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05 Mar. 2012 | Comments (0)

In order to tackle its competitiveness challenges, America needs to harness the inherent creativity of its workforce. It is making progress in the right direction but needs to push the pace.

Michael Porter has done us all a service in identifying that the wealth of modern economies comes from the productivity, innovation and high wages found in their clustered industries — those industries that are found only in certain geographic areas and trade most of their output outside their home areas, both nationally and internationally. Wages in these clustered industries (like pharmaceuticals or business services) are dramatically higher than in dispersed industries (like primary medical care or consumer services).

To deepen the picture of the economy created by Porter, Richard Florida and I decided to explore the patterns of wages by job content across clustered and dispersed industries. By job content we mean in particular whether the job requires independent decision-making and judgment or instead requires following preset guidelines for action.

Of course no job is completely robotic — otherwise it would be performed by a robot. But we were able to classify all jobs as either creativity-oriented or routine-oriented. And within the routine-oriented classification, there are three distinct types: routine-physical (e.g. an auto assembly plant worker); routine-service (e.g. an accounts payable clerk); and routine-resource (e.g. a coal miner).

As the following chart shows (click on the chart to view a larger image), there has been a massive transformation of the U.S. economy in the content of jobs over the past century:

Thumbnail image for Routinecreativityjobs.jpg

Creativity-oriented jobs happily have gone from just over 10% of the economy to over 30% of the economy while routine-physical jobs have gone from almost 60% of the economy to 25% of the economy as the manufacturing economy has given way to the service economy. With 45% of all jobs, routine-service has the biggest proportion of American jobs.

The question Richard and I sought to answer is whether it matters more to one's income if one is in a clustered industry or if one is in a creativity-oriented job? The answer, as it turns out, is that it is not even close. It matters way more what you do rather than in what industry you do it, as the chart below shows (click on the chart to view a larger image).

Thumbnail image for employmentincomebygroupsandindustry.jpg

It is clearly better to be in a clustered industry than a dispersed industry regardless of whether you have a creativity-oriented (24% higher wages) or routine-oriented (31% higher wages) job. But it is way, way better to have a creativity-oriented job in a dispersed industry than a routine job in a clustered industry (78% higher wages). And of course, those with creativity-oriented jobs in clustered industries are in the cat-bird's seat, with wages another 25% higher than their peers in dispersed industries.

Our inference from our work (and if you want the full report you can find it here) is that building strong clusters continues to be important. They have higher wages for both routine-oriented and creativity-oriented jobs and they have a higher proportion of creativity-oriented jobs (41% versus 32% for dispersed-industries).

However, the real challenge for the U.S. economy is what to do with routine-oriented jobs in dispersed industries. That category makes up almost half of the jobs in America and the average employment income for these jobs is under $25K. That is a big chunk of America that is just scraping by economically.

And their job security is just wretched in comparison. Over the past 40 years, only in the very worst of economic times has unemployment in the creativity-oriented jobs hit its peak of 4% while for routine-oriented jobs, only in the very hottest economies has unemployment dipped to nearly 4% and it regularly spikes to double-digits. Finally, especially for the routine-service jobs, not only is employment income low, benefits are typically very low as well.

The current challenges with income inequality are in large part a function of the emergence of these two extremes — the creativity-oriented workers in clustered industries (a little more than 10% of jobs) and routine-service workers in dispersed industries (about a third of all jobs). The former are doing great — they aren't being outsourced or downsized or laid off. The latter are being squeezed in every way.

There is no quick fix for this problem. But my view (and Richard's) is that we have to rethink how we utilize workers in our advanced economy. We fear that job structuring and classification becomes entirely self-sealing for many American workers. Once a job is defined as routine, it becomes routine and the individual in it doesn't exercise judgment or decision-making. That employee then becomes by definition low-productivity and both can't be paid much and is easier to think of as a candidate for off-shoring.

If instead, the employee was asked to exercise judgment and decision-making in order to innovate and enhance the productivity of the operation, then the possibility for higher productivity, higher firm performance and higher wages exists.

This won't be the case for all jobs. But I believe that America can influence the slope of the line of increasing creativity-oriented jobs by leaning toward creativity; giving workers the encouragement and space to innovate; utilizing the most of their brain, not the least of it. That would be the grass-roots way out of America's economic doldrums that everyone is looking for.

This post is part of the HBR Insight Center on American Competitiveness.

This blog first appeared on Harvard Business Review on 2/27/2012.

View our complete listing of Labor Markets blogs.

  • About the Author:Roger Martin

    Roger Martin

    Roger Martin (www.rogerlmartin.com) is the Dean of the Rotman School of Management at the University of Toronto in Canada. He is the author, most recently, of Fixing the Game.…

    Full Bio | More from Roger Martin

     

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