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U.S. High-tech Jobs Lost as Technological Lead Shrinks

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U.S. High-tech Jobs Lost as Technological Lead Shrinks

Product, Design and Development  |  January 17, 2012

The United States lost 28 percent of its high-technology manufacturing jobs over the last decade, as the nation’s rapidly shrinking lead in science and technology in the global marketplace was accompanied by a toll on U.S. high-tech jobs, according to a new study released today by the National Science Board (NSB), the policy making body for the National Science Foundation.

One of the most dramatic signs of this trend was the loss of 687,000 high-technology manufacturing jobs since 2000. U.S. multinational corporations also created research and development (R&D) jobs overseas at an unprecedented rate. Meanwhile, China became the world leader in high-technology trade and, for the first time, Asia matched the United States in R&D investments.

Those were among the key findings released today by the NSB, as it unveiled the most comprehensive and up-to-date information and analysis on the nation’s position in science and technology. The biennial report, Science and Engineering Indicators (SEI), highlights trends and factors that have an impact on the nation’s economy, competitiveness and innovation capacity. 

U.S. employment in high-technology manufacturing reached a peak in 2000, with 2.5 million jobs. The recession of 2001 provided the first big hit causing “substantial and permanent” job losses, the report said. By the end of the decade, more than a quarter of the jobs were gone.

Click Here“The latest data clearly show the economic consequences of the eroding competitive advantage the United States has historically enjoyed in science and technology,” said Dr. José-Marie Griffiths, chairman of the NSB committee that oversees production of the report. “Other nations clearly recognize the economic and social benefits of investing in R&D and education, and they are challenging the United States’ leadership position. We’re seeing the result in the very real, and substantial, loss of good jobs.”

“The volume gives a clear picture of the United States’ position in globalization,” Griffiths said. “Over the last decade, the world has changed dramatically. It’s now a world with very different actors who have made advancement in science and technology a top priority. And many of the troubling trends we’re seeing are now very well established.”

U.S. Firms Create More R&D Jobs Abroad

On top of the lost manufacturing employment, U.S. multinational corporations are rapidly expanding their R&D jobs overseas. From 1994–2004, U.S. firms established R&D jobs abroad at a relatively slow annual rate of 3 percent, increasing the share of their R&D employment overseas from 14 percent to 16 percent. But according to preliminary figures,in the five years after that (2004–2009, the number of new R&D jobs overseas took off, growing to 27 percent of all R&D jobs at these U.S. firms. Since 2004, about 85 percent of R&D employment growth in U.S. multinational corporations has been abroad.   

That rapid increase in employment by U.S. firms abroad contrasts with very modest growth in R&D employment in the United States by foreign companies. 

“This apparent acceleration of U.S. R&D jobs overseas, along with other indicators, suggests that the capabilities of Asian countries are strong enough to accommodate such a rapid shift,” said Rolf Lehming, NSF’s program director for the report. “The policies of Asian governments appear to be paying off for them, and U.S. companies seem to be confident in the quality of R&D work done abroad.”

The relative shift of R&D to Asia also can be seen in overall expenditures. The United States still does more R&D than any other single country, spending $400 billion in 2009. But, for the first time, the Asian region has nearly matched the United States, with R&D expenditures of $399 billion.

Reversed Positions on High-tech Trade

Recent trends also are reflected in the dramatic change in shares of global high-tech exports. After growing from 19 percent to 22 percent between 1995 and 1998, by 2010 the United States’ share of the global high-tech exports had dropped to 15 percent. At the same time, China’s share nearly quadrupled, growing from 6 percent in 1995 to 22 percent in 2010. 

Asia now produces more than half of all high-tech goods exports worldwide, while the United States and European Union countries each produce 15 percent. During the 15-year period from 1995 to 2010, Japan’s share fell from 19 percent to 7 percent.

