A Disciple Becomes the Guru
American businesses are increasingly moving their research and development operations to India and China. Debates rage in the United States about whether this will lead to greater prosperity or threaten the country’s global economic leadership. There are few facts in the debate, yet business and political leaders appear to be reaching consensus on how to respond to the rise of India and China: have more American children study math and science, and graduate more engineers and scientists.
This remedy’s most common justification is the supposed statistic that China and India between them graduate twelve times the numbers of engineers the United States does. Business executives such as Microsoft chairman Bill Gates say that they have no choice but to move their research and development operations abroad because a deficient US education system has resulted in a severe shortfall of engineers.
The Global Engineering and Entrepreneurship project team at Duke University has been researching this topic. We found that the graduation statistics in common use were misleading, as they were based on faulty comparisons. Our interviews with the executives of technology and engineering companies engaged in outsourcing research and development (R&D) to India and China revealed that their primary motivation in moving operations abroad was not a shortage of engineers but rather lower cost and the proximity of growth markets. Furthermore, we found that there were serious issues with the quality of engineering education in China and India.
Yet India is racing ahead to become a global hub for advanced R&D in several industries. In trying to understand how India is achieving this feat, we learned that the Indian private sector has found a way to overcome deficiencies in its education system through innovative programs of workforce training and development. These have transformed workers with a weak educational foundation into R&D specialists. In response, then, the United States needs learn from India and upgrade its workforce.
Various articles in the popular media, speeches by policy makers, and reports to Congress have stated that the US graduates roughly 70,000 engineers annually, while China graduates 600,000 and India 350,000. Even the National Academies and the US Department of Education have cited these numbers.
But no one has compared apples with apples. In China, the word “engineer” does not translate well into different dialects and has no standard definition. An “engineer” could be a motor mechanic or a technician. Chinese graduation numbers included all degrees related to information technology and to specialized fields such as shipbuilding. They also included two- and three-year degrees, making them equivalent to US associate degrees. Nearly half of China’s reported engineering degrees fell into this category. The Indian definition of “engineer” was equivalent to the US one, but included information-technology and computer-science degrees. When we counted on a more consistent basis, we found that in 2004, the United States and India each graduated approximately 140,000 engineers, and China graduated 360,000. Chinese graduation rates have, however, been increasing dramatically since 1999.
We found a similar trend in Masters and PhD degrees. In 2005, China graduated 63,514 Masters and 9427 PhDs in engineering, exceeding corresponding US numbers: 53,549 and 7,720, respectively. India’s graduation numbers were unimpressive: 18,439 Masters and fewer than 1,000 PhDs in engineering. In fact, India wasn’t graduating enough PhDs to meet the growing staff requirements of its universities. However, China’s increasing numbers came at the cost of quality: enrollments are increasing at all but the top universities without corresponding increases in faculty and infrastructure. The growth in India’s graduation rates was coming largely from private educational institutions, the quality of which varied significantly: some provided good-quality education while the majority, did not.
Sending R&D abroad
Our interviews with 78 senior executives of US corporations involved in outsourcing engineering work revealed that India and China were their top destinations for R&D work, with Mexico in third place. The data these companies provided—on time to fill open positions, signup bonuses, and acceptance rates of job offers for engineering—showed no indication of a tightening job market. In other words, they were not experiencing shortages of engineers in the United States. The reasons they named for going offshore concerned salary and personnel savings, overhead-cost savings, 24x7 continuous-development cycles, access to new markets, and proximity to growing markets.
These companies reported that American engineers produced work of better or equal quality and were at least as productive as their Indian and Chinese counterparts. Moreover, American engineers had advantages in education, cultural understanding, communications, and their understanding of markets. But Indian and Chinese engineers worked harder and cost significantly less.