ITIF Calls End to Saturday Postal Service a ‘Step in the Right Direction’

WASHINGTON (February 6, 2013) – The Information Technology and Innovation Foundation (ITIF) applauded the United States Postal Service’s (USPS) announcement that it would be ending Saturday mail delivery. But ITIF argues more comprehensive reforms are required to address budget shortfalls and better align the agency with the needs of the Information Age. Read more »

I (Want) Robot

January 17, 2013
| Blogs & Op-eds

Automation, whether it's robots, computers, or machine tools, has never led to an increase in unemployment, and more importantly never will. Both history and scholarly analysis have clearly and consistently refuted the notion that increased productivity (through automation, self-service or robots) leads to higher unemployment in the moderate or long-term.

Walmart, Jobs and the Rise of Self-service Checkout Tech

Daniel Castro, a senior analyst at the Information Technology & Innovation Foundation, says whether the technology affects employment depends on how checkout kiosks are used.

Postal Delay in Congress Hastens Risk of Mail Stoppage

Bloomberg Businessweek
Rob Atkinson predicted that lawmakers will be forced into a last-minute deal later this year, as the Postal Service comes closer to running out of money and the public hears more about the prospect of an end to mail delivery.

In Chile, firms with greater ICT use achieved total factor productivity (TFP) 40 percent higher than those with lower ICT use.

ICTs are so powerful precisely because they enhance the productivity and innovative capacity of every individual, firm, and industry they touch throughout economies-and this holds true for developed and developing countries alike. In fact, ICT workers contribute three to five times more productivity than non-ICT workers. In Chile, firms with greater ICT use achieved total factor productivity (TFP) 40 percent higher than those with lower ICT use. ICT is just as vital to enabling innovation as to boosting productivity. Read more »

The 2012 State New Economy Index

December 6, 2012
| Reports

Read the Chinese Translation of the 2012 State New Economy Index. 

More than three years on from the end of the Great Recession, only six states have regained employment levels enjoyed prior to the recession, and 17 states are still more than 5 percent below their pre-recession employment levels. As many state economies continue to struggle through the lingering effects of the Great Recession, a question commonly asked is, “What is this seemingly invisible force that prevents the economy from returning to prerecession and especially 1990s growth rates?” In other words, why is it that, despite massive monetary and fiscal stimulus, employment seems locked in a persistent malaise? Some argue that the problem is a lack of consumer demand and that more federal government stimulus spending is the answer. Others argue that it is uncertainty over the massive national debt and that fiscal austerity is the answer. However, one diagnosis that has gone largely unnoticed holds that this invisible force is the decline in the competitiveness of the U.S. economy in the global marketplace. As ITIF points out in Innovation Economics: The Race for Global Advantage, this decline has been a relatively untold story over the past decade, although its symptoms have clearly manifested in the dramatic fall in manufacturing employment and investment since 2000. The failure of the United States to adapt to a global economy that is evermore dependent on knowledge and innovation for growth—the so-called “New Economy”—is causing traded sector firms, and manufacturers in particular, to look to other, more competitive countries when it comes to choosing locations. And this loss of traded sector activity, including jobs and investment, holds back the entire U.S. economy and its component state economies as well.

For the United States to be competitive, one key will be to compete more on the basis of innovation and entrepreneurship, and less on cost. With a globalized economy enabling easy access to low-cost production systems in nations like China, India, and Mexico, U.S. competitive advantage will continue to be found in making things and providing traded services that other nations are unable to make or provide as easily or as efficiently. And success in this means, among other things, having a workforce and jobs based on higher skills; strong global connections; dynamic firms, including strong, high-growth startups; industries and individuals embracing digital technologies; and strong capabilities in technological innovation. These keys are the same for state economies and this is why the State New Economy Index focuses on these five areas. 

