SSTI Digest

Incorporating systems thinking into economic development planning could lead to better solutions to potential and pressing problems, says a Quarterly Research Brief from the National Economic Research and Resilience Center (NERRC). The paper emphasizes that systems, or integrated planning, is essential when writing a Comprehensive Economic Development Strategy (CEDS).

The authors mention that the Economic Development Administration CEDS Content Guidelines require that the strategies ensure the economies are resilient, and cite EDA’s definition of resilience, saying, “In the face of challenges that global uncertainties, natural disasters, climate change, socio-economic disparities, and technological disruptions pose, resilience strategies are essential tools to equitably and sustainably build prosperity over time. In the economic development context, resilience aims to better prepare regions to anticipate, withstand, and bounce back from any type of shock, disruption, or stress it may experience."

The Biden Administration issued an executive order earlier this week that provides guidance on the safe, secure, and trustworthy development and use of Artificial Intelligence (AI) in the U.S. The EO includes guidance for agencies to work to provide new opportunities for small businesses and entrepreneurs in AI and other directives.

NSF is directed in section 5.2 (iii) (b) to launch a pilot program implementing the National AI Research Resource (NAIRR). The program is intended to "pursue the infrastructure, governance mechanisms, and user interfaces to pilot an initial integration of distributed computational, data, model, and training resources to be made available to the research community in support of AI-related research and development.”

The EO also calls for NSF to “fund and launch at least one NSF Regional Innovation Engine that prioritizes AI-related work, such as AI-related research, societal, or workforce needs.”

Despite a $4.1 trillion increase in annual output since 1987, manufacturing industries in the United States have been declining in both their labor productivity and share of output. The Bureau of Labor Statistics’ labor productivity (output per hour) index, tied to 2012 values, for manufacturing industries has dropped by nearly five points since its all-time high of over 101 in Q2 2013.

This edition of Useful Stats explores the Bureau of Labor Statistics’ (BLS) Office of Productivity and Technology (OPT) data on industry productivity, focusing on manufacturing industries. First, the total industry output in millions of USD is examined, then a labor productivity (output per hour) index breakdown of manufacturing industries.

Not all publicly traded companies use savings from tax cuts the same way, NBER researchers James Cloyne, Ezgi Kurt, and Paolo Surico report in “Who gains from Corporate Tax Cuts?  While changes in marginal tax rates and investment tax credits (ITC) can have significant effects on the behavior of publicly traded C-corporations, manufacturers and goods producers are much more likely to recirculate the savings into additional capital expenditure and employment than firms in the service sector.  Publicly traded service sector companies typically use the proceeds from a tax cut to increase dividends to current investors in the firms.

By April of 2023, state legislatures had filed 99 anti-ESG bills, according to Reuters. Many of these bills are motivated by the perception that investors who prioritize environmental, social, and governance (ESG) compliance by companies in which they are investing are imposing their political beliefs on others. Furthermore, some believe that ESG considerations inhibit investors and thus hurt returns. On the other hand, some critics of these bills argue the opposite: that it is restricting ESG investing that jeopardizes investment returns. In fact, Research from Pitchbook found ESG investing can have as big a return as investing in non-ESG-driven investments.

Three states are holding gubernatorial elections this fall, with voters in one of those states (Louisiana) having already chosen a new governor to replace a term-limited incumbent. In the remaining states, Kentucky and Mississippi, elections will be held next week (Nov. 7), with the incumbents facing tough opponents in their reelection bids. Six states (Colorado, Maine, New York, Louisiana, Ohio, and Texas) will vote on 36 statewide ballot measures this fall. Of those measures, 30 of the 36 measures are legislatively referred constitutional amendments or statutes, while the other six are citizen initiatives. Many of this year’s measures are focused on taxes and state funds. At the same time, state legislative elections will be held in Mississippi, New Jersey, and Virginia.

