Each week we see concerning reports about the STEM skills gap continuing to widen in the United States. The good news is that Congress and the Biden Administration have a unique chance to help move things in the right direction.
The U.S. Bureau of Labor Statistics estimated that there would be 1.4 million open tech vacancies in 2020 and only 400,000 computer science graduates. This is an alarming statistic, especially for a country that prides itself on being the home of Apple, Google, Microsoft, and Facebook.
Closing the STEM skills gap will be an important step in keeping America competitive with the rest of the world in innovation. According to Bloomberg’s Innovation Index, the United States has already fallen out of the top 10 most innovative countries.
In many countries, cultivating STEM skills is the primary way young people can improve their economic situation and raise their standard of living. However, students in the United States generally have more options, and graduate trends show that they tend to choose different paths. The federal government can only do so much to push the STEM agenda. Government programs that don’t take the right approach can lack the necessary impact, waste money, and be counterproductive.
But there are a few things the government can do that will make a difference. First, we need to invest in STEM education early and get younger generations excited for the opportunities that STEM can offer them. We also need to incentivize and reward businesses that are hiring and retaining those with STEM backgrounds. Now that Congress and the Administration are proposing a several trillion-dollar infrastructure plan, we have a chance to make a real impact if STEM spending can be targeted towards these key action points.
In recent years, private groups and local organizations have developed some promising STEM programs focused on elementary school children, but making more federal funds available to them could dramatically increase their current impact. Unfortunately, the current draft of the infrastructure plan seems to focus almost exclusively on higher education. It allocates $50 billion for STEM programs at historically black colleges and universities (HBCUs) and minority-serving institutions (MSIs), but very little to K through 12 education.
While spending on STEM programs in higher education is undoubtedly important, some of this funding could have a greater impact on younger students. For example, the Greater Houston Women’s Chamber of Commerce (GHWCC) has a program targeted at third-grade girls in underserved communities called STEAM Town USA. The afterschool program invites female engineers and scientists to volunteer with young girls and teach STEM skills through projects and activities. The result is improved grades and graduation rates for these students, but the program can only support 12-15 girls per school at ten schools in the city. To really have an impact, we need to have more comprehensive nationwide support for programs like STEAM Town.
High school programs like the National Robotics League (NRL) also provide practical hands-on experience in fun, competitive environments. This program lets students build and program robots to expose them to STEM career opportunities in the manufacturing space, where a significant amount of private-sector research and development occurs. Unfortunately, while the NRL goes beyond the classroom to get young people engaged, this program has consistently faced funding issues.
The administration says its goal for the infrastructure plan is to rebuild a more modern economy. If it can include a robust plan for enhancing STEM education in grade school and high school, it will have a much stronger chance of reaching this goal.
Incentives for STEM Employers
We also need to incentivize the businesses hiring STEM graduates so that a student’s hard work in getting a STEM education can pay off during their career. The Biden administration has proposed tax increases on businesses to pay for the infrastructure bill, specifically raising the corporate tax rate to 28%, increasing the global minimum tax on corporations to 21%, and treating capital gains as ordinary income.
These tax hikes on companies that hire STEM graduates are counterproductive – in fact, they limit employment opportunities for those who have focused on the technical fields. Fortunately, there are existing incentives for most STEM employers, and the Biden tax plan needs to protect and, if possible, expand them.
The most valuable tax incentive available to STEM employers is the Section 41 – R&D tax credit. Businesses qualify for Section 41 for the work that they do to solve problems and innovate. This includes creating new products or improving existing products, processes, and software – precisely the things that most STEM graduates do. The credit is intended as a job incentive since its value derives from the wages paid to the technical employees performing the qualifying work.
As the infrastructure plan is implemented, the value of the R&D will only increase. The plan will improve not only our roads and bridges but also our broadband and cellular networks. In particular, IT consultants and digital transformation companies, which hire large numbers of STEM graduates, will benefit from improved network infrastructure because of the work they do to elevate the technological capabilities of legacy American businesses.
The private sector also has a role to play. At a minimum, it needs to do a better job of taking advantage of the government’s incentives already made available to STEM employers. In particular, IT consultants and digital transformation companies have a history of overlooking the R&D credit, and even those who claim it are often significantly underclaiming.
Just as the federal government needs to put resources behind encouraging STEM students, they also need to be educating STEM employers about the incentives they are eligible for. Last year, there was bipartisan support for the FORWARD Act, which would have created a budget to promote the credit, increased its value, and made on-job training a qualifying activity. The FORWARD Act fits squarely into the infrastructure plan, and it should be enacted alongside the other provisions.
This is a time of great potential. If just a small percentage of spending in the infrastructure plan can be directed to a few key areas, and if the private sector can do a better job of using the incentives the government already makes available, we can make significant progress in narrowing the STEM skills gap.
About the Author
Rick White is a former U.S. Congressman. He represented Washington State’s First Congressional District, including Microsoft, Amazon, and other tech companies. He was a founder of the Congressional Internet Caucus and CEO of TechNet, a leading trade association for the technology industry. He now serves as an investor and advisor for startup companies, primarily in the Seattle area, and as a member of the Strategic Advisory Board for alliantgroup, a tax consultant firm in Houston.
Alexander Kirillov is Director for alliantgroup’s Mid-Atlantic headquarters in Washington D.C.