The Innovation Economy is Today’s Top Job Creator
The following is adapted from More Good Jobs.
While manufacturing will always have a significant place in the US economy, globalization and rapid advances in technology have dethroned the former top job creator. Today, it isn’t factories lowering unemployment—it’s what I call the Innovation Economy.
An Innovation Economy Company is a business whose product or service is based on an innovation not yet widely adopted, but with the intent of growing toward a national or global audience. It doesn’t have to be the first to market or hinge on new technology, but it does need to provide an innovative solution that addresses a market need.
Innovation Economy Companies currently drive American job creation, and they’re doing more than generating jobs: they’re creating good jobs that benefit workers and strengthen the cities that house them.
What Makes a Good Job?
Before we can analyze why Innovation Economy Companies are today’s best job creators, we need to define a “good job.” What kind of jobs should companies be striving to create and cities be aiming to attract?
First, the better a job is, the better it has to be for the person working it. Paying more, providing better benefits, and stimulating them in a way that challenges and gives them purpose are all ways in which jobs accomplish this. To put this simply, jobs that individuals want are better than jobs that someone might only endure.
Second, the better a job is, the better it is for the company doing the hiring. Good jobs attract the best talent, which is a win for the company—having the best talent can power the business ahead of their competitors.
Lastly, the better a job is, the better it is for the wider community. Good jobs should raise up the community, making it a better place for others to live and work. That means contributing productively to the community and bringing more wealth into the area to create jobs for others.
Why are Innovation Economy Companies Creating the Most Good Jobs?
From Silicon Valley and New York City to smaller metros like Boulder, Colorado, and Austin, Texas, communities have benefitted from growing large numbers of Innovation Economy Jobs.
These jobs not only meet the above criteria of being better for the person, the company, and the community, but they are also the key to larger demographic changes that can power a city’s overall growth in jobs, wages, and wealth. Why is the Innovation Economy creating such good jobs?
Because these companies are based on creating and bringing an innovation to market, they require a type of talent that isn’t in great supply. It takes a special kind of person to help create and rapidly iterate something new that others will buy. The low supply of skilled, adaptable people who can fill the roles leads to exceptionally high wages.
Companies that employ workers in Innovation Economy Jobs tend to treat their employees better as it is the only way they’ll be successful in attracting and keeping this in-demand talent. In other words, Innovation Economy Companies create good jobs because they require skilled, educated workers who are in high demand.
Is Replacing Manufacturing with Innovation Economy Jobs a Net Positive?
Innovation Economy Companies create good jobs, but is the gain of these jobs and the loss of manufacturing a net positive for society?
Research by economist Enrico Moretti in his groundbreaking 2012 book, The New Geography of Jobs, suggests that in terms of having a multiplier effect on their surrounding community, yes, Innovation Economy Jobs have a great impact.
The multiplier effect is the idea that when a member of a community earns a salary, that money isn’t something that’s used up and disappears. Instead, some portion of the salary is spent in the community, which creates more jobs and fuels a cycle of growth.
Morretti’s research shows that for each manufacturing job, an additional 1.6 jobs were created in the local community. In contrast, for every one job created at an Innovation Economy Company, five other jobs are created in the local economy. That 5:1 job multiplier is almost triple that of the manufacturing industry, meaning Innovation Economy Jobs can drastically grow and improve their local economies.
Cities Should Embrace the Innovation Economy
The loss of manufacturing jobs isn’t ideal, but if those jobs can be replaced by the Innovation Economy, local economies can actually see a net gain. These companies will create higher wages, more jobs, and wealth for the local community.
Indeed, Innovation Economy Job growth in a city correlates with overall job growth and increased median income—both of which can contribute toward improving quality of life in a community.
The loss of manufacturing was a major change for America, but the fact that the Innovation Economy is today’s top job creator is something to celebrate. With the multiplier effect creating new jobs, even cities that have suffered from manufacturing job loss can rebound and grow by embracing innovation.
For more advice on transforming local economies toward job growth in newer industries, you can find More Good Jobs on Amazon.
Martin Babinec founded NYSE-listed TriNet, a Silicon Valley cloud-based HR service, where he served as CEO for the company’s first twenty years. Relocating to his hometown of Little Falls, New York, he founded nonprofit Upstate Venture Connect, StartFast Ventures, and UpVentures Capital, all of which help grow, support, and invest in transforming Upstate New York’s economy toward job growth in the newer industries. As an independent candidate for New York’s 22nd Congressional District in 2016, Babinec also founded the Upstate Jobs Party (UJP) to influence political discourse on better solutions to grow jobs and reverse regional population decline.