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THE CURRENT SITUATION Defense Buildup Compared with earlier major buildups and declines in defense expenditures in the postwar period, the present defense program is by no means the largest or the quickest to develop. There has been a substantial increase in employment of engineers since it began; but by all indications that we were able to review, there have been no major disiocai~ons or shortages of engineers. As often happens, the situation differs among engineering fields, and some minor stringencies have been reported; but in general, the supply has adapted to the substantial increase in demand. Defense expenditures, fluctuating as they do in response to national emergencies, are a highly volatile factor affecting demand for engineers. It is apparent that no recent fluctuations have been as large as the rapid buildup in the Korean War. Up to 1985 the current defense program has moved at a slower pace than the Vietnam buildup. More quantitatively, defense spending increased from 5.2 percent of Gross National Product in 1980 to 6.0 percent in 1985, less than in either the Korean or Vietnam war periods (see both Figures ~ and 2 and Appendix Table I, page 691. To be sure, the components of the defense program with the largest impact on employment of engineers have increased somewhat more than total expenditures. Research, development, testing, and evaluation expenditures were $27 billion in 1985, an increase of 55 percent since 1980. Procurement (which includes the purchase of weapons arid matenel), a $70 billion item in 198S, increased by 62 percent, compared to the increase of 35 percent in total defense outlays. Growth in these expenditures, in addition to the increase In nondefense activities suggested by the 12 percent growth in real Gross National Product in the 5-year penod, generated a substantial increase in the number of engineers employed--about 200,000, or 14 percent (see Figure 3, page 7, and Appendix Table 2, page 70~. The outlook for further growth in defense expenditures is not clear. The adm~n~stration's intention to continue expansion is In conflict with the pressures for deficit reduction. The budget request for fiscal year 1987, now before the Congress, calls for an increase of 28 percent from 1985 to 1989 in current dollars (see Figure 4, page 7, and Appendix Table 3, page 71~. The price change from 198S to 1986 was assumed to be about 5 percent, and for 1986 to 1989 an inflation rate of about 3 percent per year in prices for these items was assumed. This means that the real increase would be about half the current-dollar increase, or roughly 14 percent. In real terms (i.e., in dollars of constant purchasing power), this translates into an average increase of about 2.7 percent annually, wed below the 6.2 percent annual average for 1980-1985. The expansion in procurement outlays is estimated at slightly less than the total, while outlays for research, development, testing, and evaluation are estimated to increase at a rate 50 percent more than the rate of increase of total defense outlays (both of these In current doDan). Those familiar with the budget prospects suggest that the real growth rate could be below that estimated in the budget. If we accept this, at least for purposes of illustration, we would conclude that the percent of the GNP represented by defense expenditures is 5
likely to remain close to present levels or may even decline slightly. If this conclusion is correct, He greatest impact that the present expansion of defense expenditures can have on increasing Remarry for engineers is behind us. 50 40 30 20- 10 - O - - ~3 ~ -10- ~ I - 1950-53 53-58 65-68 69-76 80-85 Kohl We Kern We Vat WY V - an W. Cur" b~dJup IMP ~ Mar ~ b" Year Figure 1. Average annual rates of growth and decline of defense expenditures. 4500 O. 3500 3 ~ ~/_/ _ 3000- 2500- 2000- ~ _: 1500- }~ - ~ ~ 1000- ~ g~ 500 ~ ~ l l l l l l ~ ~ 45 50 55 60 65 70 75 80 85 90 Year . - 1 6 - 14 - 12 Q A -10 ~ o O ~ 8 - 6 4 L=end GNP Defense Outlays Figure 2. Gross National Product (in constant dollars) arid defense outlays as a percent of Gross National Product, 1948-1985. 6
2.0 He - - o 0. o - - m . 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 - 1950 1960 1972 1977 1980 1982 1985 Year Figure 3. Employment for engineers, 1950-198S (in minions). 350 - 300 - 250 - 200 - 150 - 100 - 1985 1986 1987 1988 1989 Year Figure 4. Total Department of Defense military outlays, l98S-l989 (in billions of current dollars). 7
