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Is the U.S. Losing its Competitive Edge?
Business Journal

Is the U.S. Losing its Competitive Edge?

The talents and potential of 70% of American workers are going to waste, warns Richard Florida, author of the best-selling The Rise of the Creative Class

Richard Florida, Ph.D., is an urban theorist and an expert in the way cities grow and develop. Urban theorists rarely stir much controversy, but Dr. Florida has done just that by identifying a new labor class. The controversy isn't the new class identification; it's that Dr. Florida has often, and erroneously, been accused by his critics of championing "yuppies," "trendoids," "sophistos," and gays. In fact, his real focus is talent.

Dr. Florida is the Hirst Professor of Public Policy at the School of Public Policy at George Mason University. He is also a Nonresident Fellow at the Brookings Institution and a Gallup Senior Scientist, one of a group of renowned scientists who lend their expertise to The Gallup Organization's research. He is not the first to note that the global economy is undergoing another revolution -- any B-school student can explain how the world is moving from an industrial economy to an information economy. What Dr. Florida has done is discover how the information economy depends on a particular kind of worker: the creative worker.

QUOTE: Many, many people are just scared. They don't know how they fit into this creative economy.

As Florida defines them, creative workers aren't just artists and musicians; they are the people who come up with new ideas, systems, and processes that become new products or industries -- or that make entrenched ones more profitable. Dr. Florida's definition is broad enough to encompass an entire economic class, and most executives are probably in it. But Dr. Florida's work, reflected in his best-selling book The Rise of the Creative Class and the more recently published The Flight of the Creative Class, does more than define the new industrial revolution. It examines how the United States may be falling behind in it.

Dr. Florida argues that the United States became a global superpower not because it was the inventor of new products -- cars, computers, and television, for example, were all invented elsewhere -- but because American industry has been the best at finding and maximizing the abilities of talented, creative workers. Indeed, the United States has enjoyed the advantage of being able to absorb a steady stream of creative workers, both homegrown and from abroad, that flows from the nexus of universities, federally funded research and development centers, and great cities. But that class represents only 30% of the workforce, though its members earn nearly twice as much on average as members of the working class or service class. The talents and potential of the other 70% are going to waste, Dr. Florida warns -- and don't think worldwide business competitors aren't angling to take advantage of this.

In this interview, the first of two with the Gallup Management Journal, Dr. Florida explains what the creative class really does, why it matters to the economy, and why -- unless the United States ramps up the cultivation of creative workers -- the future of business may not lay in America at all.

GMJ: How do you define creativity?

Dr. Florida: Well, let me define it two ways. The fairly formal definition is the ability to create new and meaningful forms. But I've always thought that every person was a creative person, so to me, creativity is an innately human thing. All people are creative; all people are drawn to new ideas, new combinations, new ways of thinking, and new ways of doing things, and those creative applications are what power the economy. I define creative work as thinking for a living -- the ability to use your mental faculties for the job.

GMJ: That describes a lot of jobs.

Florida: Yes. If you look at the growth in the economy over the past 50 years, you see a trend away from manufacturing work and a trend toward service work. Within that the service-work category, there are really two kinds of jobs: low-end, routine, burger-flipping jobs and higher end, more significant intellectual work.

I separate those two categories by using the Bureau of Labor Statistics occupational codes. In the United States, about 30% of the population works in jobs where they principally use their minds and are required to have higher degrees of education. About 40% of the workforce works in traditional service jobs, and 20% of the workforce works in manufacturing jobs; the other 10% are in agriculture, the military, and a few other kinds of jobs.

So I define the creative class by what people do -- creative occupations such as science, engineering, technology, or research and development. But it also includes arts and culture, industrial and graphic design, architecture, and all the rest of the knowledge-based occupations, principally the professions: healthcare, education, law, finance, and so on.

GMJ: So that's why they can constitute a whole class. But what's the point of studying them?

Florida: There's another implication of my work. Creative people enact themselves and create their identity through their work. It's part of our very essence. But we have a dilemma in the United States: 30% of us, and in some other advanced industrial countries, maybe 40% of us, get to do creative work, are paid well, and can express at least some part of our identity in our work and enact ourselves through work. But there's 60% or 70% who do not.

Every human being is creative. In an advanced society with ample resources, our job should be to try to engage as many people as we can in creative work. There's a strong economic rationale for doing that. This isn't just something that's a good idea or is ethically or morally right. What we've learned from the best-in-breed companies like Toyota or IDEO or the SAS Institute is that the really important advances come from regular shop-floor workers who continually improve quality and develop new process innovations. There are a lot of great ideas in the heads of engineers and MBAs and executives, but our economic progress depends on harnessing and tapping the creativity of each and every human being.

So the further development of the individual is aligned with further economic development, and in that sense, this creative class really can include many, many more people. My hope is that 20 or 30 or 40 years out, we will have reached the stage of development where we essentially "creatify" more and more manufacturing work and more and more of the service work.

GMJ: How do you "creatify" burger flipping jobs?

