The benefit of STEM skills to individuals, society, and the economy

This report reviews and evaluates the research concerned with the contribution of STEM (science, technology, engineering and mathematics) skills to individuals, and to society in general; identifies the shortcomings and gaps in the literature; and comments on the implications of the authors' conclusions for future demand and supply of STEM skills. Key findings include: (1) mathematics skills acquired at school may have a causal effect on later earnings; (2) the development of STEM skills at school are important, but it is unclear whether the earnings premia associated with STEM subjects in higher education (HE) reflect pre-existing skills, or the skills acquired in HE; (3) the earnings premium for a degree has risen in the UK over the last three or four decades, similarly to US evidence. Even the large expansion of HE in the early 90s does not seem to have driven the return to fall significantly. The most convincing explanation for this rising trend is that skill biased technical change (SBTC) has proceeded at a faster rate than the rising supply of graduates; (4) there has been a small shift in student choices towards STEM that would be consistent with rising earnings differentials. However, any rise in differential has been small and, in any event, there is no convincing evidence that subject choices respond to their earnings differentials; and (5) there is evidence that migration can relieve skill shortages and improve earnings of native skilled workers. Migration is a potential source of highly skilled labour. The dramatic recent growth of HE in China could make up for domestic STEM shortages should visa requirements be relaxed.

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