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We have seen over the past few years misguided and increasingly misplaced calls for the abandonment of intellectual property protections. As media coverage swirls about the state of the economy a few facts come to mind:
- From 2000 to 2004, Intellectual Property (IP) intensive manufacturing produced much more value per employee than non-IP intensive manufacturing — some $181,000 per worker, per year, compared to less than $106,000 — and in the most IP intensive industry, pharmaceuticals, an average worker produced more than $425,000 in value every year.
- From 2000 to 2004, IP intensive manufacturing paid much higher wages, on average, than non-IP intensive manufacturing — nearly $51,000 per worker compared to just over $35,000 — and in the most IP intensive industry, an average worker earned almost $66,000 a year.
- Manufacturing employment contracted sharply from 2000 to 2004, with both IP intensive and non-IP intensive industries shrinking their workforce, on average, by 15 percent to 16 percent. The one manufacturing area that expanded its workforce? Jobs in pharmaceutical companies increased by more than 8% over this period.
The above were some of the key findings of a report done last year by Robert Shapiro and Nam Pham entitled "Economic Effects of Intellectual Property-Intensive Manufacturing in the United States". I could tell you how important the study is, but I will yield to Alan Blinder from Princeton University who penned the introduction:
As Robert Shapiro and Nam Pham remind us in this fascinating study, an increasing share of the market valuation of the top U.S. companies is now apparently based on "intangibles" ("ideas," if you will), rather than on companies’ stockpiles of physical assets. They reckon that this share of value rose from about 25 percent in 1984 to about 64 percent in 2005 — a huge increase in just two decades.
Shapiro and Pham show that the high-R&D industries stand out in other respects, too. They had higher value added per worker; they paid higher wages; and they lost jobs at a slower pace...The sharpest correlation of all is with value added per employee, which is a rough measure of productivity. To a remarkable degree, America’s most productive manufacturing industries are the ones that invest the most in R&D...Two industries stand out from the others with extremely high value added per employee: petroleum and pharmaceuticals.
Shapiro and Pham conclude that U.S. policymakers should foster the creation of more intellectual property (IP) and work harder to protect the IP that American companies already have