Until 1997, the United States enjoyed surpluses in trade of high-tech goods. But by 2010, those surpluses had turned into large annual trade deficits of nearly $100 billion, largely driven by the shift in production of communications and computer goods to Asia at a time of growing U.S. demand. At the same time, China’s 2010 high-tech trade surpluses reached $157 billion, while eight Asian countries (excluding China and Japan) collectively enjoyed trade surpluses of $226 billion.

Prepared biennially for the president and Congress, the comprehensive, 575-page Science and Engineering Indicators 2012 reportprovides information on the scope, quality and vitality of

America’s science and engineering enterprise. It is a policy-neutral document, providing facts widely used by policy makers, federal agencies, researchers and the news media.

Other key findings in the report include:

  • Three countries—the United States, China and Japan—were responsible for more than half of the world’s $1.28 trillion in R&D spending in 2009. (China overtook Japan during the last decade to become the second-largest R&D-performing nation.)
  • Between 1999 and 2009, the United States’ share of R&D dropped from 38 percent to 31 percent; the EU’s share declined from 27 percent to 23 percent; and the Asian region grew from 24 percent to 32 percent. 
  • Many Asian countries have increased their investment in R&D relative to their GDP, with China almost tripling its R&D/GDP ratio since 1996. The United States’ R&D/GDP ratio recently has edged upward, while that of the EU has remained steady.
  • The developed world’s lead in higher education has declined dramatically. In 2008, only 4 percent of the world’s engineering degrees were earned in the United States, while 56 percent were awarded in Asia, including one-third in China.
  • The number of natural sciences and engineering doctorates awarded by Chinese universities has more than tripled since 2000. At 26,000 awarded in 2008, the number of these Chinese doctorates now exceeds the number earned in the United States. And, unlike in China, a large share of these U.S. doctoral degrees are awarded to foreign students. In 2009, 44 percent of the 24,700 U.S. natural sciences and engineering doctorates were awarded to temporary visa holders. Some 57 percent of engineering doctorates were awarded to foreign students.
  • American industry, which historically has supported about 60 percent of U.S. R&D, reduced R&D funding by nearly 4 percent in 2009. (A rise in U.S. government R&D funding under the American Recovery and Reinvestment Act partially offset the private-sector reduction.)
  • Job losses from the 2007–2009 recession were less severe for science and engineering workers than for the U.S. workforce as a whole. In 2010, the median income for workers in science and engineering jobs ($73,290) was more than double the median income of all U.S. workers ($33,840).

SEI is prepared by NSF’s National Center for Science and Engineering Statistics (NCSES) on behalf of the National Science Board. The publication is subject to extensive review by outside experts, other federal agencies, National Science Board members and NCSES internal reviewers.

14 Responses to “U.S. High-tech Jobs Lost as Technological Lead Shrinks”

  1. Mo says:

    Asia is printing money out of thin air to fund industrial development while the US prints new money out of thin air to fund the outsourcing of jobs, factories, technology tranfers overseas, infrastructure spending abroad, overseas military bases and the consumption of foreign subsidized manfuactured goods.

  2. alex says:

    Bring back the TEXTILE INDUSTRY and create 10 million jobs in one year alone.How stupid or bought are our leader?

  3. Mo says:

    The structural problem the US has is that the money the US prints out of thin air goes into funding the outsourcing of jobs, factories, technology transfers overseas, infrastructure spending abroad, overseas military bases and conflicts and the consumption of subsidized foreign made manufactured goods with debt. The US appears to have an unofficial outsourcing policy because there are tax cuts and various subsidies to produce abroad. For example with the bailouts, a lot of US multinationals took the money to build plants overseas.

    Germany, Japan and China are an interesting mix of countries. They have higher and lower taxes than the US, higher and lower labor costs, higher and lower regulations, stronger and weaker exchange rates, some are endowed with natural resources and some not, yet they all have trade surpluses and a large manufacturing sector because the money they print is used to fund industrial activity within their countries.

    The argument comes up frequently that companies move abroad because US workers do not have the skills and that taxes are lower overseas. Yet the unemployment rate among engineers and high tech workers is averaging 5-7% in the US. Additionally countries that companies outsource to actually have higher corporate tax rates then the US when you count the tax rate on dividends. Yes on paper the US corporate tax rate is high and should be lowered but after the various deductions, exemptions and credits however, the average effective tax rate becomes something like 15-20%.

