Prospects for Advanced Technical Careers in the USA

By GARY S. BECKER

With border security and proposals for a guest-worker program back on the front page, it is vital that the U.S. -- in its effort to cope with undocumented workers -- does not overlook legal immigration. The number of people allowed in is far too small, posing a significant problem for the economy in the years ahead. Only 140,000 green cards are issued annually, with the result that scientists, engineers and other highly skilled workers often must wait years before receiving the ticket allowing them to stay permanently in the U.S.

An alternate route for highly skilled professionals -- especially information technology workers -- has been temporary H-1B visas, good for specific jobs for three years with the possibility of one renewal. But Congress foolishly cut the annual quota of H-1B visas in 2003 from almost 200,000 to well under 100,000. The small quota of 65,000 for the current fiscal year that began on Oct. 1 is already exhausted!

This is mistaken policy. The right approach would be to greatly increase the number of entry permits to highly skilled professionals and eliminate the H-1B program, so that all such visas became permanent. Skilled immigrants such as engineers and scientists are in fields not attracting many Americans, and they work in IT industries, such as computers and biotech, which have become the backbone of the economy [if wages are depressed by visa-receiving immigrant scientists, how can these fields attract many Americans?]. Many of the entrepreneurs and higher-level employees in Silicon Valley were born overseas. These immigrants create jobs and opportunities for native-born Americans of all types and levels of skills.

So it seems like a win-win situation. Permanent rather than temporary admissions of the H-1B type have many advantages. Foreign professionals would make a greater commitment to becoming part of American culture and to eventually becoming citizens, rather than forming separate enclaves in the expectation they are here only temporarily. They would also be more concerned with advancing in the American economy and less likely to abscond with the intellectual property of American companies -- property that could help them advance in their countries of origin.

Basically, I am proposing that H-1B visas be folded into a much larger, employment-based green card program with the emphasis on skilled workers. The annual quota should be multiplied many times beyond present limits, and there should be no upper bound on the numbers from any single country. Such upper bounds place large countries like India and China, with many highly qualified professionals, at a considerable and unfair disadvantage -- at no gain to the U.S.

* * *

To be sure, the annual admission of a million or more highly skilled workers such as engineers and scientists would lower the earnings of the American workers they compete against. The opposition from competing American workers is probably the main reason for the sharp restrictions on the number of immigrant workers admitted today [I doubt that. The opposition is too politically ineffective.]. That opposition is understandable, but does not make it good for the country as a whole. [The problem with this argument is that it overlooks the entire technical infrastructure of national defense. Unless the USA is prepared to hand out security clearances to immigrants from China and India, the depression in wages brought about by this immigration will continued to push American technical talent away from aerospace.] Doesn't the U.S. clearly benefit if, for example, India's government spends a lot on the highly esteemed Indian Institutes of Technology to train scientists and engineers who leave to work in America? It certainly appears that way to the sending countries, many of which protest against this emigration by calling it a "brain drain."

Yet the migration of workers, like free trade in goods, is not a zero sum game, but one that usually benefits the sending and the receiving country. Even if many immigrants do not return home to the nations that trained them, they send back remittances that are often sizeable; and some do return to start businesses.

Experience shows that countries providing a good economic and political environment can attract back many of the skilled men and women who have previously left. Whether they return or not, they gain knowledge about modern technologies that becomes more easily incorporated into the production of their native countries.

Experience also shows that if America does not accept greatly increased numbers of highly skilled professionals, they might go elsewhere: Canada and Australia, to take two examples, are actively recruiting IT professionals.

Since earnings are much higher in the U.S., many skilled immigrants would prefer to come here. But if they cannot, they may compete against us through outsourcing and similar forms of international trade in services. The U.S. would be much better off by having such skilled workers become residents and citizens -- thus contributing to our productivity, culture, tax revenues and education rather than to the productivity and tax revenues of other countries.

* * *

I do, however, advocate that we be careful about admitting students and skilled workers from countries that have produced many terrorists, such as Saudi Arabia and Pakistan. My attitude may be dismissed as religious "profiling," but intelligent and fact-based profiling is essential in the war against terror. And terrorists come from a relatively small number of countries and backgrounds, unfortunately mainly of the Islamic faith. But the legitimate concern about admitting terrorists should not be allowed, as it is now doing, to deny or discourage the admission of skilled immigrants who pose little terrorist threat.

Nothing in my discussion should be interpreted as arguing against the admission of unskilled immigrants. Many of these individuals also turn out to be ambitious and hard-working and make fine contributions to American life. But if the number to be admitted is subject to political and other limits, there is a strong case for giving preference to skilled immigrants for the reasons I have indicated.

Other countries, too, should liberalize their policies toward the immigration of skilled workers. I particularly think of Japan and Germany, both countries that have rapidly aging, and soon to be declining, populations that are not sympathetic (especially Japan) to absorbing many immigrants. These are decisions they have to make. But America still has a major advantage in attracting skilled workers, because this is the preferred destination of the vast majority of them. So why not take advantage of their preference to come here, rather than force them to look elsewhere?

Mr. Becker, the 1992 Nobel laureate in economics, is University Professor of Economics and Sociology at the University of Chicago and the Rose-Marie and Jack R. Anderson Senior Fellow at Stanford's Hoover Institution.

Review of the Future of the U.S. Aerospace Infrastructure and Aerospace Engineering Disciplines to Meet the Needs of the Air Force and the Department of Defense (2001)
National Research Council (NRC)

AEROSPACE IN CRISIS; Vol. 152, No. 17; Pg. 24
BYLINE: ANTHONY L. VELOCCI, JR.

The U.S. aerospace industry is facing a deepening problem -- a crisis, in the opinion of some observers -- that shows few signs of abating in the foreseeable future. Call it a brain drain, a hemorrhage of intellectual capital or an erosion of the brain trust: it all amounts to the same thing.

For a growing number of companies, the challenge of attracting and retaining top technical talent is becoming increasingly difficult. The situation is especially acute in key disciplines such as electrical, software and systems engineering -- hardly an acceptable condition in an industry in which information technology and systems integration are critical.

In some cases, the situation is having a measurable impact.

''It has slowed the pace of our work and caused us to stretch out some schedules,'' said Derek Cheung, vice president of Rockwell Collins Science Center in Thousand Oaks, Calif. ''We've intensified our recruiting efforts, but we're still unable to attract as many people as we need, and it's hard to keep those we do hire. The shortage of engineers has become the No. 1 issue -- and a very severe problem -- at our research lab.''

Almost every major job is understaffed by 10-15%, forcing Rockwell Collins to ''run the rest of the technical team at 120% of capacity, which directly translates into burnout,'' according to Brian Wright, vice president of Integrated Applications. ''We're in a continuous war for experienced engineers, who are very difficult to find.'' Similar frustration was expressed by Philip Cheney, Raytheon Co.'s engineering vice president who directs their R&D program. ''It's a constant battle to get top people in here,'' he said. ''Consequently, we work the ones we've got pretty hard.'' He added, ''We've started looking at the situation as a long-term issue.''

Part of the problem is that the aerospace industry is fighting a losing battle with proliferating, fast-growing wireless technology companies and Internet startups. They are luring many of the most promising young engineers with big starting salaries, as well as the potential to become multimillionaires on the strength of stock options whose value may soar.

''We can't match what dot-com companies are paying,'' said Nils Ericson, president of Northrop Grumman's Logicon Information Solutions business unit. ''As fast as we bring new people in, we have the same number leave for the commercial sector.'' At Lockheed Martin, which employs nearly 65,000 engineers of all types, Staffing Services director Tracey Staley said that company loses more software engineers to dot-com companies than to aerospace competitors. But she adds, ''Compensation isn't usually the main reason they leave; most of the time it's because they consider the work uninteresting or they don't like the direction of their careers.''

While industry may be bearing the brunt of the talent competition, some parts of the government -- no less dependent on top engineers -- are finding themselves similarly challenged. For example, nuclear weapons labs are losing engineers to dot-com companies at an alarming rate (see p. 78). NASA is having a problem too. After shrinking its workforce to about 18,500 from some 25,000 in recent years, the agency plans to hire approximately 2,000 new workers, many of whom will be engineers. The task is being made tougher, however, because a number of candidates are being drawn to New Economy opportunities.

