Pursue Inclusive Innovation

Despite the deep and diverse benefits from innovation, there are also transition costs associated with rapid technological change and advancement. Bringing the U.S. tradition of innovation into the 21st century and securing it for the future requires that the many benefits that flow from innovation are shared and felt by all.

Managed well, the benefits of innovation have the potential to ripple through the whole economy — creating new jobs, seeding new sectors and enhancing economywide productivity. For example, the invention of the personal computer has created an estimated 15.8 million net new jobs outside of the technology sector in the United States since 1980. The innovation economy of the 21st century has the potential to create tremendous growth and opportunity on a similar scale.

But uneven participation in the innovation economy shortchanges the nation’s full innovative potential, jeopardizing future technological progress and leading to an uneven distribution of benefits. The strong link between robust participation and the benefits of innovation underscores the importance of inclusion. A bumpy entry into a period of large-scale technological change could dampen economic growth, forestall tangible benefits for American households and lengthen the period of disruption. On the other hand, policies that help level the playing field across demographic and regional divides, equip all workers with innovation-ready skills, and encourage broad participation in the innovation economy must keep pace with technological change to truly promote prosperity and inclusive growth.

The United States falls short of full and diverse participation in the innovation economy.

• Hispanic and African American workers have consistently represented around 3 percent of the total entrepreneurial and venture capital talent pools since 1990.
• Women currently make up just 22 percent of the science, technology, engineering and math workforce.

• Children from high-income families are roughly 10 times more likely to become inventors than those from families earning below the median income.
• Rural Americans are 7 to 12 percentage points less likely than those living in urban or suburban areas to say they have a smartphone, computer or tablet.
• Nearly 60 percent of U.S. patents awarded between 2000 and 2015 were to applicants living in 20 metro areas that contain just 36 percent of the population. 

Many American workers are not well equipped to manage the transition to the new innovation economy.

• Although the precise nature of transition costs associated with innovation is still uncertain, economic disruption can hit certain groups harder than others. Historically, disparate impacts of economic shifts have often been driven by gaps in skills and education.
• One recent study estimated that more than 80 percent of positions making less than $20 per hour could experience significant wage and employment pressures from automation, compared to just 4 percent of positions compensated at more than $40 per hour.

• An estimated 13 million to 54 million U.S. workers may need to switch into entirely new occupation categories through 2030 as technological change disrupts the labor market.  
• Closing the skills gap and investing in workforce training is a critical first step toward managing this change. Unfortunately, the current level of investment in worker retraining is low; only 0.03 percent of U.S. gross domestic product (2015$) goes to worker retraining.

Policy Recommendations

1. Revise degree requirements for hiring. Companies should reform hiring practices to open opportunities for “new collar” workers, focusing on skills and credential-based hiring for positions that do not require a traditional bachelor’s degree. Many low- and middle-income individuals and workers in rural areas have difficulty attaining bachelor’s degrees in today’s higher education systems but possess the necessary skills and experience to fill jobs — particularly when work-based learning and shorter education pathways are available.
2. Develop partnerships to scale inclusive innovation programs. The government should partner with private sector and local stakeholders to support effective and replicable program models for revitalizing local innovation ecosystems and fostering inclusive economic growth, particularly in low-income and rural areas of the country.
3. Support and expand innovation “residency” programs in underserved areas. The government should explore ways to scale up and support efforts to bring new opportunities to traditionally underserved regions (including rural, noncoastal and lower-income areas). This includes making competitive grant funding available to programs that match talent with start-ups in areas that lack a well-established start-up community or culture, as well as supporting regional development initiatives that aid entrepreneurial activity.
4. Deliver training resources more effectively. The federal government should identify and support organizations that have successfully replicated training programs that deliver industry-aligned skill-training and job-matching services to high-need groups across multiple sites or using online platforms. This helps maximize the impact of workforce training resources by supporting delivery models that meet the range and extent of local resource needs.
5. Support diversity in entrepreneurship. The government should collaborate with private actors to support diverse entrepreneurial ecosystems and build a national network of inclusive incubators and accelerators beyond traditional innovation hubs like New York and Silicon Valley. Such ecosystems should promote entrepreneurship among disadvantaged and underrepresented groups.
6. Facilitate access to finance. Industry should partner with federal, state and local governments to increase the availability of and access to credit to empower entrepreneurs from disadvantaged and under-represented groups.
7. Provide mentorship and networking. The public and private sectors should collaborate to provide coaching and mentoring to strengthen business and entrepreneurial skills among diverse entrepreneurs. They should build and bolster networks that enable frequent and enduring interaction between these entrepreneurs and the wider business community.