Chipmaker’s Dilemma: How Protectionism Backfired on the US Workforce

The semiconductor industry is at the heart of modern technology, powering everything from smartphones to electric vehicles. The US has made it a priority to boost domestic semiconductor manufacturing. But there’s one big problem: a shortage of skilled workers. Recent research published here by CEPR suggests that the US’s protectionist policies, designed to safeguard the industry, may have had the opposite effect.

Since 2018, policies like increased import tariffs and tighter visa restrictions aimed to protect domestic jobs. However, these measures inadvertently shrank the talent pool available to semiconductor firms. According to a new study using a dataset of 1.6 million global workers, US companies saw a 9% drop in hiring for science and engineering positions in semiconductor manufacturing, with a notable decline in entry-level positions. Over 9,000 jobs in this sector vanished between 2019 and 2022 alone.

What’s more troubling is the shift in career choices among students. By 2022, the number of US students graduating with semiconductor-relevant skills had plummeted. As fewer students entered the field, firms began looking abroad for talent. While countries like Canada and the Netherlands have adjusted their immigration policies to attract skilled workers, the US seems to be losing out.

The problem is significant. The US Semiconductor Industry Association estimates that 115,000 new semiconductor jobs will be needed by 2030. At the current rate, it could take 16 years to meet that demand. This talent shortage could undermine initiatives like the 2022 CHIPS Act, designed to make the US a global leader in chip manufacturing.

So, what can be done? Experts suggest revising immigration policies to attract international talent, improving domestic STEM education, and fostering closer partnerships between industry and academia. These steps could help build the talent pipeline needed for the US semiconductor industry to thrive.

The lesson here is clear: protectionist policies might safeguard industries in theory, but in practice, they can limit the very workforce needed for innovation and growth. If the US wants to lead the semiconductor race, it must address this talent gap head-on.

Glossary of Key Economic Terms

• Difference-in-differences methodology: A statistical technique used to estimate the effect of a treatment (such as a policy change) by comparing the differences in outcomes over time between a group that is exposed to the treatment and a group that is not.
• Entry-level positions: Jobs that are typically designed for workers with minimal professional experience, often targeting recent graduates.
• Geopolitics: The influence of geographic and political factors on the relationships between nations, including trade and workforce movements.
• Immigration restrictions: Policies that limit or control the entry of people from other countries into a nation.
• Protectionist policies: Government actions like tariffs or visa restrictions intended to shield domestic industries from foreign competition.
• Semiconductor: A material that conducts electricity under certain conditions, making it essential for modern electronics such as microchips.
• STEM education: Education in the fields of science, technology, engineering, and mathematics, which are critical for many high-tech industries.
• Tariffs: Taxes imposed on imported goods, often intended to protect domestic industries from foreign competition.
• Workforce development: Policies and initiatives aimed at improving the skills and employability of workers to meet industry needs.

Retrieval Questions for A-Level Students

1. What were the main goals of US protectionist policies implemented since 2018 in relation to the semiconductor industry?
2. How did protectionist policies affect the hiring of entry-level positions in the US semiconductor industry?
3. What trends were observed among US students graduating with semiconductor-relevant skills between 2017 and 2022?
4. Which countries benefited from the US semiconductor talent shortage, and how?
5. What steps can policymakers take to address the talent crunch in the US semiconductor industry?