To truly 'build back better,' invest in R&D, researchers say

When Simon Johnson and Jonathan Gruber published “Jump-Starting America” in 2019, they were responding to the slowdown in U.S. productivity and loss of access to well-paying jobs that began in the 1970s and accelerated through the 2000s.

Subtitled “How Breakthrough Science Can Revive Economic Growth and the American Dream,” the book proposed that the federal government jump‐start the stalled American growth engine by investing $100 billion annually to develop and commercialize innovation technologies. That investment would create 4 million good new jobs in the near term, the authors estimated.

“Almost every major innovation after World War II relied in an important way on federal government support,” wroteJohnson, a global economics and management professor at MIT Sloan, and Gruber, an MIT economics professor. Without a similar investment, “We are at risk of falling behind and losing even more good jobs.”

To close income and opportunity gaps, this federal R&D investment would be centered in 102 urban communities statistically identified by Johnson and Gruber as potential next-generation technology hubs.

“These geographically concentrated federal investments can be truly transformative: attracting companies and helping to generate more local private sector employment,” they wrote.

Then COVID-19 hit, and the U.S. shut down. The economic fallout from the pandemic exacerbated the jobs gap and brought into sharper relief the racial underpinnings of economic inequality in the U.S.

Now, a new administration is promising to “build back better,” with various infrastructure, cyber defense, and innovation legislation in play. As Americans and the U.S. economy continue to navigate the pandemic, Johnson highlighted in a recent interview the ideas from “Jump-Starting America” that are more relevant than ever:

1. In an atmosphere of extreme political partisanship, a desire for good jobs cuts across party lines.

Public spending on research and development, which peaked in 1964 at nearly 2% of GDP (and is now at 0.65%), has historically been supported by both Democratic and Republican administrations. In speaking with policymakers in Washington and around the country, Johnson said he finds that support holds true today.

“The case for expanding federal support for R&D in the U.S. is very strong,” Johnson said, citing the U.S. Innovation and Competition Act, which has garnered votes in the Senate from both sides of the aisle. “Everybody recognizes that you need R&D for national security and for good jobs” — which he and Gruber define as jobs that offer reasonably stable employment, a living wage, and decent benefits.

“When we talk to mayors and governors, irrespective of their party, they all say, ‘We know the jobs of the future are going to be related to technology. Show us how to get there.’"

2. Federal investment is still the most effective way to redress geographic inequities.

In their book, Gruber and Johnson suggest that federal investment could help smaller cities and rural areas left behind in the innovation boom that has clustered in “superstar” U.S. regions like Silicon Valley, San Francisco, New York, Los Angeles, Seattle, the Washington, DC area, and the Boston metro region.

It’s too early to tell how the pandemic-inspired work-from-home movement may change that situation, but Johnson isn’t overly optimistic. Remote work tends to be an option primarily for knowledge workers, he said, and it’s not yet clear how COVID-19 location disruptions will affect venture capital, which tends to cluster where innovation is already happening and there is ready access to capital.

The authors identified 102 urban communities that could be plausible next generation tech hubs, thanks to their large populations, highly educated workforces, and low costs of living. As last year’s racial justice movement brought to light, these are often minority-majority metropolitan areas, such as Pittsburgh, Cleveland, or St. Louis, with higher rates of unemployment.

“We do think there's a geographic justice issue here, which is that people in small towns and smaller cities have been left behind, and various demographic groups live in those cities," Johnson said. "Our book and our work emphasize the key role of education in making sure that people can participate in this knowledge-based economy."

Johnson and Gruber champion the “spillover effect” of investing in high-tech jobs in a particular region.

“The evidence suggests that public investment in R&D creates a lot of jobs for people who don't have PhDs — in fact, for people who may not necessarily have finished college, as long as they get applicable vocational training. Each PhD job comes with three to eight non-PhD jobs, and these are generally good, well-paying jobs,” Johnson said.  

3. Science matters.

At the heart of Gruber and Johnson’s proposal is a belief in the power of science to solve problems and create jobs — and the power of federal investment to grow those nascent technologies.

“The path the U.S. took during and after World War II was a deliberate path focused on using science and then developing more science to be useful,” said Johnson.

The innovation that led to rapid growth after World War II was “the direct result of a fruitful partnership between the private sector, federal government, and universities,” the authors write.

Post-1945, those partnerships produced developments such as jet aircraft, drugs and vaccines, microelectronics, satellites, and digital computers.

Together, the government and the private sector were able to fast-track COVID-19 vaccines.

“We have been saved by science,” said Johnson, who called the rapid scale up of vaccine development and distribution “a big validation of the U.S. biopharmaceutical strategy.”

Despite significant science skepticism in the U.S., Johnson remains optimistic that policymakers and the private sector can envision the benefits of scientific partnerships.

“In Washington, science is often politicized, but when I go talk to people or Zoom with people around the country now, it doesn't matter if they're left wing or right wing,” Johnson said. “At the local level, they're like, ‘We want more good jobs. How do we get these science-based enterprises to relocate here, remain here, and hire people here?’”

Read the policy summary

Explore 102 potential technology hubs