''We're having to compete with dot-com companies,'' Administrator Dan Goldin said. ''The president of one of the major technical universities said to me, 'Dan, my smart kids are wanting to get equity in the companies, and they're looking at compensation measured in hundreds of thousands of dollars.''

But the lure of the commercial sector isn't the full extent of the difficulty companies are grappling with.

The overall engineering talent pool has been shrinking for the last 10-15 years because of declining enrollment in bachelor programs, though not everywhere. ''Enrollment is far below the level it was at 10 years ago, but it's on the rise again at Princeton University,'' said Lex Smits, who heads the Ivy League school's aerospace engineering program.

Some large universities also report that the number of graduates pursuing masters and Ph.D. degrees in aerospace and aeronautical engineering programs has remained flat since the mid-1990s. However, this aspect of the problem is actually worse than the numbers indicate. Many students graduating with higher engineering degrees are non-U.S. citizens, making them less employable on Defense Dept. programs because of security concerns.

To make matters worse, the overall quality of students in many of the U.S.' top engineering schools has diminished, according to some academicians. ''Aerospace engineering programs simply aren't attracting the talent they used to,'' said Kyle T. Alfriend, professor and head of the aerospace engineering department at Texas A&M University. Eli Reshotko, Kent H. Smith professor of engineering at Case Western University, agrees, adding, ''What bothers our crowd most is that we're no longer getting the best and the brightest.''

There is a huge difference between the best candidates and the next tier, noted Norman Augustine, who briefly joined the faculty of Princeton's engineering department after he retired as chairman and CEO of Lockheed Martin. ''The sad truth is that companies aren't getting their fair share of the best people available.''

FURTHER EXACERBATING the problem is the ''graying'' of the industry's engineering workforce. ''This trend alone is alarming and should raise a red flag throughout the highest levels of the defense establishment, starting with the office of the secretary of defense,'' a top executive told Aviation Week & Space Technology.

Consider the following: on a major Pentagon program managed by a large defense contractor, more than 80% of the engineering staff will retire within the next 30 months, according to James Schwendinger, who heads up the aerospace and defense practice of the consulting firm of Deloitte & Touche. If the program continues, it's not clear where the intellectual capital is going to come from, he said.

''I don't think there is a crisis yet, because in general I don't believe the problem is preventing the industry from delivering military and civil products on time,'' Aerospace Industries Assn. President John Douglass said. ''But the situation could become a crisis if we don't begin doing certain things.''

Douglass noted the industry's 750,000-800,000 workforce, which includes approximately 450,000 engineers, produced some $ 155 billion worth of products last year. In the late 1980s, the industry employed about 1.3 million people who produced products valued at $ 115 billion. The productivity of aerospace workers has risen dramatically, and because it has increased faster than total sales, companies have been able to make up for the steady decline in recruiting losses in recent years, he said. ''For that reason, I don't think industry is behind the power curve yet in responding to the problem.''

Douglass' assessment is not shared universally.

Many of the people Aviation Week interviewed for this report expect the brain drain to get worse before it gets better because industry has failed up to this point to mount a coordinated response. ''This industry has no long-term point of view, and it has no realistic plan for dealing with this problem,'' said Case Western's Reshotko.

Reshotko is in a position to know.

Both he and Texas A&M's Terry Alfriend are members of a blue ribbon panel that has been assembled under the auspices of the National Academy of Science's National Research Council to determine if the aerospace industry will have the capability of designing future weapons systems. ''Based on our findings thus far, there's definitely cause for concern,'' Reshotko said. ''Some capability will be lost.'' The U.S. Air Force requested and is funding the study, which is supposed to be completed around the end of this year.

''The industry is in serious decline,'' declared Wolfgang Demisch, managing director at Wasserstein Perella. ''It's almost as though the leadership both at the company level and the industry level have been oblivious to a problem that's been staring them in the face for quite some time.''

Denial might be a more apt description.

''SOME COMPANIES WON'T even discuss the problem because it could raise questions in the minds of customers and investors,'' Merrill Lynch analyst Byron Callan said. ''Raise the issue with management and you're more apt to get the party line.''

In a study conducted several years ago on the health of the U.S. aerospace industry, Deloitte & Touche found companies were having an increasingly difficult time attracting and retaining engineers in software design and some other key fields. While the trend showed up as a concern, it wasn't a high management priority, Schwendinger recalls. ''It's not difficult to understand why a lot of companies now find themselves in the situation they're in.''

AIA's John Douglass said concern about the problem varies from company to company, depending on their dependence on engineering disciplines in shortest supply. At this point, he added, there's not much more on which to base an industry-wide response than anecdotal evidence. As a prelude to developing a blueprint for such action, the Washington-based trade organization probably will launch a study of its own in the near future, possibly in conjunction with the Air Force Assn.

The Lean Aerospace Initiative at Massachusetts Institute of Technology is also exploring the industry's ability to attract and hold onto intellectual capital. ''Hard data on the seriousness and causes of what we're dealing with is badly needed,'' said MIT senior researcher Kirk Bozdogan, co-head of Supplier Networks Research Team in the Lean Aerospace Initiative.

As study teams probe the depths of the overall problem, they almost certainly will discover a gender dimension.

HISTORICALLY, RELATIVELY few females have pursued engineering disciplines, at least in the U.S., and that continues to be the case. Women made up only 7% of the engineering workforce in the mid-1990s, according to the Women in Engineering Program Advocates Network. Proportionately, many more women are physicians, attorneys or work in business. ''Reversing this trend is one of the keys to solving the problem the industry is facing,'' Wright said.

Study teams also are apt to discover the industry is perceived in a very negative light by a lot of engineering students and, for that matter, some aerospace engineering professors. Right or wrong, their sense is that aerospace no longer is as innovative as it used to be. When Augustine was teaching at Princeton, he polled engineering students to learn about their career plans. They all expressed hope they could find jobs with small, entrepreneurial dot-com companies, he recalled. ''Young people are saying the industry has lost its excitement, and this too is part of the problem,'' he said.

Other current and former college professors tell of aerospace engineering graduates choosing careers with consulting and Wall Street investment banking firms. Space still seems to offer some excitement, but there definitely is a trend toward joining relatively small, entrepreneurial companies that offer a less structured environment, Princeton's Lex Smits said.

Robert Kuntz, president of the California Engineering Foundation, isn't surprised. Young people are stimulated by companies that are pushing the frontiers of technology, but such activities have been sharply scaled back with the steep decline in independent and government-funded R&D since the end of the Cold War, according to Kuntz.

''The industry is at a crossroads,'' MIT's Bozdogan said. ''Either it can grow with vitality or it can become an also-ran in the global scale of things. Based on trends in R&D spending and the problem the industry is having attracting and holding onto top engineering talent, there's more than ample reason to worry.''

AEROSPACE BUSINESS; Vol. 159, No. 24; Pg. 81

As the U.S. Defense Dept. prepares to embark on the Space-Based Radar (SBR) program with a soon-to-be-released request for proposals, aerospace industry leaders are again confronting a question that refuses to go away: Where will they get enough people with the right systems-level skills to handle such a massive project? The SBR's initial phase, for example, will require hiring about 800 engineers to define the huge orbital radar system, according to U.S. Air Force officials.

Defense is already under the congressional gun to explain technical, cost and schedule problems plaguing other complex programs, such as Space-Based Infrared System-High (AW&ST Nov. 24, p. 24). Some of those glitches are traced to inadequate systems engineering.

THE U.S. AEROSPACE and defense sector has yet to deal adequately with so-called "people issues" first highlighted by this magazine (AW&ST Aug. 4, p. 54 and June 21, 1999, p. 65). Anybody who reads Aviation Week & Space Technology's letters to the editor sees often-bitter complaints about how this industry treats its flesh-and-blood "intellectual capital." Corporate leaders continue to squirm when asked what they are doing to address employee concerns about everything from outsourcing technical jobs overseas to laying off highly paid experts to beef up the quarterly bottom line.

"People issues" were addressed by the President's Commission on the Future of the U.S. Aerospace Industry, but it basically kicked the problem downfield by recommending creation of an interagency task force to develop a national strategy addressing aerospace workforce problems.

"The [commission] addressed about a half-dozen issues. My sense was that five of them got real action, because we in the government/industry community know how to work those issues," said Rick Stephens, a Boeing senior vice president and recently appointed president of the company's Shared Services Group. "The sixth one was 'workforce development,' where there's really no action and no real consensus. It's not because people's hearts aren't there. It's more a problem of someone saying, 'Here's a solution' without [acknowledging] there are a number of constituent groups that have a major impact."

