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Rising Above The Gathering Storm: Energizing and Employing America for a Brighter Economic Future.
Statement of Norman R. Augustine Retired Chairman and Chief Executive Officer Lockheed Martin Corporation, and Chair, ...The National Academies, before the Committee on Science U.S. House of Representatives October 20, 2005.
...The thrust of our findings is straight forward. The standard of living of Americans in the years ahead will depend to a very large degree on the quality of the jobs that they are able to hold. Without quality jobs our citizens will not have the purchasing power to support the standard of living which they seek, and to which many have become accustomed; tax revenues will not be generated to provide for strong national security and healthcare; and the lack of a vibrant domestic consumer market will provide a disincentive for either U.S. or foreign companies to invest in jobs in America...
What has brought about the current situation? The answer is that the prosperity equation has a new ingredient, an ingredient that some have referred to as "The Death of Distance". ..
Suddenly, Americans find themselves in competition for their jobs not just with their neighbors but with individuals around the world. The impact of this was initially felt in manufacturing, but soon extended to the development of software and the conduct of design activities. Next to be affected were administrative and support services. Today, "high end" jobs, such as professional services, research and management, are impacted. In short, few jobs seem "safe"...
How will America compete in this rough and tumble global environment that is approaching faster than many had expected? The answer appears to be, "not very well"-unless we do a number of things differently from the way we have been doing them in the past...
Why do we reach this conclusion? One need only examine the principal ingredients of competitiveness to discern that not only is the world flat, but in fact it may be tipping against us.
One major element of competitiveness is, of course, the cost of labor. I recently traveled to Vietnam, where the wrap rate for low-skilled workers is about twenty-five cents per hour, about one-twentieth of the U.S. minimum wage. And the problem is not confined to the so-called "lower- end" of the employment spectrum. For example, five qualified chemists can be hired in India for the cost of just one in America. Given such enormous disadvantages in labor cost, we cannot be satisfied merely to match other economies in those other areas where we do enjoy strength; rather we must excel . . . markedly.
The availability of financial capital has in the past represented a significant competitive advantage for America. But the mobility of financial capital is legion, as evidenced by the willingness of U.S. firms to move factories to Mexico, Vietnam and China if a competitive advantage can be derived by doing so. Capital, as we have observed, crosses geopolitical borders at the speed of light.
Human capital-the quality of our work force-is a particularly important factor in our competitiveness. Our public school system comprises the foundation of this asset. But as it exists today, that system compares, in the aggregate, abysmally with those of other developed-and even developing-nations . . . particularly in the fields which underpin most innovation: science, mathematics and technology...
Of the utmost importance to competitiveness is the availability of knowledge capital-"ideas". And once again, scientific research and engineering applications are crucial. But knowledge capital, like financial capital, is highly mobile. There is one major difference: being first-to- market, by virtue of access to new knowledge, can be immensely valuable, even if by only a few months. Craig Barrett, a member of our committee and Chairman of Intel, points out that ninety percent of the products his company delivers on December 31st did not even exist on January 1st of that same year. Such is the dependence of hi-tech firms edge of scientific and technological progress.
The enigma is that in spite of all these factors, America seems to be doing quite well just now. Our nation has the highest R&D investment intensity in the world. We have indisputably the finest research universities in the world. California alone has more venture capital than any nation in the world other than the United States. Two million jobs were created in America in the past year alone, and citizens of other nations continue to invest their savings in America at a remarkable rate. Total household net worth is now approaching $50 trillion.
The reason for this prosperity is that we are reaping the benefits of past investments-many of them in the fields of science and technology. But the early indicators of future prosperity are generally heading in the wrong direction. Consider the following:
For the cost of one engineer in the United States, a company can
hire eleven in India.
America has been depending heavily on foreign-born talent.
Thirty-eight percent of the scientists and engineers in America
holding doctorates were born abroad. Yet, when asked in the
spring of 2005, what are the most attractive places in the world
in which to live, respondents in only one of the countries polled
indicated the U.S.A.
Chemical companies closed seventy facilities in the U.S. in 2004,
and have tagged forty more for shutdown. Of 120 new chemical
plants being built around the world with price tags of $1 billion
or more, one is in the U.S. Fifty are in China.
In 1997 China had fewer than fifty research centers managed by
multinational corporations. By 2004 there were over six-hundred.
Two years from now, for the first time, the most capable high-
energy particle accelerator on earth will reside outside the
United States.
The United States today is a net importer of high technology
products. The U.S. share of global high tech exports has fallen
in the last two decades from 30% to 17%, while America's trade
balance in high tech manufactured goods shifted from a positive
$33B in 1990 to a negative $24B in 2004.
