In a crisis, Americans always ask technology to come to the rescue. Military threat? Send in the drones. Health-care scare? Declare war on cancer and race for an AIDS vaccine. Energy shortage? Harness the sun and wind.
So inevitably, when the United States experiences the highest levels of unemployment since the 1930s, and there are few signs of improvement, the call for more technology—for more R&D–driven innovation—is heard from all directions. No greater orator than President Barack Obama has asked the country to seize what he calls our "Sputnik moment"—and invest more heavily in new technologies, just as the United States did in the years following the Soviet Union’s dramatic launch of the first orbiting spacecraft in 1957. Twelve years later, Americans landed on the moon.
"The first step in winning the future is encouraging American innovation," Obama told the nation in his State of the Union address in January.
He added: "None of us can predict with certainty what the next big industry will be, or where the new jobs will come from. Thirty years ago, we couldn't know that something called the Internet would lead to an economic revolution. What we can do—what America does better than anyone—is spark the creativity and imagination of our people."
Obama’s encouragement is valuable. Creating more permanent jobs from the already massive government spending on R&D—exceeding US $100 billion a year under even the most conservative estimates—is a worthy aim. Better pharmaceuticals, keener information-technology tools, more-compelling energy alternatives and lower-cost, more durable infrastructure technologies—all these could deliver important employment gains. Yet doubts abound that the stubborn Great American Job Bust—and the gloomy employment outlook even for highly educated new university graduates—won’t be cured by Obama’s insistence that Americans "out-innovate, out-educate, and out-build the rest of the world."
The simplest explanation for the employment crisis is "jobless innovation." Exciting new technologies are coming onto the market, but they don’t appear to require many people. The new generation of Internet stars, for instance, employ far fewer people than the older tech titans. And Silicon Valley, which remains by far the most fertile innovation cluster in the world, has experienced sharp declines in employment over the past 10 years. The Bureau of Labor Statistics found in 2010 that high-tech employment in Silicon Valley (including biotechnology) fell by a staggering 19 percent over the course of the 2000s and that Silicon Valley wages also fell, nearly 14 percent.
The decline in jobs and wages occurred, all the more shockingly, alongside the revival of Silicon Valley as a global innovation center. Not only did the area spawn major new companies, such as Twitter and Facebook, but it also saw a startling series of victories by Apple in the new arenas of the iPod, then the iPhone, and most recently the iPad. And yet despite achieving stunning dominance in smartphones and tablet computers, Apple today employs 10 workers in China for every worker in the United States.
The trend toward jobless innovation in Silicon Valley provoked Andy Grove, cofounder and former CEO of Intel, to grouse in a piece for Bloomberg BusinessWeek last year that "the U.S. has become wildly inefficient at creating American tech jobs." Grove, an icon of innovation, also complained about the United States’ "misplaced faith in the power of [technology] start-ups to create U.S. jobs."
The jobless-innovation phenomenon results partly from globalization. Grove points to two related problems: Breakthroughs made by Americans in the United States are increasingly scaled up in Asia, robbing the country of expected employment benefits. More significant innovations are arising offshore, too, Grove reports, so that "scaling and innovation take place overseas."
Scholars have labeled this phenomenon "the offshoring of innovation." They point to a marked rise in R&D activities in China and India especially, but also notably in Brazil, Indonesia, Russia, South Africa, and other rapidly growing economies. Offshoring creates a significant drag on U.S. employment, scholars say. A new book,The Global Auction: The Broken Promises of Education, Jobs, and Incomes, published in December by Phillip Brown, Hugh Lauder, and David Ashton, argues that there now exists an ample pool of "cheap brainpower," outside the United States, largely in low-wage countries, with predictable effects on the U.S. labor market.
With so much R&D now occurring in India, China, and other parts of Asia (and also in Brazil, Russia, and South Africa), new graduates of science, math and engineering programs in the United States experience "career uncertainty," reports Ron Hira, a professor of public policy at Rochester Institute of Technology, in New York. In response to poorer job prospects, Hira has found an "astounding" decline in undergraduate computer-science enrollments, for instance, suggesting to him that a supply-side approach to employment—producing more graduates in computer science—may produce only more unemployed computer scientists.