Competitiveness

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

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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

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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

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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

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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

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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.

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If Manufacturing Employment is Dead Then Take a Look at China’s Zombie Apocalypse

Policy-making relies on narratives, and narratives often come from data. Or claim that they do. One story often told by economists—by everyone from Dani Rodrik to Erik Brynjolfsson and Andrew McAfee to James Kynge to Laurence Summers—is that China’s manufacturing sector has been shedding workers since the mid-1990s. This story leads us to believe that something like this is happening:

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This argument ends up as a morality tale with serious policy implications: if even China, manufacturing powerhouse with wages developed countries cannot hope to compete with, is losing manufacturing jobs, then surely manufacturing jobs are obsolete and the U.S. is foolish to try to maintain them—let alone get them back.

Unfortunately, this story is based on a gross misreading of inaccurate evidence. There are three major problems. First, even based on a simplistic look at the data, it’s flat out wrong. Take a look at this chart that shows the actual manufacturing employment in China. (You may note that this chart only goes back to 1998, and that the peak of employment  underlying most claims was in 1996—more on that in a bit.)

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Strangely enough this graph looks nothing

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Capitol building

Congress Should Extend Bonus Depreciation

Since after the Great Recession Congress has put in place temporary bonus depreciation for new capital investment. Given the current state of the economy, already high levels of corporate taxation, and the need for additional investment, Congress should renew bonus depreciation for at least another year.

As ITIF recently wrote, American companies already face the highest statutory tax rates in the developed world. Their effective tax rates also tend to be high, partially because they are taxed on their worldwide income. Bonus depreciation, which temporarily allows companies to deduct equipment purchases faster than they otherwise could, partially offsets this. But the current provision expired at the end of last year.

Faster depreciation reduces the economic cost of new equipment, thereby spurring more investment. It does not reduce the total taxes paid by a company, but it does delay them. The benefit to companies exceeds the cost to the government because the latter can borrow at much lower rates. Higher investment also benefits the broader economy by increasing productivity and creating jobs.

Bonus depreciation also helps align tax liability with actual profits. Accounting methods require companies to write off equipment

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Cuts to the Bureau of Labor Statistics’ budget should have us all concerned.

Bring Back our National Statistics

The Bureau of Labor Statistics (BLS) is considering cutting more of its data reports, this time weighing the elimination of Import-Export Pricing Data. Far from saving tax-payers money, the potential cut will hobble the ability for both our government and our exporters to have the information they need to innovate and compete in a changing global marketplace.

The BLS’s Import-Export Pricing is a valuable part of its Price and Cost of Living report. The report collects data on goods entering and exiting the country and the prices of those goods by polling U.S. companies. The data gives producers vital information on trends in world prices and provides the public with information on U.S. inflation, economic output, and the overall well-being and competitiveness of American business.

Unfortunately, eliminating Import-Export Pricing is not an isolated example of the government’s growing information crisis. Across the board, budget cuts and sequestration has severely reduced efforts by the BLS, the Bureau of Economic Analysis, the National Science Foundation, the Department of Labor, and the Department of Commerce to produce timely and high-quality data to assess traded sector competitiveness. The BLS has already eliminated its

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Paul Krugman

Krugman Wrong on the Trans-Pacific Partnership, Again

A Paul Krugman op-ed in The New York Times today, “No Big Deal,” incorrectly argues that completing a trans-pacific trade pact would be of little consequence to the U.S. economy. Rather, successfully concluding The Trans-Pacific Partnership (TPP), which includes 12 Asia-Pacific region countries—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States—is vitally important to the U.S. economy and to future global economic integration, as ITIF argues in Concluding a High-Standard, Innovation-Maximizing TPP Agreement.

Krugman argues that the “glory days” of trade deals are over, in part because previous trade pacts significantly reduced many countries’ tariff levels, such that “there just isn’t much more protectionism to eliminate.”

Unfortunately this line of thinking fails to acknowledge the pernicious and growing impact of NON-TARIFF barriers (NTBs) on innovation industries. These barriers include a range of unfair and distortionary practices, such as inadequate intellectual protections on foreign intellectual property (IP), restrictions on trade in services, barriers to digital trade and cross-border data flows, currency and standards manipulation, and localization barriers to trade—policies that mandate local production or the transfer of technology or intellectual property

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