Tweeners

David Wessel writes in yesterday’s Wall Street Journal about tweeners – those individuals who are neither clear winners or clear losers in globalization.

They’re consumers, as all Americans are, so they enjoy the better quality, lower prices and great choice that imports offer. On the job, they aren’t squeezed hard by overseas competitors but neither do they see much direct benefit from trade. Yet they worry — with some justification — that the combination of globalization, technology and immigration makes their jobs and wages vulnerable. And they fear their children will have even more reason to worry.

He argues that tweeners can’t simply be compensated for their loses:

A smarter approach would be to make those tweeners more economically fit, to find ways to equip Americans to prosper in an economy in which there are more global competitors and more tasks that computers can do and to insure them against the greater volatility of today’s economy in which today’s winner job can be a loser job tomorrow.

I very much like the concept of tweeners as a way of better understanding the complexities of globalization. I am also a long standing proponent of the idea of creating winners (see my 1999 report, Making the Global Economy Work for Every Worker).
But Wessel implicitly accepts the argument that unrestricted global competition is good, even thought he states:

It’s time to stop thinking about globalization as good or bad. It’s both.

I say this because he repeats the following somewhat economic Darwinian idea:

In the quest for better metaphors, Mr. Richardson [J. David Richardson, an economist at Syracuse University’s Maxwell School who is writing a book on this subject for the Institute for International Economics] sees global markets “as a kind of fitness center” for firms, industries, workers and communities. “Those that are fittest grow prosperous and stably. But others, less fit, grow more sluggishly and fitfully. And still others, who consciously try to avoid global competition, face grave health risks.”

According to Wessel,

Mr. Richardson is still working on that chapter. It’ll surely emphasize the urgent need to do better, much better, at education and training and to expand successful experiments that give workers and companies the incentives to do what’s needed — not to pay off losers but to make more winners.

Like Wessel, I am also eagerly looking forward to the book Richardson’s last chapter where he tells us how to make the tweeners more “economically fit”. We will see if Mr. Richardson can come up with any new ideas – or simply recycle the same ones that we all (me included) continue to recite.
My question is how fit they can be to compete for jobs in a world were there are “more global competitors and more tasks that computers can do”. In order to understand how to be economically fit, we need to know, “fit for what.” Right now, I don’t know of anyone who can tell me what the “what” is.
What jobs can US workers compete for when there is a group of very smart, very skilled and very educated workers in other nations who will work at a quarter of your price? How does one get economically fit for that? It is like telling a 50 year man that he needs to start working out so that he can take on Michael Jordon in some one-on-one hoops. Simply put, it ain’t going to happen.
We need a much better set of solutions than the ones we have been talking about for years.

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Getting information right in the information age

One of the premises of the information age is that the information actually tells you what it is supposed to tell you. For example, the unemployment rate tells policymakers how the economy is doing and, for those who worry about inflation, how tight the labor market is. Yet, as a story in The Economist points out, the current low US unemployment number doesn’t necessarily answer the question about the tightness of the labor market.

A new paper by Katharine Bradbury of the Federal Reserve Bank of Boston should keep the question open for a while longer. The unemployment rate, she suggests, may be a poor measure of slack in the labour market. By her yardstick, there may be as many as 5.1m Americans who do not appear in the unemployment rolls, but who might rejoin the job queue if work were more forthcoming. If so, the “true” unemployment rate could be over 8%, not 5%; the true number of jobless 12.6m, not 7.5m.

The reason for the discrepancy is the discouraged worker. People are only counted as unemployed if they are actively looking for a job. If they aren’t, they are considered as outside the labor force.
What to do with people who are not actively looking for a job presents a major question for future statistics. In the industrial economy, it was rather simply – you were either working (employed), looking for work (unemployed) or not in the labor force (students, retirees, housewives, disabled). In the I-Cubed Economy, we expect that people will drift in and out of the labor force, for various reasons. Some may be voluntary retirees who could easily be lured back into the labor force it the right situation. Some many be those who are taking time off to recharge or reskill. Some may be the discouraged workers who have just given up. We need to make sure our data can account better for all this churn.
In the meantime, don’t take the unemployment number as a sign of a healthy economy. As the song from Porky and Bess says, “it ain’t necessarily so.”

Downloading music in the UK

This report of the latest research on music downloading — this time in the UK as reported by BBC NEWS, “Downloading ‘myths’ challenged”:

People who illegally share music files online are also big spenders on legal music downloads, research suggests.
Digital music research firm The Leading Question found that they spent four and a half times more on paid-for music downloads than average fans.
Rather than taking legal action against downloaders, the music industry needs to entice them to use legal alternatives, the report said.
. . .
“The research clearly shows that music fans who break piracy laws are highly valuable customers,” said Paul Brindley, director of The Leading Question.

