From: sitomlin@cantor.math.uwaterloo.ca (Stephen I. Tomlinson)
Newsgroups: sci.econ
Subject: The Emerging Knowledge Economy
Date: 10 Jan 93 18:47:28 GMT
Organization: University of Waterloo

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
 * professionals, such as doctors, engineers, lawyers, accountants;
 * engineering, scientific and technical workers;
 * the very senior ranks of management (Beck, p. 125).

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: 
 * computers & semiconductors (includes software and information services)
 * health & medical care (includes drugs and medical instruments)
 * communications & telecommunications (includes entertainment)
 * instrumentation (includes engineering and environmental equipment)
(Beck, pp. 65-6).

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.

-Stephen
Newsgroups: sci.econ