they needed more engineers, so they decided to flood the market with engineering graduates. They told the provinces to increase engineering graduation rates, and the provinces complied, as they always do. But universities like Fudan and Tsinghua—the top universities—resisted. They were able to show the government how quality dropped when graduation rates increased over one or two years. The government then gave the top universities special permission to reduce graduation rates to maintain quality.
The China National Reform Commission issued a report about four months ago that said 60 percent of the graduating class of 2006 would not be able to find employment. About two years ago, the Chinese government decided to slow down engineering graduation rates. So you will see two years from now that the engineering graduation numbers drop off again.
India is facing different challenges. In India, the country seems to succeed despite the government, while in China the country succeeds because of the government. In India, private industry compensates for the weakness of the government. Right now, in Indian newspapers debates are raging about quotas (more than 50 percent of the seats in all universities are reserved for so-called “scheduled castes”). In fact, India may be messing up its own educational system because politicians get more votes that way. That’s a problem with a democracy.
But India also has its own self-defense mechanisms. It is a relatively open, democratic country, and private colleges are beginning to provide high-quality education. Multinationals in India told us they could hire the top 5 to 10 percent of graduates from almost any college in India. Private companies like NIIT provide a “finishing school” for graduates from bad universities and give them enough training to meet the needs of multinationals.
We then took our research further and conducted a survey of U.S. companies that outsource engineering jobs. We interviewed 78 presidents, division heads, CEOs, and senior HR representatives from 58 companies. For more information see http://memp.pratt.duke.edu/downloads/Duke_Industry_Trends_in_Engineering_Offshoring_10_24_06.pdf.
Our previous research had raised questions about whether companies really hire individuals with two- or three-year diplomas who are graduating en masse from Indian and Chinese universities. I thought they didn’t, but the survey proved me wrong. We found that 40 percent of the companies we interviewed gave us an unqualified yes—that they do hire two- and three-year diploma holders. Seventeen percent said maybe—depending on what kind of additional experience an individual has. We asked companies what additional training they would like the engineers they hire to have. The answers were more communication and presentation skills, internships, computer-related skills, and so on.
We hear a lot about the shortages of people with engineering skills, and there was a serious shortage of programmers during the days of the dot-com boom and Y2K. In our survey, we asked companies a series of questions to determine the extent of the shortages in engineering skills today. Eighty percent of the companies said their acceptance rates were greater than 40 percent. In other words, about half the people they offered jobs accepted them. Eighty percent of the companies said that acceptance rates had remained constant or increased over the last few years. Most of these companies don’t offer sign-up bonuses, which are offered when a company is eager to hire people and they are not accepting offers. Today, engineering jobs are being filled in less than four months. This doesn’t look like a skill shortage to me.
We asked about what has changed over the last three to five years, and we left the question open ended because we didn’t want to bait our respondents. Most said that the engineers they have hired in the last three to five years generally have better technology skills, better communication skills, and a broader global outlook. Some said there was no change.
When asked about the advantages of U.S. engineers, respondents said they understand the market, the business, and communication, they have better interpersonal skills, they are creative, they are good at problem solving, and so on. Thirty-seven percent said U.S. engineers were more productive; 24 percent said equal; 9 percent said overseas engineers were more productive. Thirty-eight percent said U.S. engineering employees produce higher quality work, and 40 percent said equal.
When we asked where companies are sending their jobs, India was number one, China number two, Mexico number three, and then a long list of other countries. Here’s where things got really interesting. We found that a very wide variety of jobs where being shipped overseas. When we asked companies to compare jobs overseas to jobs in the United States, 44 percent said U.S. jobs were more technical; only 1 percent said that offshore jobs were more technical; and 33 percent said the jobs were more or less equivalent. When we asked what they gained by offshoring, the responses included access to new markets, culture, co-location, 24/7 development cycle, salary savings, and so on.
When we asked companies to compare the availability of engineers in the United States, China, and India, I was astonished at the responses. Seventy-five percent said that India has a large to adequate supply of well qualified entry-level engineers; 59 percent said the United States did; and 54 percent said China did. I didn’t expect this. I thought India would have a greater shortage of engineers than the United States, but the respondents we surveyed said they could hire entry-level graduates more easily in India than in the United States or China.
We asked about the strengths and weaknesses of each workforce. For the United States, the weaknesses were salary demands—not a big surprise, lack of industry experience, unwillingness to relocate, and poor work ethics. In China, they were communication skills, visa restrictions, proxim-