policy recommendations

In the aftermath of an election cycle in which manufacturing emerged as a key point of contention in many races, several groups are taking stock of the state of U.S. manufacturing competitiveness. The 2012 edition of the Global Manufacturing Competitiveness Index, based on a survey of senior manufacturing executives, projects that the U.S. will fall from third most competitive nation to fifth over the next five years. In order to stave off declining competitiveness, authors of a McKinsey Global Institute report suggest that manufacturing be viewed as a critical driver of U.S. innovation, requiring flexible federal intervention as the lines between manufacturing and services become blurred.

Fostering regional innovation is imperative to strengthening our national economy and crafting public-private partnerships (PPPs) are a key strategy for catalyzing regional economic growth. While states should continue to lead regional innovation efforts, the federal government can play a critical supporting role. The Brookings Institution proposes the establishment of a PPP unit within the White House to coordinate Federal assistance. Examples of effective federal-regional PPP units already are active within the Department of Transportation and the White House Startup America Initiative.

Two recent academic research articles found that innovation at institutions of higher education and domestic firms are significantly impacted by an increase in the immigration of skilled and qualified immigrants. An article from Stuen et al. found the quality of immigrant students was the determining factor in their contribution to the production of knowledge at academic science and engineering laboratories. In an unpublished article from Kerr et al., the authors examined the impact of skilled immigrants on the employment structures and innovation rates of U.S. firms. The authors of these articles also provide several recommendations to increase the number skilled immigrants that include making student quality the key criterion for receiving a visa, repealing 2001 legislation that limited the number of student visas and business taking a more active role in advocating for immigrations polices (e.g., H-1B visa reform) that attracted skilled workers to the United States.

The answer may not be clear, but both sides can agree the U.S. skills gap will continue to deepen if changes do not occur. In the U.S. manufacturing sector, the skills gap may be less pervasive than many believe, according to a report from the Boston Consulting Group (BCG). BCG researchers estimate the U.S. is short 80,000 to 100,000 highly skilled manufacturing workers. That shortage represents less than 1 percent of the nation's 11.5 million manufacturing workers and less than 8 percent of its 1.4 million highly skilled manufacturing workers. The researchers also found only seven states — six of which are in the bottom quartile of U.S. state manufacturing output — show significant or severe skills gaps. They conclude shortages are local, not nationwide, in nature and reflect imbalances driven by both location and job classes.

In an era of tightening fiscal constraints, states have to make tough decisions, establish clear economic development funding priorities and transform their economic development models to take advantage of immediate opportunities and position their state for long-term economic growth. Mississippi, Oklahoma and Washington have released state-specific strategic plans that make those tough decisions by focusing their resources on key science & technology (S&T) areas to address the economic impacts of the Great Recession and position the state for future prosperity. Each strategic plan also calls for state government to engage the private sector to build partnerships that will help reduce costs and increase impacts.

In 2012, Big Data has become one of the hottest topics in the news and the minds of both government and business leaders. Big Data is the collection and analysis of data that is too big, growing too fast or is too complex for existing information technology systems to handle. Proponents believe that Big Data provides business, government and other organizations (e.g., nonprofit and social enterprises) the potential to generate high quality insight that enable better decision making, increase productivity, reduce inefficiencies, create new products and services and spur economic growth. In an OPED for informationweek.com, Jonathan Feldman contends existing Big Data projects already are creating social and economic value for business firms and regions, including now-ubiquitous projects such as Google Maps.

As a part of its Compendium of Evidence on the Effectiveness of Innovation Policy intervention, the Manchester Institute of Innovation Research released a report entitled Fiscal Incentives for Business R&D. The authors advocate how a fiscal incentive for R&D, particularly a tax credit, can be a "flexible instrument that can foster the connectivity within a national innovation system."

U.S. economic policy will require a renewed focus on production and globally traded sectors in order to restore U.S. competitiveness, according to a new report from the Information Technology and Innovation Foundation (ITIF). Furthering the argument laid out in the recently published book Innovation Economics: The Race for Global Advantage and in last year's report "The Case for a National Manufacturing Strategy", ITIF's Stephen J. Ezell and Robert D. Atkinson present 50 recommendations for federal reform to restore the U.S.' competitive edge. In addition, the report provides another 13 strategies that could make a difference at the state level.

Governors and policymakers working toward economic development reform are in a unique position to propose critical changes that would not have been feasible in the past and gain broad support for transforming economic development agencies to better meet the needs of businesses, according to a new white paper from the National Governors Association (NGA). NGA has identified three major challenges states are facing and three foundational strategies to increase effectiveness of state economic development agencies.

While taxes and regulations comprise the basic framework for state competitiveness, ample opportunity exists for other strategic interventions that can create a vibrant, entrepreneurial state economy, according to a pair of reports released this week by the National Governors Association (NGA). The first report examines six factors that drive state competitiveness and the kinds of policies states use to encourage economic growth. A second report lays out 12 recommendations for state leaders, with examples from successful initiatives around the country. The reports are the product of NGA's year-long initiative to shed light on the key elements that drive economic growth and to share best practices for state leaders involved in economic development.