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A Report by a Panel of the
NATIONAL ACADEMY OF PUBLIC ADMINISTRATION
for the U.S. Congress and the Bureau of Economic Analysis
OFF-SHORING:
What Are Its Effects?
January 2007
A Report of the Panel of the
NATIONAL ACADEMY OF
PUBLIC ADMINISTRATION
For the U.S. Congress and the Bureau of Economic Analysis
January 2007
OFF-SHORING:
WHAT ARE ITS EFFECTS?
Panel
Janet L. Norwood, Panel Chair*
Carol Carson
Manuel Deese*
Norman J. Johnson*
Franklin S. Reeder*
John E. Rolph
* Academy Fellow
Officers of the Academy
Valerie A. Lemmie, Chair of the Board
Jonathan D. Breul, Vice Chair
Howard M. Messner, President
J. Christopher Mihm, Secretary
Franklin S. Reeder, Treasurer
Project Staff
J. William Gadsby,∗ Vice President, Academy Studies
Terry F. Buss, PhD, Program Area Director
Kenneth F. Ryder Jr., Project Director
Harry G. Meyers, PhD, Senior Advisor
Gwyneth H. Caverly, Senior Research Analyst
Jennifer Blevins, Senior Research Analyst
Noel A. Popwell, Senior Research Associate
Martha S. Ditmeyer, Senior Administrative Specialist
_____________________________________________________________________________
The views expressed in this report are those of the Panel. They do not necessarily reflect the
views of the Academy as an institution.
National Academy of Public Administration
1100 New York Avenue, N.W.
Suite 1090 East
Washington, D.C. 20005
www.napawash.org
First published January 2007
Printed in the United States of America
ISBN 1-57744-123-0
Academy Project Number: 2051-000

Academy Fellow
ii
FOREWORD
Shifting business operations to off-shore locations and its impact on America’s workforce and
economy are central features in the policy debate over globalization. Especially important is the
impact on the nation’s high technology—services—industries, especially high-skilled workers.
Off-Shoring: What Are Its Effects? is the third of three Academy Panel reports providing a
comprehensive review of services off-shoring. This report answers four critical questions that
frame some of the debate about services off-shoring:
• What is the effect of services off-shoring on the science and engineering labor market?
• How do temporary high-skilled foreign workers affect services off-shoring?
• Are U.S. universities keeping pace with the demand for science and engineering workers?
Are American students not choosing these careers?
• What are the effects of foreign direct investment on U.S. employment?
The House Appropriations Subcommittee on Commerce, Justice, Science and Related Agencies
mandated this study in response to growing concerns about the loss of American jobs overseas.
Congress asked the Academy to gather the facts about off-shoring and make recommendations to
address issues raised.
I want to thank Panel Chair Janet Norwood for her leadership and the other Panel members,
Carol Carson, Manuel Deese, Norman Johnson, Franklin Reeder and John Rolph, who
contributed substantially to the project. I also commend the project staff for their sophisticated
research and thoughtful analysis in support of the Panel’s findings and recommendations.
Finally, I would like to express my appreciation to Congress, especially former Chairman Frank
Wolf, for supporting this research; the staff and management of the Bureau of Economic
Analysis and Bureau of Labor Statistics without whose cooperation and support this project
could not have been undertaken; and the dozens of researchers, experts, program managers and
policy makers who shared their knowledge and insights.
We hope that the findings and recommendations in this study help shape the off-shoring debate.