That point was driven home during the recent American Institute of Aeronautics and Astronautics (AIAA) Space 2003 conference, when Stephens and Elane Scott, a Boeing educational consultant, organized a series of six sessions called "Future Workforce and Education." Most panelists were drawn from outside the aerospace industry.

"For the first time, we reached beyond aerospace in trying to come up with solutions," Stephens noted. Conference participants learned that "aerospace is not alone; we're not unique. By and large, the workforce issues we're facing are the exact same ones other industries that [depend] on technology are facing." [How many of these other indutries are critical to national defense?]

Panelists said the health care sector is having trouble finding enough physicians, nurses and pharmacists. "These well-paying careers require certain technical skills, and they're struggling to find sufficiently qualified people," Stephens said. Few students want to endure the educational rigors necessary to work in these professions, they found.

Similar tales were told by panelists from the automobile industry, which cannot find enough mechanics to repair today's sophisticated, computer-intensive cars and trucks. Dentists are having difficulty attracting qualified dental assistants and hygienists, as well.

"There was a recognition that this isn't about a labor shortage, though," Stephens said. "It's about a skills shortage." Checking the web sites of three large U.S. aerospace companies showed about 10,000 job openings listed. Of those, about 60% had the word "engineering" in their titles or job descriptions. But roughly 80% of the 10,000 listings contained the word "systems."

In other words, companies are looking for a different set of skills than they were a few years ago, because today's aerospace projects -- like SBR -- demand expertise beyond a narrow field such as mechanical engineering. They also require some level of systems knowledge, as well as "soft" skills necessary to work effectively in a team environment. More than ever before, employees need "to be able to communicate, relate to others and do critical thinking," Stephens said.[Plays on the stereotype of engineers as loners. Can't they be trained to communicate better if that's the problem?]

Another skill that seems to be in short supply is the ability to take an idea and convert it to something tangible -- hardware, software or other "product." That's because students today tend to be a lot more "computer smart" than "hands smart," according to Nate Jones, a founder of the Long Beach Grand Prix race. Young people simply don't know how to build and repair things anymore.[ Great. More vague anecdotes and buzzwords instead of real explanations.]

Researchers at Stanford University and the Massachusetts Institute of Technology have confirmed the importance of children developing manual dexterity in their early years. If they don't, they later have difficulty applying mental knowledge to the hands-on tasks of creating something (AW&ST May 6, 2002, p. 61).

Jones noted that an entire "hands-on" generation was responsible for the last 40-plus years of U.S. aerospace accomplishments. One reason Southern California spawned so many of America's premier aerospace companies was "because it was a hotbed of 'hot rod' car people," Jones said. The nation's successful Apollo program and Lockheed "Skunk Works'" advanced aircraft coups can be attributed to managers, engineers and technicians who had gotten their hands dirty building street racers in the late 1940s and '50s, he suggested. Few of today's high school students have such opportunities -- or desires. Consequently, Jones started an after-school program that teaches youngsters how to work on cars and engines. Many go on to study engineering in college.

While programs like Jones' are having positive local impacts, they won't solve nationwide technical workforce problems that span multiple business sectors. That requires a strategic approach and a focused, well-crafted domestic policy, Stephens said. To that end, the AIAA Space 2003 conference was a significant milestone -- the initial steps in building a cross-industry coalition dedicated to ensuring all "stakeholders" ultimately have enough qualified technical workers to meet their needs. That's a departure from the industry's past strategy for solving workforce challenges.

"THE WAY AEROSPACE has approached this [workforce development] problem was to go get educators, industry and elements of the government that are directly involved in aerospace," Stephens said. "We've never reached out to the larger community -- the health or other industries. And we certainly haven't reached out to the media. That important message for the aerospace industry came out of [the AIAA conference]: We have to facilitate and help create a coalition of all stakeholders. We have to see them as peers and participants, not just [resources] to help us solve our problems.

"One of the challenges we have is everybody wants to stay on the 'techie' side of the problem, but this isn't a 'techie' issue," he added. "It's a much broader issue that's affecting more than just aerospace. It's a domestic policy issue. There are tens if not hundreds of millions of dollars spent on workforce development at the federal, state and local levels. If we can integrate these and pull this coalition together, then we have a way forward."

The aerospace community also has a responsibility to contribute its systems expertise to whatever strategy ultimately emerges from coalition efforts. One panelist, USAF Lt. Gen. (ret.) Eugene Tatini, deputy director for NASA's Jet Propulsion Laboratory, said, "The aerospace industry has to stand up and explain what it can bring to the solution -- solving all kinds of engineering and technical problems. We have some of the brightest people in the world. We should apply some of those 'smarts' to educational systems, [for example]."

Stephens said he and Scott are building a coalition of six stakeholder groups -- government, business, media, the healthcare industry, "community" and education -- and identifying key leaders in each. This coalition will then develop a common vision and strategy, and start aligning financial and other resources.

By ANDY PASZTOR and JONATHAN KARP
Staff Reporters of THE WALL STREET JOURNAL
October 24, 2005; Page A6

For the second time in two months, Pentagon concerns have prompted antitrust officials to withhold swift approval for a proposed combination of Boeing Co. and Lockheed Martin Corp. government rocket programs, according to people familiar with the situation.

Taking its cue from the Pentagon, these people say, the Federal Trade Commission today is expected to allow a 30-day deadline to lapse once again without giving the green light for creation of the venture. Boeing and Lockheed said last May that they planned to combine their rocket businesses in an effort to stem their losses and save taxpayers the expense of supporting two separate systems for launching military, spy, weather and research satellites.

The companies say they remain committed to the concept, which they estimate could eventually save the government as much as $150 million annually. [We're going to believe people with legendary cost overruns when they say they're going to save us money?] Many industry and military officials believe that the deal is likely to win government approval eventually, despite the current uncertainty and apparent policy gridlock inside the Pentagon.

Boeing and Lockheed said they are working with the government to answer questions, but declined to elaborate. A spokeswoman for the Pentagon, which has put off some big purchasing decisions partly as a result of acquisitions scandals involving Boeing, said it was "premature" to comment on the rocket proposal. The FTC doesn't comment on its reviews.

The latest development indicates that the contractors are struggling to convince federal officials about the long-term benefits of the proposal and face a tougher-than-expected fight inside the Pentagon. Other companies within the industry increasingly have voiced concern or opposition.

Since the Air Force is slated to be the venture's primary customer, the FTC has taken a back seat to the Pentagon in analyzing the likely implications. Continued regulatory limbo suggests that some high-ranking Pentagon officials remain on the fence, and haven't told antitrust enforcers they support creation of a monopoly to launch government satellites.

The final decision could set an important legal and policy precedent, because the Pentagon has generally opposed going to a single supplier in market segments with two long-established suppliers.[Odd. I don't remember this complaint when all the industry consolidation was going on in the 80's and 90's.]

The outcome will affect a federal lawsuit in which Lockheed alleges Boeing engaged in corporate espionage years ago by improperly acquiring and using thousands of proprietary Lockheed rocket documents. Lockheed has agreed to drop that suit, but only if the venture goes into effect.

Meanwhile, fledgling rocket-maker Space Exploration Technologies Corp., which seeks to launch government satellites, filed a federal lawsuit in Los Angeles last week accusing the companies of conspiring to violate antitrust laws and asking the court to block the proposed venture. [They don't mention here that Space-X claims to cut overall costs by at least 50% .] Northrop Grumman Corp., a major supplier of satellite components and subsystems, is among larger companies that have expressed concerns to the government about combining the rocket programs.

The anticipated decision by the commission underscores that national-security concerns, projected cost savings and industrial-base issues -- rather than traditional antitrust considerations -- will likely determine the outcome. [This demonstrates the power of incumbency. How can Space-Ex compete without the security infrastructure of the establishment and the comfort level that gives the government? Notice that this doesn't even get to discussions of technology or cost reductions. ] Executives and lawyers for each company spent the weekend considering whether to file a revised submission, the officials said, or push ahead with answering more-detailed questions the commission is expected to pose about the existing document. The companies last month pulled and then filed revised documents with the commission as a way to gain more time and pre-empt regulators from publicly signaling their concerns. It wasn't clear yesterday if the companies intend to use that option again.

