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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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Developing Countries Need Robots Too

Ask any economist why some countries are poor and some countries are rich, and they will probably answer, “productivity”. Essentially, this means that people in rich countries are rich because they are able to create more wealth with less effort. But how do they do this? One of the primary ways is through better technology.

Unfortunately, instead of being recognized for its contribution to wealth, better technology is all too often demonized as a threat to employment, particularly in low-income countries without social safety nets. Intuitively, people care more about the jobs and income streams that already exist than the potential future savings from automating their jobs–a bird in hand, as they say. But a new paper by Mehmet Ugur and Arup Mitra of the University of Greenwich shows that even in very poor countries, technology is far less threatening than it may appear.

We have argued here before that robots are not taking our jobs: in the long run on a macro level productivity increases have no relationship with either the total number of people employed or with the level of unemployment. This is because when automation or

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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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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:


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.)


Strangely enough this graph looks nothing

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CBO Report Says Immigration Bill Benefits the Middle Class (don’t listen to those claiming otherwise)

CBO Report Says Immigration Bill Benefits the Middle Class (don’t listen to those claiming otherwise)

The recent Senate immigration bill, S. 744, passed for a reason: it’s good policy that conservatives, moderates, and liberals can all get behind. According to a recent CBO report, it will not only raise GDP but also benefit a broad swath of workers.

Unfortunately, even though the CBO report is clear about the overall benefits to the American economy and the middle class in particular, the effects of such a far-reaching economic policy are complicated enough that some people manage to misinterpret them. For example, in a recent article in The Weekly Standard Jay Cost argues that the immigration bill would cause “a decade of economic displacement.” He cites the CBO study as evidence, noting the report’s claim that “workers’ output, on average, would be lower for a time. That decline would reduce average wages relative to those under current law.”

Let’s go over the report’s major points. In the process we will see why focusing on this excerpt, and ignoring the rest of the report’s findings, is  misleading.

The first point the report

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Should Multinationals Have to Report Jobs in the U.S.?

An article in today’s Washington Post takes many U.S. multinationals to task for wanting on the one hand tax incentives to create jobs and on the other refusing to report their breakdown of jobs here and overseas. Indeed, while all companies in the United States are required by law to report the number of jobs they have to the U.S. government, that data is by law also protected and is only revealed in aggregate (e.g., jobs in particular industries), not by individual firm.

While it might be useful to know this data by firm, there is a very good reason why many multinational firms don’t want to report it: American politics is so broken that any company that is creating more jobs overseas than here at home is immediately branded as an anti-American, selfish corporation that puts profits ahead of people.  Remember John Kerry’s “Benedict Arnold corporations” from 2004?  Who wants this kind of grief for doing what your shareholders (and customers) are demanding?

The ultimate in this kind of thinking is to fall prey to the dangerous illusion that the U.S. can have a thirving economy without healthy large

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Technology and Automation Create, Not Destroy, Jobs

During an interview (third minute) with Ann Curry of NBC’s Today program yesterday morning (June 14, 2011), President Obama suggested that technology and automation were in part responsible for the U.S. economy’s sluggish job growth. The President explained that,  “There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.” But the President’s suggestion that technology leads to job loss is simply not the case. In fact, U.S. productivity gains were higher before the Great Recession than they are now (and productivity gains were higher still in the 1990s when job growth was booming), meaning that technological-based productivity gains are not the culprit behind recent sluggish U.S. job growth. Rather, as ITIF explains it its report Embracing the Self-Service Economy, the vast majority of economic studies show that productivity gains—including through self-service technologies such as ATMs,

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The Drunk, the Street Light, and the President (and Jobs, Innovation, and Competitiveness)

Try a quick (perhaps not so quick) experiment.   Build a list of all the major companies that have been recognized as technology leaders in their use of “IT” over the past 5 years.  Create a “technology leaders index” like a Dow Jones or  Standard and Poor’s and look at the behavior of these technology leaders as whole.  You will find that together they outperform any of our traditional market indices and the US Fortune 500 as a group.

Perhaps your reaction will be a big “so what” – conventional wisdom says that technology and technology innovation is a major driver of productivity and business performance, so what is the “big deal”?

Now try something else.  Look at the employment figures for these same technology leaders over the same multi-year period.   On the news every day we hear the financial network commentators and their interviewees talk about the “jobless recovery” and how the key economic indices can climb along with national productivity as a consequence of automation.  But this second experiment reveals a new phenomena – these technology leaders with their superior market performance and above-the-norm investment in technology increased their

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A New Approach for STEM Education

Most Americans appreciate the fact that the world is a very competitive place.  Policy makers and parents have long known that our kids, from grade school through college, need to step up their skills and understanding of science, technology, engineering and math – know in education circles as STEM studies – if they are going to compete successfully with their counterparts in China, India, Korea, and many European countries.  For this reason, for nearly 40 years there has been a lot of interest in improving STEM education.  While it is laudable that we are focusing on STEM education, we are running the risk of tethering ourselves to assumptions that might be a little faulty and outdated.  We can’t be truly innovative as a nation if we are not innovative in our thinking about STEM education.

The current assumption driving STEM education is that all students should get at least some STEM education at every step of their educational journey.  Supply students with high standards, great teachers and get as many kids excited about STEM as possible.  Call this the “some STEM for all” approach.  It sounds appealing, right?  Universal tech

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Lessons From the New NSF Innovation Survey

Last week the National Science Foundation released its 2008 Business R&D and Innovation Survey, which surveys over 1.5 million for-profit organizations and benchmarks the number of “new or significantly improved products and processes” U.S. firms developed between 2006 and 2008.  The data reveals much about the state of innovation in the U.S. economy.

First, the survey reveals while nine percent of all firms developed at least one new good or service and nine percent developed at least on new business process, there are significant discrepancies among industries.

Far and away the most innovative industry was software publishing: 77 percent of software firms innovated a new product or service and 19 percent innovated a process.  Following software designers are navigational and electromedical instruments, computer equipment, communications equipment, and pharmaceuticals. In other words, four of the top five innovative industries between 2006 and 2008 were IT-related industries.

These industries are big winners across the board for the U.S. economy: They pay more, have higher labor productivity, and have weathered the economic recession far greater than most.  Indeed, the average annual wage in 2008 within these industries equaled $74,000—170 percent above the

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