Howard M. Messner
President
iii
iv
ACRONYMS
Academy National Academy of Public Administration
BA Bachelor of Arts
BEA Bureau of Economic Analysis
BLS Bureau of Labor Statistics
CIPSEA Confidential Information Protection and Statistical Efficiency Act
CPST Commission on Professionals in Science and Technology
DHS Department of Homeland Security
DOS Department of State
EIN Employer Identification Number
EPO European Patent Office
ETA Employment and Training Administration
FDIUS Foreign Direct Investment in the United States
FY Fiscal Year
GAO Government Accountability Office
GDP Gross Domestic Product
ICT Information and Communication Technology
INS Immigration and Naturalization Service
JPO Japanese Patent Office
MBA Masters of Business Administration
MGI McKinsey Global Institute
MNC Multi-national Corporation
MOU Memorandum of Understanding
NAICS North American Industrial Classification System
NBER National Bureau of Economic Research
NSF National Science Foundation
OECD Organization for Economic Cooperation and Development
OES Occupational Employment Statistics
PCAST President’s Council of Advisors on Science and Technology
QCEW Quarterly Census of Employment and Wages
R&D Research and Development
RDT Research, Development and Testing
S&E Science and Engineering
SOC Standard Occupation Classification
STEM Scientific, Technical, Engineering and Mathematics
USDIA United States Direct Investment Abroad
USPTO United States Patent and Trademark Office
WIPO World Intellectual Property Organization
Y2K Year 2000
v
vi
TABLE OF CONTENTS
FOREWORD................................................................................................................................ iii
ACRONYMS ................................................................................................................................. v
EXECUTIVE SUMMARY .......................................................................................................xiii
Overall Observations .............................................................................................................xiii
S&E Labor Market, Globalization and Services Off-Shoring ............................................... xiv
The Role of Temporary, High-Skilled, Foreign Workers...................................................... xvi
Off-Shoring, Globalization and S&E Higher Education ...................................................... xvii
The Economic Effects of In-Shoring ...................................................................................xviii
CHAPTER ONE: INTRODUCTION ........................................................................................ 1
Services Off-Shoring—One Component of Globalization ....................................................... 1
Defining Globalization........................................................................................................ 2
Implications of Globalization ............................................................................................. 2
Services Off-Shoring and Globalization............................................................................. 3
Major Potential Impacts of Services Off-Shoring .................................................................... 3
S&E Labor Markets and Services Off-Shoring .................................................................. 4
Role of Temporary Foreign Workers.................................................................................. 4
Off-Shoring, Career Choices and University Production of S&E Workers ....................... 5
Economic Effects of “In-Shoring”...................................................................................... 5
CHAPTER TWO: WHAT IS THE EFFECT OF SERVICES OFF-SHORING ON THE
S&E LABOR MARKET? ................................................................................................ 7
Trends in and Composition of the S&E Labor Market............................................................. 8
Defining the S&E Labor Market......................................................................................... 8
Recent Challenges Confronting the S&E Labor Market .................................................... 9
S&E Labor Market Trends and Performance ................................................................... 11
Increased Globalization and Competitiveness in S&E ........................................................... 17
Intellectual Property Indicators for Foreign Countries Growing Faster than U.S. ........... 17
U.S. Share of Journal Article Production/Citations Is Declining ..................................... 19
Federal Dominant Share of R&D Spending is Diminishing............................................. 20
Foreign R&D Spending is Increasing ............................................................................... 22
vii
Implications of a More Globalized S&E Labor Market ......................................................... 25
Increased Competitive Pressures from Global S&E Labor Market.................................. 25
Ability to Attract and Retain Foreign Talent in S&E ....................................................... 26
Increased Opportunities for Services Off-Shoring ........................................................... 27
More Rapid Changes from Multiple Competitors ............................................................ 27
Findings and Recommendations ............................................................................................. 28
CHAPTER THREE: WHAT IS THE EFFECT OF TEMPORARY FOREIGN
WORKERS ON SERVICES OFF-SHORING? .......................................................... 31
The H-1B and L-1 Visa Programs .......................................................................................... 32
Current Data Systems for Temporary Foreign Workers......................................................... 34
