The Economics of
Engineering:
Is Professional Licensure
Relevant in Today’s
Economic Realities?
President WightNSPE Annual
Meeting
Dan Donahoe
July 17, 2015
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Policy Overview
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Caution about Social Sciences
• This is an engineering audience, a group expert at empirical
approaches to difficult problems.
– Caution about economics:
• Economic data is confusing.
– Economic data is necessarily time-delayed.
– Nuances of data collection/reporting is often misreported.
• We seek the best data available.
• We should note whether common interpretation errors are out of ignorance or
due to deliberate propagandizing, when possible.
– Analysis of social problems is prone to errors
• Built-in cognition biases are best described by 2002 Nobel Laureate in
Economics Daniel Kahneman [http://www.princeton.edu/~kahneman].
• Early economists were arm chair philosophers, and their oftenrepeated theories are known as Zombie Economics
– Many of these ideas are “walking dead” [Quiggin, J., Zombie Economics, Princeton
University Press, 2011]
• Economics data is better than economics theory.
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Legal Principles
• Law defines our free market system; it does not exist otherwise.
– Politically driven policies are often tacitly coupled as shown in following
slide as a Gestalt.
• Regulatory legal foundations
– Article I Section 8 of the US Constitution is known as the Commerce
Clause.
• Defines federal business regulation for interstate or international trade.
– The 10th Amendment reserves all else to the states, known as police
powers that promote the general welfare (includes public health and
safety).
• Professionals face a confounding maze of state and local laws & regulations
– Other federal laws affect engineering and licensure such as recent
litigation regarding anti-trust (Sherman Act) related to engineering:
• “High-Tech Employee Antitrust Litigation” before US District Court of Northern
California Judge Lucy H. Koh
• SCOTUS, 25 Feb. 2015, “North Carolina Board of Dental Examiners v. Federal Trade
Commission”
Heilbroner, R., The Worldly Philosophers, 5th Ed, 1980, pp 16-39.
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Currents in American Political Leadership:
Conflicting Interests, Unanticipated Outcomes
J. Baldwin Turner
AAU (1900)
NSF (1950)
Morrill Act (1862)
NCEES (1920)
Created the Land Grant Universities,
2012 was 150th anniversary
ABET (1932)
NACE (1956)
1989 more S&E graduates NAE (1964)
Arms Controls Acts
Weak enforcement (BIS)
Eilberg Amendment (1976)
Immigration Act (1990)
Bayh-Dole Act (1980)
AUTM (1974)
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IEEE (1963)
ITTA (TechAmerica)
Technology Transfer
AAU wanted foreign students
Created the H1-B visa
The Purple Squirrel
Allowed universities to profiteer (and states to cut funding)
Universities in Trouble in 2013
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Disaster Drives Public View of Licensure
• Landslide on Aug. 5, 2014, 1.5 miles from our home for 12 years
• Another landslide near Oso, WA killed 43 people March 22, 2014
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Headcount of PE’s and Engineers
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Number of Professional Engineers
• PE’s make up approximately 0.1% of the US population
• Approximately 20% of US engineers are PEs.
• Based on 2014 NCEES exam, approx. 50% of PEs are Civil Engineers
http://ncees.org/licensure/number-of-licensees-by-state/
https://www.census.gov/popest/data/national/totals/pre-1980/tables/popclockest.txt
BLS, Occupational Outlook Handbook, 2010-11 Ed, p 166.
http://ncees.org/exams/pe-exam/
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Trend of PEs into the Future
• Good curve fit highlights long term slowing of licensure
• Extrapolating predicts maximum reached at 2040
• Question: Why might the rate trend be decreasing?
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Graduation Rates as an Economic Indicator
• 78,099 Engineering BS degrees granted in 2011
• Recent changes in technical fields but no uptick in overall
• BS graduation rates reflect the job market
https://www.nsf.gov/statistics/seind14/index.cfm/chapter-2/c2s2.html
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Drilling Deeper into Workforce Numbers
Selected
Fields
Electrical
Civil
Mechanical
Chemical
Industrial
Note:
2012
Employment
(BLS)
306100
272900
258100
223300
223300
Ten Year
New
2011 BS Excess
Growth Jobs per Degrees 2011 BS
[%] (BLS)
Year
(NSF)
degrees
4
1224
16485
15261
20
5458
14480
9022
5
1291
19470
18179
4
893
7535
6642
5
1117
4295
3178
"Excess BS" assumes no retirement, no immigration, no advanced degrees
• There is no national shortage of engineers.
