Billion-dollar bid to upgrade high-tech firms

By now, nobody in Boston needs to be told that microchips matter. Consumers have eagerly embraced the products of a $200-billion-a-year electronics industry that hardly existed 20 years ago. Businessmen yearn for more work processors and robotics equipment to help increase productivity and reduce costs. Pentagon officials estimate that the President's proposed five-year, $1.23 trillion defense budget will create a $224 billion demand for electronics gear -- a significant chunk of which will be built in New England.

Nor is the end in sight. Planners out on Route 128 and in similar high technology centers in California, Texas, and Florida, forecast a future that extends the impressive growth (17 percent a year) of the last decade. Their forecasts include products yet to be invented for needs we never knew we had. A rosy picture, until somebody asks, "Where do the new inventions come from?" The answer is "From the engineers."

And where do the engineers come from?

That, as nearly everyone in the industry will tell you, is the rub. High tech has capital, markets, and raw materials in abundance. What is desperately needs is people -- highly trained engineers and scientists from the nation's universities.

How many? A survey by the American Electronics Association last year pegged the industry-wide need for newm graduates holding electrical-electronic or computer software bachelor's degrees at 199,00 between 1981 and 1985. During that period, the nation's 244 accredited departments of engineering will supply only 70,000. Shortfall by 1985: 129,000 engineers in two fields alone.

That's a serious prospect for high tech firms, whose manufacturing processes require up to five time as many scientists and engineers as are needed in mature , low-technology industries. In an industry where this month's invention is on next months's bottom line, those people are crucial.

But the engineering shortfall is only a symptom of a larger phenomenon. For the economic structure of America is apparently going through a profound change. Here, as articulated by James Botkin, Dan Dimancescu, and Ray Stata in their recent book entitled "Global Stakes: The Future of High Technology in America" (Cambridge, Mass: Ballinger Publishing company), is the situation:

"We are moving from a capital intensive, physical-resource-based economy of the first half of this century to a knowledge-intensive, human-resource-based economy in the last half. The formulas, policies, economic theories, and conventional wisdom that facilitated the earlier transition from an agrarian to an industrial society are no longer applicable to the transition noow in progress from an industrial society to an information society."

Those are strong words, in keeping with the slightly potboiling tendencies of their authors. But they are backed up by firm (if slightly scattered) arguments. In a nutshell, they go like this:

In the last 30 years, the percentage of the nation's work force holding "industrial jobs" has fallen from 65 percent in 1950 to an estimated 25 percent today. On the rise has been the number of "information jobs" in companies "whose primary activity is production, manipulation, or distribution of information goods and services." In 1940 that number accounted for a quarter of the work force. Now it comprises nearly half.

That shift has had profound consequences for the nation's economy. It has forced America to think more globally -- partly because ideas represented by electronic blips are far more exportable than the heavy items of an earlier age. Not surprisingly, the share of the nation's gross national product attributable to imports and exports has also leapt upward: from 10 percent in 1960 to 25 percent in 1980.

As high tech production has increased, costs have fallen. A computer operation that cost $200,000 in 1950 costs about two cents today. Had similar changes occurred in the automobile industry (say the authors with some humor), "today's Rolls-Royce would not only cost just $2.50 but would get half a million miles per gallon."

The economy has indeed shifted -- faster than economic thinking. Why did the recessions predicted for 1979 and 1980 fail to materialized fully? "The reason, " the authors say, "stems from a failure to understand that the United States is a dual economy suffering an industrial recession but enjoying an information boom."

That's the bright side. The dark underbelly looks like this:

Our old industrial notions still dominate our thinking. Demanding good bottom lines each quarter, we resist strategies of long-range investment. When we do invest, it still tends to be in capital goods rather than people. "It is easier to allocate money for renovating a building than for upgrading an employee's capabilities," the authors note sadly. "Tangible assets are more valued than intangible ones," they add, since "Products still take priority over people."

How can we place the priority where it should be? By upgrading the one thing that shapes our human resources: education. The problem is partly at the university level, where (according to the American Council on Education) there were 1,583 positions vacant in engineering schools in 1980-81. The reason: salaries are low; well-paying jobs outside the academy are plentiful; equipment for teaching and research is outdated; and class-loads are large.

But the problem extends to the secondary schools as well. Paul Gray, Massachusetts Institute of Technology president, puts it bluntly: "The teaching of science and mathematics at the secondary school level is a national scandal." Again, low salaries and difficult teaching conditions drive teachers into industry.

What is needed? A national game plan similar to those of the French and the Japanese, the authors say. They call for the high technology equivalent of the 1862 Morrill Act, which established state-run land-grant universities throughout the nation. It would have four parts:

* Sustained support for higher education, upgrading institutions and allowing them to plan more certainly for the future.

* A shift toward life-long education, allowing engineers to continue to upgrade their understanding in fast-moving fields.

* An improvement in the elementary and secondary schools, coupling their programs to those of the universities.

* A global perspective that pays attention to the needs of third world countries and helps develop them as markets.

In fact, however, the first point takes priority. For the authors also have a bottom line in mind: $1 million. They want the federal government to kick in

They have hit upon a popular theme: who can object to upgrading educational standards? The money is formidable -- although it may be, as one New England educator quipped, a mere rounding error in the Pentagon's budget. But one Maine legislator, questioning the authors at a seminar hosted by the New England Board of Higher Education recently, asked whether they seriously thought they had any hope of raising $800 million from taxpayers.

Perhaps they don't. But Ray Stata, the MIT-trained president of his own high tech firm (Analog Devices) and founder of the Massachusetts High Technology Council, pressed his point -- and revealed a slightly disturbing undercurrent in the whole argument. Why not, he said, approach department X in university Y with a sum of money -- quite a lot of it -- to be used to upgrade program Z? Why not, he implied, let industry and the government quietly pay for the needed programs? The funds would upgrade salaries, equipment, and courses -- while avoiding university-wide arguments about whether engineering professors should be paid more than philosophers.

Here, some education enthusiasts become suspicious. Not outof cynicism: the shortage of engineers is far too serious to be dismissed as a fabrication of industrialists who want the government to provide lots of cheap labor. No, they see a more subtle danger. It arises whenever a single sector of the nation, however sound its reasons, tries to buy its way into the educational establishment.

Is that bad? Well, suppose the same XYZ formula -- except that Z is a new, heavily funded program that plugs creationism, or casino gambling, or the virtues of smoking. The issues raised by selective funding reach beyond the department and touch the whole academic community. When they money comes from taxpayers, that community wants to make sure the program represents the interests of the nation as a whole.

Is our engineering shortage a problem of that scope? The authors of "Global Stakes" have good reason to think so, and they present their case well. They may not have the answers yet, but they have zeroed in on a question that demands hard thinking from Boston and the nation.