Unfortunately, our improving trade performance has not translated into a higher standard of living for the average American family. Average real median family income fell in 1991, and was virtually unchanged from its 1978 level. For 13 years, real family incomes have stagnated, despite a large increase in the number of the two earner households. In the long run the generation of new knowledge and its translation into new and improved products and processes are the most important forces contributing to national growth. It is estimated that, in the 1980's, research and development contributed about 0.4 percentage point per year to the real GDP growth rate of 2.6 percent per year.
Technological change contributes to national competitiveness in two ways.
First, new technologies drive productivity increases, which, in turn, allow companies to remain competitive even as they increase the wages of American workers. Second, new technologies generate new products that compete on their quality and innovative features not just on price. Companies that compete on innovation are often able to capture large shares of lucrative markets. The latter is a recipe for declining standards of living and national competitiveness. It is not surprising that jobs in high-tech industries pay better than the rest of the economy.