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Future jobs in natural science and engineering: shortage or surplus?

For a long time now, there has been a continuing need for occupational demand and supply projections for purposes of educational planning. In recent years, however, concerns over shortages of technical labor, international competitiveness, changes in the demographics of the work force, and other issues have come to the fore, especially regarding scientists and engineers.

In a 1990 study, the National Science Foundation projected a cumulative short-fall of 675,000 bachelor's degrees in the natural science and engineering fields by the year 2006.[1] The finding was based largely on demographics: the college-age population was projected to decline throughout the 1990-2006 period. The Foundation concluded that because of this shrinking base, the number of degrees awarded in natural science and engineering would fall short of historical levels.[2]

The National Science Foundation study was criticized for defining short-falls solely in terms of a declining supply of natural scientists and engineers. The study assumed that future demand for these workers would remain constant at historical levels. Alan Fechter argued, however, that a declining supply may not imply an increased tendency toward a shortage if future demand also is declining.[3] Fechter noted that Bureau of Labor Statistics (BLS) projections of engineering employment indicated a sharp decline in the growth rate of engineering employment for the 1990's, compared with the 1980's. Weak labor markets for graduates in natural sciences and engineering in recent years reinforced this view.

The surplus-or-shortage controversy intensified when the U.S. House of Representatives' Committee on Science, Space and Technology held formal hearings on the National Science Foundation study.[4] The committee heard evidence both in support of and in contradiction to the study's findings and methodology.

The National Science Foundation provided support to the BLS to reexamine the issue of scientific and technical employment utilizing existing BLS labor market projection methodologies, taking into account future declines in demand for natural scientists and engineers. Based on this reexamination, BLS concluded that supply and demand in the 1990-2005 period are very likely to approximate supply and demand in the 1984-90 period.[5]

This report examines the future labor market for natural scientists and engineers, utilizing new information on future degree awards which we apply to the BLS projection methodology. Our results indicate that the market conditions experienced by natural science and engineering graduates in die late 1980's and early 1990's are likely to depress further the proportion of young people earning degrees in these fields. That is, the decline in the number of degrees awarded in natural science and engineering probably will be greater than the decline that would be projected by a simple demographic model. Moreover, for the 1991-97 period, the projected decline in the number of degrees awarded in natural science and engineering is greater than the projected decline in the number of job openings in those fields.

Historical rates

The future supply of graduates in natural science and engineering is a critical component affecting labor market projections. The National Science Foundation projected future degree awards in natural science and engineering as a percent of the 22-year-old population (hereafter, "degree awards rate"), adjusted up or down (from 4.4 percent to 5 percent) according to surveys of freshmen's intentions. According to the foundation, the historical degree awards rate has varied from 3.7 percent to 5.2 percent over tile last 30 years.[6]

[TABULAR DATA OMITTED]

In the BLS study, Douglas J. Braddock examined three projections regarding the future degree awards rate of natural science and engineering graduates: a low rate of 4 percent, a midlevel rate of 5 percent, and a high rate of 6 percent. The midlevel rate is close to the historical levels of the 1980's. As will be shown subsequently, however, this rate is atypical, resulting from unusual labor market conditions.

Chart 1, panel 1, shows trends in degree awards rates from 1970 to 1990. The mean rate for this period was 4.5 percent; die actual rate has varied substantially about the mean. In the early 1970's, several factors contributed to a decline in the demand for scientists and engineers: spending on research and development slowed, research carried out by the National Aeronautics and Space Administration was curtailed after the successful moon landings, and defense-related research and development and production fell. A major policy concern for higher education was the issue of the "overeducated American," and anecdotes about engineers driving taxis abounded. The weak job market for natural science and engineering graduates resulted in a degree awards rate of approximately 4 percent in the 1970's, well below the mean for the entire 1970-90 period.

The high rates of the middle and latter 1980's followed a period in which there was a strong job market for natural scientists and engineers, and widespread shortages of scientists and engineers were reported.[7] In the early 1980's, two factors contributed to the high demand for these workers: a sharp runup in energy prices stimulated energy-related investment and research and development, activities that employ large numbers of natural scientists and engineers; and defense spending increased substantially, in general and for defense-related research and development. The latter 1980's posted rates of approximately 5 percent, well above the mean of 4.5 percent.