Impact of Temporary Foreign Workers on S&E Labor Market ............................................. 35
H-1B and L-1 Visa Admittances....................................................................................... 36
New Visas Issued.............................................................................................................. 37
Petitions Approved............................................................................................................ 38
Wages Paid Temporary Foreign Workers......................................................................... 47
Conclusions............................................................................................................................. 51
Recommendation .................................................................................................................... 52
CHAPTER FOUR: ARE U.S. UNIVERSITIES KEEPING PACE WITH THE
DEMAND FOR S&E WORKERS? .............................................................................. 53
S&E Degree Production in the U.S......................................................................................... 54
Enrollment in S&E Undergraduate Degrees Has Remained Constant ............................. 55
Enrollment in Graduate S&E Degrees Has Increased ...................................................... 56
Enrollment in Doctoral S&E Degrees Has Increased ....................................................... 60
S&E Postdoctoral Opportunities Have Increased ............................................................. 61
Foreign Student Issues ............................................................................................................ 62
Student Visa Problems Have Decreased........................................................................... 62
U.S. Remains the Place of Choice for Foreign S&E Students after Graduation .............. 64
Conditions in Home Countries.......................................................................................... 65
Foreign S&E Degree Production ............................................................................................ 66
Foreign Universities Are Producing an Increasingly Larger Share of S&E Students ...... 67
Qualitative Differences Among U.S. and Foreign S&E Workers .......................................... 68
U.S. Universities Remain Highly Competitive................................................................. 68
viii
Demand for S&E Labor in Foreign Countries is Increasing............................................. 70
Comparative American Student Performance .................................................................. 70
U.S. Student Career Choices................................................................................................... 71
Foreign Students and Crowding Out................................................................................. 71
Time to Degree Award Has Increased .............................................................................. 72
Funding Support Affects Higher Education Choices........................................................ 73
Compensation for S&E Students Appears Competitive ................................................... 74
Federal R&D Funding for Basic Research Has Been Stagnant........................................ 77
Conclusions............................................................................................................................. 79
Recommendations................................................................................................................... 80
CHAPTER FIVE: WHAT ARE THE EFFECTS OF FOREIGN
DIRECT INVESTMENT ON U.S. EMPLOYMENT? ............................................... 81
Defining In-shoring and its Principal Economic Effects ........................................................ 82
Employment, Average Employee Compensation and Value Added of U.S. Affiliates
of Foreign MNCs .................................................................................................................... 83
U.S. Affiliate Employment is Increasing.......................................................................... 85
Employment in Manufacturing and Services of U.S. Affiliates is Increasing.................. 85
Average Employee Compensation of U.S. Affiliates Is Increasing.................................. 86
Value Added from U.S. Affiliates of Foreign MNCs is Increasing.................................. 88
U.S. Affiliated Trade in RDT Services................................................................................... 88
Conclusions............................................................................................................................. 90
Recommendation .................................................................................................................... 91
APPENDICES
Appendix A: Panel and Staff Listing.......................................................................................... 93
Appendix B: Individuals Interviewed or Consulted ................................................................... 97
Appendix C: Selected Bibliography ......................................................................................... 105
ix
CHARTS AND TABLES
Charts
Chart 2-1. S&E Employees in U.S. Workforce, 1983-2004 .................................................... 12
Chart 2-2. Unemployment in S & E Occupations (1983-2004) ............................................... 15
Chart 2-3. Top 10 Offices of Patent Filings in 2004 ................................................................ 18
Chart 2-4. Federal and Nonfederal R&D Expenditures as Percentage of Total (1953-2004) .. 21
Chart 2-5. Percent Change in OECD Average R&D Expenditures as Percent of
GDP (1983-2003) .................................................................................................... 23
Chart 3-1. Non-Immigrants Admitted by Visa Class Selected Fiscal Years 1981-2004 ......... 36
