© 1000 kilometers 2015 1 1000 kilometers The Economics of Engineering: Is Professional Licensure...

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The Economics of Engineering:

Is Professional Licensure Relevant in Today’s Economic Realities?

Dan DonahoeJuly 17, 2015

President WightNSPE Annual Meeting


Policy Overview


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 often-repeated 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.


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.


Bayh-Dole Act (1980) Allowed universities to profiteer (and states to cut funding)

AUTM (1974)

Morrill Act (1862) Created the Land Grant Universities,2012 was 150th anniversary

AAU (1900)

NSF (1950) NAE (1964)1989 more S&E graduates

ABET (1932) NACE (1956)

The Purple SquirrelImmigration Act (1990)

Eilberg Amendment (1976) AAU wanted foreign students

Created the H1-B visa

Currents in American Political Leadership: Conflicting Interests, Unanticipated Outcomes

Universities in Trouble in 2013

IEEE (1963)

J. Baldwin Turner

NCEES (1920)

ITTA (TechAmerica)

Arms Controls Acts Weak enforcement (BIS) Technology Transfer


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


Headcount of PE’s and Engineers


Number of Professional Engineers

http://ncees.org/licensure/number-of-licensees-by-state/https://www.census.gov/popest/data/national/totals/pre-1980/tables/popclockest.txtBLS, Occupational Outlook Handbook, 2010-11 Ed, p 166.http://ncees.org/exams/pe-exam/

• 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


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?


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


Drilling Deeper into Workforce Numbers

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

Selected Fields

2012 Employment

(BLS)

Ten Year Growth

[%] (BLS)

New Jobs per

Year

2011 BS Degrees

(NSF)

Excess 2011 BS degrees

Electrical 306100 4 1224 16485 15261Civil 272900 20 5458 14480 9022

Mechanical 258100 5 1291 19470 18179Chemical 223300 4 893 7535 6642Industrial 223300 5 1117 4295 3178

Note: "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.


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)


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.

https://www.conference-board.org/data/helpwantedonline.cfm

With permission from The Conference Board


More Miscues


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


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.


What is STEM?

• 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?

STEM OccupationsAll Science including techs 0.9Computer 2.5Engineers 1.4Mathematics 0.03

4.8Busness OccupationsBusiness & Financial 4.5Management 10.9Sales 11

26.4


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 high-

tech 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.


Lecture Series Dedicated to Anniversary

The Research University in the World of the Future, http://www.oc.illinois.edu/visioning/series.html


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)


Turner’s Dream?

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 200

50

100

150

200

250

300

350

400

450

Top 20 Universities Generating American Engineer-ing PhDs, 90% Foreign

• 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

MIT

Uni

v. C

alif

. Ber

kele

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Uni

vers

ity

of I

llin

ois

CU

Dewey & LeBoeuf, Maintaining Competitive Edge: Government Policies Affecting R&D and Manufacturing Activity, March 2009, p30.


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


Business Fashion


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.


Electronics Leader: Motorola’s Revenue

• 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.

1940 1950 1960 1970 1980 1990 2000 2010 20200.0E+003.0E+096.0E+099.0E+091.2E+101.5E+101.8E+102.1E+102.4E+102.7E+103.0E+103.3E+103.6E+103.9E+10

Motorola Earnings Reported

Year

$


Flight from Hardware to SoftwareVenture Capitol for 2012

• 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]

Sector

Silicon Valley (largest

portion of national) National

Software 39 25Biomedical 26 19Electronics Hardware 2 4Semiconductors 2 4

Delvett, P., Less Money Went to Startups on 2012,: But that is Good San Jose Mercury News, 1 Feb 2013


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: L-1, OPT, E-3, B-1, J-1 and even permanent residence - the “purple squirrel”


“Reengineering” (aka Outsourcing)


Manufacturing

FRED, http://research.stlouisfed.org/fred2/series/MANEMP?cid=11


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.


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.


Putting this Together


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


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.


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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