The real reason for hiring engineers

Teschler on Topic
Leland Teschler • Executive Editor
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On Twitter @ DW_LeeTeschler

Ask most people about the role of engineers in the economy and you’ll get back answers that mention technology research and new ideas embodied in patents. That’s certainly the image you could come away with if you examined some of the undergrad courses at the leading engineering schools. For example, at Stanford University, engineering undergrads can take a course called Principled Entrepreneurial Decisions. At the Massachusetts Institute of Technology, the MIT Sandbox Innovation Fund program claims to provide tailored entrepreneurship education. And the University of Michigan College of Engineering has a Center for Entrepreneurship.

Yet in actuality, most engineers aren’t entrepreneurs, have nothing to do with corporate laboratories, and have never filed for a single patent. Nevertheless, a lot of them do find ways to develop new products and invent new processes.

Until recently, the truth about what engineers really do was not much more than tribal knowledge among technologists. But the question for the general public remains: If most engineers aren’t Thomas Edison-style innovators, why do companies hire them? That’s the kind of puzzle economists like to look into. Thus recently, economists from the National Bureau of Economic Research explored stereotypes about engineering work by collecting data about firms having a lot of engineers on their payroll.

The picture that emerges from the NBER study is that engineers mainly bring a steady rise in productivity rather than Bell Labs-type innovations to their employers. The NBER researchers looked specifically at manufacturing firms because manufacturing industries provide employment for a disproportionate concentration of scientists and engineers: Manufacturers employ 20% of all scientists and engineers in the industrial workforce and over 60% of all R&D scientists and engineers outside academia.

Moreover, it turns out that the more scientists and engineers a manufacturer employs, the higher the likelihood its productivity will exceed that of competitors. Researchers admit they’re not sure exactly why this is so but speculate it’s because engineers spend considerable effort getting their employers to implement and adopt new technologies.

NBER researchers found that workers tend to earn more money when they work at manufacturers having a workforce containing a high proportion of scientists and engineers. Researchers also said engineers’ best strategy for boosting their paycheck was to get a job where the workforce contained a high proportion of engineers, rather than staying at a firm that was increasing the engineering ranks of its own workforce. Nevertheless, researchers found that wherever scientists and engineers work, they earn 15% more than other employees at the firm on average.

Researchers also found a possible explanation for why scientists and engineers sometimes feel their managers don’t appreciate them: A workforce comprised of proportionally more scientists and engineers had a much greater positive impact on productivity than on company earnings. For many of today’s short-term-focused company managements, earnings today trump productivity improvements that lead to better performance down the line.

Reading between the lines, the NBER data show it’s likely company managements may not fully appreciate what their own engineering workforce does for the bottom line. That’s something to keep in mind next time you get into a what-have-you-done-for-me-lately conversation with your bosses. DW