful party has been able to make this all work so well. We are all so glad you have been addressing the little problems of our great countryÖwell, maybe soon. BTW, see you in WONKALAND.

posted by: john on 01.06.06 at 03:44 PM [permalink]

I think that this distinction between dynamic and transactional engineers is very useful and accurately describes what I see in the software industry as well.

Even when chinese and indian programmers are on staff in American companies, there are notable differences. You never quite know what you're getting until you sit folks in a room and start talking about the systems to be built.

Enterprise systems that are to make a difference in the productivity of the target customers are notoriously difficult to assemble, even when using simpler standard technologies that procurement departments are demanding be offshored. That is why companies like Accenture continue to make money in the American and international markets. The skills of management consultants that can do a tight handover to technologists are in high demand, but even so these are applications that tend not to be robust. Anything that takes more than six months to build will suffer from changes in the business environment, turnover in personnel and integration with other systems that themselves are being changed.

Again, the allure of cheap labor in this area is that SQL is SQL. Not necessarily so. It's actually getting more complicated to do these applications properly, primarily because of an attitude the 'best practices' can be built into every application. This means that a lot of abstraction of problems is done, and a number of experts who don't do hands on work are employed. All this is done at the expense of homegrown (meaning inside the client company) experience which is the great hidden expense of outsourced systems.

It comes down, in my view, to a decades old clash between management philosophies. Deming vs Hammer. The Deming method says to evolve the way people are working with technology and business processes. That's highly integrative and evolutionary. It means you have to do a lot of listening and translating. The Hammer schools says, throw out the old and make everyone start from scratch. That's re-engineering. Companies that get re-engineered outsource and offshore better than companies that evolve. Companies that evolve are more productive because the culture of the company teaches everyone what the focus of the business is. They can be more numble, but there's a steep learning curve.

I'm from the Deming School (an old Xeroid from the McKinsey makeover under David Kearns) and have been in the enterprise sofware business for two decades. The Deming way is harder, and it's often against the best interests of management and technology consulting companies, not to mention software vendors, to evolve a good company to great, but the real loss is that so many American corporations are literally outsourcing their own quality improvement. They don't want to grow their own MBAs, they want somebody else's. This dependency is what both depletes American talent, and keeps consultants like me in new BMWs.

posted by: Cobb on 01.06.06 at 03:44 PM [permalink]

Soon, the day will come when writing software will be a typing exercise. It's close now, but not quite.

Someone will draw a picture on a piece of paper (or whiteboard), and that will be the innovation, hard work, and discipline.

then, it will be handed to a "coder" somewhere to code.

It will be the modern equivalent of a secretary taking dictation.

It will be easy to outsource coding in that case. But it also means that what most people learn in a BS engineering degree isn't enough to be able to draw that picture well--so the real skill will again be rare, and the "certification" that the ugrad degree provided will become like a high school diploma: merely a demonstration of same basic reading and writing skills.

These jobs people are so angry about losing are jobs that are going away whether they leave the nation or not. The world is still changing. Jumping on a bandwagon and believing that if you don't do something rare, that you'll still be guaranteed a job won't work. And a good thing for that.

posted by: anon on 01.06.06 at 03:44 PM [permalink]

"Soon, the day will come when writing software will be a typing exercise. It's close now, but not quite.

Someone will draw a picture on a piece of paper (or whiteboard), and that will be the innovation, hard work, and discipline."

Try replacing "writing software" with "designing aircraft".

We're close to having IDEs that will take what you tell them to do and produce code that will do it. Just like we're close to having CAD/CAM systems that will let you draw a design freehand and then tidy it up and build it. But....

If you can write your idea on a piece of whiteboard and specify all the possibilities that might come up, then coding it isn't any big deal apart from typos and brainfarts. It's easily in reach to design compilers that can take a specification of all the possibilities and code them while completely automating the process of putting in typos and brainfarts. But usually there's something wrong with the original idea, that doesn't show up until somebody who's looking at the details has to ask.

And it's the inefficiency in that feedback process that makes outsourcing competitive. It works so badly already that having the coders work on another continent speaking ESL doesn't make it much worse. ;)

posted by: J Thomas on 01.06.06 at 03:44 PM [permalink]

"My advice to any young American who is thinking of getting a degree in engineering: Think about it hard before making a decision."

It's easy to become unemployable as an engineer after about ten years or so. Your official training isn't as recent as a new graduate and also you're more expensive. What you've learned in those ten years is harder to quantify, and if it looks good it tends to price you out of the market. Engineers have as short a shelf life as ballerinas.

Could a recent graduate get that written into his contract? That he expects his salary to peak learly, and then start decreasing to the point that when he retires it makes no difference to his income, provided he stays in engineering? Something like that might let him last to retirement. Not that many engineers can expect to become managers.

