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Posted by: Michael Mandel on January 27

A new report from the Informatition Technology & Innovation Foundation argues that investing in research and development can play a key role in economic stimulus. The authors, Daniel Castro and Rob Atkinson, point out that:

in the last two decades economic downturns have also impacted public and private organizations conducting research. In each of the last two downturns (1992-93 and 2001-02) total investment in R&D fell by over 2 percent, with industry funding declining even more. And the current recession is to see even more significant declines. Not surprisingly these declines in research funding lead to job losses for researchers and others employed in related fields.

They then go on to say that:

We estimate that spurring an additional $20 billion investment in research would create approximately 402,000 American jobs for one year.

We usually think about R&D as being a relatively small part of the economy. But as the economy has become more and more intangible, and less manufacturing-based, the economic importance of R&D has gone up.

Just as one illustration. The latest data from the BLS shows 620K workers employed in establishments providing scientific research and development services (these can belong to larger companies). By comparison, the entire utility industry only employs 564K workers, and the motor vehicle and parts industry just 800K workers (as of December).

To put it a different way—R&D expenditures, in total, were probably close to $380 billion in 2008. In the third quarter of 2008, consumer spending on motor vehicle and parts was running at a $370 billion pace, and will likely be much lower in the fourth quarter.

That’s right…R&D spending in the U.S. now exceeds household spending on motor vehicles and parts.

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Reader Comments

david foster

February 4, 2009 09:58 PM

"as the economy has become more and more intangible, and less manufacturing-based, the economic importance of R&D has gone up"...really? In a company that makes steam turbines, many forms of R&D are important, from metallurgy (improved alloys) on up. Is there an equivalent role for R&D in the fast food business? In the performing arts? In advertising?

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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