5 ways R&D is helping create jobs

What links peanuts in Argentina, mining in Guinea and science in the European Union? They’re all bright examples of how funding for research and development (R&D) can be translated into high-quality job creation.

Generating good employment opportunities is a key priority for governments around the world and was a hot topic when the World Economic Forum convened its Growth Summit 2023 on 2-3 May in Switzerland.

The Forum’s Global Future Council on the Future of Job Creation looks at the best ways to prioritize, incentivize and invest in jobs. Co-chaired by Stanford University’s Erik Brynjolfsson, the council had published a briefing paper highlighting key investment pathways to job creation.

Creating good jobs matters because workers who are paid fairly, who use their skills, and who feel reasonably secure and motivated tend to be more fulfilled and more productive, according to PwC research. And in the long term, job creation helps to keep unemployment rates low around the world.

Around five new jobs are created for every $1 million invested in public R&D in OECD countries, according to the Global Future Council on the Future of Job Creation.

That echoes other findings on the topic. A one-point increase in R&D expenditure as a percentage of GDP was shown to decrease the unemployment rate by 1.132, all other things being equal, according to a study by the Georgia Institute of Technology that analyzed data from 71 countries.

Here are some examples of R&D support projects that have had a positive effect on job creation, as outlined in the Forum’s paper:

Since the 1970s, a series of changes including the introduction of less stringent intellectual property protections, import restrictions, price controls and public investment have helped India become a global leader in this industry.

In 2013, India’s pharmaceutical industry produced an estimated 10% of global supply and supported 29 million jobs.

Argentina is the largest supplier of peanuts to the EU, and the heart of its peanut industry lies in the province of Córdoba. The sector was supported by R&D financed by the National Innovation Agency and it now sustains the economies of 30 towns in Córdoba, providing roughly 12,000 direct and indirect jobs.

The European Union’s R&D efforts are a great example of how concerted attempts to increase spending on projects can push young people towards careers in scientific research, create innovative and sustainable products, and accelerate learning.

Horizon 2020 – which ran from 2014 to 2020 with a budget of nearly €80 billion ($88 billion) – directly created 53,000 research jobs and is expected to create 2.3 million jobs overall between 2014 and 2030, according to a study from the European Parliament.

It has now been succeeded by Horizon Europe, which has a budget of €95.5 billion to help address climate change, achieve the UN’s Sustainable Development Goals and boost competitiveness and growth as well as job creation.

In parts of Guinea where business opportunities and jobs are rare, more than 700 jobs were created over five years by improving links between government, industry and small business owners.

Linkage programmes focus on creating business opportunities, and the one in Guinea involved local supplier development, local management training, market and capacity building, and improving access to information on opportunities in the mining sector.

That underscores how in Africa, and elsewhere, small- and medium-sized businesses can really propel job creation – but it is vital that they receive support to do so.

Resources and ability to keep pace with regulation are often factors that hold back small- and medium-sized enterprises (SMEs) and prevent them from growing and creating more jobs.

The International Labour Organization’s (ILO) Sustaining Competitive and Responsible Enterprises (SCORE) programme works to improve SMEs’ productivity, competitiveness and working conditions by combining classroom training with in-factory consulting.

Almost half of SMEs in Indonesida that participated in SCORE training reported increased productivity. At the same time, 21% saw a reduction in labour turnover, 75% reported operational cost savings, and over 1,400 full-time and temporary jobs were created.

As a percentage of GDP, Israel spends the most on R&D at 5.4%, according to UN data, followed by South Korea, Sweden, Belgium, the US and Japan.

The impact varies by sector, that study found, with manufacturing firms the most favoured by innovation activities.

What’s clear is that while there’s probably more work to do exploring the link between R&D and job creation, against a backdrop where the outlook for the future of work is constantly changing, any additional understanding will be vital for politicians and policy-makers.