Key Economic Indicators of U.S. Competitiveness
- Trends in National Economic Growth, Standard of Living, and Labor Productivity
- Rising Competitiveness of China and India
S&E and the technological innovations that emerge from R&D activities enable high-wage nations such as the United States to compete in today’s highly competitive global marketplace. Many of the innovative new products found around the world, many of the inventions and manufacturing process innovations that improve worker productivity, and many of the transformative innovations that create not just new companies but new industries can be traced back to earlier national investments in S&E and R&D. Business application and marketing of these innovations make large contributions to national economic growth and support U.S. economic competitiveness in the marketplace at home and abroad (Okubo et al. 2006).
An international standard used to judge a nation’s competitiveness rests on the ability of its industries to produce goods that sell in the marketplace while simultaneously maintaining, if not improving, the standard of living for its citizens (OECD 1996). Three macroeconomic indicators that help to measure this standard of national competitiveness are economic growth, standard of living, and productivity. Trends in these indicators for the United States are presented alongside those for the EU and Japan, which also rely on R&D and other S&E investments to support national competitiveness.
Trends in National Economic Growth, Standard of Living, and Labor Productivity
National Economic Growth
The U.S. economy, the largest of any nation, continues to be one of the fastest growing compared with other large, advanced economies
Standard of Living
Faster growth of the U.S. economy, however, is due partially to more rapid population growth in the United States compared with the other two economies. Normalizing the value of all national economic activity (GDP) for population size provides a widely recognized measure of the national standard of living. During the same 15-year period discussed previously (1991–2005), U.S. GDP per capita increased each year except 2001, rising from $31,312 (inflation adjusted to PPP 2005 dollars) in 1991 to $41,824 in 2005
Productivity of the United States and Other Advanced Economies
The high and rising standard of living enjoyed by the three advanced economies, the United States, the EU, and Japan, is influenced by the efficiency with which their resources (labor and capital) are employed, measured by labor or multifactor productivity. Labor and multifactor productivity are the change in GDP per unit of labor and combined unit of labor and capital, respectively.
Process innovations and the application of new capital equipment in the manufacturing process help to raise labor’s productivity, allowing high-wage nations such as the United States to compete successfully in the global marketplace.
Labor productivity of the United States has exceeded that of the EU and Japan for at least several decades
International Comparisons of Labor Compensation
Productivity growth can directly affect the level and growth of wages in a country. Existing data allow only limited international comparison. An international indicator of relative wages across economies is compensation costs (direct wages and benefits) for production workers in manufacturing, which measure whether gains in productivity and per capita GDP have been accompanied by an increase in labor compensation. These compensation data do not fully take into account cost-of-living differences across countries, however.
U.S. workers have enjoyed steady gains in compensation during the past decade and a half, coinciding with gains in U.S. productivity
Data on wages and benefits for U.S. workers employed in broad sectors of the economy show that productivity growth has been accompanied by an increase in real wages and benefits paid to U.S. workers in private industry
Judging from the measures discussed above, the United States continues to be highly competitive in the global marketplace. The U.S. economy continues to expand, finding demand for its products and services while maintaining relatively high compensation for U.S. workers and rising GDP per capita for its citizens.
Rising Competitiveness of China and India
Economic growth in China and India has been rapid in recent years, and these two countries have increased their global market share, trade, and investment in many industries. Productivity and per capita income growth of these two countries, particularly China, appear to have been much more rapid in recent years than that of the United States and other advanced economies
 The Bureau of Economic Analysis (BEA) estimates that treating R&D as an investment increased the level of current-dollar GDP by an average of 2.5% per year during the period 1959 to 2002 (Okubo et al. 2006). The BEA estimate measures the direct impact of R&D and does not include the indirect (spillover) impact of R&D.
 GDP per capita does not reveal anything about comparative distribution of income across countries, for which data are not readily available.
 Extensive literature exists on the impact of IT on U.S. economic growth in the mid-1990s. For example, see Stiroh K 2001. What drives productivity growth? Economic Policy Review 7(1):39–59; http://www.newyorkfed.org/research/epr/01v07n1/0103stir.html. Accessed 26 June 2007.