Chart 3-2. Median Salaries for U.S. Individuals in Engineer Occupations
(1993, 1997 and 2003), Bachelors Degree .............................................................. 48
Chart 4-1. Earned Bachelor’s Degrees in S&E Fields, 1985-2002 .......................................... 56
Chart 4-2. Graduate Enrollment in Science Fields, 1983-2003 ............................................... 59
Chart 4-3. Graduate Enrollment in Engineering Fields, 1983-2003 ........................................ 60
Chart 4-4. Doctorates Awarded by U.S. Institutions, by Field and Citizenship Status,
1985-2003 ............................................................................................................... 61
Chart 4-5. Percentage of Temporary Residents Receiving S&E
Doctorates in 1998 and 2001 Who Remain in the U.S. After Two Years .............. 65
Chart 4-6. Suitability of S&E Graduates .................................................................................. 69
Chart 4-7. Highest Degree Earned by Those Who Earned S&E Bachelor’s Degrees
Before 1994: 2003 ................................................................................................... 73
Chart 4-8. Median Annual Salaries of U.S. Individuals in Selected S&E Occupations .......... 75
Chart 4-9. Median Annual Salaries of U.S. Individuals in Selected S&E Occupations .......... 75
Chart 4-10. Median Annual Salaries of U.S. Individuals in Selected S&E Occupations .......... 76
Chart 4-11. Median Salaries of Degree Recipients 1–5 years After Degree, by Field
and Level of Highest Degree: 2003 ........................................................................ 77
Chart 4-12. U.S. R&D, by funding sector: 1953–2004 .............................................................. 78
Chart 4-13. Trends in Federal Research by Discipline, FY 1976-2004, Obligations for
Research Gross Domestic Product .......................................................................... 79
Chart 5-1. Employment of Non-Bank U.S. Affiliates of Foreign MNCs (1980 to 2004) ....... 84
Chart 5-2. Banking Employment of U.S. Affiliates of Foreign MNCs (1987, 1992, 1997
and 2002) and U.S. Commercial Bank and Savings Institution
Employment (1990 to 2005) ................................................................................... 85
Chart 5-3. Manufacturing and Services Employment of Non-Bank U.S. Affiliates of
Foreign MNCs (1980 to 2004) ................................................................................ 86
Chart 5-4. Average Employee Compensation of Non-Bank U.S. Affiliates of
Foreign MNCs 93 (1980 to 2004) ........................................................................... 87
Chart 5-5. U.S. Affiliated Trade in Research, Development and Testing Services
Within U.S. and Foreign MNCs (2001 to 2004) ..................................................... 90
x
Tables
Table 2-1. Inflation-Adjusted Change in Media Salary 1-5 years after Degree by
Field and level of Higher Degree (1993-2003) ....................................................... 14
Table 2-2. Changes in Median Annual Salaries of U.S. Individuals in
Selected S&E Occupations (1993-2003) ................................................................ 14
Table 2-3. Annual Patent Applications (1995-2004) ............................................................... 18
Table 2-4. Share of S&E world article output (1988, 1996, and 2003) .................................... 20
Table 2-5. U.S. R&D expenditures by funding source (2004) ................................................. 22
Table 2-6. Basic Research Share of Gross Domestic Product, by Country/Economy
Selected Years (2000-2002) .................................................................................... 24
Table 3-1. Caps on H-1B Visas ................................................................................................ 35
Table 3-2. Temporary Visas issued in Categories Likely to include Scientists
and Engineers (FY 2004) ........................................................................................ 37
Table 3-3. Comparison of Temporary H-1B and L-1 Visas and Admittances ......................... 38
Table 3-4. H-1B Petitions Filed and/or Approved by Type of Petition: Fiscal Years
2000 to 2003 ........................................................................................................... 39
Table 3-5. H-1B Petitions Approved by Type: Fiscal Years 2000 to 2003 ............................. 40
Table 3-6. H-1B Petitions Approved by Country of Birth of Beneficiary and Type of
Petition (Number): Fiscal Years 2002 and 2003 ..................................................... 41
Table 3-7. H-1B Petitions Approved by Country of Birth of Beneficiary and
Type of Petition (Percent): Fiscal Years 2002 and 2003 ........................................ 42
Table 3-8. H-1B Petitions Approved by Age of Beneficiary at Time of Approval and ..............
by Type of Petition: Fiscal Year 2003 .................................................................... 43
Table 3-9. H-1B Petitions Approved by Level of Education of Beneficiary
and Type of Petition: Fiscal Year 2003 .................................................................. 44
Table 3-10. H-1B Petitions Approved by Detailed Industry and Type of Petition
(Number): Fiscal Years 2002 and 2003 .................................................................. 45
Table 3-11. H-1B Petitions Approved by Detailed Industry and Type of Petition (Percent)
Fiscal Years 2002 and 2003 .................................................................................... 46
Table 3-12. Median Annual Salary (US dollars) of Individuals Employed in
S&E Occupations, by Sex, Race/Ethnicity, and Visa Status
(Selected years, 1993–2003) ................................................................................... 47
Table 3-13. H-1B Computer Programming Wages Compared to National Wages by ...................