The 2012 State New Economy Index builds on prior State New Economy Indexes published in 1999, 2002, 2007, 2008 and 2010. Overall, the report uses 26 indicators, divided into those five key areas that best capture what is new about the New Economy:

  1. Knowledge jobs
  2. Globalization
  3. Economic dynamism
  4. The digital economy
  5. Innovation capacity

The state that is farthest along on the path to the New Economy is Massachusetts, as it has been in all previous editions of the State New Economy Index. Boasting a concentration of software, hardware, and biotech firms supported by world-class universities such as MIT and Harvard, Massachusetts survived the early 2000s downturn and was less hard hit than the nation as a whole during the Great Recession, at least in terms of job growth and per-capita income growth. However, Massachusetts no longer holds the commanding lead it held in the 2010 index; in this edition, it shares the top quartile with Delaware, Washington, California, and Maryland. Second-place Delaware is perhaps the most globalized of states, with business-friendly corporation law that attracts both domestic and foreign companies and supports a high-wage traded service sector. The state has moved up four ranks from 2010, driven by big improvements in entrepreneurship levels, R&D investment, and movement toward a green economy. Washington state, in third place, scores high due not only to its strength in software aviation, but also because of the entrepreneurial hotbed of activity that has developed in the Puget Sound region, and heavy use of digital technologies in all its sectors. Fourth-ranked California thrives on innovation capacity, due in no small part to Silicon Valley and high-tech clusters in Southern California. California also still dominates in venture capital, receiving 50 percent of all U.S. venture investments, and also scores extremely well across the board on R&D, patent, entrepreneurship and skilled workforce indicators. Maryland occupies fifth place and Virginia sixth. Their high rankings are primarily due to high concentrations of knowledge workers, many employed with the federal government or related contractors in the suburbs of Washington, D.C. Colorado, in seventh place, maintains a highly dynamic economy along with an educated workforce. The state is also a hotbed for venture capital investment in the middle of the country, ranking behind only California and Massachusetts. Eighth-place Utah is ranked number one in economic dynamism while it ranks third in digital economy factors. Moreover, its high-tech manufacturing cluster centered around Salt Lake City and Provo support its first-place ranking in manufacturing value added. Ninth-place Connecticut’s success is not based on any one area or indicator. In fact, Connecticut does not rank first on any of the 26 indicators; however, the state scores highly across most indicators, having a highly educated population, strong defense and financial industries, and robust R&D investment. New Jersey’s strong pharmaceutical industry, coupled with a high-tech agglomeration around Princeton, an advanced services sector in Northern New Jersey, and high levels of inward foreign direct investment help put it in tenth place. However, relative to its peers, the state has declined in many categories—most notably in entrepreneurial activity, health IT, and initial public offerings—which explains its fall from its fourth-place ranking in 2010.

Overall Ranking:    
1. Massachusetts 18. Georgia 35. Nebraska
2. Delaware 19. Michigan 36. Hawaii
3. Washington 20. Illinois 37. Montana
4. California 21. Florida 38. Iowa
5. Maryland 22. Pennsylvania 39. Tennessee
6. Virginia 23. Rhode Island 40. South Carolina
7. Colorado 24. Idaho 41. Wyoming
8. Utah 25. North Carolina 42. Indiana
9. Connecticut 26. Nevada 43. South Dakota
10. New Jersey 27. Maine 44. Louisiana
11. New York 28. Alaska 45. Kentucky
12. New Hamphsire 29. Kansas 46. Alabama
13. Minnesota 30. New Mexico 47. Oklahoma
14. Oregon 31. Wisconsin 48. Arkansas
15. Vermont 32. Ohio 49. West Virginia
16. Arizona  33. Missouri 50. Mississippi
17. Texas 34. North Dakota  

The two states whose economies have lagged the most in making the transition to the New Economy are Mississippi and West Virginia. Arkansas, Oklahoma, Alabama, Kentucky, Louisiana, South Dakota, Indiana and Wyoming round out the bottom 10. Historically, the economies of many of these Southern and Plains states depended on natural resources or on mass-production manufacturing, and relied on low costs rather than innovative capacity to gain competitive advantage. But, in the New Economy, innovative capacity (derived through universities, R&D investments, scientists andengineers, highly skilled workers, and entrepreneurial capabilities) is increasingly the driver of competitive success. To improve their economic fortunes, states’ old economy economic development policies must be adapted to the hyper-competitive New Economy, with states developing comprehensive “innovation strategies.” These strategies should focus on three key policy areas:

  1. policies to reduce zero-sum competition;
  2. policies to spur “win-win” economic results;
  3. policies to support the traded sector—manufacturing in particular. 

