Competitiveness

StephVsLeBron

What Steph Curry and LeBron James Can Teach Us About Innovation

“You have to see this kid from Davidson,” said my friends who had brought me to a small college gym in Spartanburg, South Carolina, in 2008, as I watched a midseason college basketball game of little importance. And sure enough, just a few minutes in, this painfully skinny sophomore comes flying off a screen several feet behind the three-point line, still dogged by a defender, and then somehow sets his feet and still moving laterally lets an improbable shot fly. Only it wasn’t improbable. Swish. My jaw dropped. A huge basketball fan, I had never seen anything like it. I had just seen Stephen Curry for the first time.

A few months later, as Curry led his underdog Davidson team deep into the NCAA tournament, newly-minted NBA MVP LeBron James watched Curry play. “I saw a kid who didn’t care how big someone was, how fast someone else was, how strong someone else was,” said James afterwards.

James is a dominant player in the NBA precisely because he is, indeed, bigger, faster, and stronger than people he is playing against. However, LeBron James and Steph Curry today sit atop the

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Trump.Manichean

How the Black and White Debate on Trade Hurts the United States

Nowhere is today’s highly polarized political climate more visible than in the debate on trade, which has been dominated by two polar opposite viewpoints. The first sees trade as a white knight capable of fixing all our woes, no matter the circumstances, and the second sees it as an evil tyrant that strips people of their wealth. Championed by supply-side economists and fearmongering protectionists, respectively, these rigid articles of faith have crowded out more rational and nuanced analyses. This is unfortunate, because both extremes are wrong, albeit in different ways, and the focus on absolutes makes it almost impossible to seriously discuss or address loss of American manufacturing strength.

Consider, for example, the claims of commentators such as Scott Lincicome and Michael Hicks, who echo the unabashedly pro-free-trade logic of conservative economists like Milton Friedman when they argue that all of our job losses have been lost because of productivity. Hicks writes, “Had we kept 2000-levels of productivity and applied them to 2010-levels of production, we would have required 20.9 million manufacturing workers. Instead, we employed only 12.1 million.”

This assertion relies on a rigid, supply-side economic model that

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SpinningJenny

Innovation Fact of the Week: Over Past 140 Years, Tech Created More Jobs Than It Destroyed

(Ed Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Looking at job records in the United Kingdom dating back to 1871, researchers as Deloitte have concluded that new technology continually creates more jobs than it destroys. As new technologies are implemented, historical data shows, savings on consumer goods have increased people’s spending power, freeing them to purchase a larger and more diverse basket of goods and services. This demand creates new jobs in expanding industries.

While technology tends to shift jobs between industries, the net effect is that employment goes up. Moreover, the jobs created tend to be jobs in caring, creative, technology, and business sectors, while jobs destroyed are more likely to have been dangerous, dull, and reliant on muscle power. For example, from 1992 to 2014, the number of farmers, company secretaries, metal workers, and typists are all down by more than 50 percent, but the number of nurses has increased by 900 percent. Technology, the report concludes, is a “job-creating machine,” and though up to 35 percent of U.K.

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manufacturing-blog

New ‘Manufacturing Communities Act’ Would Spur Broad Manufacturing Renewal

While America’s manufacturing sector has rebounded somewhat from Great Recession lows—for example, adding 865,000 manufacturing jobs since February 2010—the recovery languishes, and even those job gains recover less than one-sixth of the U.S. manufacturing jobs lost during the 2000s. Moreover, the U.S. manufacturing sector has seen no growth in real value added since the end of the Recession. In fact, in 2013, U.S. manufacturing value added remained 3.2 percent below 2007 levels.

Put simply, America’s manufacturing sector continues to underperform its potential, meaning that America’s policymakers need to be leveraging every tool and instrument at their disposal to bolster the health of America’s manufacturing economy. And here, a key component of the strategy for accelerating America’s manufacturing recovery should include better empowering regional- and community-based manufacturing ecosystems.

That’s exactly what new, bipartisan legislation in the Made In America Manufacturing Communities Act, unveiled on Tuesday, February 9, 2016, sets out to accomplish. Sponsored by Senators Kirsten Gillibrand (D-NY), Mark Kirk (R-IL), and Jerry Moran (R-KS) along with Representatives David Cicilline (D-NY), Richard Hanna (R-NY), John Katko (R-NY), Tom Reed (R-NY), and Tim Ryan (D-OH), the legislation supports local manufacturing ecosystems

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microchip

Time to Stop Blaming Manufacturing Job Losses on the (Nonexistent) Shift to Services

The U.S. lost more than 5 million manufacturing jobs since 2000 (roughly a 30 percent drop), while nonmanufacturing jobs have grown by 8 percent. Understanding why is critical to developing the right policy response.

Unfortunately, too many apologists for U.S. manufacturing decline argue that manufacturing employment loss is a natural trend. They blindly follow the assumption that as economies get richer they naturally consume a smaller share of manufactured goods and a larger share of services.  Therefore, we should expect manufacturing job losses.

New data from the St. Louis Federal Reserve Economic Data should hopefully put an end to these false claims. Recent analysis demonstrates that after adjusting for inflation, the share of real consumption of services has actually decreased slightly after reaching a peak in 1992. At the same time, durable goods manufacturing consumption is growing as a share of total consumption.

Accounting for inflation, services reached a peak of 70 percent of total consumption in the mid-1990s and have since declined to around 66 percent. This is not so different from the late 1950s when services made up 62 percent of total consumption. Meanwhile, the consumption of durable

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gear

Is the U.S. Economy in Slow Gear Forever?

