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08/31/2010

Hoppy's Commentary For Tuesday

Talkline Host Hoppy Kercheval

America is slipping.

Don’t take my word for it. Listen to Paul Otellini, President and Chief Executive Officer of Intel Corporation, the global leader in computer processors.

“When you take a hard look at the things that make any country competitive, it becomes clear that we are slipping,” Otellini told the Technology Policy Institute’s Aspen Forum recently.

That’s a scary proposition. After all, America’s wealth and security are directly linked to our ability to produce and adopt new technologies, such as the microprocessor, which Intel perfected 30 years ago.

Otellini worries that America is losing ground on multiple fronts. We used to have the best math and science students and the best research centers. Our country used to be the most attractive for investors.

“We seemed a generation ahead of the rest of the world in information technology,” Otellini said. “That is simply no longer the case.”

Yes, America still ranks near the top in innovative competitiveness, but the trend ahead is worrisome. Otellini cites a recent study showing America is doing less than any of the top 40 industrialized nations to become more innovative in the future.

A report earlier this year from the College Board illustrated our slide in education dominance. Over the last 30 years, America has dropped from first to 12^th in the world for people ages 25-34 with college degrees.

Our tax structure and regulatory policies are also making innovation more difficult.

“Our combined state and federal corporate income tax rate…is the second highest in the industrialized world,” Otellini said. “It is precisely these high statutory rates that punish the most dynamic and innovative firms and hinder their ability to compete globally.”

For example, Ortelli says, it costs $1 billion more to build, equip and operate a semiconductor plant in this country than elsewhere.

In 1971, Intel started commercial production of the microprocessor. The Intel 4004 was the first central processing unit (CPU) on a single chip. It was the size of your fingernail and it had the same processing power as the first electronic computer built in 1946 that took up an entire room and used 18,000 vacuum tubes.

The microprocessor was the last “big thing.” It revolutionized economies and altered cultures in ways that were once considered science fiction. In the process, it fostered the creation of trillions of dollars of wealth in this country and around the world.

But Otellini believes that unless we regain our competitive edge in education and recreate the culture of investment, “then the next Intel or the next big thing will not be invented here.”

That will lead to “an inevitable erosion and shift of wealth, much like we are witnessing today in Europe.”

America has enjoyed a long period as the best place for economic growth and investment, but our success is no longer a de facto presumption. Capitalism is agnostic. Innovation and wealth creation will naturally migrate to where they have the best opportunity for success.

If we continue to slip, more of those opportunities will be elsewhere.

User Comments

Zero. Don't be slandering George W Bush that way. He earned his wealth the old fashion way. I don't mean by inheriting it like one of our senatorial candidates. No, GW used his cunning by buying into the Texas Rangers cheap and then getting the taxpayers to build them a new stadium which increased the value of his investment 25 fold. That was just before he ran for Governor of Texas espousing self-reliance rather than reliance on government.

Hoppy, the United States's innovation driven economy, backed by a history of manufacturing and growth in the health care, education and professional services sectors, is not going to position us to thrive in the 21st century. There is a huge gap in work force skills in the training and education policies that threaten to undermine our nation's economic standing.

Middle skill jobs (44%) represent the largest share of jobs in the United States. Middle skill jobs are those that require more than a high school diploma but not a four year degree. In 2008, our software support company went looking to fill 55 new entry-level ($35K/yr) technicial middle skill positions to be located in Savannah, GA. Of the nearly 400+ applicants, less than 5% had the bare minimum skills to fill these jobs. The result, we outsourced all those positions to Northern Ireland. We pay them well to do what we should be doing.

To this former business partner, our educational pathways need to be better aligned. More than 60 percent of all community college enrollees are placed into remedial programs. Fewer than 16 percent of community college enrollees complete an associate’s degree in three years. As 95bulldog stated, "There is no motivation for some people to get out and make something of themselves..." We need to do a better job of connecting our education and training to future labor market demand. The problem is that while the demand for this labor is there, the respondents are either over educated professionals that are out-of-work or others looking for career changes that require complete retraining.

Employers currently hiring are facing a difficult time filling middle skill jobs. If we cannot prepare our labor force for these jobs now, we risk losing more jobs to countries that can deliver that educated workforce. The jobs we risk losing are good jobs in light manufacturing, green technologies, pharmaceutical production, computer support, professional services, engineering, and allied health fields. Our current political leaders will tell you the United States is way ahead in green technology, and that those "green tech jobs" cannot be outsourced. Ask any Human Resource officer if they buy into that.

US economic competitivness will need a strong science, technology, engineering and math work force to support innovation industries. Some in business have been calling for an increases in the number of students receiving bachelor or advanced degrees in these fields. Those of us in small services business and innovative enterprise companies have seen the immediate need to increase the number of students who receive associate’s degrees or technical certifications in these fields as well.

A University of Massachusetts 2009 report noted that degrees conferred in these fields in our nation's colleges have decreased while degrees in low demand heavy industries have grown. We need a program that provides related skills training to our existing workforce so we can quickly meet demands for skilled workers. This means training to include evening, weekend and part-time courses with stackable credentials. Training more middle skill workers is a cost-effective, attainable goal, and countries that accomplish this first will jump way ahead of the United States in economic power. Give small businesses and middle market companies some tax breaks, lower interest rates for loans and we can put that money into work skills training. Sorry, TD. Most business owners look for every dollar available to reinvest and grow their businesses.

