Competitiveness

Santiago

How Immigration Policy has Walled Off Silicon Valley

In today’s fast-paced, globalized world, knowledge workers can choose to work anywhere. In fact, being an appealing place for people to locate, especially those with advanced skills, is a valuable national resource. Highly skilled workers earn high wages, spend those wages locally, pay domestic taxes, and contribute to spill-over effects that benefit everyone in the area. Most engineers will tell you that the most appealing location for tech workers is located right here in the United States. Some countries strike oil. Others find diamonds. The United States hit it rich with Silicon Valley.

However, Silicon Valley has a weakness that threatens this preeminence: the lack of enough skilled workers to promote expansion and innovation by existing firms and industries and the development of new ones. One of the chief causes of this problem is America’s growth-stymying, restrictive immigration policies toward high-skill, foreign-born talent. For example, for the first time in American history, there are fewer startups founded by immigrants than there were 10 years ago. The effect is especially apparent in Silicon Valley, where immigrant-founded startups dropped from 52.4 percent to 43.9 percent from 2005 to 2012. And unfortunately for … Read the rest

india

A Modi Administration Report Card on the Eve of His Visit to the United States

Indian Prime Minister Narendra Modi’s historic election was viewed with a great deal of optimism by much of the world, including here in the United States. His campaign platform—putting economic growth front and center—championed the kinds of policies needed to get India’s economy back on track. With the Modi Administration having been in office for just about four months now, and as he embarks on his first official visit to the United States, it’s a good moment to take stock of the Modi Administration’s accomplishments to date—and areas where we hope to see continued progress toward improving the state of U.S.-India economic and trade relations.

On the positive side, the Modi Administration has announced a number of promising economic reforms. In particular, it has:

  • Retired India’s Planning Commission, a vestige of centralized state planning;
  • Eased some restrictions and limitations on foreign direct investment (FDI), notably in the defense and railway sectors (with the FDI ceiling in the former raised to 49 percent and in the latter to 100 percent);
  • Committed to renewed infrastructure investment in power generation and transportation networks;
  • Set a year-end target to complete long-pending implementation of a
  • Read the rest

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Will the next Silicon Valley be located in the United States?

In 1956, an American engineer, William Shockley, had an idea that silicon could be used to make transistors, and founded a company in Mountain View, California. The rest is history. The area experienced explosive growth after the invention of the silicon semiconductor sparked waves of innovation. Other firms developed around the Shockley’s first company, also developing and improving on the invention. Continual support from nearby Stanford University, along with collaboration between local firms, created an innovative environment ideal for fostering growth. By the 1960s, 31 semiconductor firms had been established in the country, of which only five were located outside the region. Smaller firms providing research, specialized services, and other inputs located nearby the larger companies. Innovation thrived, the local economy boomed, the center of high-tech innovation shifted from the east coast to the west, and the Silicon Valley was born.

The Silicon Valley is a prime example of how advanced R&D tends to focus in clusters- geographically concentrated industries that maximize spillovers from firm to firm and between public and private researchers. Once research concentrates in an area, it is hard to displace, which is why DOE and other Read the rest

Robots

Reshoring optimism, but not much else

You’ve probably heard the good news. After a decade of being constantly bombarded with news of off-shoring, images of deserted factories, and heart-wrenching tales of laid-off American workers unable to find new employment now that their job is in China, jobs are streaming back into the country, factories are reopening, and we’re back to whistling while we work. We’ve even got a new word for the phenomenon- reshoring.

Just don’t look at actual data. Because funny enough, the numbers illustrate that reshoring is a myth.

True, off-shoring has slowed and has maybe even stabilized. But this respite does not mean that manufacturing jobs are reappearing. Yes, there are isolated instances which your local paper can emphatically cite. However, there is no evidence that America’s manufacturing woes have magically worked themselves out, or that a significant number of jobs that left for China and Mexico are being shipped back.

The truth is that even since the recession, more manufacturing firms have been lost than created in the United States. Manufacturing establishments (the number of factories or manufacturing sites), have followed the same trend. In 2011, the United States was home to … Read the rest

Manufacturing

How America’s Manufacturing Job Loss Outpaces Other Leading Industrialized Countries

In July 2014, ITIF’s Stephen Ezell testified before the Senate Finance Committee regarding the importance of manufacturing to America’s economy and the role that U.S. trade and technology policy plays in supporting American manufacturing. As part of his testimony, Ezell cited data describing the rapid decline of U.S. manufacturing employment to demonstrate the severity of the challenges faced by America’s manufacturing industries. For the reality is that, particularly since 2000, America’s manufacturing sector has been in a steep decline, with job losses outpacing those in many peer countries.

Following the hearing, Marc Levinson, a Section Research Manager with the Congressional Research Service, produced a report countering some of the data in Ezell’s testimony, and suggesting that there is not a clear cause for alarm regarding employment losses in the American manufacturing sector. However, Levinson’s account does not fully present all of the facts and only succeeds in further muddying this important policy debate.