• Are engineers leaving the workforce? The short answer is yes,
but their departure is often involuntary.
https://www.nsf.gov/statistics/seind14/index.cfm/chapter-2/c2s2.html
http://www.bls.gov/ooh/architecture-and-engineering/home.htm
http://spectrum.ieee.org/at-work/education/the-stem-crisis-is-a-myth
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Workforce Age Distribution
• Software developers are quite young, reflecting relatively low
formal training requirements (such as certifications vs degrees)
• Engineering shows more volatility than Business & Finance.
– Reflecting engineering downturn at end of the Cold War
Bureau of Labor Statistics, Current Population Survey (CPS)
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Recent Jobs Reporting
Occupational Changes for the Month of April
• In April, 8 of the largest online job categories posted
decreases while 2 posted increases. Computer and Math
demand decreased 29,400 in April to 579,200 due to
drops in demand for web developers and applications
software developers. ... Architecture and Engineering
ads dropped 14,200 to 166,800, largely due to a decline
in demand for industrial engineers.
With permission from The Conference Board
https://www.conference-board.org/data/helpwantedonline.cfm
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More Miscues
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Certifications (vs. ABET)
• There are an amazing number of certifications today.
– There are approximately 190,000 ASQ granted certifications
(Six Sigma Black Belt, Certified Quality Engineer, etc.)
– And almost 400,000 certified project managers,
– and 160,000 certified LEED professionals,
– and IT certifications by Microsoft, CISCO, etc.,
– And even HR folks are certified.
• Today’s employers like certifications, initially
motivated by short term IT needs.
– I see certification as OK, but not a healthy business trend.
– Certifications make a degree unnecessary, diminishing the
depth and breadth of knowledge in the workforce
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Claimed STEM Talent Shortage
• Politicians, businessmen, bureaucrats and the press
clamor for remedies of a “talent” shortage in STEM
occupations (the “E” is engineering), but
• STEM is not a utilitarian categorization, only defined
by BLS in August 2012
• There is no such shortage. It was based on NSF claim
in 1989.
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What is STEM?
STEM Occupations
All Science including techs
Computer
Engineers
Mathematics
Busness Occupations
Business & Financial
Management
Sales
0.9
2.5
1.4
0.03
4.8
4.5
10.9
11
26.4
• Percent US workforce in “STEM” vs. business from BLS
• STEM is dominated by IT occupations
– Math and Science are in the round-off error region for occupations
– Why is “M” included in STEM?
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Sesquicentennial Anniversary
• The Morrill Act (1862) created the land grant universities
– Named after the bill’s sponsor from Vermont, nevertheless an idea
attributed to Jonathan Baldwin Turner in Illinois
• The motto of the University of Illinois is “learning and labor” echoing
Turner’s words
– These universities graduate the larger fraction of American engineers.
– Some are called “public ivy” (attributed to R. Moll) or “land grant ivy”
and dominate the AAU, the 63 top universities in North America.
• Robert Noyce, inventor of the integrated circuit (1959), answered
the question what would you do as emperor of the United States:
– “Make sure we are preparing tour next generation to flourish in a hightech age. And that means education of the poorest as well as at the
graduate level.”
– And he put his money where his mouth was to the tune of 65 M$
– Today land grant universities are in financial trouble.
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Lecture Series Dedicated to Anniversary
The Research University in the World of the Future, http://www.oc.illinois.edu/visioning/series.html
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US Land Grant University World Status
• Shanghai Jiao Tong World Ranking
– Often cited due to its detachment from domestic interests
• Engineering ranking
– 14 of top 50 are US land grant institutions
– 24 of top 50 are US (only 8 are private)
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Turner’s Dream?
Univ. Calif. Berkeley
University of Illinois CU
Top 20 Universities Generating American
Engineering PhDs, 90% Foreign
15
16
450
400
350
300
MIT
250
200
150
100
50
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
17
18
19
20
• Data from SIA report based on NSF data
• I see this as a “chicken and egg” problem. Next slides will
outline how we got here
Dewey & LeBoeuf, Maintaining Competitive Edge: Government Policies Affecting R&D and Manufacturing
Activity, March 2009, p30.
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Why Are College Tuitions Increasing?
• Correlation to patents and coincidence of specific legal
actions to tuition increases (r = 0.94, 1981 on)
http://trends.collegeboard.org/sites/default/files/cp-2014-table-2.xlsReference
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Business Fashion
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Diametrically Opposite Views
• Entrepreneur vs. Engineer
– Engineering training focuses on “prediction” of outcomes, and this is a
difficult skill to master and to perform.
• Practice entails timeliness issues
– Entrepreneurs focus on control of outcomes, because one need not predict
what one can control.
