Working Paper: NBER ID: w25065
Authors: David J. Deming; Kadeem L. Noray
Abstract: Science, Technology, Engineering, and Math (STEM) jobs are a key contributor to economic growth and national competitiveness. Yet STEM workers are perceived to be in short supply. This paper shows that the “STEM shortage” phenomenon is explained by technological change, which introduces new job skills and makes old ones obsolete. We find that the initially high economic return to applied STEM degrees declines by more than 50 percent in the first decade of working life. This coincides with a rapid exit of college graduates from STEM occupations. Using detailed job vacancy data, we show that STEM jobs change especially quickly over time, leading to flatter age-earnings profiles as the skills of older cohorts became obsolete. Our findings highlight the importance of technology-specific skills in explaining life-cycle returns to education, and show that STEM jobs are the leading edge of technology diffusion in the labor market.
Keywords: STEM; technological change; skill requirements; labor market; economic returns
JEL Codes: J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological change (O33) | Decline in economic returns to applied STEM degrees (J39) |
| Rapid obsolescence of skills learned in school (J24) | Decline in economic returns to applied STEM degrees (J39) |
| Technological change (O33) | Flattening of age-earnings profiles for STEM workers (J39) |
| High-ability workers initially choose STEM careers (J24) | More likely to exit STEM fields over time (J79) |
| Changing skill demands (J24) | Rapid exit of college graduates from STEM occupations (J69) |
| Declining returns associated with STEM careers (J24) | Rapid exit of college graduates from STEM occupations (J69) |
| Technological change (O33) | Changes in skill demands (J24) |