STEM shortages

By Eric Crampton 03/05/2013

The American econo-blogosphere has been wondering whether there really is any shortage of workers in Science, Technology, Engineering and Maths. Dan Kuehn and coauthors at the Economic Policy Institute suggest that the absence of particular wage inflation for graduates in STEM disciplines means there are no particular shortages of STEM workers relative to other workers; Tyler Cowen notes that this may be evidence of a shortage of complementary inputs for those workers. Kuehn agrees, but notes that policy then should be targeting those complementary inputs rather than boosting STEM numbers.

The American policy debate differs from the Kiwi one. There, they’re talking about increased immigration for STEM workers via H1-B visas; EPI doesn’t think they’re needed. Here, we’re wondering how much emphasis the tertiary education system should put on STEM disciplines relative to the others.

I’ve done a bit of digging around in NZ Stat; unfortunately, the publicly available data doesn’t seem sufficiently disaggregated to say much about relative shortages. Median weekly income for all occupations went up by 6.7% from 2009 to 2012. Professionals’ incomes increased by 9.4%; technicians and trade workers’ income went up 4.9%; community and personal service workers’ median weekly income went up 12.7%; managers’ median weekly income went up 14.4%. By broad category, there doesn’t seem to be much evidence of the kinds of salary ramp-ups that would be consistent with strong shortages in STEM disciplines. If anything, skilled managers seem to be in shorter relative supply. It could be that the technicians category is too broad and is missing out on very large increases in science technician salaries; maybe the ‘scientist’ category is a high-wage-growth lump within the broader professional category. The ANZSIC classifications are sufficiently finely grained, but I’d have to make the data request.

But suppose that we found STEM shortages here evidenced by large salary discrepancies. While salary ramp-ups can be evidence that we need to make it easier to import skilled workers, they’re not really sufficient basis for increased government spending on STEM training. We’d rather expect that higher salaries would draw capable students into STEM subjects and away from disciplines with worse employment prospects. If there were binding constraints built into the funding system, like caps on the maximum number of students who could be funded to pursue those disciplines, then those caps could be revisited. But instead it seems the government wants to pour more money per student into STEM training. Where the gains from STEM training are internalised in higher wages, I’m not sure that’s such a great play.

The best case for encouraging STEM workers over others is if those disciplines generate greater social benefits relative to the worker’s wages;* maybe you could make some productivity spillover case for it. But even in that case, we ought to be intervening where the intervention can have best effect. If tech workers require a lot of complementary inputs and are mobile, does it make more sense to highly subsidise STEM disciplines in our universities and hope that the New Zealand labour market finds use for them, or to subsidise the wages of qualified STEM workers, or to subsidise the outputs that the government thinks actually generate whatever positive externalities they think come from technological innovation? If our workers are mobile and if there are agglomeration effects in play, then other countries will always be able to outbid us for STEM workers graduating here; I’m less than convinced that large funding boosts for STEM disciplines are the best way of achieving whatever the government’s trying to achieve. If it wants more scientific research, funding lab outputs directly or establishing prizes for great new innovations bids up the wages of STEM workers most likely to produce those innovations and also brings in the complementary investments.

If the story is asymmetric information about job prospects and salaries post-University leading to inefficient student choices among disciplines, that seems already adequately addressed by government initiatives to highlight employment prospects for various degrees.

* The alternative case would work as follows. Government wants to maximise its total net tax take. If it thinks that young peoples’ time preferences are too high relative to the government’s time preferences, or even just if it discounts non-wage elements in students’ utility functions, it might want to push people onto lower-welfare-but-higher-lifetime-earnings paths. That’s more an Olson despot, NZ Inc. model. If government were maximising a broader social welfare function, it would put more weight on the externality case and look for areas where social benefits are high, wages are low, out-migration is unlikely, and where increased provision can be more efficiently ensured with training rather than wage/output subsidies. Another alternative case: it’s a second-best solution when they’re constrained to provide student loans at zero percent no matter what discipline the student chooses while repayments are keyed to income.

0 Responses to “STEM shortages”

  • I am begining to think that there are simply not enough jobs for all the people who want to work. We should be thinking of a new model where people are employed to do useful and enjoyable work for a modest income. It should be better than paying people to stay at home and feel guilty and neglected.

    • Oh, there’s plenty of work that needs to be done.

      But agree on one big-picture bit: unemployment makes people miserable. Policies that hurt employment while raising income among those employed can do rather more harm than good.

  • While STEM workers (I’m an engineer, so that’s my focus) are typically paid less than comparable professional positions, I don’t think that’s the reason for the shortage. Rather it’s the perception of “intellectuals” that keeps people away from STEM directions, particularly maths. No-one seems quite sure how to combat this.

  • I agree that there’s a generalised anti-nerd Kiwi bias and that we’d be better off were that gone. But if engineers are paid less than comparable professional positions, that’s hardly evidence of a shortage!

  • Regarding the “not enough jobs for those that want them”: as the population grows (unfortunate but inevitable) and our production efficiency increases (ie. less people are required to produce more stuff), we might have to start “time-sharing” employment; instead of 1 job, 1 person, 40 hours/week/person; we have 1 job, 2 people, 20 hours/week/person. Lots of other things will require an economic “shift” to make it work, but half a job is better than no job.

  • Shadowmind,

    Are engineers treated as “intellectuals” though by the wider community?
    I thought most people considered the work of engineers to be far more useful/easy to understand than scientists, so they are less likely to be considered intellectuals?
    (This is not to say that engineering is less intellectual (far from it), just that the perception that engineers do “useful” stuff helps them avoid the “intellectual” or “geek” labeling???

  • According to a 2008 survey (
    most scientists and technologists choose their career based on curiosity and the desire to make the world a better place, not on the amount of money they will earn (so long as the pay isn’t too ridiculously low anyway).
    I tihnk STEM workers tend to be one group that, as a whole, are more likely to be motivated by intrinsic, rather than extrinsic rewards (and thank goodness for that otherwise the whole sector would collapse!)

  • Many scientists require expensive toys ( some CRI FTE charges are above $250K pa, but annual salaries can be below $70K ).
    So employers can now hire skills as the need arises ( when promised funding starts ), rather than offering fulltime continual employment.

    Funders are still allowing providers to define short term research objectives where they can easily source cheap fixed-term scientists from offshore.

    Interesting jobs or workplaces still attract lots of applicants, many from offshore. Research providers now like to purchase skills as cheaply as possible and with minimal longer-term obligations, consequently older specialist researchers can be disadvantaged, as has happened in the USA for industrial chemists over the last few years.

    It’s hard for physical science and medical researchers to compete for any research against deep-pocketed providers such as Universities ( students ) and CRIs ( fixed term postdocs ). As the recent science challenges fiasco shows, uniquely NZ problems that would build on local researcher skills are not favoured by funders or larger providers. Offering incentives for innovation will only help the institutions, rather than the researchers, who will still be low cost disposable consumables.

    If we don’t value NZ researcher experience and knowledge appropriately, then NZ providers will keep inventing cancer cures, energy solutions, etc. that provide continual revenue for providers, but minimal breakthroughs.