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Wednesday, June 07, 2006

The 'Creative Economy' and the Future of the American Worker

Richard Florida of George Mason University writing in Cato Unbound says developing the creative class is the key to success in the global economy:

The Future of the American Workforce in the Global Creative Economy, by Richard Florida, Cato Unbound: ...American economic experts and policy-makers are rightly preoccupied with the emergence of behemoths like India and China, which offer huge markets, capable workforces, and cost advantages. Unfortunately, they overlook a subtler but even more profound shift in the nature of global competition. ... where knowledge, innovation, and creativity are key. At the cutting edge of this shift is the creative sector of the economy: science and technology, art and design, culture and entertainment, and the knowledge-based professions.

The U.S. is at the forefront of this global creative economy. Over the next decade, it’s projected to add 10 million more creative sector jobs, according to the newest numbers from the Bureau of Labor Statistics. At the present rate of increase, creative jobs alone will soon eclipse the total number of jobs in all of manufacturing. ...

Such remarkable job growth goes far beyond technology and engineering. While the U.S. economy will add 950,000 computer jobs and another 195,000 in engineering, the biggest gains by far will be in health care and education, which will add more than 3.5 million. Jobs for college professors alone are projected to increase by more than half a million. Arts, music, culture, and entertainment will contribute some 400,000 new jobs. That’s twice as many as engineering.

The rise of this global creative economy changes the rules of international competition in four crucial ways.

First, it makes talent the fundamental factor of production. Economic advantage no longer depends on natural resources, raw materials, trade of goods and services, giant factories, or even growing consumer markets. The real source of value creation, and therefore of international competitiveness, is creative talent. ...

But ..., places around the world have stepped up their efforts to skim off talent. China and India are stepping up their efforts to attract back their own top scientists and entrepreneurs, while Canada, Australia, and many European and Scandinavian nations bolster their efforts to attract leading graduate students, scholars and cultural creatives from around the world.

The U.S. should not be worried about losing out on the low-cost, low-skilled end of the global labor market; it should be worried about other countries slowly chipping away at its ability to grow, attract, and retain top creative talent. ...

Second, the new playing field makes regions the fundamental economic and social organizing unit of the world economy. True, technology enables the diffusion and decentralization of economic activity... But the tremendous productivity and creativity gains that spring from high density give shape to a powerful counterforce: geographic clustering and concentration.

As a result, the cutting edge of the world economy is taking shape around a relatively small number of regions...  This clustering of talent is just as prevalent in the emerging economies, especially India and China... A small number of booming mega-regions like Bangalore, New Delhi, Shanghai, Beijing, and Guangzhou are sucking talent from the countryside, connecting to the world economy, and leaving the rest of their countries behind. Within these regions, too—as within U.S. metros—the economic divide between high-skilled and low-skilled is growing.

Third, the very forces of concentration fueling the growth of the global creative economy are also creating powerful new social, cultural, and political divides in the United States. UCLA economist Ed Leamer has dubbed this division “geeks vs. grunts.” But it’s more aptly seen as a growing divide between those who enjoy higher-paying higher-skill work in the creative sector and those who do lower-wage lower-skill service work.

It’s no coincidence that these are the two sectors of the U.S. economy enjoying rapid growth. Alongside its 10 million new creative sector jobs, the U.S. economy will add another 5 million, mostly low-paying, service jobs over the coming decade... Impressive figures: until one considers that these jobs pay a third of those in the Creative Economy, and half of what manufacturing workers make. ...

The task facing economic leaders of the 21st century is not simply how to spur technology and innovation, but how to recreate the large pool of high-paying but relatively low-skill jobs that were once the hallmark of our broad middle-class society.

Since not everyone can be a scientist, artist, or professional, and since a large number of manufacturing jobs simply will not be coming back, the best strategy may be to elevate the millions of new service-sector jobs our economy is generating into secure, respectable, high-paying jobs. ...

There are those who say that market forces conspire to keep wages for these jobs low, and others who say that the only way to improve them is with massive government intervention. But companies all across the United States and the world—from Starbucks and Whole Foods to Target and the Container Store—are devising strategies to upgrade service work. They are bumping up pay and benefits, and enabling employees to use their creative talents to serve customers better...

Perhaps the best example is Best Buy, which employs 90,000 people... Best Buy CEO Brad Anderson has made it his company’s stated mission to provide an “inclusive, innovative work environment designed to unleash the power of all of our people as they have fun while being the best.”

Employees are encouraged to improve upon the company’s work processes and techniques in order to make the workplace more productive and enjoyable while increasing sales and profits. In many cases, a small change made on the salesroom floor—by a teenage sales rep ... or an immigrant salesperson  ... has been implemented nationwide, generating hundreds of millions of dollars in added revenue. ...

Fourth, the creative economy is giving rise to even more extreme divides globally between the relatively small number of advantaged regions and the rest of the world. ... Even as world-class scientists return to exploding creative centers in China and India, the poorest countries and regions around the world continue to export more than half of their scientific and engineering talent to the advanced economies... Economic disparity is rising...

So while it’s crucial to spur investment in science and engineering, ..., business and government leaders must also recognize that the leading sources of job growth in the creative economy come from sectors outside of high-tech. To continue down the current path will mean far greater regional concentrations of wealth, mounting economic inequality, growing class divides, and eventually worsening political tension and unrest within countries and on a global scale. It’s time to wake up to the new realities of the creative economy, and stop developing policy for a bygone industrial age...

I'm not sold that the private marketplace will "upgrade service work ...  bumping up pay and benefits" so I am not going to pin my hopes on this alone, but it will be nice if it works out as he envisions.

But I do agree, of course, that policymakers should be asking questions about how to best use scarce government resources to prepare for the future. Are tax cuts on business profits to encourage investment in manufacturing better than, say, a tax cut for low and middle class parents with kids in college or perhaps returning art and music classes to our public schools to develop creativity? As we consider reducing or eliminating particular taxes, or increasing or decreasing government spending in particular areas, the extent to which the policy changes are expected to help prepare workers for the global economy needs to be a bigger part of the conversation.

    Posted by on Wednesday, June 7, 2006 at 11:01 AM in Economics, Technology, Universities | Permalink  TrackBack (0)  Comments (76)

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