On the first, states should take steps to limit local communities’ within-state zero-sum competition and also work to reduce zero-sum competition with other states. On the second, states can expand incentives and programs to spur win-win results that benefit both their state and the nation as a whole by investing in areas that promise long-term growth and innovation. Although many states are facing tough fiscal environments, states can and should also work creatively to identify policies that can spur innovation on a budget, essentially embracing a “poor man’s innovation policy.” And on the third, both states and the federal government need to implement what ITIF calls the “4Ts” of manufacturing policy: tax, trade, technology and talent policy. While trade is mostly in the realm of the federal government, there are many policies available to states in the other three areas that can spur traded sector growth. The current challenge of competitiveness and manufacturing decline is more severe than ever before, and on the federal level, our political system seems less able to respond with the kinds of comprehensive solutions that take the best from “both sides of the aisle” than it has been for at least a century. Until federal action is forthcoming, states will be the level of government best positioned to spur on the processof economic revitalization, but only if they stake out new ground and new approaches. States that score highly on the State New Economy Index are best able to face the challenges brought on by the New Economy transformation, while lower-scoring states have significant ground to make up. While low-scoring states would perhaps benefit most from implementing comprehensive and cogent innovation strategies, even the high-scoring states have room for improvement. Indeed, all of the states, and perhaps most importantly, the federal government, need robust innovation strategies in order to compete in the New Economy. Without these, virtually every U.S. state will find itself perpetually stuck in the economic doldrums, unable to reap the job growth and quality of life improvements that the New Economy enables.

Download the 2012 Data Files:

Download the 2012 Indicator Ranks (CSV).

Download the 2012 Indicator Scores (CSV).

Download the 2012 Master Table (PDF).

Service Innovation Policy Benchmarking: Synthesis of Results and 15 Country Reports

December 1, 2012
| Reports

The United States lacks an integrated national service innovation strategy which reduces technological deployment and business development in a range of sectors, from health care to education. In addition, this lack of focus puts American industries at a disadvantage as other nations seeks to develop stronger service innovation policies across business sectors.

Winning the Race 2012 Memos

September 5, 2012
| Reports

As the 2012 presidential campaign moves in the final stage, ITIF is presenting general principles and specific recommendation ideas across several policy areas we believe the next President and Congress should adopt to restore U.S. global competiveness and prosperity.

As chronicled in Innovation Economic: The Race for Global Advantage, the United States is losing its once formidable edge as an innovator. Many other nations are putting in place better tax, talent, technology and trade policies, and reaping the rewards in terms of faster growth, more jobs, and faster income growth. It’s not too late for the United States to regain its lead but it will need to act boldly and with resolve.

Week by week until the November election, the Winning the Race series will put forward creative yet pragmatic ideas in policies affecting taxes, trade, education, broadband, the digital economy, clean energy, science and technology and other areas. Taken as a whole, the series represents a new Innovation Consensus to replace the outdated Washington Consensus.

Memo One (September 3, 2012): Boosting Innovation, Competitiveness, and Productivity

Memo Two (September 10, 2012): Trade and Globalization

Memo Three (September 17, 2012): Corporate Tax

Memo Four (September 24, 2012): Digital Communication Networks

Memo Five (October 1, 2012): Traded Sector Industries

Memo Six (October 9, 2012): Digital Economy

Memo Seven (October 15, 2012): STEM Skills

Memo Eight (October 22, 2012): Clean Energy

Memo Nine (October 29, 2012): Science and Technology

Memo Ten (November 5, 2012): Overcoming the Barriers 

Complete List of Policy Recommendations: Top Policy Recommendations for the Obama Administration to Help the United States Win the Race for Global Advantage

Winning the Race 2012 Memos: Boosting Innovation, Competitiveness, and Productivity

September 3, 2012
| Reports

Since the economy has still not fully recovered from the Great Recession, the challenge for the next administration will be two-fold: restoring U.S. global innovation leadership and driving productivity growth. To achieve robust job growth, the United States needs a growing and competitive “traded sector engine” powered by innovation. America also needs strong productivity growth because it is the surest way of addressing the fiscal challenge presented by the baby boom retirement. The next administration needs to make both top priorities and not be diverted by non-crisis foreign policy challenges or other domestic policy issues. We need the next President to state, to paraphrase John F. Kennedy, “Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of U.S. innovation leadership.”

However, as long as economic policy is a fight between small government, free-market advocates and big government, Keynesian redistributionists it will be difficult to address major economic challenges. The next administration needs to put aside obsolete doctrinal views and focus pragmatically on ensuring that economic organizations in the United States (for-profit, non-profit and gove