Saturday, May 26, 2012

Salzman on STEM Shortages and Immigration

Hal Salzman has a new article at U.S. News and World Report arguing that fears about shortages of scientists and engineers should not drive you to support "stapling a green card" to STEM diplomas.

If you want an open and inviting immigration policy, I for one am in your corner. If you want to use immigration policy to distort the labor market, I have a lot more reservations about it. I don't think it makes much sense to let people into this country conditional on their educational or occupational background. That doesn't seem right to me and it doesn't seem like good economics either. And some of the arguments that lean in that direction certainly aren't consistent with the evidence.


  1. cause or effect ?

    The industry I'm working in is moving STEM jobs offshore because its cheaper/easier to export the jobs than to import the workers. About 8 out of 10 of the engineers I work with are from overseas. We'd like to hire many more engineers domestically, but can't find qualified grads with US residency.

    1. Sorry - I'm moving today and can't do as much of a response as I'd like to.

      Certainly this could be going on, but I have doubts about how strong this is. If demand were strong and work was moved overseas as a result you'd see continued bidding up of wages, which we really don't see (except in specific sectors that have temporary hiring issues like nuclear and petroleum engineering). I'm not saying this isn't going on in your firm - certainly there are going to be specific cases where this is happening. But over all, the wages tell a different story. If you're involved in software engineering, I also don't know as much about that labor market - so that may be the case there. H1-Bs have not been exhausted the last couple years - another sign of weak demand.

      Vivek Wadhwa, Hal Salzman, and many others have also found that Indian and Chinese engineers are much less qualified than American engineers. Of course, that doesn't mean that companies won't trade off quality for quantity - they're a lot cheaper too. But relative to the countries getting a lot of the offshoring the U.S. has far higher quality engineers (that's why they come here to get educated, after all!), so to the extent that this does go on it's not a "we can't find quality" problem. I think the reason why businesses say that is (1.) a lot of Americans are willing to believe it, and (2.) a lot of Americans think it justifies the offshoring.

      So let's talk about the offshoring. Most of this work is actually production for foreign markets themselves. I recently heard a figure of 89% (although I think that was total offshore production - not specific to engineering or software engineering). It probably makes sense to produce that in the market you're supplying - because of proximity and cost reasons for goods and because of transactions costs and other costs for services.

  2. Two points:

    - Rent-chasing and asylum make good sense to me. Asylum should be obvious. As far as rent-chasing, there is no reason to turn away exceptionally talented people. We have a visa for those sorts of people and we've had special arrangements in the past. That seems quite differnt (in terms of its economics) from a software engineer you don't have to pay as much.

    - I actually think a temporary work visa like the H1-B makes good sense. What I don't like is the sort of targeting that people advocate, the "staple a green card" talk, and the shortage claims.

  3. I find it ironic that there are worries about a shortage of scientists and engineers when for some time people have been claiming that there is a supposed glut of scientists.

    1. Two things -
      1. Actual gluts are field specific. I think there are few people who deny that there is a glut of life scientists.

      2. This is precisely the disagreement - but I think most people who study the issue are in fairly strong agreement that if there are any shortages they are relatively temporary (there is a broad consensus about delayed convergence in these markets). The people who talk about shortages are usually either (1.) people trying to get labor as cheap as possible - i.e. business owners - who want to act like there's something wrong with the labor market, (2.) politicians, and (3.) economists who know there are externalities associated with scientific work and therefore reason we have "too few" scientists and engineers (this much is solid), but then go on to the faulty reasoning that there is a problem in the labor market for scientists (which I think it's fairly safe to say most labor economists who study the issue think there isn't).


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