Innovation Shortfall and Hiring

On the New York Times Economix blog, David Leonhardt brings up another implication of the innovation shortfall:

The reason that job growth was mediocre in the 2000s and that job losses have been so high during this recession has been an absence of hiring. You can see this in a chart posted here.

In the new issue of BusinessWeek, Michael Mandel offers what strikes me as a potential explanation for the hiring drought:

I agree with David 100%. In fact, the key innovative sectors have proven to be poor job producers over this past decade (see below).

Weak Job Growth in Innovative Sectors
change 1998-2007
(thousands of jobs)
 Semiconductors and electronic components -202
 Telecommunications -137
 Computer and peripheral equipment -136
 Communications equipment -109
 Electronic instruments -66
 Data processing, hosting and related services -15
 Internet publishing and broadcasting and web search portals 19
 Software publishers 40
 Pharmaceuticals and medicines 48
 Scientific research and development services 116
 Computer systems design services 203
 Custom computer programming services 210
Total -29
Data: BLS

Let me point out two things. First, internet publishing and web search—the sector which includes Google—has only added 19,000 jobs over this period. Scientific research services includes biotech, which has only added 29,000.

All told, these sectors have actually lost jobs over that nine-year period. Compare that to the early years of the auto industry, where the new automakers had explosive job growth.

Part of the problem is globalization, but that’s not the whole thing. In the past, innovation tended to produce fast-growing profitable companies, which led to a lot of new hiring. We got that with Google, but we just haven’t had enough big winners.

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