Innovation Is What Drives Us: The Impact of Technology on Employment

driverless_carThe inexorable march of progress continues as Google carries on with its plan to bring driverless cars to a highway near you. This form of transportation—previously found only in the annals of science fiction—could prove a boon to the auto-industry and has many other profound implications for both business and society at large.

Among other things, Google’s self-driving car has reignited the larger debate over the role of technology in our lives, especially in the jobs market—a sector that is quite important to millions of working class Americans worried about employment prospects. This concern lies in the prevalent view that advanced technology is usurping jobs that would have otherwise gone to humans. An Associated Press analysis of employment data from 20 countries found that millions of mid-skill, mid-pay jobs already have disappeared over the past five years. With this data in mind, coupled with slow economic recovery, should the American people be worried? Not as much as you might think. It is helpful to realize that this sort of technological innovation has happened throughout history and, while jobs were indeed replaced, new ones arose that more than compensated for the original loss. For example, the combustion engine decimated makers of horse-drawn carriages, saddles, buggy whips and other occupations that depended on the horse trade. But it also resulted in huge auto plants that employed hundreds of thousands of workers, who were paid enough to help create a prosperous middle class. As Nobel Prize-winning economist Joseph Stiglitz states, “What has always been true is that technology has destroyed jobs but also always created jobs.” The invention of the iPhone, for instance, has put more than 290,000 people to work on related iPhone apps since 2007, according to Apple. This suggests that innovative technology continues to create new types of jobs that require higher skills and creativity.

Like an employment phoenix rising from the ashes of a bygone industry, the American worker will undoubtedly be able to take advantage of new opportunities. For its part, the United States must continue to invest in the educational system so its students are able to take on the challenge of these new and exciting industries.

Posted by: Matthew Goldberg

Sources: Washington Post, Forbes, Associated Press, New York Times

Photo Credit: Google self-driving car in Mountain View courtesy of flickr user MarkDoliner

American Manufacturing Starting to Make Sense Again

reshoringIn the past decade, offshoring was considered an obvious business decision for companies that wanted to reduce costs and increase profits. However, this trend may soon begin to wane as many American companies, both large and small, return to the U.S.

This so called “Reshoring Movement” has been generating a large amount of buzz, especially as high profile companies such as General Electric and Apple plan to start manufacturing more products back home. This reverse course is based both in public relations and sound economic reasoning. While larger companies often leave the majority of their manufacturing abroad, they are still able to benefit from the positive publicity of selling some American-made goods. For smaller businesses, it makes clear economic sense primarily due to soaring wages in low-cost countries. For instance, the pay and benefits for the average Chinese factory worker increased by 10% a year between 2000 and 2005 and rose to 19% a year between 2005 and 2010. This increase has made offshoring only marginally cheaper, and firms still have to deal with other problems such as intellectual property theft and unwieldy supply chains.

This trend ties in nicely with the issue over consistently high US import levels and enormous trade deficits. Harry Moser, head of the Chicago-based Reshoring Initiative, states that “since the 1950s, about three million manufacturing jobs have been lost to imported goods. So to balance the deficit we’ll need to bring back three million jobs.” While “reshoring” has only brought back around 50,000 jobs in terms of offsetting trade imbalances, it is an interesting development that is worth further exploration.

Posted by: Matthew Goldberg

Sources: The Economist, MIT Technology Review, Forbes

Photo Credit: World Class Manufacturing Academy courtesy of flickr user Chrysler-Group

Labor market figures show modest signs of growth into 2013

unemploymentThe month of November featured the highest level of job openings in five months. The total of 3.68 million was an increase by 11,000 compared to the month of October. Though the gains are modest they are positive signs that the U.S. economy might be heading on the right track to a more robust recovery.

Brian Jones, senior economist at Societe General in New York, commented that labor market indicators all point towards improvement. In total, 155,000 jobs were added in December and 161,000 in November. Perhaps more importantly than the sheer number gains in jobs added is the fact that the hiring was accompanied by gains in wages and a longer workweek. What further adds to this positive trend is the unemployment rate, which in November stood at 7.7% – the lowest level in more than four years. Some economists believe that if the unemployment rate continues to drop at this pace it will reach about 7.1% by the end of 2013.

One problem that continues to linger, however, is that of discouraged workers who are not considered part of the labor force and therefore technically not “unemployed”. The labor participation rate in November stood at 63.6% – a figure that according to Nigel Gault of HIS Global Insight remains low by historical standards. In fact, much of the improvement in the unemployment rate over the past two years can be attributed to people dropping out of the labor force. In some ways, determining how to decipher the statistics released by the Department of Labor becomes a question of interpretation with the bigger question of an American economic recovery still lingering.

Posted by: Samuel Benka

Sources: Bloomberg, TIME, The New York Times

Photo credit: 2008 Fall Career Days 005 courtesy of Flickr user pennstatelive

STEM Visa Bill Defeated in Congress but Debate Goes On

One of the most talked about measures to improve the competitiveness of the United States in the area of technology and innovation is the STEM Jobs Bill. On September 20th, the bill, put forth by Republican Congressman Lamar Smith of Texas, was defeated in the House, failing to receive two thirds of the votes.

The Bill would enable 55,000 students with a doctorate or a master’s degree in one of the STEM subjects to apply for a Green Card upon graduation. If enacted, the STEM Jobs Bill would have discontinued the Diversity Visa Program, or Green Card Lottery, which currently allocates 55,000 Green Cards to people from countries with low levels of immigration to the United States. The Bill was struck down mostly by Democrats unwilling to eliminate the Diversity Visa Program. Two more bills are on the table, one by Democratic Congresswoman Zoe Lofgren of California, the other by Democratic Senator Chuck Schumer of New York. Both of these bills aim to keep the Diversity Visa Program alive while introducing the STEM Visa program simultaneously.

Politicians on both sides, as well as heads of industry all agree that something needs to be done in order to not lose highly educated workers to other countries. Without the ability to stay and work in the United States, these foreign students are forced to leave and end up working for companies overseas. These students are especially important to the future of the US economy because of the low rates of American students who decide to go in to science and engineering, only about 5% of graduates.

Solving the issue of talent leaving the US will be essential in order to ensure America’s continual success in leading the world in technology and innovation in the 21st century. If Congress can manage to cooperate across the aisle and reach a compromise, the STEM Jobs Bill would supply hi-tech companies with much needed workers and boost the US economy.

Progress is being made, but a lot more has to be done in order for the United States to reverse the current trend of lagging behind other countries in competitiveness. Ultimately, the problem of American students lacking interest in studying science and engineering has to be tackled in order to ensure future prosperity.

Posted by: Samuel Benka

Sources: Forbes, Politico, The Huffington Post

Photo Credit: US Capitol Courtesy of Flickr user katieharbath

You are invited to: The New Advanced Manufacturing Partnership Report

 You are invited to: 

The Program on America and the Global Economy (PAGE) presents:

The New Advanced Manufacturing Partnership Report

Thursday, September 20, 2012

1:00 p.m. – 2:30 p.m.

5th floor Conference Room, Woodrow Wilson Center


Martin A. Schmidt, Co-Technical Lead, Advanced Manufacturing Partnership Report; Associate Provost; Professor of Electrical Engineering at MIT

 

Theresa Kotanchek, Co-Technical Lead, Advanced Manufacturing Partnership Report,

Vice President, Sustainable Technologies and Innovation Sourcing, Dow Chemical Company

 

Introduction:

Thomas Kurfess, Prof., Georgia Tech, Assistant Director for Advanced Manufacturing, Office of Science and Technology


The recently released Advanced Manufacturing Partnership report, Capturing Domestic Competitive Advantage in Advanced Manufacturing, details the unique role that manufacturing plays in the broader U.S. economy-as a direct source of jobs, as a spur to additional job growth across the economy, and as an important force for addressing the nation’s trade deficit.  Most importantly, the report reveals that the nation’s continued strength in innovation depends on sustaining a close, two-way connection between the innovation and manufacturing processes.  “Proximity to the manufacturing process creates innovation spillovers across firms and industries leading to the ideas and capabilities that support the next generation of products and processes,” the report notes.  “In this way, a vibrant manufacturing sector is inextricably linked to our capacity as a nation to innovate.”  At this forum the two technical co-leads for the AMP report will discuss its findings.


RSVP here or to receive further information, send an email to PAGE@wilsoncenter.org

Directions to the Wilson Center: www.wilsoncenter.org/directions

Post-Mortem on the Congressional Transportation Bill

Capitol Hill was in a self-congratulatory mood at the end of June when they managed to pass a transportation bill right before the session came to an end.  The bill was passed one day before current federal transportation funding was set to expire and it authorizes an additional 27 months of spending at current levels (about $120 billion).  The bill’s authors claimed it will save approximately 3 million jobs that would have been lost if funding dried up.

Obviously, the bill is better than not continuing funding at all (which was a distinct possibility). But no one is pretending that this is an ideal bill.

The bill is pretty bare-bones.  In negotiations to get the necessary votes from both sides, negotiators cut important reforms like giving new monies to aid mass-transit systems (which more and more Americans are utilizing), shifting more money to fixing existing roads rather than building new ones (analysts have long argued that it’s more cost-effective to repair the roads we already have) and establishing a new coordinated policy that linked up freight and ports.  At the end of the day, all the bill does is extend current spending levels for another 27 months on mostly the same highway projects.

But that is where the real problem is.  Congress could not bring themselves to lower federal transportation spending at a time when the construction sector is clamoring for jobs.  But they cannot responsibly increase it either because the funding mechanism is broken.  Revenue for the Highway Trust Fund is derived almost entirely from the federal gas tax and distributed to all 50 states. It covers nearly 80% of the capital costs of federally-funded transportation projects, with states carrying the remainder.  But the gasoline tax isn’t what it used to be.  The tax currently stands at 18.4 cents a gallon but it hasn’t been raised since 1993, which puts it at about 11 cents, adjusted for inflation.  This, combined with the fact that cars are becoming more and more fuel-efficient, means that the source of revenue the federal government uses to pay for this kind of spending is disappearing.  For this bill alone, the gas tax will only bring in $72 billion of the $120 billion allocated for the next two years of spending.  The rest has to be taken from future revenues to fund current spending and other fiscal gimmicks such as collecting $2.8 billion that came from ending the tax deduction for “black liquor,” a byproduct of paper manufacturing.

Not only does funding transportation is such a way prevent any long-term bill that would give the states long-term infrastructure plans and long-term assurances to the manufacturing industry, but it also ignores the fact that the problem is only going to continue to get worse.  Congress will have to eventually raise the gas tax — or, alternatively, index the current gas tax for inflation. A few senators, like Mike Enzi (R-Wyo.) tried to offer amendments to do just that. But those went nowhere.

Infrastructure spending is a key facet of economic competitiveness for the United States.  More immediately, is also offers an area for strong job growth.  The fact that federal funding for that sector is in such poor health is something that needs to be addressed sooner rather than later.

Posted by: Sean Norris

Sources: The Washington Post, CNN, The New York Times

Photo Credit: Highway courtesy of flickr user chberge

Connecting Students to Jobs

College graduates today face not only the problem of a job-hunting in a slow economy, but also the problem of finding the job that matches their skills. On the same note, corporations and other employers are having trouble finding workers the skills they need. The Commission on Pathways Through Graduate School and into Careers, which brought together leaders in industry and education, released a report on April 19 detailing these findings as well as recommendations for universities, employers, and policymakers.

Graduate students, graduate school deans, and employers were surveyed in the report on topics such as desired career paths, career guidance, and employer expectations. The main issue addressed was the lack of clear pathways for graduate students entering the workforce. In the Pathways Through Graduate School and Into Careers background video that accompanied the report and briefing, President and CEO of the Educational Testing Service Kurt M. Landgraf stated that these “pathways are not clear” to anyone in the chain.

Freeman Hrabowski, President of the University of Maryland, Baltimore County, agreed that there was a need for “greater transparency” because the information that graduate students need “is not collected in any way that would ensure that a student knows exactly what the pathways could be.”

A ScienceInsider article highlighted one cause of this issue as the faculty advisers who are “more likely to recommend academic careers than careers in industry, entrepreneurship, the nonprofit sector, or government.” Another problem is the lack of “soft skills” among recent graduates – communication, teamwork, and project management, to name a few.

Besides stronger government programs for advising and training, the report recommended schools to encourage students to find internships for exploring possible career paths. Internships not only allow students to test out new options and gain exposure to the professional world, but also to develop a broad set of skills that employers require.

 

Posted by: Pokyee Yu

Sources: The Commission on Pathways Through Graduate School and into Careers, ScienceInsider

Photo Credit: The Commission on Pathways Through Graduate School and into Careers