The Appalachian Regional Commission (ARC) recently awarded new grants totaling over $16.4 million to boost green energy manufacturing and workforce development through its Appalachian Regional Initiative for Stronger Economies (ARISE) funding opportunity.  ARC’s Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) Initiative recently awarded nearly $54 million to projects that will leverage entrepreneurship, workforce development, and infrastructure to bolster re-employment opportunities, create jobs in existing or new industries, and attract new sources of investment in communities and regions that have been affected by job losses in coal mining, coal power plant operations, and coal-related supply chain industries due to the changing economics of America’s energy production.

Projects funded through ARISE include:

As the U.S. does not have a “skilled worker” visa like many other countries, the H-1B program is one of the only accessible ways for domestic employers to hire foreign, nonimmigrant labor in specialty occupations. The current statutory limit on new H-1B visas is 65,000 per fiscal year, with an additional 20,000 available for foreign individuals who have graduated with a master’s or doctoral degree from an institution of higher education within the U.S. This limit has led to a much higher demand than can be supplied, leaving some industries with less H-1B workers than they may have hoped.

Since 2009, the industry with the most approved H-1B visas has been the Professional, Scientific, and Technical Services industry (NAICS 54), accounting for half of the total initial approvals each year on average. Educational Services (NAICS 61) and Manufacturing (NAICS 31-33) historically follow behind at an average share of 10% each per year.

Manufacturing in the U.S. accounts for 90% of private-sector R&D, employs 80% of the nation’s engineers, and contributes trillions to the economy—according to Deloitte—with every dollar spent in manufacturing leading to an additional $1.81 added to the economy. However, despite its key importance, the U.S. lags behind much of the world in its proportion of manufacturing value added—the difference between the price of a product or service and any associated production costs—to the economy, seeing less value added each year as a percentage of GDP.

Manufacturing value added as percentage of the GDP has remained virtually stagnant worldwide. Japan’s and India’s have stayed fairly consistent, while China, Germany, and the U.S. experienced regular declines. In 1997, the U.S. figure for value added by manufacturing to its GDP was 16%, while in 2021 this share had dropped to just under 11%. China saw nearly 28% value added in 2022—a drop from 32% in 2004.

The CHIPS and Science Act (Act) established guardrails to prevent funding recipients from using the money to support the development of semiconductor manufacturing and technology in foreign countries of concern, including North Korea, China, Russia, and Iran. On September 25, 2023, the CHIPS Program Office CPO published the final rules for preventing improper use of CHIPS Act funding. The guardrails in the legislation include the Expansion Clawback and the Technology Clawback. The Expansion Clawback restricts recipients from using CHIPS funding for material expansion of manufacturing capacity in a foreign country of concern; the Technology Clawback limits recipients from engaging in joint research or technology licensing with a foreign entity of concern.

The final rules clarify some points that were raised during the comments period about the clawbacks.

Changes in the final rule

A proposed Department of Homeland Security (DHS) rule could herald significant changes to the H-1B specialty occupation worker program. These proposed changes would bring about a revised definition of “specialty occupation,” install what DHS says would be a more equitable selection process, allow entrepreneurs to sponsor themselves for an H-1B Visa, and open more non-lottery options for nonprofits.

The H-1B nonimmigrant visa program allows U.S. employers to hire international workers temporarily. These positions must require a bachelor's degree plus specialization or their equivalent. Sixty-five thousand of these visas are awarded each year. Congress has described the program's purpose as "filling shortages and creating opportunities for innovation and expansion.”

The National Institutes of Health (NIH) announced last week that it is adopting modified criteria in its grant review process beginning on January 25, 2024. The new system will continue to focus on the scientific merit of proposals (i.e., importance, rigor, and feasibility), while de-emphasizing criteria that may introduce bias into the review. New grant applications will be evaluated for whether the applicant demonstrates sufficient expertise and resources, but without considering the reputation of the institution or the investigator.