In a recent international test involving mathematical
understanding, U.S. students finished in 27th place among the
nations participating.
About two-thirds of the students studying chemistry and physics in
U.S. high schools are taught by teachers with no major or
certificate in the subject. In the case of math taught in grades
five through twelve, the fraction is one-half. Many such students
are being taught math by graduates in physical education.
In one recent period, low-wage employers like Wal-Mart (now the
nation's largest employer) and McDonald's created 44% of all new
jobs. High-wage employers created only 29%.
In 2003 foreign students earned 59% of the engineering doctorates
awarded in U.S. universities.
In 2003 only three American companies ranked among the top ten
recipients of patents granted by the U.S. Patent Office.
In Germany, 36% of undergraduates receive their degrees in science
and engineering. In China, the corresponding figure is 59%, and
in Japan it is 66%. In the U.S., the share is 32%. In the case
of engineering, the U.S. share is 5%, as compared with 50% in
China.
The United States is said to have over ten million illegal
immigrants, but the number of legal visas set-aside annually for
"highly qualified foreign workers" was recently dropped from
195,000 per year down to 65,000.
At a time when the world's nations are clamoring to obtain science
and engineering talent, U.S. law will grant a visa for outstanding
foreign students to attend U.S. universities only if they promise
they will go home when they graduate.
In 2001 (the most recent year for which data are available),
U.S. industry spent more on tort litigation and related costs than
on research and development.
As important as jobs are, the impact of these circumstances on our nation's security could be even more profound. In the view of the bipartisan Hart-Rudman Commission on National Security, ". . . the inadequacies of our system of research and education pose a greater threat to U.S. national security over the next quarter century than any potential conventional war that we might imagine."
The good news is that there are things we can do to assure that America does in fact share in the prosperity that science and technology are bringing the world. In this regard, our committee has made four broad recommendations as the basis of a prosperity initiative-and offers 20 specific actions to make these recommendations a reality. They include:
o "Ten Thousand Teachers, Ten Million Minds"-which addresses America's K-12 education system. We recommend that America's talent pool in science, math and technology be increased by vastly improving K-12 education. Among the specific steps we propose are:
Recruitment of 10,000 new science and math teachers each year
through the award of competitive scholarships in math, science
and engineering that lead to a bachelor's degree accompanied by a
teaching certificate-and a 5-year commitment to teach in a public
school.
Strengthening the skills of 250,000 current teachers through
funded training and education in part-time master's programs,
summer institutes and Advanced Placement training programs.
Increasing the number of students who take Advanced Placement
science and mathematics courses.
o "Sowing the Seeds"-which addresses America's research base. We recommend strengthening the nation's traditional commitment to long-term basic research through:
Increasing federal investment in research by 10% per year over
the next seven years, with primary attention devoted to the
physical sciences, engineering, mathematics, and information
sciences-without disinvesting in the health and biological
sciences.
Providing research grants to early career researchers instituting
a National Coordination Office for Research Infrastructure to
oversee the investment of an additional $500M per year for five
years for advanced research facilities and equipment.
Allocating at least 8% of the existing budgets of federal
research agencies to discretionary funding under the control of
local laboratory directors.
Creation of an Advanced Research Projects Agency- Energy
(ARPA-E), modeled after DARPA in the Department of Defense,
reporting to the Department of Energy Undersecretary for Science.
The purpose is to support the conduct of out-of-the-box,
transformational, generic, energy research by universities,
industry and government laboratories.
Establish a Presidential Innovation Award to recognize and
stimulate scientific and engineering advances in the national
interest.
o "Best and Brightest"-which addresses higher education. In this area we recommend:
Establishing 25,000 competitive science, mathematics,
engineering, and technology undergraduate scholarships and 5,000
graduate fellowships in areas of national need for US citizens
pursuing study at US universities.
Providing a federal tax credit to employers to encourage their
support of continuing education.
Providing a one-year automatic visa extension to international
students who receive a science or engineering doctorate at a
U.S. university, and providing automatic work permits and
expedited residence status if these students are offered
employment in the US.
Instituting a skill-based, preferential immigration option
reforming the current system of "deemed exports" so that
international students and researchers have access to necessary
non-classified information or research equipment while studying
and working in the US.
o "Incentives for Innovation"-in which we address the innovation environment itself. We recommend:
Enhancements to intellectual property protection, such as
the adoption of a first-to-file system.
Increasing the R&D tax credit from the current 20% to 40%, and
making the credit permanent.
Providing permanent tax incentives for US-based innovation so
that the United States is one of the most attractive places in
the world for long-term innovation- related investments.
Ensuring ubiquitous broadband Internet access to enable
U.S. firms and researchers to operate at the state of the art in
this important technology.