Not necessarily incompetent, but certainly unhappy. Generally -- but not always -- you get better performance from people who enjoy what they're doing, and great ideas from people who are passionate about what they're doing.
Could the reason you're finding it difficult to hire engineers be that you're not offering enough money? Surely, you could entice some engineers to switch jobs if you offered competitive (or better) compensation.
Demographers have been saying for some years now that companies seem unprepared for the departure of the baby boomers, considering the smaller generation to replace them. I suspect this is due to the prevalent short-term bias that pervades corporations, likely coupled with the idea that any talent deficiencies can be easily fixed via outsourcing or H1-Bs. Which of course justifies the unwillingness to train or mentor. Endless restructuring didn't help either.
Perhaps there is a ray of hope, as I have noticed some companies appear to be (slowly) recognizing that constantly churning employees hurt productivity and institutional memory. Considering the depth of the recession, the panic layoffs didn't seem to cut as deep as prior downturns. But I wonder whether the lack of hiring is the flip side of that, as essential work is still too often undone or delayed, particularly in new product development.
@KB3001. Fast forward 40 years ... I think the balance of economic power will even shift more in Asia's favor. I forsee even more production and consumption being driven by Asia. And I see things staying this way for some time (I don't see the per capita income in Asia becoming significantly greater than that of the US any time soon).
Even if Asia does develop and surpass the US (... in education, technology, innovation etc) - perhaps Africa would then be the next destination in the cycle for the outsourcing exercise. I don't think much production will come back to the US - as it has already been said. Never mind the government mantra about creating "green jobs"
Someone made a valid point in saying executive jobs could eventually be at risk as well. This is because companies could eventually deem it expensive to always keep the business side of their organisations in the US. The Asian Business schools are rising in profile by the way.
If a company does not know how to utilize Chinese engineers, it would find them more expensive to use because work will not get done. Most of the Chinese engineers require mentoring for a few weeks and close supervision. After that they can be very productive and cost efficient. I think the design development process is not widely understood in China because China has entered industrialization relatively late and educational institutes teach theory but not practice. Language is also a barrier. In most companies in the West as well as in US, CEO's themselves do not understand the development process so they cannot understand why their attempts in China are not productive. I have personally worked with a Chinese enginneer who was labeled "non productive and useless" by several people. I was given the opportunity to utilize him. After about 4 to 6 weeks of handholding and indoctrination he became a star performer and few years later he managed a team of over 15 enginners. A diamond has to be processed before it is useful. The French CEO probably failed because work was thrown to the Chinese engineers without understanding where they came from and without proper initiation.