When the proposed venture was announced in May, industry officials anticipated a relatively easy review and approval before the end of the year. Since then, support for the idea appears to have cooled in some Pentagon offices, and the Air Force has installed a new acquisition chief for space projects. Air Force Undersecretary Ronald Sega has been noncommittal in his public comments. More than a week ago, he said he hadn't gone through details of the company's revised submission.

By ANDY PASZTOR
Staff Reporter of THE WALL STREET JOURNAL
November 19, 2005; Page A4

Plans to build the Pentagon's next-generation satellite-communications network appear on the verge of being delayed and dramatically restructured, battered by escalating pressure on military budgets and congressional skepticism of space programs, according to people close to the companies.

Boeing Co. and Lockheed Martin Corp. are leading separate teams vying to build the proposed $19 billion system called Transformational Satellite Communications, or TSAT, but both contractors are now preparing for deep cuts and sweeping changes.

No final decisions have been made, and the companies continue to work on competing design contracts. Pentagon officials publicly talk about how important the program is, and the Air Force is still pushing the concept of launching a fleet of newly developed communications satellites starting early in the next decade. They are projected to have vastly greater capacity than existing spacecraft to provide secure communication links for a range of military and intelligence users.

But in their recent internal planning, Chicago-based Boeing and Lockheed, of Bethesda, Md., anticipated a slowdown in funding and piecemeal development of cutting-edge technologies, according to industry officials. The anticipated cutbacks to TSAT -- effectively downgrading the Pentagon's most expensive and ambitious communications project to a longer-term research and technology-development effort -- could set a precedent for a broader shake-up of acquisition of space hardware by the armed forces.

Instead of kicking off TSAT production as early as 2006 as originally anticipated, industry and government officials are mulling less-expensive alternatives using versions of current-generation satellites as a transition to the ultimate system. Boeing and Lockheed are each pushing their own models.

Gen. Lance Lord, head of the Air Force Space Command, said "we'll take a reduction" in funding and "have to look at restructuring" partly because there are lingering questions about "are we moving too fast with the technology."

The fundamental question, according to James Albaugh, chief executive of Boeing's defense and space operations, is whether the "customer has the stomach to take on another big space program." The most likely scenario, he said in a recent interview, is for the Air Force to "build a few more" of the satellites already in production and thereby "kick the can down the road" on deciding the fate of TSAT. [The human talent to build these systems will be long retired or dead by the time the can reaches the end of the road. ]

A Lockheed spokesman, who declined to comment on internal deliberations, said the company "stands ready to help the government" sort through its options. But privately, Lockheed executives for some time have been advocating, as a stopgap measure, that the Air Force should purchase at least one additional so-called AEHF satellite, a model Lockheed already is building for the Pentagon.

Ronald Sega, the Air Force's senior space-acquisition official, has talked about building simpler, less-risky satellites by focusing on gradual performance enhancements. To a large extent, such strategies are driven by harsh budget realities on Capitol Hill. Both the House and Senate are moving to cut at least a third of the Pentagon's $835 million TSAT request for the current fiscal year.

At the same time, Air Force officials are considering delaying and reducing the complexity of certain advanced weather satellites already under construction, and scaling back the capabilities of future spy satellites still in preliminary concept design. But the budget crunch appears most severe for TSAT, which is poised to shift into full-scale production just as the Air Force struggles to reassess its budget priorities and juggle spending between aircraft and space programs.

By ANDY PASZTOR and JONATHAN KARP
Staff Reporters of THE WALL STREET JOURNAL
September 23, 2005; Page B2

Concerned about extensive technical problems and multibillion-dollar cost overruns on a spy-satellite program run by Boeing Co., U.S. intelligence agencies have decided to shift a big chunk of the work to rival Lockheed Martin Corp., according to industry and government officials.

Intelligence chief John Negroponte briefed lawmakers yesterday on the unusual move to strip Boeing of an important portion of the highly classified, six-year project, called Future Imagery Architecture, or FIA. The government plans to sign a contract with Lockheed to complete the development of so-called electro-optical satellites, similar to orbiting telescopes and designed to provide clear, high-resolution pictures of small objects on Earth.

Financial and other details haven't been released, both companies said they hadn't been officially notified of changes and intelligence officials said only that the FIA program is being "restructured."

As news of Mr. Negroponte's decision spread among lawmakers throughout the Pentagon, details emerged about government efforts over the years to elicit assistance on the project from current and former Lockheed officials. At the request of senior intelligence officials, former Lockheed Chairman and Chief Executive Vance Coffman this year served as a member of a special government-created review team that overwhelmingly recommended stripping Boeing of some work on the troubled program. Through a spokesman, Mr. Coffman declined to comment.

The anticipated shake-up, affecting one of the government's most secretive and expensive classified programs, threatens to damage Boeing's long-term strategy to establish itself as a world-wide leader in satellites, military space and intelligence systems. Despite restructurings, management changes and budget increases, by some estimates the program is $5 billion above initial cost projections.

Boeing's victory over Lockheed in 1999 as the prime contractor for FIA was seen by industry officials as a shocking upset, since Lockheed had dominated the production of U.S. spy-satellites for decades. But almost from the beginning of the program, according to executives and former intelligence officials familiar with the details, the government sought systems-engineering expertise and other assistance from Lockheed. The goal was to help shore up Boeing's work on the electro-optical sensors -- the very component that has now been shifted to Lockheed -- by devising ways to better stabilize the imaging telescopes.

Lockheed agreed to provide Boeing a limited number of systems engineers, these people said, but balked at making a larger commitment, arguing that it needed to save its top-notch engineers for its own programs. Lockheed also had a separate and broader role as a technical and engineering adviser to the National Reconnaissance Office, or NRO, which oversees spy satellites.

With the recent expeditions to Mars and talk of landing on the moon again, being ir,volved in the space industry is becoming 'cool' once more. However, this industry has a grwing concern. A lot of seasoned NASA and Air Force space engineers and Scientists will be retiring soon and, as such, they are facing a problem of filling that void due to a lack of educational and research activity Although it is at its worst in the US, the problem stretches worldwide. Among others, Europe will soon encounter a similar situation, but with a few years grace, as the continent joined the space race a little later than its US counterpart.

"It's a multifaceted problem - retirement and education based," explained Harry Ames. deputy director of Utah State University Space Dynamics Laboratory in the US. 'his is a hard industry to be in. It is a relatively high-risk business and the pressures are tremendous. As you age up to the 60-year old bracket, you find your body just doesn't have the tolerance for the 2Ohour days you put in sometimes, M p2ople are retiring early and taking all the knowledge with them. Meanwhile, our student population is opting not to go into the aerospace sciences, such as physics and electrical engineering. in favour of software," he added.

'There's certainly a similar problem in the UK, but I think the reasons might be a little different," noted Professor Martin Barstow, professor of astrophysics and space science at the University of Leicester. "One is the lower take up of science and engineering degrees and the second is that, at least within the universities and space research in this country, salaries are not particularly good, so recruitment and retention is a problem." "In terms of retention, the money is definitely one aspect that turns people away. If you want to earn two or three limes your salary then you go to work in the computer and IT industry," he explained. The other aspect is the work environment itself, In a giant like the space engineering industry, it is not always 'hands-on' engineering, plus many of the new recruits have to shout to get their ideas heard and they often don't get the credit they deserve. "Customer paperwork can comprise 50% of the day of an engineer in our business. No one likes to do that much paperwork, especially not the brilliant youngsters upon which this burden eventually must rest," said Ames. "In addition, the young technical person is very conscious of identity and uniqueness. That is lost when you are one of 150,000 on the same complex of buildings in Los Angeles, Seattle or Maryland ." he said. "The road to the top is obscure and your early career will likely have 3s many cancelled programmes in it as completed ones."

This isn't to say that a crisis is at hand, but it is something that needs serious contemplation. Those least affected by this problem at the moment are commercial companies like EADS Atrium who are involved in the 'sexy' side of space engineering. These companies are already seeing many retire and are having to recruit larger amounts of people, but they are not seeing a huge problem in finding them. "What we have I suppose, would be called a rather sexy industry. A lot of people want to come into our business and so we probably benefit from that," said Alistair Scott, director of communications for the UK, EADS Astrium.