Occupation F.Y. 2004 , National Wages OES. 2003 .............................................. 49
Table 3-14. Department of Labor H-1B Investigations, Violations Identified,
and Back Wages Due .............................................................................................. 51
Table 4-1. Percentage Change in International Enrollment, 2004 to 2005 and 2005 to 2006 . 58
Table 4-2. Visa Problems at Graduate Physics Departments, Fall 2004 .................................. 63
xi
xii
EXECUTIVE SUMMARY
The services sector—especially the high-technology, science and engineering (S&E) sub-
sector—has been a major source of U.S. innovation and technological advances that have
fostered productivity improvements, economic growth and greater prosperity. This sector has
been less susceptible to international competition and overseas migration, though that perception
has been eroded by numerous anecdotes and advocate reporting on the prevalence of services
off-shoring. In response, the House Appropriations Subcommittee on Science, State, Commerce
and Justice1 provided for a comprehensive study of off-shoring by the National Academy of
Public Administration (Academy).
This third Academy Panel report on off-shoring—Off-shoring: What Are Its Effects?—examines
the relationships among services off-shoring, economic globalization, the S&E labor market, role
of temporary high-skilled foreign workers, American student career choices and the university
system’s production of new S&E workers. It also examines the economic effects of service “in-
shoring,” the obverse of off-shoring.
At the outset, we present the Panel’s key findings on off-shoring and globalization.
OVERALL OBSERVATIONS
The Panel finds that services off-shoring has had little economic impact on the S&E labor
market, education of S&E workers, or S&E career choices of American students. This may be
partly attributable to the apparently limited extent of services off-shoring over the last five
years,2 but it also may reflect the submergence of off-shoring effects into the deeper and more
widespread challenges imposed by economic globalization. High-skilled temporary foreign
workers are critical in meeting the growing domestic demand for S&E labor and reducing need
to off-shore high tech services.
The Panel believes that economic globalization—the emergence of individual national
economies into a more highly integrated network—is likely to increase services off-shoring.
This may result from business restructuring (where a business restructures its internal production
processes and replaces domestic workers with imported inputs from a foreign supplier) or global
expansion (where a business decides to expand its operations or production activities in foreign
markets).3 This is one challenge that globalization presents. A more critical challenge is the
declining U.S. share of scientific knowledge and technical expertise as a greater number of
diverse knowledge centers emerge in a global economy. The ability of the United States to
respond and establish a new leadership role, especially by effectively leveraging new knowledge
1
In January 2007, Congress renamed this the Appropriations Subcommittee on Commerce, Justice, Science, and
Related Agencies.
2
See National Academy of Public Administration, Off-shoring: How Big Is It?, October 2006, Highlights and Panel
Message sections
3
Ibid., see Chapter 2, p. 46-48, for more detailed description of these two distinctly different types of services off-
shoring.
xiii
and transforming it into innovative and marketable products and services, will determine its
prospects for continued future economic growth and development. How effectively the nation
meets these challenges and exploits opportunities will determine the extent to which firms will
off-shore services in the future.
The Panel suspects that services off-shoring may be more a manifestation of expanding
economic globalization than a cause of it. In an expanding, more globally integrated economy,
the role of multinational corporations (MNC) increases, trade liberalization supports an increase
in trade and investment flows, new centers of scientific knowledge and engineering expertise
develop in diverse areas, new supplies of high-skilled workers become available, and continued
improvements in communications and other information technology enhance networking
capabilities. Together, these accelerate economic integration and may increase U.S. businesses
off-shoring, either through business restructuring or global expansion. Any subsequent increases
in off-shoring add to the larger trade and investment flows that support globalization.
