For a long time, I’ve noticed economists and politicians expound the advantages of innovation as a source of new jobs. It goes without saying any longer that innovation is lumped in with economic development, entrepreneurship, and job creation. One big happy family. But does advancement create more jobs? Is innovation a trusted economic development system?
I think there is a correlation/causation issue working here. In places where there is a complete lot of development, say, Silicon Valley, there is apparently more job creation and those careers frequently have higher wages and income. Conversely, in places where innovation quotients are lower, it appears there’re less job creation and less economic development. Does innovation lead to job creation? While I’m not an economist, there are some things I think I understand about how business works.
Schumpeter said it best when he coined the word creative destruction. Let’s take a look at Apple, that observed innovator. Did Apple’s period of development create new careers? Few would claim that Apple was anything apart from a successful serial innovator, creating the iPod, iPhone, iPad, and so forth. So we celebrate Apple as an innovator. But does Apple’s creativity create careers?
To some extent, yes, for Apple as well as for Foxconn, Apple’s production partner. But there are always a couple of problems with that working job creation. First, lots of the working jobs created were in China, where the price of labor is leaner than in the US. Apple outsourced much of its production, so although it was innovative, the development in careers in the states were concentrated in marketing, sales, product, and finance design. Remember that Apple’s new advertising campaign targets DESIGN in California, not manufacturing.
- Omnichannel Marketing Generates Better Results
- Part time general counsel for small companies
- Using the insured property to carry out business when this was not announced to your insurance company
- Children’s books
- Low-Income Home Energy Assistance Program (LIHEAP)
- Evolution of Chatbots
Second, if we were to track what was taking place in Apple’s core markets, we’d find that while Apple was adding careers here and abroad, jobs were eliminated in competitive companies. Look at Nokia and Motorola for example in the cellular phone industry. As the iPhone was booming (and creating new jobs) Nokia and Motorola, which had been the biggest players in the area, lost a large number of employees. At one point in the late 1990s and 2000s early, Nokia appeared an unshakable prominent power in handsets.
Yet today Nokia is a shell of its former personal and Motorola is exiting much of the handset business. Both lost more jobs than Apple added much. So if innovation is a working job creator, it is a working job creator for the dominant innovation winner, creating jobs locally but often destroying jobs in competitive firms. But Apple’s innovation allowed a whole new industry to emerge – the “app” industry, where people could build small mobile applications and sell them for use on their smart phones.
While Apple’s technology killed many smart phone jobs, it created a fresh industry with a large number of good paying jobs simultaneously. Any innovation is likely to kill jobs in its core context, but may create jobs in adjacent markets or solutions, both creating and destroying. To consider the idea further, the technology creates new careers based on new insights, new systems, or new features.
These new careers often make old careers and potentially existing workers obsolete since they require new skills. In most cases new enhancements create new careers that existing employees, systems, and processes can’t maintaining. Further, many improvements create improvements to the way we work, simplifying or getting rid of steps or careers. For instance, innovation in farming techniques and equipment means that significantly less than 2% of the US population creates enough food to feed everyone in the US and have plenty left for export.
Less than 50 years ago the same food production required almost 25% of the population. Innovation creates new jobs but those careers aren’t always transferable to existing workers. Innovation often eliminates processes, workshops, and careers through automation or efficiency. Remember that in Apple’s case new jobs were created not in hardware (handset) however in software, especially in the app market. This involves new and different skills potentially. So far this analysis has failed to acknowledge the most significant contributor to the problem of careers perhaps.
Innovation is more harmful than it was previously for two key reasons. First, many innovations and inventions made it possible to take advantage of human capital. Railroads, steamboats, even the internet created platforms that individuals could build on, increasing jobs and output. There may be a diminishing marginal return to that type of innovation. Today quite a few improvements are intangible improvements and don’t often have a “platform” or “Long Tail” offering which allows others to capitalize on the system and build new solutions on the platform.