Search This Blog

Tuesday, April 24, 2012

The Numbers on the Value of Intellectual Property

I’m a big believer that, when used properly, numbers can help drive home important points. Of course, as an economist, I might be a bit biased.
Consider the role of intellectual property in our economy.
As defined by the New Oxford American Dictionary, intellectual property is “a work or invention that is the result of creativity, such as a manuscript or a design, to which one has rights and for which one may apply for a patent, copyright, trademark, etc.”
Most economists note the importance of protecting intellectual property in order to spur invention and innovation, and along with them, driving economic growth, productivity, incomes and employment higher. But given the intangible nature of intellectual property, some people have a more difficult time understanding the need to enforce intellectual property rights compared to the protection against theft or infringement of physical property.
Perhaps the best example of this in recent years has been a widespread willingness to download music in violation of copyright protections, but an unwillingness to break into a retail establishment in order to steal music CDs. There is no substantive moral, ethical or economic difference; nonetheless, people feel very differently about the two acts.
At the same time, while intellectual property has long been central and critical to the economic development of nations, that probably has never been more so the case than during the twenty-first century. That reality is driven home by the numbers in a new report titled “Intellectual Property and the U.S. Economy: Industries in Focus,” published by the U.S. Department of Commerce, and prepared by the Economics and Statistics Administration and the United States Patent and Trademark Office.
So, what’s examined in this study? Namely, it identifies “IP-intensive industries” (75 industries among a total of 313) and estimates their contributions to the U.S. economy.” Among some of the key findings:
• In terms of the overall economy, IP-intensive industries “contributed 34.8 percent to gross domestic product (GDP), with total value added of $5.06 trillion in 2010.”
• “Direct employment in the subset of most IP-intensive industries identified in this report amounted to 27.1 million jobs in 2010, while indirect activities associated with these industries provided an additional 12.9 million jobs throughout the economy in 2010, for a total of 40.0 million jobs, or 27.7 percent of all jobs in the economy.”
• “Due primarily to historic losses in manufacturing jobs, overall employment in IP-intensive industries has lagged other industries during the last two decades… [However,] copyright-intensive industries provided a sizeable employment boost, growing by 46.3 percent between 1990 and 2011.” That was more than twice the rate of non-IP-intensive industries.
• IP-intensive industries, though, have been ahead of general job creation recently. “Between 2010 and 2011, the economic recovery led to a 1.6 percent increase in direct employment in IP-intensive industries, faster than the 1.0 percent growth in non-IP-intensive industries. Growth in copyright-intensive industries (2.4 percent), patent-intensive industries (2.3 percent), and trademark-intensive industries (1.1 percent) all outpaced gains in non-IP-intensive industries.”
• What about earnings in IP-intensive industries? “Average weekly wages for IP-intensive industries were $1,156 in 2010 or 42 percent higher than the $815 average weekly wages in other (non-IP-intensive) private industries. This wage premium nearly doubled from 22 percent in 1990 to 42 percent by 2010. Patent- and copyright-intensive industries have seen particularly fast wage growth in recent years, with the wage premium in patent-intensive industries increasing from 66 percent in 2005 to 73 percent in 2010, and the premium in copyright-intensive industries rising from 65 percent to 77 percent.”
• IP proves to be critical to U.S. trade, with 60.7 percent of U.S. merchandise exports coming from IP-intensive industries in 2010, and despite limits on data, it’s reported that 19 percent of U.S. private services exports came from IP-intensive service-providing industries in 2007.
• Finally, in terms of self-employment, while the share of employment is roughly the same in IP-intensive industries as non-IP-intensive industries overall, that was not the case in copyright industries. As reported: “The highest self-employment share, however, was in the copyright-intensive industries, in which the 0.8 million self-employed workers filled 16.5 percent of all jobs. This high share is not surprising as many jobs in the creative and performing arts are contract rather than payroll jobs, usually related to the completion or performance of a specific authored work.”
As impressive as all of this is, it is important to understand that it is not the full IP story. As noted in the study: “Because all U.S. industries rely on IP to some degree, the statistics reported here for the sectors that use IP most intensively may tend to under-represent the broad impact of IP in the American economy. Moreover, the statistics reported here may not fully reflect the long-run economic benefits and costs of IP in promoting innovation and productivity growth. For example, while this report shows that employment in trademark-intensive industries is almost six times as great as employment in patent-intensive industries, it may be that the kinds of innovation protected by patents play a larger role in driving the long-run growth of productivity throughout the economy.”
This report from the Commerce Department provides additional information – courtesy of some important numbers – about the major role IP plays in the U.S. economy. It follows that policymakers need to take very seriously their governmental responsibilities to protect property, including intellectual property in all its forms and venues, including in the digital universe and across international borders.
 Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is“Chuck” vs. the Business World: Business Tips on TV.

No comments: