The American gospel of innovation has taken some lumps of late. Disquiet has grown up amid the proliferation of astonishing new technologies ranging from self-driving cars to drones and genomic editing. Wages are stagnant and the returns to capital are rising. People are wondering: What about jobs and prosperity for all?
And yet, the fact is that expanding U.S. leadership in high-technology innovation industries remains an absolute prerequisite for any future shared prosperity. Which is the core point of a new paper our group at Brookings has just released.
At a moment of questioning, the new report asserts unapologetically that America’s innovation and skills-driven “advanced industries”—which we define and map—will be a critical anchor of any revitalized, more inclusive U.S. economy.
Characterized by their heavy expenditures on R&D and STEM (science, technology, engineering, and math) workers, the 50 crucial advanced industries range from manufacturing fields (such as automaking, aerospace, and medical devices) to energy industries (such as oil and gas extraction) to high-value service industries (such as software publishing and telecommunications). Together, these industries employ 80 percent of the nation’s engineers, generate 85 percent of all U.S. patents, and account for 60 percent of U.S. exports. As such, these industries represent the nation’s tech sector at its broadest and most consequential. Already, these industries have led the present economic recovery.
But these industries also represent the country’s best shot at delivering broadly based opportunity. They are potentially vital sources of inclusion and social mobility, for a number of reasons:
- Advanced industries provide high-quality, accessible direct employment. The 50 advanced industries employ 12.2 million workers—some 9 percent of total U.S. employment. That’s more than work in the U.S. financial, insurance and real estate sectors combined. Moreover, advanced industry jobs are surprisingly accessible and pay high and rising wages to workers of all skill levels. More than half of the sector’s workers possess less than a bachelor’s degree. Meanwhile, the average advanced industry worker earner $90,000 in total compensation, nearly twice as much as the average worker outside the sector.
- Advanced industries generate significant additional economic activity. Spending by advanced industries and their workers also supports additional jobs to an extraordinary degree. Every new advanced industries job creates 2.2 jobs domestically—0.8 jobs locally and 1.4 jobs outside the region. This means that in addition to the 12.3 million workers directly employed by advanced industries another 27 million varies jobs are tied to the sector—nearly a quarter of U.S. jobs. And those jobs aren’t just for engineers and programmers but also for mechanics, drivers, nurses and tradespeople.
- Advanced industries are delivering massive consumer value to households. Technology and business model innovation in the advanced industry sector is saving low- and middle-income families billions of dollars in consumption costs. Recent data from the Consumer Price Index show that the prices of a number of advanced economy goods and services have actually declined in relation to median income. For example, while median income has grown annually by 2.8 percent since 1990, the average price of durable goods has declined by .01 percent a year. Computers, information technology services and appliances are all cheaper today than 25 years ago. Today it takes fewer hours of work for a middle-income wage earner to afford a car than at any time in history. These price declines constitute unequivocal wins for the American middle and working classes.
- Advanced industries will be essential to generating the income that will support broad opportunity. Finally, it will be essential for the United States to expand its advanced industries—and the productivity growth and output gains they deliver—if the nation is to reclaim the ideal of shared prosperity and economic mobility. Without a dynamic advanced sector there will be neither sufficient resources nor opportunities to expand the circle of prosperity to more Americans
Supporting and expanding America’s advanced industries isn’t just about advancing the fortunes of corporations and elites. Most importantly, it’s about embracing the economic opportunities of the 21st century and finding ways to ensure they benefit everyone.