New Economy Index Home
Introduction
SECTION I
What's New About The New Economy?
Industrial and Occupational Change
New Industries and Jobs
Skills and Wages
Globalization
Trade
Foreign Direct Investment
Dynamism and Competition
Gazelles
Competition
"Coopetition"
The Churn Economy
Product and Service Diversity
Speed
The Information Technology Revolution
Microelectronic Proliferation
Cost of Computing
Cost of Data Transmission
SECTION II
New Economy Outcomes: Impacts on Americans
SECTION III
Foundations for Future Growth
Explaining the Productivity Paradox
The Knowledge Economy
Nine Myths About the New Economy
Data Sources
Endnotes
The Authors
DYNAMISM
AND COMPETITION
The New Economy is Constantly Churning
WHY IS THIS IMPORTANT? Slow and steady growth in net total employment masks a constant churning of job creation and destruction. This churning has accelerated as the number of firms being born and dying every year has grown. The faster pace of job churning has undermined the predictability and stability of old economic arrangements and has increased the insecurity faced by workers. However, while such turbulence increases the economic risk faced by workers, companies, and even localities, it is also a major driver of economic innovation and growth. As less innovative and efficient companies die or contract, more innovative and efficient companies take their place. In fact, this turbulence is one of the factors that has let the U.S. economy surpass Europe and Japan, where entrepreneurship and dynamism is less vibrant and job protection more prevalent.
THE TREND: Between 1994 and 1995, as the private sector added a total of 3.6 million new jobs, new establishments created 5.8 million jobs while dying establishments eliminated 4.5 million others. Expanding establishments created 10.6 million jobs while contracting ones lost 8.2 million. The period saw a net growth of 108,000 additional business establishments-a product of 695,000 births and 587,000 deaths (up from only 337,000 births and deaths, combined, in 1975). And while firms can grow fast, they can go out of business or downsize just as quickly. In fact, 30 percent of all jobs are in flux (either being born or dying, expanding or contracting) every year. Even that last bastion of job security, government, has been undergoing its own restructuring, outsourcing, and downsizing.
THE DATA:
Index Home | Introduction
SECTION I | SECTION II | SECTION III
Productivity Paradox | Knowledge Economy
Nine Myths | Data Sources | Endnotes | The Authors
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Technology, Innovation, and New Economy Project
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