Businesses, labor, educators, and policy-makers must work together to ensure the United States has the middle skill work force needed to thrive. Otherwise, we'll find our needs overseas.

I guess rather than to try to make sense of what TD said about the wealthy and his logic that your only costs in producing TV sets would be $22 an hour, I will just have to agree with zerotolerance

Much like TD I believe it is all because of George Bush and all those evil rich people who earned their wealth off the backs of us po folks.

I can't say that I blame big companies for shipping out their operations. People are growing sick and tired of general mood of this society. I see way to many people that would rather sit at home and draw a check from the government. There is no motivation for some people to get out and make something of themselves, when they can stay at home and sleep all day and stay up all night.

Big companies get it stuck to them in many ways. The recent increase here in WV for the unemployement fund. How would any of you like to be a company that was a success and did not have to lay off anyone during this economic mess, and be forced to cough up more money for people that were laid off.

Hoppy,

Since you seem impressed by the analysis of Intel Executives, I would refer you to an article by Andy Grove, a cofounder and former CEO of Intel in a recent issue of Business Week. Here are a couple of his observations:

"Our fundamental economic beliefs, which we have elevated from a conviction based on observation to an unquestioned truism, is that the free market is the best economic system -- the freer, the better. Our generation has seen the decisive victory of free-market principles over planned economies. So we stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better.

Such evidence stares at us from the performance of several Asian countries in the past few decades. These countries seem to understand that job creation must be the No. 1 objective of state economic policy. The government plays a strategic role in setting the priorities and arraying the forces and organization necessary to achieve this goal."

http://www.bloomberg.com/news/2010-07-01/how-to-make-an-american-job-before-it-s-too-late-andy-grove.html

Hoppy, The problem is we are no longer an industrialized nation. We have traded the present for the future. One can not buy a tractor that is made in the U.S.. The U.S. has given most of the industtrialized jobs to other countries, in the name of free trade. Too many U.S. companies are only loyal to money and outsourcing our jobs. Furthermore, many of these other countries do not have all the governmental restirictions, eg. EPA regulations which has allowed them to boom. "Yahoo" news had an article yesterday about the lack of skilled workers. The government has thumbed their nose at training for "blue-collar" jobs.

The incentives are all wrong. If you let wealthy people take their profits at a low rate, over the past 10 years dividens and capital gains have been 15%, that is what they will do rather than invest and grow their business.

We need a tax structure that encourages long term investment and punishes short term profit taking. As long as we let the multi-national corporations have their way with trade policy, etc... the downward spiral will continue.

Why do we not manufacture in America? You would probably respond the cost of labor. Take this example of flat screen televisions, a huge market right now. Those could be made in USA, say in Marlinton, WV, wouldn't that be great? Labor cost there would be $22 per embployee per hour (including taxes and benefits) and let's say foreign labor is free. A modern facility employing 100 workers would produce 4 sets per hour per worker, according to my research.

So you can look at this two ways, $2,200 per hour compared to zero or the fact that American labor would add $5.50 to each set. I would gladly pay an additional $5.50 to employee Americans.

Everything from shoes to wash machines and televisions could be manufactured here in modern facilities and the labor cost would add less than 10% to most items, unemployment/deficit/host of other problems solved. The reason corporations don't manufacture here is they can't pollute the air and water, they have to adhere to certain standars in safety and the way they treat their workers. In Asia they can work individuals 60 hours a week until their back gives out then just kick them to the side and get someone else.

Corporations don't want to pay American workers, they don't want to pay taxes to our government, but they do want and need free and total access to our market. We are the ones in the driver seat not them and we need to dictate the terms under which they have that access.

The CEO of Intel sounds like another shortsighted guy who has gotten rich off of the American market and is completely ungrateful. God bless the USA unless he can put an extra penny in his pocket from elsewhere.

Hoppy,

America's competitiveness in technology and the economy in general is by far the most important issue facing this country. Instead our political leadership in Washington panders to a section of the voters by bashing business and focusing on equality, rights, entitlements and the "environment" at the expense of everything else. There is a huge disconnect between the elected officals and the political leadership needed to concentrate on and emphasize competiveness in technology and to move the country forward.

Hop, the American educational system has failed for a variety of reasons. First and foremost is because both parents(if a child is lucky) have to work to maintain middle class status.There is little time for parent/student homework tutoring when making enough to survive has you working overtime or a part-time job. Trying to compete with Red China has lowered wages for all Americans. Second, being an ex-social studies instructor it pains me to say that the teachers unions have let us down. I did my student teaching at Huntington East before graduate school and complained to Marshall about a variety of issues that were swept under the rug to protect an arrogant teacher that should have been fired.I will not go into details as to not offend the majority of great teachers in this state. The charter school movement would not have gained traction but for the failures of administrators to take appropriate steps to raise academic standards. Yes, the caretakers of our youth have been asleep at the wheel and the car ended in the ditch just like the economy. Third, the docters with their ADHD medications making future drug addicts have not helped the situation. I mean my mom did not have to sedate me for me to respect my teachers. In addition surprisingly coming from a flaming liberal, paddling helped keep order. Of course I wouldnt advise it today we dont have the experts we used to have. Finally, our lazy non-motivated kids that live the life of Riley have got to do a little better on American individualism or at least try. We have created monsters by trying to make everyone feel like a winner by giving trophies just for participating in things. That is not reality so when they grow up and face reality they are not prepared. Heck, I think the real solution is to bring Chinese and Indian teachers to replace ours they have taken all our other jobs.

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