The Market for Engineers The current labor market for engineers is a product of the recent growth In defense expenditures and the flexibility with which the labor market responded to that influence. To appraise these effects, the Pane} reviewed information on the labor market statistics assembled by the staff, reports from college placement officers, and opinions of recruiting officials of large comparnes. To gather evidence on whether the increase in demand and employment was accompanied by a shortage of engineers, several measures of labor market activity were examined. One of these is the High Technology Recruitment Apex maintained by Deutsch, Shea, and Evans, Inc. From a low point in 1971, this Index rose until 1974; and after a decline In the recession of 1975, it cInnbect to levels roughly 40 percent higher than in 1974 for He four years 1978-1981. The Index fed to the 1974 level dunng the 1982 recession, and though it has risen since, it has not returned to the peak 1978-1981 levels. This suggests that in the mid 1980s, when defense production was rising sharply, the companies included in the Index did not find it difficult to fill scientific and technical positions (see Figure 5 and Appendix Table 4, page 72~. A similar picture is given by the College Placement Council's Job Offer Index for persons with bachelor's degrees. Except for computer science and aeronautical and electrical engineering graduates, job offers fell dramatically after 1982 (see Figure 6, page 9, for selected results; a more complete table is in Appendix Table 5, page 72~. Unemployment rates, however, suggest a tighter market for engineers in 1984 than at any time since 1976, with aeronautical/astronautical engineers and electrical engineers reporting the lowest unemployment rates. The most important feature to recognize from data on employment of engineers is that unemployment of engineers has been consistently low (see Appendix Table 6, page 731. 460 140 - 120 - . 100 - 80- 60 40 20 V ~~ / / ~ / / free r 01 ~ I I I I I I I I I I I I I 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 Year Figure 5. Annual quarterly average of He High Technology Recruitment Index, 1970-1985 (1961 = 100~. 8
165 - 150 - 135 - / 105 e 75: ~e:~~ 1 , , , , , ~ , . . . 75 76 77 78 79 80 81 82 83 84 85 86 Year - Legend _ Chemical Eng. - Electrical Eng. Computer Sci. Figure 6. Job Offer Index for bachelor's-degree candidates, by selected cumculum and year, 1975-1985 (percent relative to the value of the 1980 Index). Another area of concern is the shortage of engineering school faculty to cope with enrollments that had more than doubled in the 1970s. Fewer American students were continuing their engineering education at the graduate level; more of the doctoral graduates in engineering, normally candidates for faculty positions, were said to have been attracted to industry; and more of the facula jobs went to foreign students, who constitute a high proportion of the Ph.D.s. The extent of this shortage vanes by discipline and is greater in fields such as electncal engineering than in fields such as civil eng~neenng. Information obtained from a group of 13 recruiters for large co~poradons indicated that, in general, they had no problems in meeting their firms' recruiting goals, both in numbers of new graduates and in quality. Some recruiters reported problems in hiring electrical engineers, engineers to work on certain tYDes of combat systems. and certain software engineers. ~ ~ a. , Recruiters also noted that when recruiting is difficult or requires raising salary offers, companies can adjust by shifting the placement of the existing engineering work force. For example, mid-level engineers might be kept in engineering positions longer rather than promoting them to managenal positions; technicians can be substituted for engineers in low-level assignments; or labor-saving technology made possible by computers--CAD/CAM, electronic networking, etc.--can be used. Placement officers from about a dozen colleges and universities indicated that currently the demand for graduates roughly matches supply. Students tend to seek jobs not far away from their colleges, some officers said--an indication that the market is not forcing Rem to make long-distar~ce relocations. Students' motivations to enter engineering have changed recently, some placement directors observed. Whereas In the past many came from manual worker or farm families, - now more come trom urban, mlaule-class, wnlte-collar tamllles (m some part because more of the population is in this group). Fewer students fit the traditional technically oriented stereotype of an engineering student; more are George oriented with ·e ~ · . ear · . A- communications skilIs and an ~nterest in management, and they see eng~neer~ng educat~on as a way of gaining "organizational access" and working up to management or financial jobs. 9
Defense Employment Since one of the questions of concern was whether the defense program would attract engineers to defense work at the expense of civilian industries, the Pane! examined data on the extent to which scientists and engineers were working on projects sponsored by the Department of Defense (DoD). This information is given for doctoral-level scientists and engineers In the National Research Council's biennial Survey of Doctorate Recipients (SDR).2 The proportion of ah doctoral-level scientists and engineers working on DoD-sponsored projects was lower in 1985 (~.5 percent) than in 1973 (10.5 percent), but higher than in 1981 (7.8 percent). The proportion of doctoral engineers, physicists, and mathematicians working on defense was higher than that of all scientists and indeed was higher in 1985 than in 1981, but the differences were small. Despite the increase in defense outlays in the 198Os, there is no evidence that the defense program seriously depleted the supply of Ph.D.