Ames also believes that the 'sexy' topic of Mars has made space more interesting, but he believes more people will be interested in being observers rather than participators. "Certainly there's going to be a very large number of folks going into our business, but the deficit is going to be very, very large as the so-called Baby Boomers retire out," he noted. For the majority of the industry, the problem does exist and will only get worse. Ultimately, the industry won't be able to find the right technical staff for the roles and the problem of losing engineers to more 'fun' and well-paid industries such as IT and software will grow.

As well as recruitment and retention, another problem that arises from this wave of retirements is the lack of knowledge transfer. 'We've not been very good at capturing and transferring that aggregate wisdom to the techno-nerds of the following generations," said Ames. 'there's the problem of transferring four decades of what's in our brains to the younger folks it's going to take time to learn otherwise we could start reinventing some of the problems because the lessons weren't adequately passed on."

overcome this problem for the US; its government has begun looking into possible ways of easing this problem by setting up the 'Commission on the Future of the United States Aerospace industry'. Many universities and laboratories are also puning Solutions are now coming about to help plans into action; working both with industry and the government to give further training to those interested in the industry and prepare them for the environment they will be working in, all with the aim to aid recruitment and retention. The results from such schemes will, hopefully, guide Europe and, also, stop it from making the same mistakes.

about and many believe the whole educational system needs to be looked at. 'We have to address the overall science education problem, because if you have more people interested in doing science and engineering degrees that will solve part of the problem," said Barstow.

'The other thing is to do inspirational things that brings people in; things like some of the new ESA initiatives, the main one being Mars exploration," notes Bantow. "1 find this quite aspiring and I hope it will feed into the rest of science industry and education. But then, we've got to make sure that we direct the effort and money into those areas and things that brought the people to us in the first place

--2004 IEEE Review by Keri Allan

From November 25, 2005 Financial Times

The US Commerce Department called for public comments last March on a proposal to expand current restrictions on the sharing of advanced research and technology with foreign nationals. The result was an outpouring of opposition, particularly from universities, which have already seen the enrolment of foreign students shrink because of new visa requirements adopted after September 11 2001. "I sit writing this letter one block from the site of the first self-sustaining chain reaction, produced in the 1940s by Enrico Fermi and collaborators," wrote Simon Swordy, a professor of physics, astronomy and astrophysics at the University of Chicago, in one of more than 300 comments on the proposal, running to more than 1,100 pages. "Ironically, if this proposed rule change had existed at that time, Fermi would not have been allowed to use the equipment to do this without a licence, since he was from Italy, then an enemy of the US."

Noting that Edward Teller, the father of the hydrogen bomb, was a citizen of Hungary, then a Soviet bloc country, Prof Swordy wrote: "One might reasonably conclude that the US would not have become a leading nuclear power if the intellectual input of foreign-born nationals had been excluded." The proposal has been under discussion in the administration since the Commerce Department's inspector-general warned in a March 2004 report that the current level of controls was insufficient to stop the transfer of sensitive technology to foreign nationals. Under rules in place since 1994, companies or research universities must apply to the government for an export licence if certain advanced technologies are shared with nationals of China, former Soviet bloc countries and embargoed countries such as Iran, Cuba and North Korea. That requirement covers even research that takes place entirely within the US. Currently, however, an individual's status is determined by his most recent citizenship or country of residence, not his place of birth. That, the report warned, was a serious loophole. Counter-intelligence officials fear that China, in particular, is exploiting this loophole, and that the US has become increasingly vulnerable to Chinese espionage. The tens of thousands of Chinese who have taken out citizenship in Canada or Australia - countries that exchange technology freely with the US - are of particular concern.

"The Chinese intelligence efforts take advantage of our open economic system to advance China's technical modernisation, reduce the US military advantage and undermine our economic competitiveness," Michelle Van Cleave, the national counter-intelligence executive in the new Office of the Director of National Intelligence, told a congressional hearing in September. "Our general culture of openness has provided foreign entities easy access to sophisticated technologies," she said. Ed Krauland, a lawyer with Steptoe and Johnson in Washington, who works with industry groups opposed to the proposal, says: "There's a lot of pressure on the Commerce Department to do this. There is a concern about the leaking of technologies to unreliable countries." But the administration's proposal to address that problem has many universities and companies fearing the cure could be far worse than the problem. The Commerce Department report suggested that the "deemed export" rule be altered to control the sharing of technologies based on a foreign national's country of birth, not his current residence or citizenship. In its most extreme form, the proposal would capture US dual citizens and permanent residents as well as those from the closest US allies such as Canada and the UK. It would also broaden definitions so that even laboratory use of equipment such as sensors and high-end oscilloscopes would be controlled.

Intel, the US semiconductor maker, said it could be forced to apply for hundreds or even thousands of "deemed export licences" annually just to continue its internal R&D. Licences can take as long as six months to be issued by Washington. It said the rule would make Intel far less attractive to highly skilled foreign workers. "US national and economic security is ... illserved by regulation that impedes efforts of US companies to stay ahead technologically and otherwise remain globally competitive." Universities, already hurt by new visa restrictions, see the proposal as one more illconsidered Washington initiative that threatens their status as the world's leading research institutions.

The Association of American Universities, representing 60 top US universities, warned the scheme could "seriously undermine the vitality of American research." [Here, they are basically admitting that the "vitality" of American research derives from imported high tech labor.]Mr Mulvenon says that while US counter-intelligence officials are highly attuned to the threat of Chinese espionage, "they are not really very savvy about what the economic impact of this will be". The most likely outcome appears to be some sort of compromise that will further tighten the deemed export rules but would adopt something short of restricting all those born in China or other controlled countries. Dave Wilkinson, recently named under-secretary of commerce in charge of export controls, told reporters this week that "we're appropriately sensitive to the critical role that foreign nationals play in innovation and research in the US." He said implementation of the new rule "would be very cognisant of that fact, [Good luck with that! ] while also addressing very legitimate national security concerns.

Tech Firm Battles Big Rivals
To Nab Top Engineers;
Bidding Wars Are Back
Math Problem on a Billboard
By PUI-WING TAM and KEVIN J. DELANEY
Staff Reporters of THE WALL STREET JOURNAL
November 23, 2005; Page A1

In June, as engineer Anselm Baird-Smith mulled leaving eBay Inc. for another job, he received a call from Google Inc. Within days, Google executives had interviewed him and dangled before him an enticing offer: a six-figure salary and restricted stock then valued at several million dollars, to be distributed over several years.

"Google was really aggressive and they moved fast," says Mr. Baird-Smith, who holds a doctorate in computer science and is known for his work as the developer of Jigsaw, software used in computer servers. As a bidding war escalated, Google Chief Executive Eric Schmidt telephoned to urge him to defect.

In the 15 months since Google went public, the Mountain View, Calif., company has galvanized the technology world with its innovative Internet search technology, its rapidly broadening business plan, and its soaring stock price. In the office parks of Silicon Valley, Google also has helped fuel something else -- a hiring frenzy reminiscent of the dot-com boom.

HEADCOUNT

Track the hiring trends2 at Google, eBay, Yahoo and Amazon.To accomplish its current pace of hiring about 10 new employees a day, Google has assembled a formidable hiring machine. Its recruitment department includes as many as 300 free-lance recruiters who are helping it to identify who's who in software engineering, according to three people involved in the effort.

To locate new talent, Google has held software-code-writing contests. It has plastered billboards with math problems, such as one on U.S. 101 in Silicon Valley that asked drivers to identify "the first 10-digit prime found in consecutive digits of e." It has paid to insert an "aptitude test" into tech magazines, encouraging engineers to submit their answers to 21 questions, along with their résumés. And it has upped the stakes in competing with other companies to draw attention from engineering students, handing out free pizza and raffling off gadgets to boost university recruitment.

One top-notch engineer is worth "300 times or more than the average," explains Alan Eustace, a Google vice president of engineering. He says he would rather lose an entire incoming class of engineering graduates than one exceptional technologist. Many Google services, such as Gmail and Google News, were started by a single person, he says.


Other top tech firms are fighting back. Google's play for Mr. Baird-Smith prompted eBay to offer him cash incentives to stay. Bill Nguyen, a Silicon Valley entrepreneur who also had been talking with Mr. Baird-Smith, offered the engineer $1 million over three years to work on a start-up, plus a substantial equity stake in any resulting project. In the end, Mr. Baird-Smith accepted Mr. Nguyen's offer.