    Lastly, the argument is made that the large number of regulations in the US is a burden that causes outsourcing. Yes some regulations are very burdonsome and should be either repealed or revised but the World Bank’s Ease of Doing Business Index ranks the United States the 4th easiest country to do business in. China is ranked 87, India at 139 and Germany at 19. The Heritage foundation ranked the US 9th in blended economic freedom. Also when it comes to Unions, only about 6.9% of the private US workforce belong to a Union. So the decline of US manufacturing is not natural occurrence but happening through government intervention relating to bad trade policies

  4. Bruce Bishop says:

    “Ease of Doing Business,” is not the same as “cost.” Compare, for example, Tiffany’s, with the jewelry department at BigBoxMart.

    According to Paul Craig Roberts, “The offshore outsourcing of American jobs has nothing to do with free trade based on comparative advantage. Offshoring is labor arbitrage.” P15, “How The Economy Was Lost.”

    Roberts further states: “Economists have failed to examine the incompatibility of offshoring with free trade.” ibid, P25.

    The Heritage Foundation has sold us out. Their labor guy, James Sherk, claims that our manufacturing job losses were due to automation and robotics and that China had nothing to do with it. He is either clueless or someone is paying him to lie.

    • Mo says:

      Labor arbitrage is a monetary phenomenon that depends on competitors printing new money out of thin air faster then the US so that based on paper exchange rates foreign labor becomes artifically cheaper. To prove my point, when capital like machines gets outsourced, real wages should eventually rise in countries that receive the capital because with machines workers can make more goods per hour, day, year etc. Countries that lose capital should have real wages decline like the what is occurring in the US. So countries with more capital per worker should have higher real wages and a higher valued exchange rate as more products are demanded from countries that produce more goods per hour,day, etc. But this is not occurring because some countries just keep printing new money faster so based on paper exchange rates it keeps making labor and product costs artifically cheaper. Trade today is now a money printing out of thin air and accounting game.

      • Bruce Bishop says:

        Mo,

        Are you saying that the reason why a toaster that costs $256 when manufactured in the U.S., costs only $25 when manufactured in China, is because the Chinese are printing money faster than we are?

        How much of the difference between the $256 price and the $25 price would you attribute to currency manipulation? How much of the difference would you attribute to the difference in labor cost between China ($.50/hour) and the U.S. ($15/hour)?

        • Mo says:

          To respond to some of your previous comments first, if automation was the reason for the loss of 60,000 factories since 2000 then more goods would say made in the USA. The number of factories decreased from about 402,000 in 2000 to about 340,000 in 2011.

          I mentioned the ease of business index because I’m sure that some of the people that cite regulation as a problem work for the heritage foundation. So if regulation was so burdensome why is the USA number 9 in ease of business which is 10 times higher than the countries some US companies outsource to?

          Now to address your question about the toasters. If countries like China didn’t print money faster then the US, then considering China’s huge reserves of FX it’s conceivable that the exchange rate between the dollar and yuan could possibly be 1 to 1. If the exchange rates were hypothetically 1 to 1 or par, then the cost to make the toaster in China would cost $162.50 just based on exchange rates alone. This is not including other variables.

          If it was just labor cost alone to explain why the toaster was cheaper to make in China, then if it costs $15 an hour to hire US labor and $0.50 an hour for Chinese labor then the toaster should only be like $15 higher in price if it was made in the US. The real reason in my opinion why the toaster is being sold cheaper is because they are dumping products below cost where either the foreign central bank, development banks or industrial banks creates new money out of thin air to cover the difference between cost to make and price sold below cost abroad. The government does this so they can acquire US dollars which they’ll try to use to buy up US companies and their technology. While other countries have industrial policies which is fancy name for printing money to manufacture goods, the US has an unofficial outsourcing policy where the US prints money out of thin air to fund outsourcing.

