STEM Shortage In The US: Yes, But Not For The Obvious Reasons

Over the last few years there has been a lot written about the shortage of STEM (Science, Technology, Engineering and Math) graduates in the US. Walter Hickey, in a piece on, argues that the idea of a STEM shortage is a myth propagated by parties who don’t want to tell Americans the reality, which is that there are plenty of STEM graduates in America but of an inferior quality to foreign students.

Writes Hickey:

The Economic Policy Institute published an informative paper several weeks ago that broke down a lot of the myths around the STEM shortage.
First, let’s look at basic economics. When there’s a shortage — when demand exceeds supply — the price of a good increases. If there were truly a supply shortage, then, why hasn’t the compensation for tech workers increased dramatically?

screen shot 2013-05-31 at 2.30.09 pm

Even more, were there truly a STEM shortage — were demand for STEM majors to exceed supply — one would expect that unemployment statistics for recent STEM graduates would be outstandingly low.
The reality? Nope….

We clearly don’t have a STEM shortage. If we did, rudimentary economics would kick in and show either low unemployment for new majors or a rising price of computer science labor. People wouldn’t say they’re out of the industry because of no jobs.

What we really have is a “STEM majors who have the skills that Silicon Valley needs, who are willing to work for a price Silicon Valley wants to pay” shortage.

As someone who has spent a lot of time working with graduate students in the US and abroad, my general reaction is that Hickey is correct, but that he does tell the whole story.

It would be easy to walk away from this piece thinking that American students are just lazy or not as smart as Asian students, and this explains the shortage of American STEM graduates that are good enough, if he is right, for Google, Apple, etc. But I do not think that is the case at all.

The reality is that basic economics has created this situation, since in the US any seriously bright student smart enough to complete an engineering degree is also smart enough to complete a finance degree and head to Wall Street and not Silicon Valley. Why kill yourself getting an EE degree at MIT when, for the same amount of effort, you can get a finance degree at Wharton that, at least in the not too distant past, would have guaranteed you (a) a much higher starting salary and (b) the possibility to earn literally billions over a lifetime? Wall Street is not an option for most super-smart kids in Beijing or Mumbai, and so for them STEM degrees make a lot of economic sense — not so for their equivalents in the US.

The bottom line is that if there is a tier-1 STEM graduate shortage in this country, it is the result of logical economic choices made by the brightest American students since the deregulation of Wall Street. It’s another unintended consequence of the policies the US has followed, which is why, given where we are today, importing tier-1 STEM graduates for Silicon Valley is a sound strategy, at least until we learn if the effects of the great recession have changed the focus of the best undergraduates. That said, given the recent resurgence of Wall Street, somehow that does not seem very likely.

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Carlos Alvarenga

Founder and CEO at KatalystNet and Adjunct Professor in the Logistics, Business and Public Policy Department at the University of Maryland’s Robert E. Smith School of Business.

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