"This is what you have to do if you want to beat Google," says Mr. Nguyen.

Although Mr. Baird-Smith got away, Google has succeeded in snaring other top talent. Its high-profile hires include Adam Bosworth from BEA Systems Inc., Kai-Fu Lee from Microsoft Corp., Louis Monier from eBay, and Vinton Cerf, who is often cited as a founding father of the Internet, from MCI Inc. Google declined to comment on any specific recruiting cases.

Over the years, Silicon Valley has seen other hiring booms, as companies such as Apple Computer Inc., Cisco Systems Inc. and Netscape Communications Inc. wrestled for brainpower while staffing up during their fast-growth phases. When the dot-com bubble burst earlier this decade, however, demand for tech talent dried up, and many workers left the area altogether.

Google, which saw its revenue increase more than sixfold to $3.2 billion between 2002 and 2004, is helping lead the latest charge. Its hiring drive began not long after its initial public offering in August 2004. At that time, the company had about 2,600 employees, a fraction of Microsoft's 60,000 employees and Hewlett-Packard Co.'s 150,000. Google grew to more than 3,000 by year end, to nearly 3,500 by March 31, and to just over 4,100 by June 30. As of Sept. 30, the company had 4,989 full-time employees, 87% more than when it went public.

"We definitely continue to experience the giant sucking sound that is Google," says Joe Kraus, chief executive of start-up JotSpot Inc. and a former executive at onetime Internet darling Excite Inc. He says he has recently battled Google for technology talent.

Google executives say their efforts to snare top programmers, engineers and other technology experts are not unique. "We're working hard to get [talent], but other companies across Silicon Valley are doing that as well," says Arnnon Geshuri, Google's staffing director.

Indeed, competition for high-tech employees appears to be rising across the board as demand for high-tech products has recovered. The number of job postings on Dice.com, a tech-employment site, more than doubled to 77,600 since October 2003. Average salaries for tech consultants are up 6.2% in the first six months of 2005 to $87,100, the company estimates.

Microsoft acknowledges trying to hire some employees from Google and snagged the head of Yahoo Inc.'s research labs earlier this year. Yahoo has aggressively beefed up its research staff with high-profile hires from Amazon.com Inc. and International Business Machines Corp., among others.

LEGAL BATTLE


• Judge Orders Staying of Google Suit Against Microsoft3
10/28/05

Google hired away Microsoft's Mr. Lee in July by offering the speech-recognition expert a pay package valued at some $10 million over four years, according to documents in a court case over the matter. Microsoft Chief Executive Steve Ballmer tried to hold on to Mr. Lee by offering him a new job and higher pay, according to Mr. Lee's sworn declarations in the case. When Mr. Lee said he planned to leave anyway, Chairman Bill Gates told him to expect a lawsuit. "We need to do this to stop Google," said Mr. Gates, according to the declarations.

The result is a legal battle reminiscent of the recruiting wars of the late 1990s. Microsoft filed suit against Mr. Lee and Google in July in Washington State Superior Court in King County, alleging that Mr. Lee violated a noncompete agreement when he defected to Google. Google and Mr. Lee have disputed the claim. The case is scheduled for trial in January.

Grueling Process

Google's typical hiring process is regarded as one of the industry's most grueling and extensive. Candidates are often subjected to weeks of interviews, with hiring decisions often made by large committees of executives.

"Google is super active and they're one of the most visible companies" on campus, says Jitendra Malik, a computer-science professor at the University of California at Berkeley. Google held 179 interviews with UC Berkeley's electrical-engineering and computer-science students this fall, up from just 10 job interviews in the same period a year ago, says the university. UC Berkeley says demand from other tech companies hasn't increased as much over the past year.

Google's Mr. Eustace maintains that the salaries it offers for top talent are generally on par with its competitors, or slightly lower. But the offers are often accompanied by hefty grants of restricted stock known as "Google Stock Units." [Pay them more and they will come.].Unlike stock options, which can become worthless if a stock falls below a certain price, restricted stock usually retains value. If employees stay long enough for shares to vest, they receive actual Google shares.


Google began offering restricted stock to all new hires earlier this year. In a recent regulatory filing, it said it had 498,000 such shares outstanding, with a current total market value of around $200 million. According to some Google rivals, if Google discovers that a top job candidate has competing offers, it sometimes doubles its restricted stock offer. Mr. Eustace says Google has engaged in heated competition in only "a tiny fraction" of recruiting situations and generally makes offers in the same range as rival tech companies.

To compete against its larger rivals, Google beefed up its recruiting effort, retaining veterans like Shally Steckerl, a contract recruiter who runs a consulting firm called JobMachine, and Eric Jaquith, a free-lance recruiter who runs Recruiting Choices. Both began working as in-house consultants for Google in September 2004, when the company had more than 80 full-time and contract recruiters in-house, says Mr. Jaquith.

Messrs. Steckerl and Jaquith say they were instructed to diversify Google's engineering pool by hiring more female engineers. They called their team "Zion," after the underground city of humans in "The Matrix" movies. Mr. Jaquith says he was assigned to track down all women from the top 50 universities world-wide who had graduated after 1980 with Ph.D.s or master's degrees in physics, math or computer science. By last December, the end of his stint at Google, he had made thousands of phone calls to female engineers, he says.

Jim Stroud, a contract recruiter involved in the effort between December 2004 and June, says he unearthed several hundred names of female engineers. He estimates that fewer than 10 of those were hired during his tenure. Google's job-interview process is "like a Senate committee hearing," says Mr. Stroud. "You have to get approved by 14 people at least before you get hired."

Mr. Steckerl says the Zion group hired more than 45 engineers during the last quarter of 2004, and increased the total to more than 100 in the first quarter of 2005. Google declines to comment on Messrs. Steckerl, Stroud and Jaquith or the percentage of engineers who are female. Google says it doesn't have 300 recruiters, but declined to elaborate.

'They Went After Us'

Other tech companies have made runs at Google employees. Mr. Steckerl says Microsoft approached him earlier this year. In April, he joined Microsoft as a full-time employee. Within weeks, he says, Microsoft had hired away three other Google contract recruiters from the Zion team, including Mr. Stroud. "They knew who they wanted and they went after us," says Mr. Steckerl.

Abilio Gonzales, Microsoft's general manager of staffing, says the software maker has stepped up recruiting in the past year, telling prospective hires that it works on a wider array of technologies than Google. He says Microsoft's staffing department has grown to 355, up 15% from a year ago.

Yahoo has also expanded its recruiting team. Its executive committee discussed Google's hiring push at meetings earlier this year, says Usama Fayyad, Yahoo's chief data officer. "We believe the [compensation] levels they are willing to go to are unreasonable," says Mr. Fayyad. "It has gotten nuts over the last six months."

Nevertheless, Prabhakar Raghavan, Yahoo's head of research, contends Yahoo has won a majority of the head-to-head hiring battles against Google that he has been involved with. But he says it may become harder to compete if Google continues with what he contends are inflated compensation packages. Earlier this year, he says, Google offered one job candidate much more money than Yahoo was willing to pay. When the engineer decided to join Yahoo anyway, Google doubled the amount of stock it was offering, to no avail, he says.

Mr. Raghavan, who says he was wooed by Google and Microsoft before joining Yahoo in July, argues that such "irrational" offers are bad for the tech industry because they distort compensation expectations and sow resentment among lower-paid employees.

Allan Brown, Google's director of recognition and human-resources systems, disputes that the company is bidding too aggressively for talent. He estimates that Google wins only about half of its hiring showdowns with Yahoo. He says Yahoo also engages in bidding wars, and that Google would consider doubling a restricted stock offer only if there was a strong argument for doing so. Mr. Eustace adds that Google sometimes offers compensation of up to about 15% more than other tech companies, but generally stays within the same range as its rivals.

EBay spokesman Hani Durzy says the San Jose, Calif., Internet auctioneer has lost 10 to 20 technologists to Google since the start of the year. But Mr. Durzy says eBay hired 1,300 people during that period, including 800 technologists.

Google may need to assemble an engineering brain trust to hedge against a potential talent drain. With its stock closing yesterday at $416.47 a share, many of its earliest employees have become multimillionaires. At other successful tech companies such as Microsoft, some wealthy veterans have retired young. Earlier this year, a Google vice president of engineering, Wayne Rosing, retired to pursue his passion for astronomy. Google says there is no mass exodus and that its annualized attrition rate is in the low single-digits, below average for a tech firm.

