Think Globally, Act Locally

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MANN: The United States, for a very long time, thought it could get by by being pretty good at everything it does. An athlete with great talent who doesn't train is ultimately going to be caught by somebody who has less talent but better training. We don't get to make the globalization choice. We do get to make the choice about whether or not we change.

SLAUGHTER: I think we're at a really important point. An important political decision needs to be made about how much we're going to allow this globalization of industries and labor forces to continue. We've got the capacity now to globalize production in a much wider range of economic activities. When I go to my dentist's office, I look at the wall behind the receptionist, and it's all these paper files. That's all going to change. Maybe some of that will get digitized, maybe some will go to India or China or God knows where. It's like manufacturing back in the 1980s.

TIME: What does it mean when, say, R. and D. can be done all over the world and innovations are so rapidly shared?

SLAUGHTER: Innovation in services, like leisure and hospitality and education, is not the classic idea of guys in labs with test tubes. To have that kind of innovation, you need educated, experienced, motivated workers. So, are we cranking out these kinds of workers in the U.S.? Income inequality across skills — the earnings of a college graduate relative to a high school graduate — is widening. The really highly skilled group, they've had pretty good real wage growth in the last three or four years. It's everyone else that's had virtually no real wage growth.

HIRA: We have to shift our idea of innovation from company-centric views to workers. We need to think about innovation in terms of a healthy science and engineering labor market in the U.S. How do we get there?

SLAUGHTER: One thing that's been completely lost is that the labor force is going to grow much more slowly. That's largely determined by the population. So the overall growth of the U.S. labor force in the next 20 years is going to be half of what it was in the previous 20. When you think about where in the U.S. economy we're going to get these kinds of highly skilled workers, suddenly you need to be talking about immigration. Yet in the post-9/11 world, U.S. immigration policy has gotten more restrictive than open.

TIME: So why should we care if smart kids can't get into this country to go into graduate programs?

SLAUGHTER: Because these are the smart kids that drive innovation. But with the rising global engagement of China and India, these students could have better options back in their home countries.

MANN: Multinationals are already going abroad for new ideas about how to get the mouse. Why are they going there?

BAUMOL: As far as innovations quickly crossing borders, that's essential for us all, because that's the way of eliminating obselescence quickly. But I worry about government support of basic research, reduction in private spending on R and D.

HIRA: I don't see R. and D. as a silver bullet. We increase R.-and-D. spending 10% or 15%, it's not going to create lots of new jobs. If it does create innovations, it's not clear that the spillover benefits of making those products will be done by U.S. labor.

TIME: Is there a sense of urgency that these issues really have to be dealt with?