          • Tom T. says:

            Mo, you bring up an interesting analysis. The fact is that without a market economy, EVERYTHING is skewed based on what the rule makers want to happen. Chinese companies can easily predate U.S. industries and capture that part of the economy. It suppresses the demand that the suppliers would otherwise earn in the economy and breaks the back of the free market capitalist model by using these global forces. Our politicians are fools for allowing this to happen and the pundits that follow the free trade mantra are just as foolish.

            Bruce is correct that the labor costs do matter. The fact is that the Chinese government manipulates this value to the detriment of U.S. industries. The Chinese making the 50 cents per hour have just enough to live on (maybe) while the communist government captures their value to use strategically in their collusion with the merchant “free traders” in our economy to undermine the profitability of the suppliers in the economy.

            Tom T.

          • Bruce Bishop says:

            The general consensus among economists appears to be that China’s currency is undervalued by around 40%.

            I don’t understand how bringing it up to par with the U.S. dollar would shoot the cost of the Chinese toaster from $25 to $162.50.

            Could you please explain?

  5. Mo says:

    To respond to some of your previous comments first, if automation was the reason for the loss of 60,000 factories since 2000 then more goods would say made in the USA. The number of factories decreased from about 402,000 in 2000 to about 340,000 in 2011.

    I mentioned the ease of business index because I’m sure that some of the people that cite regulation as a problem work for the heritage foundation. So if regulation was so burdensome why is the USA number 9 in ease of business which is 10 times higher than the countries some US companies outsource to?

    Now to address your question about the toasters. If countries like China didn’t print money faster then the US, then considering China’s huge reserves of FX it’s conceivable that the exchange rate between the dollar and yuan could possibly be 1 to 1. If the exchange rates were hypothetically 1 to 1 or par, then the cost to make the toaster in China would cost $162.50 just based on exchange rates alone. This is not including other variables.

    If it was just labor cost alone to explain why the toaster was cheaper to make in China, then if it costs $15 an hour to hire US labor and $0.50 an hour for Chinese labor then the toaster should only be like $15 higher in price if it was made in the US. The real reason in my opinion why the toaster is being sold cheaper is because they are dumping products below cost where either the foreign central bank, development banks or industrial banks creates new money out of thin air to cover the difference between cost to make and price sold below cost abroad. The government does this so they can acquire US dollars which they’ll try to use to buy up US companies and their technology. While other countries have industrial policies which is fancy name for printing money to manufacture goods, the US has an unofficial outsourcing policy where the US prints money out of thin air to fund outsourcing.

  6. Mo says:

    Tom manufacturing costs in China now average $1.36 an hour in US dollars. However if the exchange rate was 1 to 1, the cost of labor per hour in China would be at least $9 an hour.

    Furthermore, a comment from the article linked below makes the following good points:

    How meaningful are comparative labor cost without factoring in ‘cost of living.’ A worker in China making $1.36 per hour is low. But, if housing and food are subsidizes and free medical, no pension contribution, etc. all that has to be factored into the cost of manufacturing. China has specialized industrial cities like the one where all the Apple and other electronic products are made. To know the cost of manufacturing in such cities all the various subsidized cost of living have to factored in. When it is, the cost of labor component of manufacturing is more than $1.36 per hour

    http://www.economicpopulist.org/content/china-and-india-really-are-cheap-labor-manufacturing

  7. Mo says:

    Bruce, the average Chinese labor cost per hour in US dollars comes out to $1.36 which does not include the various government subsidies like free housing to workers, etc. That cost of $1.36 in dollars is based on the exchange rate between the dollar and yuan at about something like 6.5 Yuan to the dollar. If the exchange rates were at par, $1.36 x 6.5 would equal $8.84. Yes economists say the currency is undervalued by 40% but we don’t know how really undervalued it is or even possibly how overvalued it is because there are various price controls in China.

