in petroleum engineering, and, significantly, all of the response to the demand signal was from domestic students (including Green Card holders).

A few questions were asked after the presentation. One participant asked, assuming that workforce is of high quality and able to meet the needs of the future, whether we would not need to produce a different type of worker who can think on his or her own and be agile in responding to change. How might we do this?

•   Harold Salzman noted that when he has looked at what engineering skills will be needed in the future, what is in short supply are skills to work across boundaries. Employers are looking for persons who may not necessarily have had the strongest technical skills but are nonetheless broad-minded, willing to travel, and so forth.

Another participant referred to Charles Vest’s keynote presentation (see Chapter 3) in which the speaker commented that he believes we are heading for a train wreck; the participant asked whether Salzman sees this as well.

•   Salzman said that he sees a different type train wreck ahead: he did not see the lack of students to draw from, nor any shortages not responsive to market demand. Instead, he sees the danger as one of creating an oversupply, as happened recently in the life sciences for example.

One participant noted that Salzman’s presentation focused on high school and college graduates and asked about those who do not go that far. The participant offered the example of Boeing, where it now takes 13 weeks to train a new hire for factory work, whereas it used to take 6 weeks. The participant noted that although engineers today may have excellent technical skills, they cannot always apply them to real-world problems, nor are they necessarily innovative or creative.

•   Salzman noted that in the past, companies did not expect an engineer to be productive for the first 5 years of employment and that cooperative-type education programs are an attempt to address this issue.

•   Committee Co-Chair C. Dan Mote, Jr., noted that the OECD’s Programme for International Student Assessment showed the United States to be average in science, mathematics, and reading—essentially at the 40th percentile—and that Shanghai was ranked first in all categories.

•   Salzman commented that although that is true of averages, the distribution is bimodal, with large numbers at the top and bottom, and that the United States does very well when the top of the pool is considered.

Panel Discussion

The session then proceeded to the brief presentations by four panelists on the topic of Panel 3, limitations to meeting workforce needs of DOD and the industrial base.

Burt Barnow, Amsterdam Professor of Public Policy at the George Washington University, discussed the nature of labor shortages. Economists generally view a shortage as a situation in which demand exceeds supply at the prevailing wage for an extended period of time, but in reality there is no single definition of a shortage that is universally accepted. For example, Kenneth Arrow has defined a “social demand” shortage17 as one in which the market clears but the jobs are filled with those who, while they are good enough, do not necessarily have the right qualifications. Moreover, a “skills” shortage is sometimes defined differently from an “occupational” labor shortage. Furthermore, others define a shortage as occurring when supply increases less rapidly than the number demanded, implying that shortages can persist for a long time.

Barnow noted that there are many reasons why shortages may arise. For example, price restrictions such as those imposed by third-party payers, a fixed-labor-price long-term contract, or restrictions on entry such as licensing requirements can create a shortage environment. With respect to measuring the size and severity of a shortage,


17K.J. Arrow and W.M. Capron. 1959. “Dynamic Shortages and Price Rises: The Engineer-Scientist Case.” Quarterly Journal of Economics 73(2, May):292-308.

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