• Entrepreneurs value relationships vs. engineer’s value of technical
competence
• Business is based on exploitation of opportunity, ethical choices are inherent.
• Best articulated in an article about political action
“"... when we act, we create our own reality. And while you're studying that … we'll act
again, creating other new realities, which you can study too, and that's how things will sort
out. …you will be left to just study what we do.''
Dew, N. and Sarasvathy, S., Of Immortal Firms and Mortal Markets: Dissolving the Innovator’s Dilemma,
The Second Annual Technology Entrepreneurship Research Policy Conference, Univ. of Maryland, Dec. 2001,
http://www.darden.viginia.edu (14 Jan 2008).
Ron Suskind, Faith, Certainty and the Presidency of George W. Bush, New York Times, 17 Oct 2004.
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Electronics Leader: Motorola’s Revenue
Motorola Earnings Reported
$
3.9E+10
3.6E+10
3.3E+10
3.0E+10
2.7E+10
2.4E+10
2.1E+10
1.8E+10
1.5E+10
1.2E+10
9.0E+09
6.0E+09
3.0E+09
0.0E+00
1940
1950
1960
1970
1980
Year
1990
2000
2010
2020
• Due to large losses, Motorola split into two (Mobility and
Solutions) in 2011. Motorola Mobility was sold to Google in
2012. I made this plot from a review of annual reports.
• What happened after 1990? I believe it was leadership by
fashion (such as Six Sigma), a corporate epidemic today.
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Flight from Hardware to Software
Venture Capitol for 2012
Silicon Valley
(largest
portion of
Sector
national) National
Software
39
25
Biomedical
26
19
Electronics Hardware
2
4
Semiconductors
2
4
• 40% of venture capitol went to Silicon Valley (51% to California) in 2012.
• But VCs not interested in “silicon” or electronics hardware but
focused on software.
– The dot com era came after a long love affair with hardware
– “My favorite programming language is solder” [Bob Pease]
Delvett, P., Less Money Went to Startups on 2012,: But that is Good San Jose Mercury News, 1 Feb 2013
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High-Skill (Immigration Act of 1990)
• Legal Permanent Resident (LPR) at 140000 per year
• Employer sponsored temporary (6 year) H1-B visa
– Capped at 65000 per year; expanded to 195000 in 2000
– Labor Condition Application (LCA) requirement unenforced
• Used by IT industry for cheap programmers (aka
software engineers)
– Primarily used for outsourcing firms
– But also used by major American firms
• H1-B is not the only visa program being misused: L1, OPT, E-3, B-1, J-1 and even permanent residence the “purple squirrel”
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“Reengineering” (aka Outsourcing)
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Manufacturing
FRED, http://research.stlouisfed.org/fred2/series/MANEMP?cid=11
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Impact of PNTR on Employment
Pierce, L. and Scott, P., The Surprisingly Swift Decline of US Manufacturing Employment, Figure 5, NBER Working
Paper No. 18655, Dec. 2012.EIA Annual Energy Review2011, Table 8.1, p. 221.
Donahoe, D., Progress in Energy Efficiency, SusTech 2013, July 2013.
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Economic Theory - Justification
• David Ricardo (1772-1823)
• Comparative Advantage:
– Each trading partner should focus on industries where it is
most internationally competitive and trade with other
countries to obtain products no longer produced nationally
– Two types of criticism are (1) historically new technology
transfer (Tassey) and (2) lost product life cycle (Elkis)
• The results are clear to see in earlier charts.
– One might argue we growing our economy via
“financializing”. But.
Elkis, R., Winner Take All: How Competitiveness Shapes the Fate of Nations“,
http://www.cpmt.org/scv/meetings/cpmt1005.html
Tassey, G., The Technology Imperative, Edward Elgar Publishing, 2007.
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Putting this Together
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Students Report Loss of Interest
• American students are loosing interest in an engineering career, despite
relatively good (bachelors) starting salaries
• Films about engineers depict troubled characters in No Highway in the Sky
(1951), Falling Down (1993), Space Cowboys (2000) who are introverted, laid
off, and not a team player.
Data in graph in an email from Ty Cruce, ACT Inc., 24 Feb 2012
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Engineering is About People
• 30th “Anniversary” of Compaq Computer Corporation (CPQ) at Minute Maid
Stadium in 2012 although CPW was acquired by HP in 2002
• Rod Canion, co-founder and CEO, left in 1991.
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Conclusions
• Engineering is in a crisis.
• Engineering professional societies must meet our
community’s needs. No matter our discipline, we face
one big leadership challenge.
Charles Maurice Stebbins & Mary H. Coolidge, Golden Treasury Readers: Primer, American Book Co. (New York), p 89.
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