Repeat after me “the music industry needs a new business model.”

That sinking feeling

From the Wall Street Journal’s The Evening Wrap, this story on the geopolitical ramifications of global warming:

Hans Island is a barren piece of Arctic rock less than a mile square, but it’s the subject of an ever-hotter dispute between the usually placid nations of Canada and Denmark. Both have laid claim to the island at various times, but recently Canada planted its flag and sent its defense minister on a visit there, sparking a protest from Denmark. A government official in Greenland, a Danish protectorate, called Canada’s action an “occupation.” There were news reports that the Danes would send a ship to assert their territorial rights. While the dispute might seem silly, there’s a lot at stake, including the rights to natural resources beneath the island and the ability to use the region for navigation if and when global warming raises sea levels, sinking Hans and other Arctic islands and opening shipping lanes.

The Creativity Economy

Business Week sounds the warning: Get Creative!:

Listen closely. There’s a new conversation under way across America that may well change your future. If you work for Procter & Gamble Co. (PG ) or General Electric Co. (GE ), you already know what’s going on. If you don’t, you might want to stop what you’re doing and consider this:
The Knowledge Economy as we know it is being eclipsed by something new — call it the Creativity Economy. Even as policymakers and pundits wring their hands over the outsourcing of engineering, software writing, accounting, and myriad other high-tech, high-end service jobs — not to mention the move of manufacturing to Asia — U.S. companies are evolving to the next level of economic activity.
What was once central to corporations — price, quality, and much of the left-brain, digitized analytical work associated with knowledge — is fast being shipped off to lower-paid, highly trained Chinese and Indians, as well as Hungarians, Czechs, and Russians. Increasingly, the new core competence is creativity — the right-brain stuff that smart companies are now harnessing to generate top-line growth. The game is changing. It isn’t just about math and science anymore. It’s about creativity, imagination, and, above all, innovation.
What is unfolding is the commoditization of knowledge. We have seen global forces undermine autos, electronics, and other manufacturing, but the Knowledge Economy was expected to last forever and play to America’s strengths: great universities, terrific labs, smart immigrants, an entrepreneurial business culture.
Oops. It turns out there are a growing number of really smart engineers and scientists “out there,” too. They’ve learned to make assembly lines run efficiently, whether they turn out cars or code, refrigerators or legal briefs. So U.S. companies are moving on to creating consumer experiences, not just products; reconceiving entire brand categories, not merely adding a few more colors; and, above all, innovating in new and surprising arenas.
The U.S. has a lead in this unfolding Creativity Economy — for the moment. The new forms of innovation driving it forward are based on an intimate understanding of consumer culture — the ability to determine what people want even before they can articulate it. Working in what is still the largest consumer market in the world gives U.S. companies a huge edge. So does being able to think outside the box — something Americans still do better than most. But Toyota Motor Corp. (TM ) has a feel for U.S. consumers, and Samsung Group can be pretty creative, too. Competition will surely be intense.

While many companies get it, Washington doesn’t. Unfortunately, our public policy has taken a step backwards – and our leaders are fighting a rear guard action to simply restore the gains that were made in the 1980s. Take, for example, the recent Wall Street Journal op-ed by Vinton Cerf (the man who really did invent the Internet) and Harris Miller, “America Gasps For Breath In the R&D Marathon”:

America will soon find its grip on the levers of international commerce slipping as we turn our backs on a proud tradition of technology innovation. The stewards of our national destiny are busily tightening the tap on the federal R&D budget, the most important source of funding for programs that seek to answer fundamental questions of science and technology.
. . .
In a very real sense, today’s R&D agenda determines where America will find itself in the future. The benefits of vigorous, federally funded academic R&D programs reaped by American society at large have been enormous. Our domestic and global economies thrive on the results of such work. Private sector programs alone cannot produce comparable results, in part owing to an ethical obligation to deliver bottom-line business results for their stockholders. The U.S. government needs a long-term strategy for continued economic growth. A strong and thriving academic R&D program is critical to that strategy. To choose otherwise is a recipe leading to irrelevance and decline.

No wonder we can’t move public policy to the Creativity Economy (as Business Week calls it) or the I-Cubed Economy (as we call it). We are too busy still trying to convince certain Washington policymakers that technology matters!