Complaints about the sluggish recovery from the Great Recession are rampant and for good reason. It is by far the slowest of the recoveries from the nine recessions since WWII. Productivity and job growth have been anemic, while median inflation-adjusted household income is down.

Such extended malaise should indicate a longer-term structural problem within the economy. Instead, the problem is being treated as an extreme business cycle phenomenon. Thus, the major policy response has been monetary stimulus, which has been invoked at unprecedented levels with the result of near zero short-term interest rates for the past six years. To accomplish this historic feat, the Fed’s balance sheet was expanded from around $800 billion in 2008 to $4.5 trillion today.

The obsession over monetary policy is mind boggling. Congress holds periodic hearings on the Fed’s performance relative to its “dual mandate”: ensuring stable prices and full employment. The hearings are often contentious, as members demand to know why more progress is not being made. The financial media conduct daily assessments of when the Fed will begin to raise interest rates, as if increasing short-term rates from zero is somehow going to

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ict_kids2

Don’t Blame ICT for Manufacturing Offshoring

During the 2000s, globalization took millions of jobs from the United States. Some have been quick to associate this job loss with the technology that ostensibly made it possible, chiefly the adoption of ICT that allowed for global connectivity. So, would the United States have been better off if it had simply never invested in ICT in the first place?

There are those who would love to somehow put the technology introduced by the ICT revolution back in the box. But a new study shows that doing so would have detrimental impact on the economy. Yes, in some cases ICT investment introduced the tools which allowed companies to outsource jobs. But, as new paper, Does ICT Investment Spur or Hamper Offshoring?, finds, the same ICT investment enabled productivity gains that kept companies at home.

Of course, it is difficult empirically to determine whether ICT investments increase the likeliness of offshoring, as causality is difficult to determine. To address this problem, authors Luigi Benfratello, Tiziano Razzolini, and Alessandro Sembenelli examined small and medium-sized Italian manufacturing firms with varying access to local broadband facilities, a random variable that was used

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SONY DSC

Robots Don’t Eat Sugar: Productivity Growth and Sugar Consumption Now No Longer Growing Together

In recent years what was once seen as crackpot economics has now become close to conventional wisdom: the notion that productivity costs jobs. Economists call this the lump of labor fallacy. As ITIF has written here, here, and here, it’s clear that the jobs problem of today has nothing to do with productivity and that we should not worry about productivity reducing the number of jobs.

But that has not stopped many talking heads and experts from opining that yes indeed, productivity kills jobs. One graph that has gotten and continues to get widespread attention is from Andrew McAfee and Erik Brynjolfsson’s book, The Second Machine Age, that shows that “productivity and employment have become decoupled.” [i]

But as any first-year statistics course will teach you, correlation does not prove causation. In fact, it is easy to get spurious correlations. Here’s one: The divorce rate in Maine is almost perfectly correlated with the per capita consumption of margarine.

In Brynjolfsson’s case, the relationship being examined merely shows two variables that happen to be increasing from 1970 to 2000, but there is no feasible underlying argument about how

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highgrowth

High-Growth Entrepreneurship for Development: Report of a Roundtable with Michael Dell

Policymakers around the world have increasingly come to realize that entrepreneurship, particularly high-growth entrepreneurship (HGE), is critical for economic development in nations at all levels of development. That is one reason the United Nations Foundation asked Michael Dell, founder and CEO of Dell Inc., to be the Global Advocate for Entrepreneurship and to work closely with the Foundation and its Global Entrepreneurs Council to help shape and advance a global entrepreneurship agenda.

To inform the Council’s thinking, Michael Dell led a meeting in Washington, DC, on December 2, 2014, hosted by 1776, a cutting-edge “accelerator” to help technology-based entrepreneurs translate their ideas into growing businesses. The meeting participants included tech-based entrepreneurs and policymakers, and I was asked to participate and serve as rapporteur.

Michael Dell opened up the roundtable with a discussion of proposed policy mechanisms to spur high growth entrepreneurship, including ensuring access to capital, technology, talent, and markets. The following is a summary of the themes and recommendations from the discussion.

The Nature of Technology-Enabled Entrepreneurship Opportunities

Policymakers around the world are interested in HGE because they understand that technology opportunities driving this type of entrepreneurship have exploded.

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GraduationPhoto

The Leaky STEM Pipeline Can’t Be Patched with Higher Wages

Even with the economic recovery, recent graduates have it rough. Unemployment among young people remains high and wages remain depressed. Frequently, graduates accept low-wage positions that do not utilize their degrees.

However, one group of recent graduates—those in STEM fields—has it easier than their peers. For these graduates with degrees in fields such as computer science and engineering, high-paying jobs are plentiful. Eighty-one percent of STEM grads hold jobs closely related to their degrees, compared to 72.5 percent among all graduates. Median starting salaries for computer science and engineering are estimated at around $67,300 and $64,400 respectively, 80 percent higher than starting salaries for humanities and liberal arts majors. Moreover, most sectors of today’s economy rely on STEM skills, so graduates have a plethora of career paths to choose from. In addition, compensation is high because companies face an acute shortage of qualified STEM workers.

Economics 101 tells us that the laws of supply and demand should fix this problem as high wages motivate more students to pursue computer and engineering degrees. Instead, exactly the opposite has occurred. We currently have fewer computer science graduates than we did

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