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The False Claim That Inequality Rose During the Great Recession

February 19, 2015 Comments off

The False Claim That Inequality Rose During the Great Recession
Source: Information Technology & Innovation Foundation

ncome inequality has become a major topic of public concern lately, partly as a result of the release last year of Thomas Piketty’s best-selling book on inequality, Capital in the Twenty-First Century, and his writings with his colleague Berkeley economics Professor Emanuel Saez. In 2013, Saez claimed that 95 percent of growth during the recovery from the Great Recession went to the top one percent. Many commentators jumped on these results as a foreboding sign of what was to come in the future and called for a focus on redistribution, rather than growth policies. After all, if the rich are getting all the gains, why focus on overall economic growth?

However, the claim that income inequality grew following the Great Recession is nothing more than a statistical gimmick. In fact, Piketty’s own research shows that the “1 percenters” experienced the largest loss of income from 2007 to 2012. A Congressional Budget Office report found that while the richest one percent of households saw their after-tax incomes decline by 27 percent from 2007 to 2011, the bottom 95 percent saw only one to two percent loss.

This report analyzes the data to provide a clearer picture on income inequality during the last eight years and argues, given these findings, that it would be a mistake to give up on pro-growth policies in favor of a predominant focus on redistribution.

The Myth of America’s Manufacturing Renaissance: The Real State of U.S. Manufacturing

January 30, 2015 Comments off

The Myth of America’s Manufacturing Renaissance: The Real State of U.S. Manufacturing
Source: Information Technology & Innovation Foundation

To listen to most pundits and commentators, U.S. manufacturing has turned a corner and is roaring back after the precipitous decline during the 2000s. Long gone are the dismal days when manufacturing jobs and output were lost due to foreign competition. Higher foreign labor costs, cheap oil and gas here at home and automation are combining to make America the new global manufacturing hub: at least according the now dominant narrative. Indeed, the term “manufacturing renaissance” is used to describe this new state of affairs.

However, as a new ITIF report shows, the data do not support such a rosy scenario. In fact, at the end of 2013 (the most recent year available) real manufacturing value added (the best measure of the health of U.S. manufacturing) was still 3.2 percent below 2007 levels, despite GDP growth of 5.6 percent. Moreover, there are still two million fewer jobs and 15,000 fewer manufacturing establishments than there were in 2007. Much of the growth since 2010 appears to be caused by a cyclical recovery as demand, particularly for motor vehicles and other durable goods, returns. In fact, 72 percent of jobs gained and 187 percent of the heralded real value added growth in manufacturing between 2010 and 2013 came from transportation sector or primary and fabricated metals.

It is true that some jobs are being brought back to the United States. However, reshoring numbers are modest and the manufacturing sector is also still sending jobs overseas, roughly at the same rate. While this new equilibrium between companies coming and going is certainly an improvement over rapid off-shoring, it is hardly indicative of a renaissance.

The Rise of Data Poverty in America

November 3, 2014 Comments off

The Rise of Data Poverty in America
Source: Information Technology & Innovation Foundation

Data-driven innovations offer enormous opportunities to advance important societal goals. However, to take advantage of these opportunities, individuals must have access to high-quality data about themselves and their communities. If certain groups routinely do not have data collected about them, their problems may be overlooked and their communities held back in spite of progress elsewhere. Given this risk, policymakers should begin a concerted effort to address the “data divide”—the social and economic inequalities that may result from a lack of collection or use of data about individuals or communities.

Understanding the U.S. National Innovation System

July 4, 2014 Comments off

Understanding the U.S. National Innovation System
Source: Information Technology and Innovation Foundation

The conventional view of innovation is that it is something that just takes place idiosyncratically in “Silicon Valley garages” and R&D laboratories. But in fact, innovation in any nation is best understood as being embedded in a national innovation system (NIS). Just as innovation is more than science and technology, an innovation system is more than those elements directly related to the promotion of science and technology. Rather, it also includes all economic, political and other social institutions affecting innovation (e.g., a nation’s financial system; organization of private firms; the pre-university educational system; labor markets; culture, regulatory policies and institutions, etc.). Indeed, as Christopher Freeman defined it, a national innovation system is “the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies.”

This report identifies the broad elements that make up a national innovation system, including a description of the innovation success triangle, which measures the business environment, regulatory environment, and innovation environment of a nation, and is used to predict the success of an innovation system in promoting technological development and economic growth. It then uses this framework to analyze the U.S. national innovation system and assess the strengths and weaknesses of individual components and whether those components are improving, stable or deteriorating relative to our competitors. Unfortunately, in many areas the U.S. national innovation system falls behind our global competitors, hampering our ability to foster the innovation that is imperative for success in the 21st century economy.

Worse Than the Great Depression: What the Experts Are Missing About American Manufacturing Decline

March 28, 2012 Comments off

Worse Than the Great Depression: What the Experts Are Missing About American Manufacturing Decline
Source: Information Technology & Innovation Foundation

In the 2000s, U.S. manufacturing suffered its worst performance in American history in terms of jobs. Not only did America lose 5.7 million manufacturing jobs, but the decline as a share of total manufacturing jobs (33 percent) exceeded the rate of loss in the Great Depression. Despite this unprecedented negative performance, most economists, pundits and elected officials remain remarkably blasé about what has transpired. Manufacturing, they argue, has simply become incredibly productive. While tough on workers who are laid off, outsized job losses actually indicate superior performance. All that might be needed are better programs to help laid-off production workers. And there is certainly no need for a determined national manufacturing competitiveness strategy.

+ Full Report (PDF)

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