Unions in the I-Cubed Economy

In the wake of the union breakup, the Wall Street Journal asks the key question: Can the new economy be organized? This is at the heart of the split between the new Change to Win Coalition and the AFL-CIO. In a story today, “Reinventing the Union”, the Journal talks about ways that the break away unions, headed by Andy Stern of the Service Employees International Union (SEIU), are seeking to become more relevant:

In an interview, Mr. Stern said he realizes the difficulties of organizing workers from disparate industries and says one of his goals is to create different kinds of unions. “First of all, we have to be sophisticated: The 1930s adversarial type unionism isn’t going to apply to nurses and reporters and child-care workers,” he said. “We need to create a lot of different models of unions.”
For example, white-collar contract employees who move from job to job are concerned with how to get and keep benefits. Nurses are worried about staffing and quality of care. Building security guards are more interested in wages.

Another idea is having the unions provide relevant services to members, such as “401(k)-type retirement plans that wouldn’t be tied to a particular employer and job-education programs, both of which could help employees as they move from job to job in an increasingly flexible economy.”
No doubt about it, the unions will be facing an uphill fight. According to a Business Week survey about the union split, the majority voted for “Who needs unions? In the global economy, they’re dinosaurs.”
My view is that unions are not dinosaurs, yet. They can play an important role in the information economy. Six years ago, the New Democrat’s (DLC) magazine Blueprint ran a special issue on the new unions. In their lead editorial, “Why America Needs a New Labor”, talked about a new role for unions:

Some union visionaries foresee the next generation of unions organizing across company lines — an Information Age version of the hiring hall — and serving as the foundation upon which members build economic security. Under this intriguing scenario, one can begin to see the union of the future taking shape. It not only bargains with employers over wage and workplace issues and serves as a guarantor of high-quality workmanship, it also functions as an employment agency, benefit provider, and life-long learning coordinator.
Ultimately, the only way organized labor can reverse its decline is to carve out a new and valued role for itself in the private-sector economy.

Maybe that is what is happening now.

CRS report on pending patent bill

For those of you how are interested in following up on the pending patent legislation (as discussed in last month’s AthenaCELI briefing on patents and innovation), here is a good resource. Patently-O: Patent Law Blog has posted a new Congressional Research Service (part of the Library of Congress) report. The report covers the major elements of the proposed patent reform bill, reviews major changes, and analyzes how the specific change would affect particular groups and industries (individual inventors; universities; technology companies; biotech; etc.). The summary of the report follows:

Congressional interest in patent policy and possible patent reform has expanded as the importance of intellectual property to innovation has increased. Patent ownership is perceived as an incentive to the technological advancement that leads to economic growth. However, growing interest in patents has been accompanied by persistent concerns about the fairness and effectiveness of the current system. Several recent studies, including those by the National Academy of Sciences and the Federal Trade Commission, have recommended patent reform to address perceived deficiencies in the operation of the patent regime. Other experts maintain that major alterations in existing law are unnecessary and that the patent process can, and is, adapting to technological progress.
The Patent Act of 2005, H.R. 2795, introduced in June 2005, would work significant legal reforms to the patent system. Among the more notable of these changes are a shift to a first-inventor-to-file priority system; substantive and procedural modifications to the patent law doctrines of willful infringement and inequitable conduct; and adoption of post-issuance opposition proceedings, prior user rights, and pre-issuance publication of all pending applications. Several of these proposals have been the subject of discussion within the patent community for many years, but others are more novel propositions.
Pending legislation attempts to address several issues of concern including the quality of issued patents, the expense and complexity of patent litigation, harmonization of U.S. patent law with the laws of our leading trading partners, potential abuses committed by patent speculators, and the special needs of individual inventors, universities, and small firms with respect to the patent system. In addition, although the existing patent statute in large measure applies the same basic rules to different sorts of inventions, regardless of the technological field of that invention, the patent system is widely believed to impact different industries in varying ways.
The provisions of H.R. 2795 would arguably work the most sweeping reforms to the U.S. patent system since the nineteenth century. However, many of these proposals, such as pre-issuance publication, prior user rights, and oppositions, have already been implemented in U.S. law to a more limited extent. These and other reforms, such as the first-inventor-to-file priority system and elimination of the best mode requirement, also reflect the decades-old patent practices of Europe, Japan, and our other leading trading partners.
Other knowledgeable observers are nonetheless concerned that certain of these proposals would weaken the patent right, thereby diminishing needed incentives for innovation. Some also believe that changes of this magnitude, occurring at the same time, do not present the most prudent course for the patent system. Patent reform therefore confronts Congress with difficult legal, practical, and policy issues, but also with apparent possibilities for altering and possibly improving the legal regime that has long been recognized as an engine of innovation within the U.S. economy.