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Can the U.S. still innovate to create jobs?

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Fareed ZakariaLast weekend, Fareed Zakaria returned to an issue he’s often discussed on this CNN show, Global Public Square (GPS) and in his editorials at TIME. The subject is Innovation in the U.S. and American Employment.

In his June 5th TIME editorial, Zakaria notes that even though

U.S. GDP is now about $13.5 trillion, a bit above what it was in 2007, before the financial crisis. The bad news is that we are producing the same amount of goods and services as in 2007 with 7 million fewer workers. The number of Americans who are unemployed has roughly doubled, and though that number is declining, it is doing so very slowly. Most new jobs are for part-time work at wages that average $19,000, less than half the median income. The official unemployment number does not include the millions who have stopped looking for work or are working part time. Add these categories and the actual number of Americans without a real full-time job would be closer to 24 million.

While that’s bad news for American workers, Zakaria pinpoints five areas in which US policy should focus to increase employment and begin the process re-engaging in innovative thinking:

Manufacturing – “Focus on technical education, technical institutes and polytechnics, as well as apprenticeship programs. Specialize in high-end, complex manufactured products that can command a premium price. Call it the BMW model. Or, for that matter, the Pratt & Whitney model.”

Retraining – “Like the GI Bill, it would have to be a program in which government paid a large share of the costs while educational institutions provided the services. The private sector should also get involved by identifying what jobs the economy needs and creating apprenticeships and internal training to match up with national efforts.”

Growth Industries – Identify what business sectors are growing or are likely to grow over the next couple of decades and how can the US not only encourage them here in the US but also make them attractive to foreign populations. For example, since the US has the best health care innovation in the world, how can the US use and market this innovation to create health care tourism to attract people worldwide to come to the US for health related treatment?

Small Business – “The Kauffman Foundation has found that from 1980 to 2005, nearly all net job creation in the U.S. occurred in firms that were less than five years old. That suggests that we should focus on improving the ecosystem for start-ups and small businesses by funding basic research, streamlining the patent process, limiting regulation and encouraging venture-capital and private-equity companies that fund new ventures.”

Jobs for Now – “The American Society of Civil Engineers gave U.S. infrastructure a grade of D and estimated that we need to spend $2.2 trillion to fix our airports, bridges, highways and train systems. Senators John Kerry and Kay Bailey Hutchison have made innovative proposals that would fund infrastructure projects through a national bank, allowing the private sector to participate, as it does in many countries.”

More recently, Zakaria launched, in association with the New America Foundation, a web series called Global Innovation Showcase. Featuring articles from business leaders, economists, and experts in various fields, the series explores ways in which America can once again become the world’s innovation leader, instead of last as noted in a recent report of 40 countries.

If the US is going to create new jobs and new businesses, new political ideas and philosophies must be developed alongside innovation in the marketplace. What worked in the 1980s and ‘90s are not applicable today. The world has changed too much. It’s akin to saying, “the horse and buggy worked for my grandparents, so why would I need a car?” Economies are not static; they are dynamic beasts subject to constant change and creative destruction.

Obviously, obsessive government support of old, legacy industries has not created a flood of innovation or reduced an unemployment rate that’s becoming fast structural rather than cyclical. Moreover, every reputable study shows that new businesses – those companies that are 5 years old or younger – are the real job creators, not large corporations or small businesses like your corner market. These new businesses tend to be innovators, developing technologies and products that disrupt the market while producing huge growth and employment opportunities.

As a result, politicians must begin to think about new ways to encourage new businesses and innovation: what policies will foster the creation and growth of new businesses and innovation?

At the same time, politicians must develop policies to support the American worker in ways that reduce unemployment through retraining as noted above, public – private partnerships to retain jobs rather than utilizing layoffs to decrease balance sheet employment costs, and restructuring unemployment compensation to help unemployed workers retain or increase their job skills.

I encourage everyone to visit the Global Innovation Showcase and read all the articles. Begin to think about new methods of doing things, both in politics and the marketplace.

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Written by Valerie Curl

June 8, 2011 at 4:49 PM

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