The industry is watching closely the legal dispute over Google's hiring of Mr. Lee from Microsoft, which sheds light on how Google courts top talent. In an email disclosed in the litigation, Mr. Eustace wrote that he "pursued [Mr. Lee] very hard because he has incredible hiring ability," which might help "shake a few more people loose."

Google Vice President Jonathan Rosenberg wrote in an email to colleagues: "I all but insist that we pull out all the stops and close him like wolves."

Engineering a shortage
Jan 6th 2005
From The Economist

POLITICIANS and businessmen are worried by Britain's shortage of scientists. Industry regularly bemoans the dearth of technically minded employees. Science was a big theme in the chancellor's pre-budget report last month. And it is a favourite subject for Lord Sainsbury, the minister responsible.

But the market demurs. According to a report from UK GRAD, a government-funded group, science and engineering graduates have the highest rate of unemployment, at every level from first degree (see chart) to PhD. And although, when they do find work, their salaries are slightly higher than average, they are rising more slowly than most. The average Briton got a 3.2% wage hike last year, but scientists and engineers had to make do with 2.4%. “It's very difficult to show that there's a shortage from the data,” says Nick Jagger of the Institute for Employment Studies.

What's going on? For engineers, the problem is too much learning. Graduates are plentiful; it is technicians that are in short supply. “We need about 10,000 apprentices a year, but we're only getting 6,000,” says a spokesman for the Engineering Employers' Federation. Pay data backs this up: according to the Engineering Technology Board, salaries for technicians have risen by 15.2% since 2000, compared with 9.5% for chartered engineers.

But the government's determination to push more teenagers through university means that youngsters that might otherwise have left school at 16 and got a vocational qualification are being persuaded to study for degrees instead. Universities are encouraged to offer less rigorous courses, because they are paid according to the number of students they attract and keep.

The result is not too few good-quality graduates but too many poorly-trained ones. Financial services firms in the City offer big salaries to the brightest, which suggests that Britain has more need of good-quality accountants and derivatives traders than engineering graduates. The large engineering groups cherry-pick the best of the rest, leaving a rump of mediocre, expensively-educated graduates who often end up in jobs that technicians could do just as well.

Scientists' problems are different: rather than too much learning, many of them have the wrong sort. Richard Smith of the Science, Engineering and Manufacturing Technologies Alliance, an employers' organisation, complains that there are too many graduates with degrees in subjects that are popular with students but not with employers. Forensic science is one example. Police dramas have made it a popular undergraduate degree, meaning that universities increasingly offer it at the expense of more rigorous courses like chemistry. There were no forensic science courses offered in Britain in 1990; now there are more than 50. The result is a glut: Mr Smith reckons that there are about 2,000 forensic science students graduating every year, but only 100 jobs for them to fill—and these usually require a post-graduate qualification, not just a first degree.

Government policy plays a part here, too: chemistry and physics are expensive to teach compared with watered-down degrees like forensic science, and the universities get the same amount of money either way. But universities will make money only if they offer courses that are popular with students, who seem content to ignore what the market is telling them. That may be the result of state-funded higher education. If students had to pay the full cost of their courses, then employment prospects might loom larger in their minds when deciding what to study.

U.S. Manufacturers Report
Shortages Are Widespread;
Critics Cite Training Cuts
By TIMOTHY AEPPEL
Staff Reporter of THE WALL STREET JOURNAL
November 22, 2005; Page A2

Difficulty in finding enough skilled workers is hampering the ability of many U.S. manufacturers to serve their customers.

Eighty-one percent say they face "moderate" or "severe" shortages of qualified workers, according to a survey by the National Association of Manufacturers and Deloitte Consulting LLP. More than half of manufacturers surveyed said 10% or more of their positions are empty for lack of the right candidates.

The shortfall is especially acute in skilled trades, for positions such as welders and specialized machinists. Gaps on the factory floor can make it harder for manufacturers to move quickly to exploit new market opportunities and could hasten the exodus of jobs as more employers hunt for skilled workers outside the U.S.

The survey was last conducted in 2001, using somewhat different questions. The earlier study found about the same percentage of companies surveyed reported difficulty finding qualified workers. But Jerry Jasinowski, president of the Manufacturing Institute, NAM's research arm, says advancing technology used by manufacturers to remain competitive in global markets is raising the level of skills demanded, both among those newly hired as well as within a company's existing work force.

The recent survey found 50% of those surveyed said they were spending more on training than they did three years ago, slightly less than the 51.8% who answered that way in 2001.

Some critics say manufacturers have brought the problem upon themselves by cutting back on training programs and shifting work away from unionized locations. Unions have traditionally played a key role training industrial workers.

Michael Handel, an associate professor of sociology at Northeastern University in Boston who has studied the availability of skilled workers, says companies often blur the distinction between hard skills, such as welding, and broader work habits. "Employers complain about a lack of skills, but when you scratch deeper, it's really an attitudinal issue," he says. "It's about how fast people will work or for how low a price."

The recent survey, based on responses from 815 U.S. companies of varying sizes, found that companies see the biggest shortfall in skilled production workers. Eighty percent of respondents expect those workers to be in short supply over the next three years, while 35% expect a shortage of scientists and engineers. More surprising, 25% said they expect a shortage of unskilled workers over the next three years.

Three-quarters said they spend the equivalent of less than 3% of their payroll on training; 22% spend less than 1%. Among the study's recommendations is that companies spend at least 3% of payroll on training.

Ronald Bullock, president of Bison Gear & Engineering Corp. in St. Charles, Ill., currently has 10 openings at his company, which employs 200, including one for an electrical engineer he has been trying to fill for more than a year. Not having enough workers hurts profits, says Mr. Bullock, because it means paying more overtime to his existing employees to get projects done or farming the extra work out to others. "This has slowed the pace on some of our crucial projects," he says.

Behind 'Shortage' of Engineers:
Employers Grow More Choosy
Job Hunters Face Long Lists
Of Requirements as Web
Brings Flood of Résumés
Two Hires From 158 Applicants
By SHARON BEGLEY
Staff Reporter of THE WALL STREET JOURNAL
November 16, 2005; Page A1

Many companies say they're facing an increasingly severe shortage of engineers. It's so bad, some executives say, that Congress must act to boost funding for engineering education.

Yet unemployed engineers say there's actually a big surplus. "No one I know who has looked at the data with an open mind has been able to find any sign of a current shortage," says demographer Michael Teitelbaum of the Alfred P. Sloan Foundation.

What's really going on? Consider the case of recruiter Rich Carver. In February, he got a call from the U.S. unit of JSP Corp., a Tokyo plastic-foam maker. The company was looking for an engineer with manufacturing experience to serve as a shift supervisor at its Butler, Pa., plant, which makes automobile-bumper parts.

Within two weeks, Mr. Carver and a colleague at the Hudson Highland Group had collected more than 200 résumés. They immediately eliminated just over 100 people who didn't have the required bachelor of science degree, even though many had the kind of job experience the company wanted. A further 65 or so then fell out of the running. Some were deemed overqualified. Others lacked experience with the proper manufacturing software. JSP brought in a half-dozen candidates for an interview, and by August the company had its woman.
[Expanding Supply]

To JSP, taking six months to fill the position confirmed its sense that competition for top engineers is intense. Company officials "struggle to fill" openings, says human-resources manager Vicki Senko.

But for candidates facing 200-to-1 odds of getting the job, the struggle seems all on their side. "Companies are looking for a five-pound butterfly. Not finding them doesn't mean there's a shortage of butterflies," says Richard Tax, president of the American Engineering Association, which campaigns to prevent losses of engineering jobs.

Amid rapidly changing technology, the engineers employers want aren't necessarily the engineers who are available. And companies often create the very shortages they decry by insisting on applicants who meet every item on a detailed list of qualifications. With the Internet adding to the pile of résumés, company officials say a certain degree of mechanical weeding-out is unavoidable.

The dueling perceptions of engineer shortages lie behind some big policy debates in Washington, fueling emotional clashes over immigration policy and the future of well-paying jobs in America.