But there's still the problem of the exchange rates. An engineer in india or china doesn't live that much worse than an american. They eat well, they sleep well in decently warm houses, etc. They live much much better than an american could living on their income converted to dollars. The international monetary system makes labor here far more expensive than it ought to be. So a young engineer who can pick up a second language might do well to look at working elsewhere. There are risks to living in a third world nation, and it would be very expensive to come home to visit or to buy things made in the USA. But if you're allowed to work there will be jobs.

"We may export aging boomers to India for retirement/assisted living also."

Not likely. Lots and lots of debilitating diseases that affect anglos. Any tiny sanitary slips and retirees would be dying like flies. They wouldn't agree to that unless our government made all their alternatives even worse.

posted by: J Thomas on 01.06.06 at 03:44 PM [permalink]

"The problem we have in this country is very simple and we are apparently unable to recognize it. The fight is not republicans against democrats, itís us vs the rest of the world. All of this partisan crap wonít do any real good for Americans. This is it guys, we either work together or we lose."

Until republicans stop waging war on the rest of the country, we can't work together. And they show no sign of truce,

So we lose.

posted by: J Thomas on 01.06.06 at 03:44 PM [permalink]


All of the unemployed and underemployed workers in Ohio and Michigan appreaciate your optimism.

Saturday here is a big day for foreclosure auctions.

"free trade benefits all parties"

Free trade benefits all economies in the aggregate. It has been hell on American workers.

posted by: save_the_rustbelt on 01.06.06 at 03:44 PM [permalink]

Let us start using 'unregulated trade' for the term 'free trade'.

Freedom is an honorable concept, and many of our ancestors died for it. 'Free' trade is something different, and this term is a rhetorical trick which confuses the issues.

Unregulated trade is associated with vast gains for the wealthy, stagnant or declining wages for workers, loss of benefits, loss of jobs, reduction of job quality, etc.

It's interesting that in our unregulated trade era, the Bush & Co recovery brought on the order of 3 million jobs, whereas other postwar recoveries spawned 17-24 million jobs.

posted by: camille roy on 01.06.06 at 03:44 PM [permalink]

I donít know why any kid would want to major in science or engineering. The subject is hard and the career is pretty lousy. Nursing, medicine, pharmacy, and law are much easier fields, they pay much better than engineering, and the career can last a life time, unlike engineering.

posted by: Mark on 01.06.06 at 03:44 PM [permalink]

While this confirms my hunch that American engineers are doing fine, your last line is not much comfort. Most IT work at big companies consists of "discrete, simple and rote tasks". Also, foreign engineers are getting better by leaps and bounds. They will soon produce many more BS level engineers as good as America. Thank goodness I have a PhD.

posted by: Dude on 01.06.06 at 03:44 PM [permalink]

Your conclusion doesn't follow from your quote, and rote jobs are automated not outsourced. Exportation of manufacturing will export engineering and design jobs along with them; it is just the nature of business. At least you don't promote the industry fallacy of a shortage that needs government intervention. In the long run will we have as many engineers as we need, even if that is fewer than we have now. Businesses love free markets until it applies to them.

posted by: Lord on 01.06.06 at 03:44 PM [permalink]

I have some anecdotal information to add to this discussion - take it or leave it as you see fit.

I am a paralegal in an immigration law firm that does primarily business immigration. I have done dozens if not hundreds of H-1B petitions for Chinese and Indian nationals over the past 6 years. Immigration is a very "paralegal heavy" area of law - we do about 98% of the work that goes into a petition.

As part of the process, I get to see each individual's resume, work history and education. One thing that has struck me is how seldom those from China progress beyond basically entry level positions, as opposed to those from India. My theory for this is that the culture of learning in China is very rote - creativity is not encouraged. Therefore, while those from China can certainly do the jobs we need here in the US, they are certainly not the innovators that keep their industry moving ahead and changing in creative ways. This is in stark contrast to those from India - I get a sense of much better people skills, managerial skills, and creative problem solving from them.

Finally - you have no idea how much work it takes our firm to get our contacts within our client companies to take the whole immigration process seriously. Honestly, it suprizes me each day I get up that I still have a job - most of our HR contacts and recruiters act as if the immgration process is about as pleasant as having a tooth pulled. I've lost perspective a bit, as I could do an H-1B in my sleep now....

posted by: April on 01.06.06 at 03:44 PM [permalink]

Two responses to comments:

"the day will come when writing software will be a typing exercise."

This is exactly comparable to saying "the day will come when composing music will be a writing exercise." It's just as inane and thoroughly inaccurate. Until humans are able to calculate, communicate, and remember information without the help of machines, there will be a need for software engineering.

"I donít know why any kid would want to major in science or engineering. The subject is hard and the career is pretty lousy."

That's one person's opinion. I've found engineering to be very rewarding in terms of personal satisfaction, but that's just because I like building things and problem-solving. As far as the money goes, I've done pretty well. There's another guy in my field who's done pretty well too, name is Bill Gates. Heard of him?

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