S&E LABOR MARKET, GLOBALIZATION AND SERVICES OFF-SHORING
For the S&E labor market, the Panel posed several questions: How well has the labor market
met the need for high-skilled labor given the major challenges it has faced over the past several
years? How has that market been affected by expanding economic globalization? What are the
major challenges and opportunities for a more globalized labor market and what are the
implications for future services off-shoring?
The Panel reviewed trends in employment growth, entry level salaries, unemployment rates and
use of foreign S&E workers to assess how well the S&E labor market responded to the U.S.
economy’s increased demands for high-skilled S&E workers, severe economic shocks, the Y2K
crisis, dot.com boom and bust and 2001 recession. If the market had periodic problems meeting
increased demands for workers, U.S. business might have shifted some activity off-shore to
access a larger pool of labor. Data showed that:
• The S&E share of the total workforce increased steadily from 2.6 percent in 1983 to 3.9
percent in 2004, with decreases in 1992 and 2002 resulting from the 1991 and 2001
recessions, respectively.
• From 1993 to 2003, median real salaries for recent graduates with S&E degrees in
engineering, math, and computer science grew substantially faster than those for recent
graduates with non-S&E degrees. Most of the growth for computer scientists occurred
between 1993 and 1999.
• S&E unemployment rates were less than the aggregate unemployment rate from 1983
through 2004, except for computer programmers in 2001, 2002 and 2004. The
differential between the rate for all workers and S&E workers appeared to narrow.
• Foreign-born college graduates in the U.S. S&E workforce increased from 11.2 percent
in 1980 to 22.4 percent in 2000.
xiv
The S&E labor market appeared resilient in responding to numerous significant economic shocks
and continued to meet the U.S. economy’s growing demands for high-skilled labor. In short,
there is little evidence that an insufficient supply of labor has forced American businesses to off-
shore high-tech services to secure necessary skills.
A review of selected indicators of scientific knowledge and technical information (e.g., S&E
journal article publications, article citations, and patent applications) showed that a number of
foreign countries increased their rankings or scores on research and development indicators,
while the U.S. declined over the last decade or two. America’s once dominant position as a
center of scientific knowledge and technological advances may not necessarily continue in an
increasingly global S&E market.
The more intense global competition for S&E human capital presents another principal
globalization challenge. As new centers of scientific knowledge and technical skills emerge, a
more globally integrated market increases opportunities for additional off-shoring of high-tech
services. Increases in foreign R&D spending supporting development of diverse knowledge
centers also present opportunities for those who can effectively access and use this knowledge
and skill. Leveraging and transforming that new knowledge into innovative and marketable
products and services are critical, not only for establishing a new leadership role but also for
continuing economic growth and prosperity.
The United States’ success in establishing and maintaining a new leadership role in a more
global S&E market directly depends on its ability to attract and retain high-skilled foreign S&E
workers, as well as U.S. businesses’ and workers’ ability to adapt to changes from more and
diverse sources and apply them in innovative ways to improve productivity and expand
economic activity.
The Panel believes that U.S. universities should improve the quality and quantity of their S&E
graduates to help them and their employers compete more effectively in a rapidly changing and
more intensely competitive global market. Enhancing the adaptability and responsiveness of the
domestic S&E workforce to a more turbulent labor market will require adjustment assistance,
unemployment insurance, re-training and other worker support programs that effectively address
emerging market challenges.
The Panel recommends that:
• The President and Congress reduce legislative and administrative barriers to
the flow of high-skilled S&E workers to the United States.
• The President and Congress reassess the effectiveness and applicability of
current worker support programs relative to the challenges presented by the
global economy.
xv
THE ROLE OF TEMPORARY, HIGH-SKILLED, FOREIGN WORKERS
With regard to temporary foreign workers, the Panel focused on the following questions: How
have temporary foreign workers contributed to the S&E labor market? Who are the primary
beneficiaries of temporary workers? What impact do temporary workers have on off-shoring
and globalization?
