Wage premium for engineers in the UK

The skills of graduate engineers underpin the UK economy. New data shows that engineers work in engineering roles in all sectors of the economy and, as has been known for some time, engineers have skills demanded for non-engineering jobs too. New evidence that demand greatly outstrips supply can be seen in a persistent, sizeable wage premium for people holding engineering degrees - a premium that has grown over the last 20 years and is good news for graduates in a world of falling graduate wage premiums.

These are the messages of a report, published by the Royal Academy of Engineering, which has collected evidence for the frequently made claim that the UK does not have enough engineers.

The report, Jobs and growth: the importance of engineering skills to the UK economy, draws on many different sources to conclude that the UK does not produce enough engineers. It also brings together evidence on the labour market returns from science, engineering, technology and mathematics (STEM) qualifications as well as examining the link between STEM education, training and qualifications and economic growth.

Around 1.25 million science, engineering and technology professionals and technicians are needed by 2020, including a high proportion of engineers, to support the UK’s economic recovery.

The analysis shows that the combined replacement and expansion demand for science, engineering and technology (SET) occupations will be 830,000 SET professionals and 450,000 SET technicians, but this is merely to maintain the industry on an even keel rather than to support strong growth. Around 80% of these people will be in engineering and technology-related roles.

The minimum number of STEM graduates required just to maintain the status quo is 100,000 a year with a further 60,000 individuals with Level 3+ (broadly equivalent to HSC-level) STEM qualifications for the period 2012-2020. However, only 90,000 STEM students currently graduate annually and, as around a quarter of engineering students choose non-SET occupations, there is already a shortfall.

Sir John Parker GBE FREng, President of the Academy, says: “We need an increase in the number of STEM graduates over the next 10 years in support of rebalancing the UK economy. I am delighted to see that the government is taking on board the message that a proper industrial strategy is essential for effective and sustained economic recovery. Only with such a framework and vision in place can we create ‘the pull’ that defines our future educational and skills needs. We must encourage employers to work with universities with the aim of producing more engineers.”

Professor Matthew Harrison, Director of Engineering and Education at the Academy, and author of the report, says: “As rising wages and wide distribution of SET occupations in the economy show, STEM qualifications are portable and valuable. All young people should have access to them as a means of social mobility and to strengthen the economy. Their importance to both individuals and the economy justifies a history of government intervention to address the shortage of people with STEM qualifications.”

The report also found:

• Demand for STEM skills will exceed demand in the foreseeable future. Independent models of future skills demand predict shortages of STEM-qualified people for all occupational levels of SET. Much of this is replacement demand resulting from skilled people leaving the labour market as well as areas such as nuclear new build and premium vehicle manufacture where demand is driven by expansion.
• Assessments of national strategic risk show that engineers are needed in vital industries and services such as energy, water, sanitation, communications and IT systems. Rising wages, coupled with warnings of skill shortages from employers, show that current resources are stretched thin and the median age of the chartered engineer rises 10 years for every 14 that elapse.
• The lack of women engineers is well known. There is evidence to suggest under-representation of people from lower socioeconomic backgrounds amongst those applying for STEM degrees, although more research is required.
• The higher wage returns, coupled with known under-representation of certain socioeconomic groups in SET occupations and people holding STEM qualifications, provide justification for successive governments’ focus on numeracy and on participation in and access to STEM qualifications.