For immediate release

Innovation is key to U.S. job creation, according to new policy brief

Human capital, not factories and infrastructure, is the best predictor of a community’s economic success, and a community’s share of highly educated workers plays a particularly important role in job creation, according to a new policy brief just issued by the National Agricultural and Rural Development Policy Center.

“The future of American jobs is in innovation, not manufacturing,” said Enrico Moretti of the University of California, Berkeley, and author of the two-page brief. “We can see this by looking at where job creation is concentrated in the U.S. In America’s so-called brain hubs — cities like Seattle, Austin, or Boston — where the economy is driven by innovation, the work force is highly educated and well paid, and the labor market is strong.”

Meanwhile, in sharp contrast, labor markets in many parts of the country including some rural areas are still weak or even in decline. According to the brief, one reason for this growing economic divide between communities is variation in residents’ education levels.

The problem has a rich-get-richer ring to it: counties with more college-educated workers attract more of the same, while counties with a less-educated workforce have trouble attracting and retaining those educated workers. Similarly, counties with innovative employers attract more innovative companies, and those with few or no innovators have trouble attracting any at all.

In rural areas, this disparity is exacerbated by the fact that opportunities to obtain higher education are limited, because rural counties have fewer colleges per capita than urban counties. At the same time, salaries for college graduates are lower in rural counties, providing less incentive for residents to pursue educational opportunities.

But a well-educated and innovative workforce provides benefits that ripple out to the entire community. Chief among these are higher wages and more abundant job opportunities for workers with less education, according to research highlighted in the brief. For example, Moretti found that for each new college-level job in a county’s innovation sector, five additional jobs are created outside of that sector – including service-sector jobs that require less education.

Because this multiplier effect is so much stronger in the innovation sector than in manufacturing, Moretti makes the case that communities should adopt policies of investing more in educational opportunities for residents and should re-think traditional policies that promote spending to attract manufacturing establishments to depressed areas. “Relative to current policies, investing in the education of residents is likely to have a higher rate of economic return and to be a more effective use of taxpayer money,” he writes in the brief, adding that “the best way for a county to generate jobs for its less educated residents is to attract innovative companies — such as technology firms — that employ the highly educated.”

“The Future of Jobs in America” is the latest in a series of NARDeP policy briefs that explore the increasingly contentious and complex agricultural and rural development issues facing the U.S. They are available online at the NARDeP website, along with all the briefs in the series.

NARDeP was organized in 2012 by the four U.S. Regional Rural Development Centers and is funded by the USDA National Institute of Food and Agriculture (NIFA) under a competitive grant (Number 2012-70002-19385). A virtual center based at Penn State University, it engages land-grant universities as well as national organizations, agencies, and experts to develop and deliver timely policy-relevant information around signature areas identified by its advisory boards. More information about NARDeP is available at www.nardep.info.

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Contact:

      Enrico Moretti

      moretti@berkeley.edu

      cell 415 994 7206

Department of Economics
University of California
637 Evans Hall #3880
Berkeley, CA 94720-3880