These periods of fluctuating demand for graduates in natural science and engineering are consistent with trends in relative starting salaries in the two fields. (Relative starting salary is the ratio of median starting salary offers in natural science and engineering to median starting salary offers in all other fields, as reported by the College Placement Council.) Chart 1, panel 2, presents trends in relative starting salary premiums for natural science and engineering graduates. On average, graduates in natural science and engineering received a starting salary offer 26.2 percent higher than graduates with other majors. During the weak job market of the early 1970's, the salary premium was less than 15 percent. It increased steadily into the early and middle 1980's, when die exceptionally strong job market drove the premium to almost 40 percent. In the latter part of the 1980's the salary premium declined, but was still high, historically speaking.

Lagged relationship. In 1991, based on a review of literature, L. L. Leslie and R. L. Oaxaca concluded that both economic and demographic factors affect choices of college major and, therefore, the types and numbers of future degree awards.[8] In 1990, the National Science Foundation had reported that it could not establish any such empirical relationship, concluding that "statistical correlations between annual production of [natural science and engineering] bachelors with starting salary data from the College Placement Council . . . show that in the past there has been virtually no relationship between changes in the relative starting salaries ([that is,] relative to other fields such as business, the social sciences and health sciences) and degree production in the combined fields herein defined as [natural science and engineering]."[9] However, in 1991, Eileen L. Collins reported that lagged median starting salaries were significant in explaining degree output.[10] Our analysis of 1967-85 data from the College Placement Council indicates a strong and persistent relationship between relative staffing salaries of natural scientists and engineers and the rate of degrees awarded in these fields, albeit a relationship lagged in nature, with the number of natural science and engineering degrees increasing (decreasing) approximately 4 to 5 years after increases (decreases) in relative salaries in the fields.

This lagged relationship is consistent with findings from earlier work by labor economist Richard Freeman on the labor market for science and engineering majors.[11] Freeman found that because students lacked information on future job opportunities and salaries, their choice of a major was influenced by current wages and job openings. Thus, first-year college students choose engineering based upon current job market conditions for graduating engineers; then, after a 4- or 5-year lag, these students receive degrees. This model would predict that the high relative salaries of natural science and engineering graduates in the early 1980's resulted in the high rates of degrees awarded 4 to 5 years later.

Effect of salary premiums

As stated earlier, relative starting salary is the ratio of median starting salary offers in natural science and engineering to median starting salary offers in all other fields, as reported by the College Placement Council. Median salary offers are weighted by the number of offers reported for a given degree in the year in question. Because engineering and business report the largest number of job offers, this weighting results in a skewed measure of starting salaries for new graduates. For example, business and engineering majors receive a large portion of the job offers recorded by placement offices, compared with the proportion of all bachelor's degrees awarded in these two fields. This occurs because companies focus their campus recruiting efforts on these majors and also because graduates sometimes report multiple job offers, a phenomenon that is usually more common in business and engineering than in other majors. If our purpose were to estimate average starting salary differentials accurately for the whole population of new graduates, we would have to weight these offers by the number of degrees granted, rather than the number of offers recorded. However, we weighted by the number of job offers recorded because a large number of offers per graduate is one way a popular field is signaled to first-year students, who can still consider changing their majors. One can argue, of course, that both the salary and the number of job offers indicate the labor market value of a given degree, and the empirical results indicate that this weighting does indeed give a good measure of the labor market signals reaching and influencing first-year college students in their choice of major.

Chart 1, panel 3, combines degree awards rates with salary premium rates in the natural sciences and engineering that have been lagged by 5 years; that is, 1970 salary premium data are displayed in 1975, 1971 data are in 1976, and so on. The results confirm that degree awards rates follow trends in salary premiums.

Results of regression equations estimating the relationship between degree awards and salary premiums are shown in table 2. The rate given by equation 2 is calculated by including, as a percent of the 22-year-old population, persons awarded engineering technology degrees, along with those awarded degrees in natural science and engineering. The number of engineering technology degree awards is growing relative to that of other engineering degree awards. In 1971, bachelor's degrees in engineering technology were 11 percent of all engineering degrees; in 1989, the figure was 28 percent.[12] Graduates with bachelor's degrees in engineering technology usually take jobs that focus on the application of existing technology.[13] When the dependent variable is broadened to include those with degrees in this area (equation 2), a slightly better statistical fit is obtained in terms of the variance explained. The two equations explain more than 95 percent of the variation in historical degree awards rates. Both indicate that about 4 percent of 22-year-olds would receive degrees in the natural sciences and engineering, even if relative salaries were to fall to their lowest level in 25 years. These equations indicate that additions to this 4-percent "rate floor" are related to the labor market attractiveness (that is, both the number and size of salary offers) of natural science and engineering relative to that of other majors. Table 3 presents projected values from equation 1 of table 2 and historical rates.

