R&D Employment: Innovation and Growth

Studies show a positive relationship between innovation and growth. Companies with a higher degree of R&D orientation[1] grow faster than other firms. Further, nations with greater expenditures on R&D as a percentage of GDP [2] also experience faster economic growth.

On average, half of all R&D expenditures[3] are attributed to labor costs, underscoring the key role of a skilled workforce in driving innovation. Indeed, examining the employment in occupations and industries most heavily associated with research and development reveals a strong relationship with faster employment growth.

Since no single SOC code[4] encompasses all positions related to research and development, we begin by identifying the occupations that most-often reference R&D in job posting titles. This serves as our proxy for “R&D-related occupations”--it represents job ads containing either “Research and Development” or “R&D” in the job titles.

Using JobsEQ’s[5] Real-Time Intelligence (RTI) online job postings, the table below shows the most common occupations associated with R&D in their titles.

There is quite a bit of diversity among these R&D-related occupations. It includes computer occupations such as information research scientists and security analysts, engineering occupations such as mechanical and nuclear engineers, science occupations such as chemists and food scientists, and management analysts from the business occupations group.

Next, we consider the relationship R&D-related occupations have to the industries that employ these workers. Specifically, we looked at the employment[6] for this group of occupations within each 4-digit NAICS[7] code. The top six industries that most-often employ these types of workers account for roughly half[8] of the employment of the R&D-related occupation group. These “R&D-related industries” are:

• NAICS 5415 - Computer Systems Design and Related Services
• NAICS 5416 - Management, Scientific, and Technical Consulting Services
• NAICS 5413 - Architectural, Engineering, and Related Services
• NAICS 5112 - Software Publishers
• NAICS 5511 - Management of Companies and Enterprises
• NAICS 5417 - Scientific Research and Development Services

Now that we have these groups defined, we can compare the growth rates of the R&D-related occupations and industries with the economy as a whole. R&D-related occupations have grown[9] over the last four years at a faster pace (5.1%) than all occupations (1.9%), and are expected to continue growing[10] at a faster pace (2.0%) than all occupations (0.7%). Likewise, R&D-related industries have grown at a faster pace (3.0%) than all industries (1.7%), and are projected to continue growing at a faster pace (1.4%) than all industries (0.7%).

Employment in five of the six R&D-related industries are projected to grow at a faster pace than the average for all industries. 

One industry, management of companies and enterprises, is projected to grow at a slightly slower pace than average. However, this industry also contains the lowest percentage of its total employment within the R&D-related occupations group. Indeed, with a slight deviation for software publishers, we can see that the projected annual growth rate increases in tandem with the percentage of the total industry employment attributed to R&D-related occupations.

These industry and occupation employment data are consistent with a strong, positive relationship between innovation and growth. The industries seeking to hire a relatively high concentration of R&D workers are also industries that have grown faster than average and are expected to continue expanding more quickly. Likewise, the occupations most associated with research and development show the same pattern of fast job growth. Given this association, fostering a climate conducive to innovation is a strategy worth considering by economic developers and policy makers to promote a growing, healthy economy.

[1] Rosli, M.M., & Sidek. S. (2013). Innovation and firm performance: evidence from Malaysian small and medium enterprises. Entrepreneurship Vision 2020: Innovation, Development Sustainability, and Economic Growth, pp. 794-809. Retrieved from: https://pdfs.semanticscholar.org/5602/2deca5e07c9d9f94c555fcda4c3173169869.pdf

[2] Akcali, B.Y., & Sismanoglu, E. (2015). Innovation and the effect of research and development (R&D) expenditure on growth in some developing and developed countries. Procedia - Social and Behavioral Sciences, 195, pp. 768-775. Retrieved from: https://www.sciencedirect.com/science/article/pii/S1877042815039531

[3] OECD (2016), OECD Factbook 2015-2016: Economic, Environmental and Social Statistics, OECD Publishing, Paris. http://dx.doi.org/10.1787/factbook-2015-en

[4] SOC (Standard Occupational Classification) codes begin at the two-digit level and subdivide into occupations down to six digits (and in some cases further subdivide to eight digits).

[5] Chmura’s JobsEQ platform offers Real-Time Intelligence, or RTI—a dataset comprising online job postings data in the United States, updated daily, to provide insight on potential hiring. A “job posting” in this dataset is a unique (deduped) job posted from one of more than 15,000 sources which has been classified by SOC and location as well as analyzed for additional attributes such as skills and certifications.

[6] Industry data compiled in JobsEQ are based on covered employment from the QCEW, published by the BLS, with self-employment calculations imputed by Chmura Economics and Analytics. Data as of 2017 Quarter 3.

[7] NAICS stands for the North American Industrial Classification System. NAICS codes begin at the two-digit level and subdivide into industries down to six digits. NAICS codes at the four-digit level are used in this analysis.

[8] Employment in R&D-related occupations group is approximately 2.2 million, and among these approximately 1.1 million workers are attributed to the six industries included in the R&D-related industries group.

[9] Occupation and industry historic employment are provided in the Occupational Employment Statistics from the BLS. Note: occupation data are based on an average annual growth rate 2012-2016, and industry data are based on an average annual growth rate 2012Q3-2017Q3.

[10] Occupation and industry 10-year employment projections are per JobsEQ, with national projections derived from the 2016-26 Employment Projections from the BLS.