    How the currency manipulation really works is that for each dollar invested in China the government gives something like 6.5 Yuan. This would be equivalent to the US giving each European investor 6.5 dollars for each Euro invested in the US. So it’s a subsidy for foreign investors to invest in China which gives them more leverage to bid for resources like labor and etc. But when it comes to price advantage in goods, the currency manipulation is in my opinon not what gives them the main advantage, it’s the industrial policies where the government prints new money and gives it to their companies so that they can subsidze them selling products overseas below cost.

    When it comes to the toaster’s cost for example, an undervalued exchange rate would causes prices for imported raw materials to become artifically higher. So even if they make labor artifically cheaper they cause the price for raw materials to be artificially higher. But if it was just a labor cost difference to explain why the toaster was cheaper to make in China, then the price of the toaster made in China should only be $15 dollars cheaper. What explains the big difference in price between the $25 cost to make in China and the $256 cost to make in the USA if it’s not industrial policy?

    • Bruce Bishop says:

      Mo,

      If I understand you correctly, the $365 billion of goods we imported from China in 2010 would have cost us $2,372 billion (6.5 times) were it not for China’s currency manipulation.

      So, are you saying that China is absorbing the extra $2 trillion in costs that we would be paying if there were no currency manipulation?

      It appears that you are assuming a labor component of about 6% of total cost, ($15/$256). The mistake often made when considering labor cost is to overlook the “labor” components of materials and overhead. Every human input in China costs about one twentieth, or less, of what it would cost here. This would include the costs of machinery, tooling, facilities and energy.

      • Mo says:

        Bruce, assuming the exchnage rate between the dollar and yuan was at par and there were no changes in productivity, no price controls, and industrial policies then yes goods imported from China would cost more. It’s hard to say if it would cost an extra 2 trillion to import from China if exchange rates were on par because as prices for Chinese imports rose, it could cutback demand or cause production to occur in other countries like even the US.

        When it comes to undervalued exchange rates, the analysis can be tricky because the nominal exchange rate could be undervalued but goods could still cost more to produce in countries that have an undervalued nominal exchange rate. For example, the exchange rate between the dollar and yuan might be undervalued at 6.5 yuan to the dollar because it’s set by the government, but if wages and input costs are rising for example like 30% YOU then it would cost more to produce there. And it would cost even more if a lot of the inputs have to be imported by the country with an undervalued exchange rate.

        Referenced from the article linked below is a list of some of the methods China has adopted in recent history to suppress domestic demand and keep prices down which helps to subsidze their export sector:

        A) Strict price controls. (ie: Large wholesalers must seek central government approval if they want to raise prices by 6 percent within the space of 10 days or by 10 percent within a month.)
        B) Credit ceilings. (limits on how much commercial banks can lend)
        C) Floors on lending rates and ceilings on deposit rates
        D) Strict rules governing lending decisions
        E) Tight land purchase and lending requirements
        F) Direct government intervention to limited expansion in certain industries (ie: aluminum, steel, autos and textiles sectors in 2004)
        G) Penalty taxes on anyone buying and selling real estate in a short period of time.
        H) Forcing local government to cut back spending by delaying approval of their investment projects
        I) High sales taxes.
        J) Etc…

        When it comes to labor costs. It’s estimated that labor can cost as low as 10% to as high as 50% of a product’s cost with most economists estimating the average labor cost being around 30%. Assuming labor costs were 50%, the toaster should cost $128 to make. In my opinion it has to be some sort of industrial policy allowing for costs to be as low as they are.

        Yes labor costs in China are still cheaper then the US when comparing costs in US dollars which is due to exchange rate and industrial policies. The capital-labor ratio of a country is what sets the height of real wages. Because the US had a higher ratio of capital to labor than China, US real wages were higher in the recent past. Now that the US has lost over 60,000 factories since 2000, real wages in the US should be lower or declining which they are and wages in countries that have increased their capital-labor ratio should be increasing which China slowing is.

        The adjustment of real wages would have occurred much faster if global money was sound meaning it was backed by a commodity like gold or silver because then it would have been hard to create money out of thin air to implement industrial policies.

        http://www.marketskeptics.com/2009/01/hyperinflation-will-begin-in-china-and.html

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