71% Of HBS Grads Think US Competitiveness Will Get Even Worse

HBS study on U.S. competitiveness

Photo: Harvard Business School

America is the epicentre of innovation and entrepreneurship, but that’s not enough to keep us ahead of the rest of the world, according to a recent Harvard Business School study. We’re increasingly moving jobs, manufacturing and R&D outside the country — and that has huge implications for long-term productivity and living standards in the U.S. In fact, 71% of Harvard Business School grads think U.S. competitiveness will decline in the next three years (via WSJ). HBS professors Michael Porter and Jan Rivkin surveyed 10,000 of the school’s 78,000 grads in October for a study they released this week at Davos, Prosperity At Risk, which revealed wide-scale pessimism.

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The findings are interesting because Porter and Rivkin surveyed a large demographic; not just recent grads. And almost 20% of respondents had been directly involved in making offshoring decisions, according to the study:

“During the past year, more than 1,700 respondents were personally involved in decisions about whether to place business activities and jobs in the U.S. or elsewhere. In these choices, the United States competed with virtually the entire world and fared poorly, losing two-thirds of the decisions that were resolved. Facilities involving large numbers of jobs, high-end work, and groups of activities located together moved out of the U.S. much faster than they moved in.”

The authors concluded that:

“Ample evidence now points to a series of structural changes that began well before the Great Recession and threaten to undermine the long-term competitiveness of the United States. For the first time in decades, the business environment in the United States is in danger of falling behind the rest of the world. With this, pressures on jobs, wages, and living standards will only grow.”

Of the 10,000 HBS grads who took the survey, 26% work in finance or insurance, 15% work in manufacturing and 12% are in professional, scientific or technical services

71% expect U.S. competitiveness to decline; 14% are neutral; and 16% are optimistic

Those between the ages of 40 and 59 — or the majority of key decision makers — had the most pessimistic outlook on U.S. competitiveness. Those based outside the U.S. were slightly more optimistic than those who aren't

Those in the manufacturing sector have the most negative outlook. Interestingly, those in the hospitality industry and public administration are most optimistic

57% of respondents faced decisions about offshoring jobs, whereas only 9% dealt with decisions about onshoring. And 84% of the time, the offshoring jobs up for debate were ultimately moved overseas

Countries in blue indicate where respondents considered moving jobs in the past year — which shows that the U.S. is competing with virtually the rest of the world for jobs and business investment

Production and R&D activities are at the highest risk of moving abroad

Fewer jobs are being retained inside the U.S. No decisions involving 1,000 or more jobs were moved into the U.S. — the numbers are all on a smaller scale for onsourcing

While respondents think we're keeping pace with other advanced economies, they say we're at a huge risk of falling behind emerging economies

These HBS grads felt that our country's university system and environment for entrepreneurship is stronger than any other advanced economy

But that our political system is the biggest thing holding us back

The also cited the U.S. tax code, regulations, and our K-12 education system as holding the country back

The biggest reason for moving jobs outside the U.S. is lower wage rates; and the key reason for keeping jobs inside the U.S. is proximity to customers

The top reasons for not hiring within the U.S. is the cost of talent, dealing with regulations and taxes

Most want the U.S. government to simplify the tax code, make it easier for immigrants to work in the U.S., and reduce regulations

They say U.S. companies need to be investing in more technology and get smarter about hiring better talent if they want to increase competitiveness

But some people are more optimistic about where the U.S. is headed

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