Is R&D off-shoring killing us?

Richard Florida asks a few questions about R&D off-shoring trends in this post at theAtlantic.

TheRaven ran a quick test to gauge whether R&D off-shoring has caused measurable harm to the U.S. economy. The operative question is whether the economic subset associated with innovation is growing faster or slower than the labor market as a whole. Jobs associated with R&D should grow if the innovation process is out-pacing the economy and compensating for off-shoring. Conversely, if R&D employment is falling, then increased R&D off-shoring can be viewed as an existential threat, not the more benign balancing of national strengths in a global economy.

Bureau of Labor Statistics (BLS) occupation employment data was used to address this question. The BLS publishes pay range and employment data for a constant list of 800 occupations, each May. I have this data by 4-digit NAICS (North America Industry Classification System) code for 2005 through 2009. The BLS publishes data one year after it's initially collected, so, for example, the May 2010 database reports labor market conditions as of May 2009.

There are 47 occupations that can be reasonably associated with R&D - nearly all of the scientific and engineering occupations. Most people in these occupations are not devoted to R&D because R&D is typically just a few percentage points of an overall organization budget. There are exceptions, such as contract research firms, academic labs, etc., but we're dealing with occupation data across the U.S. economy. Looking at these 47 occupations should provide a decent proxy measure, especially given consideration of: (1)  labor market contraction between 2008 and 2009, and that (2) R&D is a well-known budget casualty in tough times.

Findings:

1. From 2005 through 2009:

a) The 18 science occupations had a +15% aggregate employment gain. Fourteen of 18 occupations had higher employment levels in 2009, vs. 2005.

b) The 29 engineering occupations had a +7% aggregate employment gain. Twenty-three of 29 occupations had higher employment levels in 2009, vs. 2005.

c) All 47 occupations had a +9% aggregate employment gain. Thirty-seven of 47 occupations had higher employment levels in 2009. The overall gain was 164,900 jobs.

2. Between 2008 and 2009:

a) The 18 science occupations had a +1.5% aggregate employment gain. Eleven of 18 occupations had higher employment levels in 2009, vs. 2008.

b) The 29 engineering occupations had a (1%) aggregate employment loss. Sixteen of 29 occupations had higher employment levels in 2009, vs. 2008.

c) All 47 occupations had (0.4%) aggregate employment loss. Twenty-seven of 47 occupations had higher employment levels in 2009, vs. 2008. The net loss was (8,370) jobs.

This group of occupations did better than the labor market as a whole over the 2005-2009 period and especially between 2008 and 2009. BLS data represents the bulk of the US labor market. The NAICS data-sets exclude only farming, domestic help and freelancers.

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Conclusion: while the labor market data is broad-brush, employment trends in occupations associated with R&D run counter to adverse macroeconomic circumstance and suggest that increased R&D off-shoring has not materially affected U.S. R&D-associated employment. Therefore, it's not likely that the off-shoring trend discussed in theAtlantic piece has inflicted meaningful harm on the U.S. economy.

PS - this look at employment trends and pay range patterns in four selected science occupations provides further information: