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The Offshoring of Engineering: Facts, Unknowns, and Potential Implications
cool. The biomedical students I met showed the same passion, the same fire I used to see in my technologists. But many students in civil engineering and technology didn’t have that passion. They were the ones who were looking for jobs in investment banking. Top IIT graduates from India would take courses in our Fuqua School of Business just to position themselves for jobs in investment banking.
I couldn’t answer the question my students had asked, so as an academic, I decided to research the topic, and I asked Professor Gary Gereffi, a professor of sociology at Duke, to help. We thought we’d start by assessing the facts in the outsourcing debate, but we couldn’t find many. Other than three or four academic papers, including one by Harvard professor Richard Freeman, there wasn’t much research on the subject of outsourcing and its impact on the engineering profession. And I didn’t give much credence to reports by industry analyst groups because, as a tech executive, I knew that you could often pay an analyst group to produce a report that would support your point of view.
The facts—the numbers commonly cited about the United States graduating 70,000 engineers a year and China and India graduating a million a year—didn’t make sense to me. I had worked in India, and I knew how weak education in India was. I didn’t believe that India was graduating 350,000 engineers a year, as the media often reported. And, as a board member and advisor to several companies doing business in China, I didn’t believe that China was graduating 600,000 engineers either. So the first question we asked was where these data were coming from. None of it made sense.
We decided to start by researching this issue, so we enlisted some of our brightest students to investigate the statistics. Here is what we found (Figure 1).
The statistics in common use were wrong. We were comparing four-year degrees in the United States with three- and four-year degrees in China and two-, three-, and four-year degrees in India. I have to add a caveat here—the Chinese numbers are suspect. In India, independent bodies track graduation rates. In China, provinces report to the central government, and they tell the government what it wants to hear.
The problem is that when you have the wrong information, you reach the wrong conclusions. But when you focus on a single metric, like the number of engineering degrees, there seems to be a simple solution. If the problem is the number of engineers that China and India are graduating is high compared to the number the United States is graduating, then the simple solution for U.S. competitiveness seems to be to for the United States to graduate more. Yet there is no indication that we need more engineering graduates. If we do graduate more, all we will be doing is helping McKinsey, J.P. Morgan, and First Boston with their recruiting because more of our engineering students will have to find employment there.
Recently, thanks to the Sloan Foundation, we expanded our research. We went to India and China and met with academics, business executives, and Communist Party officials to get a better understanding of the situation. Almost everyone agreed with our conclusions—that the numbers for India and China were questionable and that the quality of the graduates was questionable. The vast majority of engineers that graduate in India and China are low quality.
In China, we met with executives of about a dozen companies, each of whom had a list of as many as 10 universities they would hire from. They all said the rest of the graduates were unemployable by multinationals. If you put the lists of universities together, there are probably 20 in the whole of China (about 5 percent of the engineering schools) from which multinationals or start-up companies can recruit.
We learned that the Chinese government created this situation deliberately. About 8 or 10 years ago, they realized
FIGURE 1 Engineering, computer science, and information technology degrees awarded in 2004.