FORTUNE -- Applied Materials had to fly in 100 interviewers just to screen all the job applicants for its new Solar Technology Center in Xi'an, China, last year. The company wanted to fill 260 high-tech jobs. It got 26,000 resumes. A fraction of those applicants were invited to interview. The final selectees, board member Andy Karsner tells me, "were top-of-their-class, English-speaking engineers. They're the best of the best."
Now some of the most advanced research in this high-value, fast-growing field is being done in China -- instead of in the U.S. with American engineers. Why should we care? Because it's graduation season, when we see how starkly the direction of the American educational system differs from the way that faster-growing economies are headed.
Those Chinese solar researchers are the cream of an engineering crop that included an estimated 10,000 Ph.D. graduates last year. This spring the U.S. will graduate about 8,000 Ph.D. engineers, an estimated two-thirds of whom are not U.S. citizens. About 150,000 students who majored in engineering, computer science, information technology, and math will collect bachelor's degrees. The Chinese government claims that in recent years the number in China has been well north of 500,000 and rising fast; even if overstated, as some believe, the real number is much larger than America's, and the quality of those graduates is improving.
Americans should be alarmed, not because we have to beat the Chinese on every statistic, but because those facts threaten the heart of our great economic story. Until the past decade most Americans lived a little better every year. From the nation's beginnings, the engine of that improvement has been technology that makes millions of workers more productive. That's why you learned about Whitney's cotton gin and the McCormick reaper in elementary school. A stagnant living standard has terrible consequences, one of which is that the country eventually stops attracting and keeping the world's best and brightest, triggering a downward spiral that grows ever harder to break.
The spiral may be well under way. Instead of staying in the U.S., our non-U.S. Ph.D. graduates increasingly judge home to be a more attractive option. Anand Pillai, a top talent executive at India's giant HCL Technologies, says that his best young recruits used to insist on being sent to the U.S. for a time, but now many of them resist going: "They see such great opportunities at home."
Its next turn could be the worst. As math and science talent accumulates abroad, companies do more of their hiring there, reducing demand in the U.S. That's partly why undergraduate engineering majors are a shrinking proportion of the total, down from 6.8% to about 4.5% over the past 20 years. Employers then claim they can't find engineers in the U.S. -- so they have to hire abroad.
The fastest-growing college majors in America as of 2007, says the U.S. Education Department, were parks, recreation, leisure, and fitness studies, as well as security and protective services. That's not a great omen for technology breakthroughs. If the next great technological advances in energy, the environment, medicine, and information are made elsewhere, American workers will have a much tougher time earning good pay in those key industries.
When the National Academies (experts in the sciences, engineering, medicine, and research) raised this alarm in a landmark 2005 report, a chorus of quibblers sidetracked the discussion by arguing that China's engineering graduates weren't up to the same standard as America's, so the statistical comparisons weren't valid. Five years later it's clear that the National Academies were prophetic. For America's great economic story to continue, we need to reverse the downward spiral now, before it picks up speed. That means changing our culture -- hard but doable. As our graduates collect their diplomas this spring, we should send the next classes a message: that as an economy we want more science and math majors, and as a society we prize them.
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