[TABULAR DATA OMITTED]

The relationship set forth in equation 1 allows one to estimate the responsiveness of the degree awards rate to the salary premium: at the mean salary premium (0.26), a 10-percent increase in the salary premium increases the degree awards rate by 3 percent (from 4.27 percent to 4.40 percent). At higher salary premiums, the responsiveness increases: at a salary premium of 0.40, for example, a 10-percent increase in the salary premium results in a 9-percent increase in die degree awards rate.

Table 3 compares 1991-97 projections of degrees from table 2 with Braddock's 5-percent rate assumption. Relative to the range of projections developed from the two equations, Braddock's midlevel assumption of a 5-percent rate is high. In other words, if the historical relationship between relative salaries in natural science and engineering and degrees awarded in these fields continues, it is unlikely that the future output of degrees awarded will approach a 5-percent rate. In fact, such a rate is a historical aberration, occurring only during the 1980's. From 1984 to 1989, the rate was at an all time high, ranging from 5.0 percent to 5.2 percent. Given the estimated relationship between salaries and rates, it is likely that these high rates were in direct response to the unusually high relative salaries experienced by natural science and engineering graduates in the 1978-85 period.

If there was any period in the past few decades that can be characterized as a Pew with a shortage of natural science and engineering degrees, it was the early 1980's; it is likely that the strong market during this period spawned the high rates of the late 1980's. Our economy has no labor market experience in which degree awards rates of 5 percent were achieved without the market signals produced by such a shortage. In this historical context, Braddock's assumption of a 5-percent rate appears very optimistic, and the 6-percent rate he contemplates would be unprecedented and would require a salary premium of approximately 0.46 for natural scientists and engineers.[14] (The highest salary premium of the last 25 years is 0.39).

Using the salary premium equations to project degree production in natural science and engineering is limited in that one can only project 5 years from the most recent salary data. Because Braddock looks at a 15-year projection period, the salary premium equations cannot be used in his analysis. However, given the historical record, it is optimistic to use a 5-percent rate for this long period.[15] A rate of 4 percent to 4.5 percent would appear to be more consistent with historical trends.

Future trends

Table 4 combines occupational supply and demand data for the historical period 1984-90 and die projected period 1991-97. The table uses Braddock's method to calculate labor demand (number of job openings) and compares these with the number of degrees awarded in natural science and engineering, based upon the model given by equation 1 in table 2. Note that the number of graduates per job opening (the so-called degree ratio) during the historical period was 1.7; this is projected to drop to 1.5 graduates per job opening during the 1991-97 period.[16] These estimates indicate that the number of projected degrees is about 12 percent lower than the level needed to maintain the 1984-90 degree ratio.[17] Or, put another way, the projected average annual number of natural science and engineering degrees awarded is approximately 20,000 fewer than needed to maintain the 1984-90 supply-demand balance.
Table 4. Average number of
 annual bachelor's
 degree awards and
 job openings in
 natural science and
 engineering, 1984-90
 and 1991-97
 Historical, Projected,
 Category 1984-90 1991-97
Total openings
 (thousands) 117.6 106.2
 Net separations 45.8 53.0
 Growth 71.8 53.2
Natural science
 and engineering
 graduates 199.4 159.0
Graduates per
job opening 1.7 1.5


This result differs from Braddock's conclusion. When a 5-percent degree awards rate is assumed, the projected average annual number of degrees awarded in the natural sciences and engineering for the 1991-97 period is 180,000, or about 21,000 more than the estimate of 159,000 afforded by equation 1 in table 2. This led Braddock to conclude that the BLS midlevel employment growth alternative would result in a labor market for natural scientists and engineers in which the number of degrees awarded would be sufficient to maintain the supply-demand balance that existed during the 1984-90 period.

Historical evidence indicates that the labor market does "work," that is, students do respond to changes in relative salaries (albeit after a lag) in their choice of degree field. If the demand and supply conditions projected in table 4 materialize, it is likely that there will be a movement toward self-correction. A growth in job openings greater than the number of degrees awarded will place upward pressure on salaries, especially new-graduate starting salaries. The evidence presented in this report indicates that these higher starting salaries will eventually result in higher degree awards rates in science and engineering.

