MAY - JUNE 2001

Reader Poll:

"Is the Cost of Engineering Getting Out of Hand?"

by George F. McClure

Mini Poll Should engineers' salaries be based on their level of contribution or on the laws of supply and demand? Total Votes: 162

A recent Investors Business Daily headline raised this question. Why? Because of the sale prices last year for chip design companies that did not have chip fabrication facilities. The Fabless Semiconductor Association divided the company sales price by the number of engineers at the company, and came up with prices ranging from $3 million to $23 million per engineer.

On the assumption that, without any investment in chip fabrication facilities, the companies were bought for their creative brainpower alone, that could be a reasonable way to determine such a figure. But why was the range so wide?

Perhaps some designers put more emphasis and design time into testability. Some may have had a wider range of applications to address and therefore had more spec preparation and more designs. Others may have had a higher volume but fewer designs. Some may have invested in testing their chips after the foundry produced them, while others may have outsourced the testing. Environmental testing could have been yet another variable. With so many possibilities this seems to have been a poor way to assess whether the cost of an engineer is high or not – at least not without having more information.

But in a broader sense, this question deserves an answer. New products result from a cooperative process that involves capital, customers, and labor. If new products help create wealth and engineers design the new products, then engineers are an essential part of the process. Getting along without them would be like the farmer who tried mixing more and more sawdust into his horse’s feedbag, and found that the cost of maintaining the horse declined steadily, until the horse died and the farmer could no longer plow his crops.

So what is an engineer worth? Actually, with computer-aided design tools, engineering hours that go into products are declining steadily. One estimate shows the number of engineering hours overall are declining by one percent per year for the same output, owing to productivity gains. Some would put an engineer’s salary halfway between the factory assembly line worker and the CEO, based on the indispensability of his or her contributions. But many U.S. engineers’ salaries range between one and a half and three times factory workers’ salaries, while CEO salaries range upwards of 200 times that.

George F. McClure is IEEE-USA's Technology Policy Editor and co-chair of the IEEE-USA Workforce Committee.