To assess the effect of high-skilled foreign S&E workers entering the United States under the
temporary H-1B and L-1 visa programs, it is necessary to identify how many actually work in
the United States, who they are, where they come from, what jobs they take, how long they
remain, and what happens to them when their temporary visas expire. Unfortunately, current
Department of Homeland Security (DHS) data limitations—both data bases are administrative,
workload oriented and not designed for analytical use—precluded identifying the number of
these temporary workers actually employed in the United States. This, in turn, prevented any
assessment of the share of total U.S. S&E workers accounted for by temporary H-1B and L-1
visa holders, in the aggregate and for specific occupations and S&E disciplines. Nonetheless,
available administrative data suggest that:
• H-1B and L-1 visa programs have increased the supply of high-skilled workers to help
meet increasing domestic demands for S&E labor. As such, they likely reduced the need
to off-shore high tech services.
• The primary beneficiaries of H-1B and L-1 visa programs are workers from India and
China, but many other countries participate as well. Most of these workers are younger
than the domestic S&E workforce. Contrary to popular belief, most do not hold PhDs or
even graduate degrees. A substantial majority of those obtaining an H-1B visa in any
year are already in the United States, as a foreign student, temporary worker seeking to
extend their current visa, visitor or some other status.
• Beneficiaries are not primarily computer programmers, but work in a variety of
computer-related fields as the visa programs intended.
The Panel believes that the H-1B program provides a useful means of retaining high-skilled
foreign S&E workers trained in the United States, at least temporarily. This provides businesses
a viable alternative to shifting high tech services off-shore to secure similar critical skills.
Because high-skilled workers on temporary work visas meet increasing domestic demand for
S&E workers, and help graduating foreign students obtain work in the United States if they seek
it, the Panel recommends that:
• The President and Congress remove barriers to accepting high-skilled work
in the United States and remaining here to continue that work.
• The Department of Homeland Security improve its data systems to provide a
more accurate accounting of the number of H-1B and L-1 temporary foreign
xvi
workers actually employed in the United States and address other
unanswered key questions about them.
OFF-SHORING, GLOBALIZATION AND S&E HIGHER EDUCATION
Concerning higher education, the Panel focused on the following: Is America’s higher education
system meeting the needs of the S&E labor market? What role do foreign students play in
meeting these needs? Are American students dissuaded from choosing careers in S&E? What
threat do foreign universities pose to the predominance of American universities in S&E?
The Panel reviewed trends in enrollment and graduation rates for S&E degrees, the proportion of
each accounted for by foreign students, comparable trends in S&E degrees produced by foreign
universities, possible qualitative differences between foreign and U.S. S&E degrees, and such
factors influencing student career choices as time to obtain different degrees, funding support,
and differences in median entry level salaries for various S&E and non-S&E occupations over
the last ten years. Data indicate that:
• The proportion of total undergraduate enrollments and degrees awarded in S&E fields has
remained constant over the last 20 years, while the proportion of S&E undergraduate
degrees awarded to foreign students declined.
• Graduate enrollments in S&E fields increased, but there was substantial variation across
fields. Moreover, foreign students accounted for an increasing proportion of graduate
S&E enrollments. Although this trend was interrupted by the decline in first-time
graduate enrollments of foreign students in S&E fields from 2000 to 2003, the
interruption appeared temporary as foreign student first time S&E enrollments rebounded
in 2004 and 2005.
• Foreign production of S&E undergraduate and graduate degrees surged over the last two
decades, especially among Asian countries, with growth rates substantially greater than
the U.S. However, the U.S. still produces almost twice as many undergraduate
engineering, computer science and IT degrees, relative to total population, as China and
over five times as many as India. Although difficult to measure, students in S&E
programs in the U.S. may be better trained than their foreign university counterparts.
Increased production of S&E degrees seemed sufficient to meet g


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