Productivity, Technological Change and the Labor Market. Enrico Moretti University of California at Berkeley

Transcription

1 1 Productivity, Technological Change and the Labor Market Enrico Moretti University of California at Berkeley

2 2 Introduction Vast differences in job and wage growth across countries and regions Countries and regions with strong job and wage growth have - high labor productivity - highly educated labor force - innovative employers

3 Labor Productivity in the US 3

4 Share of Workers with College Degree 4

5 Patents per Worker 5

6 6 What Causes These Productivity Differences? Important factors: - Education of the labor force - R&D investment - Access to venture capital - Sectorial mix Not so important factors: - Transportation infrastructure

7 7 The Three Americas 1. At one extreme are the brain hubs: highly educated labor force and innovative employers: San Francisco, Seattle, Boston, Washington 2. At the other extreme are cities with an unskilled labor force and employers in traditional industries: Detroit, Cleveland, Philadelphia 3. In the middle are many cities that could evolve either way

8 The Great Divergence in Earnings 8

9 9 Not Just a U.S. phenomenon Europe: London, Stockholm, Munich Asia: Beijing, Shanghai, Bangalore Share of national GDP generated by brain hubs keeps growing

10 10 Labor Market in European Countries Labor force 70% in non-traded sector (local services) 30% in traded sector

11 11 Traded Sector It employs workers that produce goods and services that are sold nationally or globally. Examples in Latvia - Manufacturing - Transportation, tourism - Agriculture, forestry, fishing Firms face national or global competition

12 12 Non-Traded Sector It employs workers that produce goods and services that are sold locally. Examples: - waiters - store clerks - doctors - lawyers - architects Firms face only local competition; they do not face global competition

13 13 The Traded Sector is the Driver of Growth Non-traded sector has the majority of jobs, but it is not the cause of growth -- It is the effect Two reasons: Productivity trends Job Multiplier

14 14 Reason 1 Labor productivity grows much faster in traded sector thanks to technological change Productivity in many parts of non-traded sector is fixed - teachers - store clerks - waiters - hair dressers - real estate agents

15 15 High Productivity High Wages When productivity increases in traded sector wages increase in traded sector Wages in the non traded sector become non-competitive employers need to increase wages in the non-traded sector Example: manufacturing and construction Countries with the most productive traded sector have the highest wages in all sectors (examples: US, Germany)

16 16 Reason 2 Demand for local services depends on existing wealth in the community Growth in traded sector growth in local services If Dartz Motorz Company adds 1 engineer in Riga more jobs for waiters, taxi drivers, doctors, architects (but not viceversa)

17 17 Multiplier Effect My research shows that for each manufacturing job, 1.6 additional jobs are created in local services The multiplier is larger in high tech: For each high tech job, 5 additional jobs are created in local services

18 18 Example Dartz adds 100 employees in Riga Indirect job creation: 160 jobs Skype adds 100 employees in Tallinn Indirect job creation: 500 jobs NOTE: The most important impact of Skype on Tallinn labor market is outside high tech.

19 19 Why is the High Tech Multiplier Larger? 1. Salaries are higher larger effect on local services 2. High tech companies use more local services

20 20 How is the Traded Sector Changing? Over the past 30 years, the non-traded sector in Western countries has not changed very much By contrast, the traded sector has changed enormously

21 Manufacturing Employment in Sweden, Germany and the US 21

22 22 Blue Collar Jobs Are Declining Everywhere Change UK -70% Germany -50% Sweden -50% Italy -50% France -50% Change Brazil -5% India -2% China -1%

23 23 Reasons for the Decline Technological change and automation The value of the output of European manufacturing companies has doubled. But the number of workers has plummeted The decline will continue in the future

24 Production Jobs Have Declined Even in Advanced Manufacturing Sectors 24

25 25 One exception Employment of highly educated manufacturing workers has increased In the US, number of engineers employed in manufacturing has more than doubled in

26 26 The Rise of Innovation Jobs in the innovation sector are growing Information technology, software, Internet services Pharmaceutical Advances manufacturing Professional services, finance, marketing What they have in common: - High productivity growth - Make intensive use of human capital

27 The Rise of Jobs in Innovation 27

28 28 The Clustering Effect Cities with many college-educated workers and innovative employers tend to attract more: - San Francisco; London; Stockholm It is a tipping-point dynamic. This self-reinforcing trend magnifies the differences between winners and losers Serious challenge for economic policy

29 29 Conclusion Deep structural changes in European labor markets Traditional manufacturing is declining; Innovative industries are growing These industries tend to cluster geographically in brain hubs, which are regions with - many highly educated workers - high level of investment in R&D - high productivity and high wages

30 30 Conclusion The winners are not only scientists and engineers: In brain hubs, job and wage growth for all workers are strong thanks to the multiplier effect. Today, one is that the best way to generate jobs for less educated workers is to attract high-tech companies that hire highly educated ones