What Drives American Competitiveness?

Abstract

As productivity growth has slowed and wages have stagnated in the past decade, there is serious concern about the long-term competitiveness of the U.S. economy. This article discusses key factors that affect U.S. economic growth, including the number of workers, their skill level, and the level of innovation and investment in new ideas. There are limited prospects for growth in the number of workers, due to changes in age distribution, immigration, and women’s labor force participation. There has been a slow increase in worker skills in the United States, and there are opportunities for further growth in educational attainment. The role of innovation in developing new products and services that improve our wellbeing and drive productivity growth is a key driver of long-term growth, which means that the United States needs to stay at the front edge of basic and translational research. In recent decades, the preeminent U.S. position in the world economy has eroded as other countries have outstripped the United States in the growth of their educated workforce. At the same time, other countries have greatly increased their investments in basic research and innovation while U.S. investments have stalled. If the United States is to retain its long-term economic leadership, it must pay attention to policies that will enhance skills and innovation. The large public research university—an institution largely invented in the United States—has a key role to play.