Comments on Brookings Institute's Report on Innovation

The Brookings Institute released their August report from the Hamilton Project titled, “A Dozen Economic Facts About Innovation” by Greenstone and Looney. The report documented their findings on how innovation benefits the U.S. economy; that the pace of U.S. innovation has been slowing; and what lies ahead for the future of U.S. innovation.

There is no doubt that innovation has been at the heart of U.S. economic success. It has
allowed Americans to live longer, healthier and more enjoyable lives. Some disturbing findings, however, are that U.S. innovation has actually been on the decline in real terms for over 40 years; that the benefits of innovation have been spread unevenly across the U.S. working population; that Government sponsored basic scientific research has been on the decline since the 1960s; and that education and government policy need some dramatic improvements.

These findings should serve as beacon for the work which needs to be done to ensure that innovation continues to be a driving economic force in America going forward. Some highlights from the report include the following items:

1. Innovation drives economic growth and raises wages:

“Real hourly compensation increased from an average $9.88 per hour in 1947 to $35.44 per hour today. These improvements in compensation and the rising living standards they afford reflect innovations that have made businesses and people more productive.”

2. Innovation improves U .S. life expectancy:

“In 1920, average life expectancy in the United States was only fifty-eight years. By 1960 it had jumped to seventy years and today it is seventy-nine years. These rapid increases in life expectancy were brought about by medical innovations and improvements in public health practices.”

3. Innovation makes technology affordable:

“If the typical worker in 1982 wanted to purchase something with computing power of an iPad2, it would have cost more than the 360 years worth of wages.” In other words, in real dollars, the computing power of today’s iPad2 in 1982 would have cost $100,000,000.

4. New organizational structures lead to rising standards of living:

“The innovations that improve our daily lives are not just new inventions or technological discoveries. They also include ideas about how to reorganize businesses to make them more productive and efficient.”

5. New household technologies allow more time for family and leisure:

“With less time going to household work, more time is spent on leisure. Leisure increases also come about because of rising wages; as basic needs are met, individuals are more likely to choose leisure over work. Incorporated into the definition of leisure is time spent caring for children. The time devoted to childcare has risen for both men and women.”

6. The pace of U.S. innovation has slowed in the past 4 decades:

“Innovation contributes to economic growth as businesses use new technologies and ideas to produce more with fewer resources.” However, total factor productivity growth rates (any advancement that has been made in how to use existing resources to increase overall output and incomes) have slowed from 1.9% annually before 1973, to 0.7% today.

7. Innovation has failed to increase wages for a substantial number of Americans:

” Earnings for men in the middle of the income distribution have actually declined by around 28 percent since 1969 because of stagnating wages for those men that do work and because of declining employment rates…. in part due to a failure to increase educational attainment.”

U.S. women have increased their educational attainment and improved their incomes. The rate of bachelor degree attainment by men has stagnated and has only recently returned to the 1975 rate of about 27%. Men’s median earnings have actually been declining in 2010 dollars since the 1970s.

8. Significant barriers to innovation exist in the government and the private sector:

We need effective government policy and laws to protect intellectual property, and to protect the health and welfare of everyone, but can’t be onerous with overlapping, redundant or inconsistent rules. In 1990, the average wait time on patent approvals was 1.5 years, today it is nearly 3 years.

In the private sector, organizational change resistance must be avoided. We also need to recognize it does take time for organizations to adapt new technologies for which no existing infrastructure exists to help them take advantage of new tools and approaches.

9. Federal support for research and development has decreased in recent years:

“Government investment in research and development (R&D) as a percent of GDP has declined from a high of 2.2 percent in 1964 to 1 percent today. Support of federal R&D spending is critical to U.S. innovation because government can sponsor the kind of “basic” research projects that seek wide-ranging scientific understanding that can affect entire industries, rather than individual firms.”

“The U.S. government has historically funded about half of all basic research, whether done within the government or at universities. Less than 5 percent of R&D performed by industries is in basic research.”

10. Relatively few U.S. college students study fields critical to innovation:

“The United States lags behind other countries in training students in STEM fields that help advance scientific and technological progress. The share of post-secondary degrees in STEM fields is twice as high in South Korea as it is in the United States.”

The current share of U.S. degrees awarded in Science, Technology, Engineering, and Math (STEM) majors is 15%, the same rate as in the 1970s.

11. American women are less likely to continue in STEM fields than American men:

The percentage of women earning a bachelors degree in a STEM field grew from about 15% in 1965 to about 35% in 2000. However, since 2000 the rate has remained the same. Women’s progress at advanced academic levels is not being realized, and their employment in STEM fields has flattened since 1995.

“The data still suggest that there is a leaky pipeline moving women from undergraduate study in STEM to more advanced study and employment in those fields.”

12. U.S. policy makes it difficult for international students to stay and work:

“In 2006, more than 30 percent of all PhDs in the United States were awarded to noncitizens. Noncitizens made up an even larger share of PhDs in science, technology, and math (STEM) fields—about 47 percent. Moreover both the share of all PhDs going to noncitizens and the share of STEM PhDs going to noncitizens have been increasing rapidly in recent years.”

U.S. immigration policy appears to be hindering their ability to stay and work in America and they are returning to their home countries of India and China.

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Roy Luebke is an innovation expert focused on discovering new, customer-driven opportunity areas to help define the future of a company. He is inspired by knowledge and learning, and applying structured tools and methods at the crossroads of strategy and innovation to achieve business growth.