-leve} engineers and scientists available for nondefense work. About 20 percent of engineers worked on defense projects in 1985; 62 percent of aeronautical and 30 percent of electrical engineers were in defense work (see Appendix Table 7, page 74~. Of "experienced"3 engineering bachelor's and master's degree-holders surveyed by the National Science Foundation (NSF), fewer were engaged In defense work in 1984 than in 1972 and 1974. Only among those in operations research was there a substantial switch into defense work over this period. About 20 percent of the bachelors and 25 percent of the masters in engineering worked in defense in 1985 (see Appendix Tables ~ and 9, pages 75-76). A related question is whether the defense program draws "the best and the brightest" engineers away from civilian industries. Although some preli~runary evidence demonstrated that particular groupings of academic institutions were not disproportionately represented in defense employment and no gross discernible quality effects were emphasized by placement officers at academic institutions, the Pane! concluded that data were inadequate to address the hypothesis. It is perhaps best to say that there is no evidence at present that either the defense sector or the commercial sector is lacking in appropn ate representation of Me "best" of our engineers. There are impediments to recruitment for defense jobs, including student aversion to defense work (an aversion still evident at some schools, though it has diminished since the 1960s and 1970s). It is believed that experience in defense work confers less subsequent mobility either because the technical content of the work has limited civilian applications or because the work is organized in such a way as to give engineers narrow specializations. The reverse situation--a too narrow specialization in civilian industry malting engineers unfit for military assignments--was reported in the paper by Eli Ginzberg. On the other hand, recruiters reported that it was easier to fill some defense jobs because the work is organized in teams and specials requirements for additional team members are not as rigid as in civiliar~ work. Ache SDR provides statistical data descnbing He demographic and employment characteristics of individuals who have received doctorates in science, engineering, and the humanities from U.S. universities. A stratified sampling frame ensures coverage of all significant subpopulations, including representation by field and year of doctorate, field of employment, sex, racial/ethnic group, and citizenship. See National Research Council, Office of Scientific and Engineering Personnel, Science. Engineering, and Humanities Doctorates in the United States: ·983 Profile, Washington, D.C.: National Academy Press, 1985. 3"Expenenced" engineers are Nose who were in Me work force at the time of the 1970 and 1980 Census of the Population. A sample of such individuals was surveyed for NSF in 1972 and 1982, and Lose who met the NSP definition of an engineer are resurveyed until the end of Be decade, when a new sample is drawn. 10
Placement officers reported that there is less aversion to working on defense projects than during the late 1960s. Rather than competing with civilian industry, placement officers felt that defense work had expanded at a lame in early 1986, when some civilian industnes expenenced setbacks. The drop in oil prices, a slack market for farm machinery, and difficulties in the computer, forest products, and chemical industries were cited as reasons for the setbacks. A survey of jobs taken by MIT graduates showed that most of those not entering academia or military service joined the civilian work force (commercial or nonprofit); the proportion entering civilian work dropped from 70 percent in 1980-~l to 65 percent in 198~85. Average salaries were almost identical for those entenug commercial work as for those entering government contact work (mostly defense) in 1983-84. Summary In summary, the labor market situation as reported by these sources shows few strains from the expansion of defense expenditures and industrial employment of engineers, particularly at the bachelor's-degree level, in the past few years. Problems may exist, however, in particular fields requiring highly specialized training, such as optics, and the shortages of engineering facula have been well documented (see, for example, Geils, 1982). This general absence of stress in engineering labor markets reflects not only the limited extent and Pace of the defense buildup, despite its emphasis on engineenng-related . . , . . _ _ ... . . . ~ ., .... . .. ~ . . , . ...., ,. , ~ . ,. expenditures, but also a Ilex~b~lltr In the labor market--~.e., an ability on the part ot both workers and employers to make adaptations. A weakening of demand in some civilian industries, reflecting specific situations rather than a general failure of economic growth, contnbuted to the adjustments It should be recognized, however, that the recruiting and placement experiences of the large corporations and top engineering schools may not be representative of the market as a wholes Consequently, future data collections should pay increased attention to the small en~epreneunal industry side of the market 1 1
