A Tortuous Road: On the Structure of Academe

Let's start with a top-down view of the subject, from my best approximation of a labour economics perspective.

Defeat in detail of "trainees", particularly native-born postdocs.

Forgive my lack of artistic ability for a moment. Let's start dissecting this diagram...

Trainees: He/She/It? who does the work and gets shafted. We'll return to them at the end.

Universities: Produce research and the domestic supply of trainees. With some variability depending on the field, over 1/3 of US doctoral STEM graduates were Temporary Visa holders [See Notes].

• Individual PIs are forced to 'train' graduate students and postdocs, not for the pupils benefit, but to produce the research that (massive Matthew effect) will glorify the name of the PI and institution. Failure to participate in the scheme means no grants --> no tenure (or, if tenured extreme marginalization). 
• Untenured university research faculty, researchers at soft-money research institutes, and medical school faculty are in the most precarious position because their salaries are sourced directly from grants (most university tenured professors need only cover their summer salaries).
• Universities get 40-60% indirect cost on grants. These funds are a major component of university budgets. Loop holes allow for perverse incentives, like taking on building/mortgage debt to inflate indirect cost and attract senior (read: making it rain) faculty with space.

Funding: Fuel for the fire: 60%/Federal, 20%/Institutional, 5%/State&Local, 5%/Industry, balance of Other, mostly non-profits and foundations.

• Most graduate students, and the vast majority of postdocs, are supported on individual PIs grants, not training grants. 
• The whole system is founded upon the tournament model, wherein small differences in fitness are magnified into huge differences in reward [laymans: 1].

Science Policy: Somewhat amorphous catch-all for the management of stake-holder expectations (read: Mr. Public, I swear the cures for cancer will be here next year...promise!), and the dominant funding model (peer-reviewed competitive government grants/contracts) which came about following WW2 [2, laymans: 3].

Government: "He who has the gold makes the rules."

• Rationale is that, as a socially desirable, public, non-rivalrous good, knowledge, particularly basic knowledge, will be under-produced by Mr. Market. 
• Under-production of knowledge is 'bad' since innovation and knowledge are key drivers of economic growth.

Foreign Supply: Foreign graduate students (over 1/3 of total) and postdocs (over 1/2 of total, about 2/3 in Engineers) streaming into universities because of a deal with the devil between government, industry and universities.

• Current US immigration policy allows for an unlimited number of HB1 Visa sponsorships to non-profits/universities. These are also known as cap-exempt visas. 
• Dr. George J. Borjas, among others and despite some initial debate to the extent of substitutability, have established that this foreign supply is perfectly substitutable for their native-counterparts when controlling for field [4,5,laymans: 6]. The effect on trainees in both the labor market and university laboratories, is depressed wages.

Firms: Profit maximization by holding down labor cost. Trade associations, in bed with universities and most disappointing of all, the NSF, spin utterly unfounded tails of crisis in S&E labor shortfalls, and the pressing need for tax loopholes, tax breaks for research, more visas for foreign labor [laymans: 7].

Giant Box: All of the above are subject to economic constraints.

•  Up until the 2009 stimulus, movements were all procyclical. Bad economy = lower funding for universities and a soft labor market for industry hires. 
• Interestingly, the tap of foreign supply remains open, even in recessions. 
• Note that the S&E market is also subject to strong cohort effects. Be born in the wrong year at your peril. The late-2000s recession cohort, of which I'm a member, will almost certainly be a bad crop.

And back to the plight of the lowly Trainee: All of these forces conspire to make life very unfortunate for the native-born trainee.

• While foreign supply from low-income countries are better off than back home (born out in the numbers: foreigners from high-income countries tend to return home; low-income comers stay; detailed analysis in Chapter 8 of How Economics Shapes Science by Paula Stephan), the plight of the native-born is evident. 
• There is a complete misalignment in the incentive structure of universities/firms to native-born trainees. 
• Universities want cheap, temporary, disposable labor to feed the grant/indirect cost/self-glorification cycle. 
• Firms want specific skills with no frills, also known as pin-point hiring.

Rise of the postdoc: The plight of the trainee is not new. Postdocs and temporary research positions, a rarity pre-1970s, have exploded in the past 40 years. Stripping away all the B.S., the postdoc is a holding pen for scientific talent without the skills and stable aggregate demand to take non-academic jobs. This holding pen is anchored by:

• University demand for cheap, temporary, disposable labor for grants
• The broken dream of a tenure-track position
• Lack of aggregate demand from industry
• Lack of skills necessary to compete outside of academia.

That's all for today's 5,000 mile view, but I will revisit many of these issues in more detail.

Notes:

• All statistics available for free from the NSF. Nifty page for it all here. For example, that 1/3 of PhD STEM trainees are foreign comes from Table 18 from this page navigated to from the very appropriately named "International --> Graduate Students" on the main page. I define STEM as the NSF categories Life Science, Physical Sciences, Engineering, which means I exclude Social Sciences, Education, Humanities and Other. That's 10111 Temporary Visa Holders ÷ 27137 Total for 2010 =0.37, or over 1/3 in Engineer speak (don't use a calculator until you already know the answer / round on the first pass). 
• Some folks might have heard 1/4 thrown around. That's actually the proportion of all doctorates. Divide 13,625 Temporary Visa holders from 48,069 total graduates in all fields in 2010 and one gets 0.28, or 1/4 in Engineers terms.
• Feel free to comment if you have questions about the statistics sourcing. I will add an appropriate note.