Footnotes

[1] See the section, "The Future Supply of Natural Scientists and Engineers," in The State of Academic Science and Engineering (Washington, National Science Foundation, 1990), p. 195. [2] Previously, that projection bad been circulated in draft form. However, the size of the cumulative shortfall resulted in considerable attention, and the draft was used in statements in support of programs that were perceived to enhance degree production in the natural sciences and engineering. See, for example, Richard C. Atkinson, "Supply and Demand for Scientists and Engineers: A National Crisis in the Making," Science, Apr. 27, 1990, pp. 425-32; and Changing America: The New Face of Science and Engineering Interim Report (Washington, Task Force on Women, Minorities, and the Handicapped in Science and Technology, 1988), figure 12. [3] See Alan Fechter, "Engineering Shortages and Shortfalls: Myths and Realities," The Bridge, Fall 1990, pp. 17-20; see also "Pundits Foresee Stiffer Job Competition in Academia," The Scientist, May 13, 1991, p. 1. [4] See "Scientist Shortfall a Myth: NSF Study Seriously Flawed, Panel is Told," The Washington Post, Apr. 12, 1991, p. 1. [5] See Douglas J. Braddock, "Scientific and technical employment, 1990-2005," Monthly Labor Review, February 1992, pp. 28-41. [6] National Science Foundation, Academic Science and Engineering, p. 190. [7] See National Science Foundation, "Industry Reports Shortages of Scientists and Engineers Down Substantially from 1982 to 1983," Science Resources Studies Highlights, Feb. 17, 1984 (Report NSF 84-303). [8] See L. L. Leslie and R. L. Oaxaca, Scientist and Engineer Supply and Demand (Tucson, AZ, University of Arizona, 1991). [9] National Science Foundation, Academic Science and Engineering, p. 195. [10] See Eileen L. Collins, "Sensitivity of Science and Engineering Baccalaureates to Starting Salary and Underlying Population," paper presented at the meeting of the American Association for the Advancement of Science, Washington, Feb. 16, 1991. [11] See Richard B. Freeman, "A Cobweb Model of the Supply and Starting Salary of New Engineers," Industrial and Labor Relations Review, Vol. 29, 1976, pp. 236-48; and "Supply and Salary Adjustments to the Changing Science Manpower Market: Physics, 1948-1973," American Economic Review, Vol. 65, No. 1, 1975, pp. 27-39. [12] U.S. Department of Education, Digest of Education Statistics 1991 (Washington, U.S. Government Printing Office, 1991), p. 225. [13] There are no comprehensive studies of the placement of these graduates. With funding support from the Department of Energy, special tabulations from the National Science Foundation-sponsored Survey of Natural and Social Science and Engineering were developed to examine the placement and salaries of graduates with bachelor's degrees in engineering technology. These tabulations indicated that such graduates are usually hired into engineering positions that focus on production and operations, rather than on research and development. [14] See Braddock, "Scientific and technical employment," p. 40, table 5. in fairness to Braddock, the 5-percent midlevel figure he uses was prepared before it became evident that major defense cutbacks were on the horizon for the U.S. economy. If these cutbacks would be taken into account, it is possible that the supply-demand imbalance we project could be reduced or even eliminated altogether. [15] A 5-percent rate would seem reasonable for a long period in one case: if job openings were expected to outstrip supply, thus pushing up the relative wages of natural science and engineering graduates to the record levels experienced during die early 1980's. However, the reduced growth rate in employment projected by the Bureau and used by Braddock is not consistent with this scenario. [16] When one uses the number of degrees awarded in natural science and engineering plus the number of bachelor's degrees in engineering technology as the supply source, the degree ratio falls from 1.8 in the historical period to 1.6 in the projected period. [17] If the projection period were 1990-2005, as in Braddock's article, instead of just through 1997, the 12-percent figure might very well be lower, because BLS projects that degree production in the natural sciences and engineering will begin increasing after 1998. However, be this as it may, our analysis and data are applicable only up to 1997.

