"What is the evidence, and what does it mean?" Bill James
This article was posted to the sci.econ newsgroup on January 10, 1993.
In her book, Shifting Gears: Thriving in the New Economy (Toronto: HarperCollins, October 1992), innovative economic consultant Nuala Beck reports many of her findings from her four years of research on how the North American economy is changing. She argues new measuring tools are needed to guide workers, investors, managers and policy-makers.
Beck argues that there is a great misunderstanding of the strength of the emerging knowledge economy because people are trying to understand it with 'old tools'. (Beck, p. 3). For example, if you measure Microsoft by its physical and financial assets, Microsoft's success doesn't make sense. (Beck, pp. 146-7).
One of Beck's innovations is the definition of a knowledge worker. Counted as knowledge workers are
Knowledge workers already make up 30% of the labor force, compared to the just over 10% of the labor force consisting of manufacturing production workers (Beck, p. 124). Furthermore, the number of knowledge workers is rapidly growing:
Knowledge vs. Manufacturing Production Jobs (U.S., thousands)
Knowledge |Manufacturing Production
Year Workers | Workers
1984 28,029 13,285
1985 29,106 13,092
1986 29,917 12,877
1987 31,088 12,970
1988 32,711 13,221
1989 34,043 13,269
1990 34,499 12,979
1991 34,806 12,467
1984-91 +6,777 -818
Even during the recent slowdown, 1.3 million knowledge jobs were created (from June 1989 to June 1992) while 919,000 manufacturing production jobs were lost (during the same period) (Beck, pp. 125-6). Also, the unemployment rate for knowledge workers in North America is less than 3%. (Beck, p. 90)
Beck argues that the U.S. Bureau of Labor Statistics should start counting knowledge workers in its monthly statistics, just as years ago it began counting production workers to measure job creation in the then emerging mass-manufacturing economy (Beck, p. 124).
Another innovation of Beck is the knowledge ratio (tm), which is the ratio of knowledge workers to total workers. Beck determined the knowledge ratios of the 339 industries for which the U.S. government had sufficient data (Beck, p. 127). These ratios (for 1991) are listed in the back of her book.
Beck claims that companies with higher knowledge ratios than their industry average have higher margins and earnings than their competitors (Beck, p. 128) (although no data is given in support). One can see that, if this claim is true, a company's knowledge ratio is something that investors should want to know. Beck also describes 12 other new measures which investors should know, but probably don't.
Beck traced the growth and decline of 207 industries (the number of U.S. industries for which data was available from the Bureau of Census in Washington) (Beck, p. 63). From this research she identified four engines of growth--strategic industries that are already large and have been growing (almost every year) for more than a decade:
Beck insists that financial reporters must update the economic indicators they use. For example, medical starts, an indicator for the health and medical industry (13% of GDP) (p. 76) should be reported instead of housing starts, an indicator for the housing construction industry (only 3.5% of GDP) (p. 38). (By the way, medical starts were up 19.1% on the year in July 1992 (Beck, p. 71)).
Anyone who needs to understand the transforming economy, whether they be students planning careers, investors, managers, statistic bureaucrats, or public policy-makers, would profit from Beck's intriguing and innovative work.
Access count for this page:
Last Updated: 1997 July 19
Comments are welcome at comments@stephent.com.