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Jobs

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

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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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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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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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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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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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What Creates Jobs? Welcoming STEM Workers

Politicians talk frequently about job creation. But what actually creates jobs is a subject of intense debate. Do we need more public spending? Less? Fewer regulations? Smarter regulations? The answer usually depends on the audience and ignores the deeper questions. What kind of jobs are we creating? Do other jobs get destroyed? Would high-skill immigrants take a job from an American or create a new one for him or herself?

A recent report, Technology Works: High-Tech Employment and Wages in the United States, from the Bay Area Council Economic Institute, a trade organization from an area that knows a thing or two about facilitating economic growth, sheds light on these questions by highlighting a tried and true method for creating jobs: attracting and employing technology workers. When a city, community, or region employs a technology worker, this engenders a multiplier effect on employment in the local economy. In fact, the Bay Area Council’s study finds that every one job in the high-tech sector—defined as those most closely related to science, technology, engineering, and math (STEM) fields—leads directly to 4.3 jobs in local goods and services industries across all

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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

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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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Multinationals (Not Main Street) are the Key to Job Growth

Yesterday the Senate Homeland Security Committee’s Permanent Subcommittee on Investigations held a hearing on “offshore profits shifting,” with a focus on making Apple and its CEO Tim Cook into the poster child of corporate tax avoidance. As I wrote in The Hill, blame is not a national competitiveness strategy.

But another theme of the event was the seeming unfairness of a situation where domestic multinationals like Apple are not required to pay the full 35 percent tax on their foreign earnings. Despite the fact that we are one of the only nations with a worldwide system of taxation (that requires U.S. multinationals to pay US taxes on foreign earnings when they bring them home), this notion is actually wrong. It is actually in the interest of non-multinational U.S. firms for multinationals to pay less in taxes. Here’s why.

U.S. economic politics is often framed as a clash between “Main Street” and big multinational corporations, with the former salt-of-the earth hard working mom and pop owners and the latter controlled by profit-hungry greedy tycoons. But this framing misses the point that what will determine whether America thrives in the global

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Note to Tom Friedman: Technology Creates, Not Destroys, Jobs

I should just get a macro for my computer so that when I type “Control T” it writes “Tom Friedman is wrong because” since he so often is, as I pointed out here. But in Today’s New York Times Op-Ed he does it again, only maybe even worse; blaming technology for joblessness.  When will he and others realize this is not the case. He writes that information technology “is more rapidly replacing labor with machines.” Well, if this were true, how does he explain the fact that productivity growth rates were much higher in the last five years of the 1990s than the last five years of the 2000s? And yet, unemployment was much lower in the 1990s period.

He then goes on to quote Davidson’s equally incorrect article in The Atlantic which rightly points to the devastating loss of U.S. manufacturing jobs in the last decade and blames technology. No. As we point out, it was the loss output due to decline in U.S. competitiveness, not automation, that was responsible for the big loss of manufacturing jobs. Manufacturing experienced about the same rate of productivity growth in

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