One critique Levinson makes is charging Ezell with bias in selecting base years, which can have a sizable impact on analytical results. Levinson presents data using the years 1991 to 2000 and then the years from 2001 … Read the rest

Wrightbros

The United States is Slipping in Triadic Patents

Many recent studies  have shown that America is no longer winning the global innovation race, as demonstrated by manufacturing-sector decline, lacking public policy measures, poor advanced-sector job growth, faltering support of R&D, and overall  low international rankings. The latest indication of America’s slipping innovation potential is triadic patents. Since 1999, the U.S. has experienced a sharp decline, with 13 percent fewer triadic patents, a product of America’s lethargic approach to fueling innovation.

Triadic patents are patents filed jointly with the United States Patent and Trade Office, the European Patent Office, and the Japanese Patent Office to guarantee intellectual property (IP) protection worldwide. Because they represent inventions with global impact, triadic patent numbers are in many cases a better indicator of invention and innovation than regular patents.

From 1999 to 2011, U.S. triadic patent filings decreased from 32 percent to 29 percent of global triadic patents. When controlling for increases to the U.S. working age population over this time period, the United States produces a full 25 percent fewer triadic patents per person than it did in 1999. This troubling statistic sharply contrasts with the United … Read the rest

Photo Credit: Flickr User Squiggle

Salsa Dancing into the Digital Economy

Colombia’s national soccer team famously taught the world how to properly celebrate a World Cup goal; now the nation is poised to teach the world a thing or two about innovation. In 2010, Colombia’s Ministry of Information Technologies and Communications (MinTIC) devised a plan to connect 27 million people, or more than half of its population, to the Internet by 2018. This plan, called Vive Digital, has had many accomplishments, which include increasing the number of Colombia’s Broadband Internet connections from 2.2 million to more than 8.2 million. In the past four years, the Colombian government has reduced the barriers for adoption of broadband technologies, efforts that brought computers and tablets to schools and created a robust network for digital entrepreneurs.  MinTIC has also poured investment into Internet infrastructure, and is in the process of extending fiber-optic Internet access to 96 percent of the country’s municipalities—many of which are isolated in remote areas.

The man behind these aggressive efforts is the minister of MinTIC, Diego Molano Vega.

Mr. Molano wants to solve what he says is his country’s most important problem: poverty. In an interview Read the rest

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Unsubstantiated attacks on the Ex-Im Bank fail to take flight

A recent review by the Wall Street Journal of a Standard & Poor’s (S&P) credit analysis of Boeing in relation to the U.S. Export-Import (Ex-Im) Bank appears to have missed the point. The article sums up the report with the quote, “We don’t believe that the expiration of Ex-Im’s authorization in September would hurt Boeing’s credit quality or ability to make planned deliveries in 2014 and 2015.” However, this ignores the fact that this statement relates only to planes already in production being prepared for delivery. S&P goes on to conclude that alternative financing sources would not be able to match the demand for Boeing airplanes, and that Boeing would lose out on new orders of aircraft. In addition, it states that the effect of an Ex-Im Bank dissolution on Boeing’s credit quality would be significant, especially in sales to emerging markets or to start-up and financially weak airlines. Judging by 2014 data, Boeing’s new financing needs would total between $7 billion and $9 billion if it lost the support of the Ex-Im Bank.

This ‘misunderstanding’ seems to stem from a desire to portray the Ex-Im Bank—which has been quietly … Read the rest

number-2

No, Immigrants are Not Stealing Our Jobs

It doesn’t take long to get the drift of a new report from the Center for Immigration Studies, a non-partisan, anti-immigration think tank. The title basically sums it up: “All Employment Growth Since 2000 Went to Immigrants.” The only question left to the reader is, why they didn’t simply title it “Immigrants stole all of our jobs”?

Perhaps it’s because immigrants didn’t steal our jobs, and the authors have no evidence that they did, but they’re doing their best to insinuate that they do.

Their main findings certainly look surprising at first blush: immigrant employment has increased significantly since 2000, but native employment has not increased at all, despite the fact that native population has increased twice as much as immigrant employment. It seems like a closed case: all the new jobs went to immigrants, therefore we should decrease immigration.

If only it were that simple. As intuitive as it might seem to argue that a job is a job and an unemployed person is an unemployed person, this is not how economies work. The Center makes a mistake common to many casual observers of the labor market: what economists … Read the rest

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STEM Immigrants Help Raise Local Wages

The H-1B visa program, which allows a limited number of high-skilled workers to work in the United States temporarily, is controversial because some claim that it lowers wages for high-skilled workers. However, a new paper by Peri, Shih, and Sparber of UC Davis and Colgate University shows just the opposite—that additional H-1B visa recipients raise wages in cities where they come to work.

The authors’ interest in immigration is a side effect of their interest in a more general labor market question: they use fluctuations in high-skill immigration due to the H-1B visa program as an instrument to examine whether the supply of STEM workers affects productivity growth. In essence the question is, what happens when you increase the amount of high-skill STEM workers: do wages fall as one would assume in a standard supply/demand framework? Or do they increase because of the effect that the high-skill workers have on productivity, demand for innovative workers, and economic growth?

To answer this question you can’t simply look at the amount of STEM workers in a city and average wages for those workers, because you can’t tell which way causality is going. … Read the rest