What Is an Innovation Job?

Over the past fifty years, the U.S. economy has gradually shifted away from traditional manufacturing toward the creation of knowledge, ideas, and innovation. As traditional manufacturing jobs keep disappearing, the innovation sector keeps growing. It will soon be what manufacturing used to be in the 1950s and 1960s: America’s main engine of prosperity.

During the 1980s and the early 1990s, global innovation was generally stable, with the worldwide number of patents at around 400,000 per year. But since 1991 global investment in research and development has been increasing. The number of patents granted around the world exceeded 800,000 in 2010 and reaches new heights almost every year. In the United States, the top patent producers in 2010 were IBM (5,866 patents), Microsoft (3,086), Intel (1,652), and Hewlett-Packard (1,480). The largest category of patents was pharmaceutical (highlighting the importance of the life science industry for American innovation), followed by information technology, chemical and material sciences, scientific instruments, telecommunications, and, much lower in the ranking, newer industries such as nanotechnology. To find categories associated with traditional manufacturing, you have to dive deep, to positions 37 and 38: land vehicles and metalworking. Compared with the 2010 ranking, the 1992 ranking looks prehistoric. In 1992, IBM was already near the top, but IT and life sciences were much less prominent, while companies making traditional manufacturing products and photographic equipment were among the top innovators. Canon, Fuji, and Kodak were all among the top ten patent producers that year.

 Jobs in the innovation sector are not easily defined, because innovation takes many forms. Of course they include the high-tech sector: information technology, life sciences, clean tech, new materials, robotics, and nanotechnology. But jobs in innovation also include parts of the labor market outside of science and engineering. As with Dominic Glynn and Pixar, jobs in innovation are often found in unexpected places. What they all have in common is that they make intensive use of human capital and human ingenuity.

A growing number of skeptics have questioned the importance of innovation for the American economy, arguing that the increase in jobs is not large enough to offset the losses in manufacturing. Intel’s former CEO Andy Grove has famously criticized America’s “misplaced faith in the power of startups to create U.S. jobs.” Tyler Cowen’s influential book The Great Stagnation argued that companies like Facebook or Twitter do not have many employees, because they rely on their users for most of the content and are simply too small to replace the titans of the past, like Ford and General Motors.

 But the picture that emerges from the data is more complex. Take employment in the Internet sector. Before even looking at the numbers, I suspected that Internet jobs had to be growing. After all, the Web has become our favorite place to get news, buy products, search for information, connect with each other, and look for partners. However, I was not prepared for the dramatic nature of the employment growth. Using data from a comprehensive data set of all U.S. businesses collected by the Census Bureau, I estimate that the number of jobs in the Internet sector has grown by 634 percent over the past decade, or more than two hundred times the growth rate of the overall number of jobs in the rest of the economy during the same period. (This number does not even include Internet-related jobs outside the high-tech sector, such as the delivery of online purchases.) As you can see in Figure 3, this rate of job growth is explosive and has been accelerating over the past five years. If the rest of the labor market had grown like the Internet sector, not only would there be no unemployment, there would be two new job openings for each citizen, including babies and the elderly. The growth of total salary earned in this sector has been even more dramatic—712 percent over a ten-year period in today’s dollars.

Skeptics are correct in pointing out that Facebook directly employs only 1,500 workers in its Menlo Park headquarters and another 1,000 scattered around America. While this number is growing rapidly, General Electric and General Motors have about 140,000 and 79,000 employees in the United States, respectively. But Facebook is just a platform, and most of the apps that make it attractive are created by other companies. Some, such as the game-maker Zynga, have more employees than Facebook. A recent study estimates that companies that produce Facebook apps have directly created at least 53,000 new jobs and have indirectly created at least 130,000 more jobs in related business services. These are not trivial numbers, and together they put the total value of salaries and benefits associated with Facebook at over $12 billion.