Florida: That's the same question, in a way, that faced the people who powered the industrial revolution -- and I think our historical situation is analogous to that of the late 19th century. We had a great wave of innovation and technology; we built these fabulous new industrial sectors to manufacture textiles and steel, automobiles, chemicals, and electronics, when before, just about everybody was a farmer. Then, quite naturally, wealth and opportunity became concentrated in the hands of the robber-baron elite, the Rockefellers and Mellons and Fricks and Carnegies and Fords, who built their great mansions in cities like New York, Pittsburgh, Cleveland, St. Louis, and Detroit. But those manufacturing jobs were just horrific. They were very low paying and staffed mainly by low-skilled immigrants, and they were extremely dangerous.

But during the 1930s, in the midst of the Great Depression and a budding class war, President Roosevelt said that we can't live with an industrial economy that divides people like this. We must build a society that allows the industrial engine to burn like crazy, but at the same time, we must extend the benefits of the industrial economy to a wide range of society. Because Roosevelt saw the threat for what it was and found a way to enfranchise a huge proportion of the population, America became a real global superpower.

GMJ: And we're facing the same situation now?

Florida: This is exactly the same place we're in today. The average wage of a creative occupation is double the average wage of a manufacturing job and probably three times that of a service job. We have a class divide that's quite similar to the class divide we had in the industrial revolution. And the political polarization and culture war we see today is really a reflection of those who are part of the creative economy and those who are outside of it.

Many, many people are just scared. They don't have an education, so they're anxious; they don't know how they fit into this creative economy. They see thriving centers like Boston, New York City, San Francisco, Los Angeles, and Washington, D.C., and they say the hell with it, that's the place that I don't like, that's the place that's eroding my country's cultural and moral fabric. But the only way we move forward as a country and remain an economic superpower is if we address this divide, and we can't do it through platitudes.

What we have to do is make those service jobs better jobs, and the way that you do it is to create mechanisms to pay people better, to make sure they get the skills and job upgrading they need. You make sure if they're a burger flipper, that the act of flipping a burger isn't the sole thing that defines their life. But basically, you make these jobs better the same way we took manufacturing jobs and made really, really bad jobs that paid low wages, that were very dangerous, that no one wanted to do, that only immigrants would toil in, and made them into good jobs.

GMJ: Not to be snotty, but why should business be concerned with whether or not the guy flipping burgers is creatively fulfilled?

Florida: Because, I'll tell you frankly, the period we're in is the greatest competitive threat to America that I've ever seen or studied. I think it's on par with the great battle for industrial supremacy between Britain, Germany, and the United States in the last century; it may be worse. And I think most people have their eyes on the wrong ball. Some serious commentators look at the threat of terrorism, which is a very real threat, but it's not a threat like communism or fascism or the great -isms of the early 20th century. Other people say the real threat is the giant economies called India and China with all these people that are going to take away our manufacturing work. But if you look back through world history, very seldom were big economies the dominant powers; they're much more likely to be small economies.

QUOTE: I think the real threat lies in the global competition for talent.

I think the real threat lies in the global competition for talent. And the guy flipping burgers, with no creative input, no way to enact himself, could have been the guy who created the next McDonald's.

GMJ: So, we're not growing enough creative workers or luring foreign ones to America?

Florida: Exactly. I worked on high technology. I worked on Japanese direct investment. I worked on the competition from Asia and Europe. And I've never seen a threat like this to the U.S. economy -- and I've never seen one that people were less aware of. We're threatened because the real core of our economic advantage -- what made us the world's economic superpower -- is something we've always taken for granted: Our ability to attract the best and brightest people from around the world.

The world has gotten smart; it sees now why the United States has done so well -- by attracting all these really great talented people -- and they know they can do the same thing. So the threat is more diffused, and it comes from many places simultaneously. In the 21st century, our economy is likelier to die by a thousand cuts than any single body blow.

GMJ: Is this an emergency? Or is it already too late?

Florida: I think the emergency is that we can't run our industries. We have a talent deficit that is bigger in scope and scale than our physical deficits, and we can't produce the talent we need to run our industries. We're dependent on inflows of foreign talent. And when we shut off that pipeline, we're encouraging our companies to move abroad -- but what keeps America great is our ability to generate new industries.

So I think the crisis is here; we're just not aware of it. I believe we've rebounded incredibly from the terrorist attacks of September 11, 2001, and I think we will continue to rebound from future attacks if they occur, and I hope to God they don't. But what amazes me is that people focus on yesterday's problems, not emerging, future problems.

GMJ: That sounds hopeless.

Florida: For anyone who thinks that I think the United States is dead in the water, I tell this story. My dad, who worked in a factory all his life, said, "When I enlisted to go and fight in World War II, I went down to the enlistment office, and they put me in basic training. We had old World War I uniforms and horrible old helmets; there weren't enough rifles to go around, so they gave us broomsticks to carry. And then all of a sudden, we mobilized so fast you couldn't believe it. With old people and disabled people and women managing our factories, we put out this industrial miracle that enabled us to overwhelm the greatest army in the world. They probably had better technological excellence in terms of the craftsmanship and science of their weaponry, fighter planes, and rockets. But we had such an incredible mass-production machine, we transformed ourselves very quickly."

That's the real key to understanding America, this incredible ability to turn on a dime. I'm just a little worried that we're taking a long time to get aware of this problem.

In the second part of this interview, Dr. Florida will discuss how the United States can grow by recruiting new members of the creative class and how businesses can get the best from the creative workers they already have. To read part 2 of this interview, see "Managing Those Creative Types" in the "See Also" area on this page.

-- Interviewed by Jennifer Robison

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