APPENDIX

The National Science Board of the National Science Foundation has published projections of employment change to the year 2000 for natural scientists and engineers that differ in some details from those published by Braddock, but they still show the same general pattern. (See Science and Engineering Indicators 1991, Washington, National Science Foundation, 1991, pp. 79-83.) The principal difference between the two projections is that the National Science Board projects the biological sciences to grow more slowly than engineering, while Braddock projects that the biological sciences will grow faster than engineering. In all other respects, the projections are similar; mathematics and computer science will have the fastest employment growth, followed by engineering, and employment will grow more slowly in the physical sciences than in engineering.

The board's employment projections were used together with a model developed by Robert Dauffenbach to compare projected changes in demand and supply. The board's projections emphasized the uncertainties associated with the modeling process, but reported that in the midlevel assumption scenario, there was an approximate balance between supply and demand, that is, there was no tendency toward surplus or shortage. (See Science and Engineering Indicators, pp. 81-82.)

We used an update of the Dauffenbach model to produce the natural science and engineering supply projections that are contained in Science and Engineering Indicators 1991. An important feature of the model is that the student's choice of degree field (degree share) is influenced by the relative growth in employment in that field (job share). For example, if electrical engineering employment is projected to increase faster than employment in other natural science and engineering fields, then the job share of electrical engineering is increasing. The Dauffenbach model "adjusts" the electrical engineering degree share in response to the changing job shares in the field; die movement of existing workers into faster growing fields is also permitted. The supply response to fields with strong employment growth is thus made up of increased occupational mobility and increased degree share.

Table A-1 uses degree share projections from the Dauffenbach model to disaggregate the projections of degree awards in natural science and engineering contained in this report. That is, die relative degree share projected by the Dauffenbach model was applied to die projected degree awards overall in natural science and engineering for the 1991-97 period developed with the "salary premium" model in this report. For example, table A-1 indicates that the number of mathematics and computer science degrees is expected to decrease by only about 6 percent during the 1991-97 period, while the total number of natural science and engineering degrees is projected to decrease by about 19 percent. This increasing share of mathematics and computer science degree awards occurs because the Dauffenbach model projects supply response to strong employment growth in the field of mathematics and computer science.

[TABULAR DATA OMITTED]

Alternative model specification

Table A-2, on page 61, gives the characteristics of three equations representing different specifications of the supply model used in the body of this report. The three models include both the wage premium variable and measures of the eligible population from which natural science and engineering graduates are recruited. All three models represent only modest improvements over the simple model discussed in the text.

[TABULAR DATA OMITTED]

Equations 1 and 2 differ in the demographic variable used: equation 1 uses the 22-year-old population, and equation 2 uses the number of persons graduating from high school 4 years earlier. The use of high school graduates is attractive for projection purposes because high school graduation is a virtual prerequisite for college and the U.S. Department of Education has used the 1990 census to produce updated projections of the number of high school graduates during the 1990's. There is little difference between the equations using either demographic variable.

Equation 3 uses high school graduates as the demographic variable and includes engineering technology degrees in the dependent variable.

The practical significance of these equations for projecting awards in the future can be seen in table A-3. The table contains four projections of degree awards in natural science and engineering, based upon Braddock's midlevel assumption of a 5-percent degree awards rate in these fields and the three equations in table A-2. Only equations 1 and 2 may be compared with Braddock's projection; equation 3 is an estimate using degrees in natural science and engineering and engineering technology as the dependent variable. Estimates of degree awards produced from the equations were divided by estimates of the 22-year-old population used by Braddock, to produce degree awards rate estimates. As can be seen in table A-3, equation I results in a mean degree awards rate projection of 4.5 percent (162,400 degree awards); the mean rate projected by equation 2 is 4.4 percent (158,500 degree awards).

[TABULAR DATA OMITTED]

Equation 3 produces a 1991-97 annual average projection of 168,500 degree awards, because it broadens the definition of a technical degree to include bachelor's of engineering technology degrees. The interesting point to be made regarding the projections from equation 3 is that they produce a sharper decrease in total degrees than do the other projections. If one adjusts equation 3 to exclude bachelor of engineering technology degrees, the degree awards rate would be lower than the 4.4 percent estimate projected by equation 2. Relative to each other, equation 1 is the high level (4.5-percent rate), equation 2 the midlevel (4.4 percent), and equation 3 the low level, assumption. The analysis of alternative model specifications suggests that our projection of declining degree awards in natural science and engineering is not very sensitive to those specifications. The alternatives examined indicate that the decline could be somewhat larger than we estimate in this report.
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Author:Finn, Michael G.; Baker, Joe G.
Publication:Monthly Labor Review
Date:Feb 1, 1993
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