Under the H-1B temporary work visa program, U.S. employers are permitted to hire foreign nationals with knowledge and skills deemed to be in short supply. The visas are valid for up to six years and are currently capped at 65,000 per year. Business groups, led by the Electronic Industries Alliance, argue that they need the foreigners because they can't find enough skilled U.S. engineers and technical workers. American engineers, particularly those who are unemployed, complain that the H-1Bs take away their jobs.

At a forum on innovation and education held at the Library of Congress last April, Microsoft Corp. Chairman Bill Gates said, "There just aren't as many graduates with a computer-science background. [That] creates a dilemma for us, in terms of how we get our work done." Last year the National Science Board, part of the National Science Foundation, warned that the U.S. faces "an emerging and critical problem of the science and engineering labor force."

In fact, the number of students graduating with a bachelor of science degree in computer science rose 85% from 1998 to 2004, according to figures compiled from universities by the Computing Research Association. The number of bachelor degrees in engineering rose to 72,893 in 2004 from 61,553 in 1999, according to the American Society for Engineering Education.

Unemployment among engineers was 2.5% in 2004, in line with the 2.8% rate for all professional occupations. In 2003, 4.3% of engineers were unemployed compared with 3.2% for all professionals. The figures don't include people who gave up looking for work in their profession. From 2000 to 2003 engineering employment fell 8.7%, according to an analysis of Bureau of Labor Statistics data by the Center for Labor Market Studies at Northeastern University in Boston.

Despite the numbers, employers say they struggle to find the right person for openings. Earlier this year, Raytheon Co., Waltham, Mass., needed to find some systems engineers. Raytheon received 158 résumés. It eliminated 40 in the first pass because the applicants would not be able to get a security clearance, says senior vice president Keith Peden. Raytheon ruled out 90 more because the applicants lacked experience in the specific kinds of technology or markets the job required. That left 28. Ten dropped out because they would not relocate or had insufficient technical experience. Raytheon interviewed the remaining 18 in person, made three offers and hired two.

"What used to take two and a half to three months now takes five," says Mr. Peden. Raytheon's chief executive, William Swanson, says: "As a company, we are meeting our hiring needs. My concern is that the degree of difficulty in meeting those needs has gone up exponentially."

Some elite companies have an even higher applicants-to-jobs ratio. Microsoft received résumés from about 100,000 graduating students last year, screened 15,000 of them, interviewed 3,500 and hired 1,000, says a spokesman. The software maker receives about 60,000 résumés of every kind monthly, and currently has 2,000 openings for software-development jobs.

Filling Niches

Sandia National Laboratories, Albuquerque, N.M., hires only people with a master's degree or doctorate for positions in electrical, mechanical and computer engineering. They all need security clearances, says Kate Rivera, manager of staffing, recruiting and relocation. "We are seeing a good supply of engineers and are able to fill our positions," she says, "though filling niche positions can be harder."

Microsoft, too, hires almost exclusively Ph.D.s for its top research positions, says Rick Rashid, senior vice president of Microsoft Research. "We struggle to fill positions for our most technical jobs, though last year and this the supply of Ph.D.s has been fantastic" because of the hangover from the dot-com and telecom busts, he says.

Linda Olin-Weiss, director of staffing services at Lockheed Martin Corp., says there are "pockets of niche skills where it takes longer to get that talent." Lockheed competes with Boeing Co. and other aerospace firms for the best load engineers and optical engineers, she says, "but our programs are fully staffed today and we're able to fill our engineering positions."

Companies often draw up extremely narrow job descriptions, recruiters and staffing managers say, causing searches to get drawn out. One cause: the rise of online job sites, which makes it hard for company executives to personally review every candidate. To screen out the hundreds or thousands of résumés that pour in to a posting on Monster.com or Yahoo HotJobs, companies use software filters to look for keywords. In engineering, those keywords typically describe machinery or computer fields in which expertise is sought, such as C+++, server/stepper and CAE schematic.

Exact Combination
[Mike Sylvester]

Hiring managers often prefer to wait for the candidate who has the exact combination of attributes they seek, rather than immediately hiring someone who comes close and then giving that person time to get familiar with a new machine or software program.

Last April, Mike Sylvester got a call from Wabtec Corp., Wilmerding, Pa., which builds components for locomotives, freight cars, subway cars and buses. Wabtec needed a mechanical engineer to work on locomotive design. Mr. Sylvester, vice president of operations at AllTek Staffing & Resource Group in Pittsburgh, used his internal database as well as Monster.com to find candidates, and in two days had more than 40 résumés.

He eliminated most of them quickly because they lacked a bachelor of science degree or work experience in the right field. He called five, asking them for references, and passed three on to Wabtec. Then came the deal-breaker. Wabtec would only consider candidates who had experience with Pro/Engineer Wildfire, a new 3-D computer-aided design software package, not an earlier package called 2000i.

"The basic difference between Wildfire and 2000i is not that significant," says Mr. Sylvester. "I say smart people can learn sister applications, but there is reluctance among hiring managers to see that. If they use a SAP database system, they won't even look at someone with experience with a PeopleSoft system. There is a major fear of having to bring someone up a learning curve. They want them to hit the ground running."

Wabtec's vice president for human resources, Scott Wahlstrom, says the company's demands are usually less specific and it is willing to train new hires. But he says "it happens sometimes that you get in a jam, where someone left and we have a very specific search. Those are costly and time-consuming."

The detailed demands aren't confined to software jobs. Mr. Sylvester was asked to find a mechanical engineer to oversee a heating, ventilation and air-conditioning system at a hospital. "A pump is a pump and a duct is a duct, but they wouldn't even look at candidates who had HVAC experience in a mill instead of a hospital," he says.

At JSP, the plastic-foam company, Ms. Senko in human resources says it took six months to fill a process-engineer opening last year. "The hiring manager was looking for very specific technical skills and experience in plastics and injection molding," she says. "We finally persuaded him to expand the scope of the required experience."

James Murphy, 60 years old, of North Hills, Calif., sees the phenomenon from the other side. He holds a master's degree in mechanical engineering and worked for major aerospace companies doing dynamic load analysis -- figuring out what forces would cause an aircraft to break. Later he worked at Continental Airlines using computer algorithms to optimize flight scheduling. Laid off in 2001 from his position doing computerized inventory for a music wholesaler, he estimates he has sent out 10 résumés a week. He has had two job interviews in the past year, both with aircraft manufacturers. Neither led to an offer.

"There is now a string of requirements for an engineering job," says Mr. Murphy. "Years ago there would be one major requirement, with x, y and z nice to have. The worst thing about this emotionally is reading about the 'shortage' of engineers."

Pradeep Khosla, dean of engineering at Carnegie Mellon University in Pittsburgh, says that for older engineers, "there is a problem of technology moving at a very fast rate. When engineers are without jobs, it is usually because they have not kept up." Mr. Sylvester, the recruiter, puts it more bluntly: "A guy who's been working on a 15-year-old application is a dinosaur."

"Getting engineers who have the type of talent you need, quickly -- a great background, very well-educated, mobile -- has become more important over the last few years," says Jane Leipold, vice president for human resources at Tyco Electronics, Harrisburg, Pa., a unit of Tyco International Ltd. "The demands are different. The advances in technology mean you need very specific talents."

One employer demand that flummoxes many engineers is the need for "soft" skills -- working in groups, communicating and writing. In August, Cornell University hired a speaker to instruct its engineering students in "etiquette and interpersonal skills." (Hints: Don't crumble crackers into your soup or blot your underarms with the dinner napkin.)

"During the dot-com boom demand for electrical and computer engineers was so great it was enough if you could just write code," says Prof. Khosla. "Things have changed a lot."

Roller-Coaster Ride

The dot-com era is only one of many cases over the years when demand for engineers rode a roller coaster. During the Reagan military buildup in the 1980s, aerospace and the defense industry were hot. Then the Cold War ended.

Many executives who contend there's an engineer shortage today predict it will get worse over the next decade as baby boomers begin to retire. This summer a report from a business consortium called for doubling the number of science and engineering graduates by 2015 to fill a projected gap. But crystal balls about labor markets tend to be cloudy. In the mid-1980s, the National Science Foundation predicted "looming shortfalls" of some 675,000 scientists and engineers in the following two decades. They never materialized.

"Every few years there is a spurt of panic that we won't have enough engineers in five years," says Paul Kostek, a systems engineer in Seattle who recently got a job at Boeing after working as a consultant for a decade. "And I say to myself, gee, I'll still be here."