Running Hard, But Not Keeping Up: STEM Skills in the Workforce
Harvard’s David Deming and Kadeem Noray have updated their work on the economic returns to education in science, technology, engineering and math with a new study, STEM Careers and the Changing Skill Requirements of Work. The new study confirms some of their previous findings showing that early earnings premiums for STEM graduates tend to fade over time and converge toward non-STEM graduate earnings at mid-career. It also provides additional evidence that STEM occupations are experiencing rapid rates of skills obsolescence as a result of technological change.
As noted in their earlier work, Deming/Noray find that STEM degrees in applied fields like computer science and engineering provide much higher entry-level wages than non-STEM degrees. On average, an applied STEM graduate will earn 44 percent more than a non-STEM grad at age 24. However, by 35, the premium for an applied STEM credential drops to 14 percent. For pure STEM degrees, the picture is much different: in fields like mathematics, physics, and biology, STEM degree holders have only a narrow income advantage over non-STEM counterparts at the outset of their careers.
Naturally, these earnings patterns have an effect on career longevity. The study found that at ages 23-24, 62.5 percent of applied STEM degree holders are working in STEM occupations. By age 50, this declines to about 41 percent with half of the decline coming before individuals reach their mid-30s. Many of these STEM exits are individuals moving from frontline STEM occupations into management positions either in STEM-related industries or elsewhere in the economy. (Deming and Noray argue that STEM workers tend to have higher levels of general ability that ease transition to management tasks or other fields.) Conversely, in pure STEM, there are relatively fewer exits from the STEM field with the number of degree holders in the field declining from 29 percent of graduates at age 24 to 21 percent at age 35 and remaining flat thereafter.
So, what accounts for the declining wage premiums and occupational exits among applied STEM graduates? Deming and Noray point to the nature of the STEM field itself, suggesting that much of what we characterize as a “skills gap” in the STEM workforce is a shortage of actual STEM skills rather than STEM workers. By this they mean that those working on the frontiers of technology (e.g., in a STEM occupation) are at the greatest risk of skills obsolescence, and under the greatest pressure to acquire new skills, as the value and relevance of the knowledge and training they received in college decays relatively quickly. Hence, employers in STEM use the wage premium to draw in the best and brightest from each fresh graduating class but are unable or unwilling to help incumbent workers “upskill” to remain relevant to the evolving technological environment.
As noted above, many exiting STEM workers progress into management positions, which require less technical and more people-intensive skills. This finding is echoed in a forthcoming survey AEI conducted of STEM workers in partnership with Reuters-Ipsos. In our survey, while younger STEM workers place relatively low importance on management or leadership skills, the number saying such skills are important rises rapidly between the ages of 30 and 40. This is consistent with the Deming/Noray findings that wage progression for STEM majors requires advancement into management as technical skills erode.
There is much else of interest in this new study. Using Burning Glass Technology data, Deming and Noray find that the number of jobs requiring skills in machine learning and artificial intelligence increased by 460 percent between 2007 and 2017, albeit from a very low base. Raw ability matters a great deal in the workforce and especially in STEM. The study found that workers with one standard deviation higher ability are 8 percent more likely to work in STEM at age 24 but these workers are no more likely to work in STEM at age 40. In non-STEM careers, the wage gap gradually closes due to the way that knowledge and skills tend to compound over time in contrast to the way applied STEM skills tend toward obsolescence. A similar pattern was noted among pure science degree holders whose wage premium is small early in their careers but rises over time due mostly to the acquisition of advanced degrees.
Taken in its totality, the study confirms a central truth about the difference between jobs and careers: technical skills will get you a good job but, over the long-haul, families, students and workers need to invest in developing people skills to build a fulfilling career.
Brent Orrell is a resident fellow at the American Enterprise Institute.