Wednesday, September 07, 2005

Outsourcing Fears Help Inflate Some Numbers

"The Numbers Guys" column in WSJ
August 26, 2005

A year after outsourcing was debated during the U.S. presidential election, fear of losing technical jobs to lower-wage Asian countries still runs high.

To get a handle on the threat, many commentators and journalists cite vast numbers of engineers produced each year by China and India -- some estimates range as high as 600,000 for China and 350,000 for India, compared with the fewer than 100,000 degrees granted annually in the U.S. The implication is that the U.S. must increase investment in engineering and attract more bright students to the technical fields in order to compete.

But this is one of those cases where big numbers take on a life of their own through repetition. The lofty estimates have been repeated for years, often without evidence to back them up, and it turns out they vary considerably from figures reported by official sources.

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Last month, Fortune reported that for 2005, "in engineering, China's graduates will number over 600,000, India's 350,000, America's only about 70,000." No source was cited. Last week, the Fortune number was cited by an Orange County business magazine and the Austin Chronicle.

A spokeswoman for Fortune referred questions to the article's author, Geoffrey Colvin, who was traveling and said he wasn't able to review his notes for the article by my deadline. He told me by email, "I do recall finding, as you found, that there are lots of varying numbers on this topic."

Often Repeated

Indeed, I found the 600,000 figure mentioned in several other articles and speeches from the past few years. Some of the publications cited each other, but none cited original sources. It's unclear where the number got its start, but some researchers I talked with suggested it may have come from an October 2002 speech by Ray Bingham, who was then chief executive of semiconductor company Cadence Design Systems. Mr. Bingham said at a technology conference, "China produces 600,000 engineers a year and 200,000 of them are electrical engineers."

The figure got wide media attention, showing up as far away as Taiwan, in the Taipei Times. Mr. Bingham, who has since retired from Cadence, told me he used "a variety of sources" for that number, not all of which he now recalls. All of his sources, Mr. Bingham says, "made the point that China is deeply committed and very productive in the area of engineering education, and the West is lagging far behind."

Mr. Bingham said one source he could remember using was a CNET article from July 2002 that said 700,000 engineers were trained yearly in China. A spokeswoman I reached at CNET said the statistic came from a group called the China Education and Research Network. My email to the Chinese group seeking more information wasn't returned.

A Different Approach

Bill Gates used different numbers to make the same point in a February speech, saying that China has "six times as many graduates majoring in engineering" as the U.S. When I contacted the Gates Foundation, a spokeswoman cited a January editorial in the Seattle Post-Intelligencer, which attributed the data to Washington's Office of Superintendent of Public Instruction. Kim Schmanke, a spokeswoman for the office, told me that the data came from conversations the superintendent has had with various business groups, but Ms. Schmanke wasn't sure of the source and said the superintendent was unavailable for comment.

Regardless, it appears the Chinese numbers are inflated. The National Science Foundation, which tracks degrees granted in the U.S. and many other nations, says that China has been granting only about 200,000 degrees each year. NSF gets the numbers from the Chinese Ministry of Education.

It is more difficult to pin down a figure for India. That country's government last gave statistics to the NSF 15 years ago, when it issued 29,000 engineering degrees. But the country has seen a boom in private engineering schools since then. Still, researchers I spoke with said the actual number of degrees is likely nowhere near the 350,000 figure that turns up in speeches and elsewhere. That number appears to be the number of "seats" allowed each year by the government. That's different from the number of degrees awarded -- not all approved spots are filled, for instance, and some students quit programs or take extra years to graduate.

Ron Hira, professor of public policy at the Rochester Institute of Technology, puts the actual number of graduates at 120,000 to 130,000, based on his study of the question in a visit to India. Ashish Arora, a Carnegie Mellon professor who also has studied the issue, estimates the number is closer to 200,000. A World Bank report published in 2000 estimated that 65,000 Indians received technical or engineering degrees in 1997 (see page 46 of that report).

Numbers Guy reader Barry Ritholz emailed me about the Gates speech and suggested that the numbers are misleading here, because China and India have far more people than the U.S. -- 1.3 billion and 1.1 billion, respectively, according to the United Nations -- and noted that per-capita, the U.S. still graduates more engineers. Still, it's worth pointing out that that the bulk of engineering doctoral degrees awarded in the U.S. go to foreign nationals, according to NSF.

Digging for Data

For a recent study of engineering graduates, Richard Heckel, founder of the Houghton, Mich., consultancy Engineering Trends, requested information from about 70 embassies in Washington, D.C. "The one thing we learned from doing our study is that getting credible data is a difficult thing to do," he says. "Some of the data we were able to get on our own didn't match the data from other sources."

Even U.S. numbers are misunderstood. Many op-eds and news articles lament the decline of the American engineer, based on the latest available numbers from the NSF, which puts degrees at about 59,000 annually. But those figures are for 2001. Since then, data from engineering organizations suggest that engineering degrees have made a comeback, to near all-time peak levels.

The American Society For Engineering Education and the Engineering Workforce Commission, which conduct annual surveys of U.S. engineering schools, both have found that the number of bachelor's degrees awarded in the U.S. has surged since 1998. The EWC says the number of degrees has climbed to 76,003 in the 2003-2004 academic year, the most since 1985-1986. (The organizations show a few thousand more bachelor's degrees than NSF's data does in 2001, in part because they leave the definition of "engineer" to the schools.)

Joan Burrelli, senior analyst at NSF, says in an interview, "We think that EWC's numbers are great; we use them all the time. If someone is looking at engineering trends, EWC's [figures] are the place to look." Why is NSF three years behind the other groups in releasing numbers? Dr. Burrelli blames a transition to a new computer-database system, and red tape. "It's bureaucracy, basically," she says. "We will never be as quick as the other two groups are."

I asked Dr. Hira, of the Rochester Institute of Technology, why the inflated foreign numbers persist. "CEOs ... have nothing to lose," he said. "There's only an upside for them. It deflects attention from the fact that they're offshoring more work. And there's no cost to them -- government is going to foot the bill [by subsidizing engineering schools]. The increase in supply of engineers is going to keep wages down."

Dr. Heckel, of the engineering consultancy, says that lately he's received a lot of calls from journalists who seem to have been pitched articles by companies about the decline of U.S. engineers. When one writer called recently, "I told him the basis for that article was not valid," he says.

Even the most reliable numbers on engineering graduates deserve to be examined with nuance. Not all engineering graduates are created equal; it's unclear whether two-year degrees or technical degrees are counted in the figures from China and India. And some recent media reports from India indicate that many young people who have paid for degrees at the bustling private engineering colleges are having trouble finding work.

"I'm certainly not opposed to looking at this in a more honest way and concluding that we need to produce more engineers," Dr. Hira says. But he adds, "The discussion of quantity just misses the boat. It's misunderstanding the phenomenon."


More than half of engineering doctoral degrees awarded in the U.S. go to non-U.S. citizens, according to the National Science Foundation. U.S. citizens earn the majority of bachelor's and master's degrees in engineering. An earlier version of this column incorrectly said that the bulk of all engineering degrees awarded in the U.S. go to foreign nationals.


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