U.S. High-tech Manufacturing Jobs Lost as Technological Lead Shrinks

Competitive advantage the U.S. has had in science and technology is eroding according to new study.

Over the past decade the U.S. lost 28% of its high-technology manufacturing jobs, according to a new study released by the National Science Board (NSB), the policy making body for the National Science Foundation.

One of the most dramatic signs of this trend was the loss of 687,000 high-technology manufacturing jobs since 2000.

U.S. multinational corporations also created research and development (R&D) jobs overseas at an unprecedented rate. Meanwhile, China became the world leader in high-technology trade and, for the first time, Asia matched the United States in R&D investments.

U.S. employment in high-technology manufacturing reached a peak in 2000, with 2.5 million jobs. The recession of 2001 provided the first big hit causing substantial and permanent job losses, the report said. By the end of the decade, more than a quarter of the jobs were gone.

"The latest data clearly show the economic consequences of the eroding competitive advantage the United States has historically enjoyed in science and technology," said Dr. Jos-Marie Griffiths, NSB. "Other nations clearly recognize the economic and social benefits of investing in R&D and education, and they are challenging the United States' leadership position. We're seeing the result in the very real, and substantial, loss of good jobs."

"The volume gives a clear picture of the United States' position in globalization," Griffiths said. "Over the last decade, the world has changed dramatically. It's now a world with very different actors who have made advancement in science and technology a top priority. And many of the troubling trends were seeing are now very well established."

U.S. Firms Create More R&D Jobs Abroad
On top of the lost manufacturing employment, U.S. multinational corporations are rapidly expanding their R&D jobs overseas. From 19942004, U.S. firms established R&D jobs abroad at a relatively slow annual rate of 3%, increasing the share of their R&D employment overseas from 14% to 16%.

But according to preliminary figures, in the five years after that (20042009, the number of new R&D jobs overseas took off, growing to 27%of all R&D jobs at these U.S. firms. Since 2004, about 85% of R&D employment growth in U.S. multinational corporations has been abroad.

That rapid increase in employment by U.S. firms abroad contrasts with very modest growth in R&D employment in the United States by foreign companies.

"This apparent acceleration of U.S. R&D jobs overseas, along with other indicators, suggests that the capabilities of Asian countries are strong enough to accommodate such a rapid shift," said Rolf Lehming, NSF. "The policies of Asian governments appear to be paying off for them, and U.S. companies seem to be confident in the quality of R&D work done abroad."

The relative shift of R&D to Asia also can be seen in overall expenditures. The United States still does more R&D than any other single country, spending $400 billion in 2009. But, for the first time, the Asian region has nearly matched the United States, with R&D expenditures of $399 billion.

Reversed Positions on High-tech Trade
Recent trends also are reflected in the dramatic change in shares of global high-tech exports. After growing from 19% to 22% between 1995 and 1998, by 2010 the United States' share of the global high-tech exports had dropped to 15%. At the same time, China's share nearly quadrupled, growing from 6% in 1995 to 22% in 2010.

Asia now produces more than half of all high-tech goods exports worldwide, while the United States and European Union countries each produce 15%. During the 15-year period from 1995 to 2010, Japans share fell from 19% to 7%.

Until 1997, the United States enjoyed surpluses in trade of high-tech goods. But by 2010, those surpluses had turned into large annual trade deficits of nearly $100 billion, largely driven by the shift in production of communications and computer goods to Asia at a time of growing U.S. demand. At the same time, Chinas 2010 high-tech trade surpluses reached $157 billion, while eight Asian countries (excluding China and Japan) collectively enjoyed trade surpluses of $226 billion.

Other key findings in the report include:

  • Three countriesthe United States, China and Japanwere responsible for more than half of the worlds $1.28 trillion in R&D spending in 2009. (China overtook Japan during the last decade to become the second-largest R&D-performing nation.)
  • Between 1999 and 2009, the United States share of R&D dropped from 38% to 31%; the EU's share declined from 27% to 23% and the Asian region grew from 24% to 32%.
  • Many Asian countries have increased their investment in R&D relative to their GDP, with China almost tripling its R&D/GDP ratio since 1996. The United States R&D/GDP ratio recently has edged upward, while that of the EU has remained steady.
  • The developed world's lead in higher education has declined dramatically. In 2008, only 4% of the world's engineering degrees were earned in the United States, while 56% were awarded in Asia, including one-third in China.
  • The number of natural sciences and engineering doctorates awarded by Chinese universities has more than tripled since 2000. At 26,000 awarded in 2008, the number of these Chinese doctorates now exceeds the number earned in the United States. And, unlike in China, a large share of these U.S. doctoral degrees are awarded to foreign students. In 2009, 44% of the 24,700 U.S. natural sciences and engineering doctorates were awarded to temporary visa holders. Some 57% of engineering doctorates were awarded to foreign students.
  • American industry, which historically has supported about 60% of U.S. R&D, reduced R&D funding by nearly 4% in 2009. (A rise in U.S. government R&D funding under the American Recovery and Reinvestment Act partially offset the private-sector reduction.)
  • Job losses from the 20072009 recession were less severe for science and engineering workers than for the U.S. workforce as a whole. In 2010, the median income for workers in science and engineering jobs ($73,290) was more than double the median income of all U.S. workers ($33,840).
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