09 Sep 2015
Harvard Business School Alumni Survey on U.S. Competitiveness: U.S. Economy’s Failure to Generate Shared Prosperity a Concern for Business
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BOSTON—Harvard Business School (HBS) alumni are optimistic about the ability of U.S. firms to compete globally but are concerned that the resulting prosperity will not be shared broadly among Americans, according to results released today. The findings are from the latest in a series of surveys conducted by Harvard Business School’s U.S. Competitiveness Project, in association with Abt SRBI.

The project is a research-led effort to understand and improve the competitiveness of the United States – that is, the ability of firms operating in the U.S. to compete successfully in the global economy while supporting high and rising living standards for Americans.

“Most of the business leaders we surveyed doubt that firms in the U.S. will soon be more able to lift the living standards of the average American. And a majority of them see issues like inequality, middle-class stagnation, rising poverty, and limited economic mobility not only as social challenges but also as problems for their businesses,” said Harvard Business School’s Jan W. Rivkin, the Bruce V. Rauner Professor of Business Administration and co-chair of the school’s U.S. Competitiveness Project. “Business leaders would like to see future gains in prosperity spread far more evenly among Americans than recent gains have been distributed.”

“Shared prosperity – not just the success of firms but also the success of working- and middle-class families – is a hallmark of any truly competitive economy,” said Harvard Business School’s Michael E. Porter, the Bishop William Lawrence University Professor and co-chair of the U.S. Competitiveness Project. “America faces serious weaknesses in key areas necessary for shared prosperity. Addressing these is the nation’s greatest economic, political, and social challenge.”

Since 2011, HBS has asked its global network of alumni to share their perceptions about the current state and future trajectory of U.S. competitiveness. Questions focus on the structural strengths and weaknesses of the U.S. business environment as well as the ability of U.S. firms to win in global markets and pay higher wages. Each survey also delves deeper into specific aspects of competitiveness. The 2015 survey focused on the health of entrepreneurship in the U.S. and business leaders’ views on shared prosperity. The survey is a rare opportunity to ask individuals near the top of the income distribution about critical economic and social issues in the United States.

A positive trajectory for firms, but not necessarily for workers

Continuing a trend observed in prior surveys, HBS alumni are increasingly optimistic about the ability of U.S.-based firms to compete successfully in the global economy. However, they are still not confident that U.S. firms will become more able to increase wages and lift the living standards of the average American worker.

From the survey:

35% expect U.S.-based firms to be more able to compete successfully in the global economy in three years, while only 23% expect them to be less able.

36% expect U.S.-based firms to be less able to support high wages and benefits for workers, while only 32% expect them to be more able.

The portion of respondents believing that the U.S. business environment is pulling ahead of the environments of other advanced economies has risen from 9% in 2011 to 25% today.

When comparing the U.S. against emerging economies, the shift is even starker. In 2011, those who thought the U.S. business environment was falling behind the business environment in emerging economies outnumbered, by 8-to-1, those who thought the U.S. was pulling ahead. This year, the ratio is 1-to-1.

Mixed signals on entrepreneurship

Historically, entrepreneurship has offered a path to the middle class in the United States. The 2015 survey aimed to understand the status of entrepreneurship in America compared to the rest of the world. HBS alumni report lower barriers to entrepreneurship in America than in other parts of the world, and they see entrepreneurship as more accessible today than it was a decade ago. The results seem at odds with U.S. Census data showing that startups have accounted for a declining portion of firms and employment since the early 1980s.

Karen G. Mills, a Senior Fellow at HBS and a former Administrator of the U.S. Small Business Administration, suggests one way to resolve the paradox: “It may be the case that entrepreneurship in America has become more accessible for well-educated, well-connected individuals such as HBS alumni but less accessible to the population as a whole. If so, that’s a blow to shared prosperity and a cause for deep concern for our long-term economic growth.”

From the survey:

Compared to respondents from outside the U.S., HBS alumni in the U.S. are less likely to say that lack of startup and growth capital, regulatory and tax burdens, lack of talent, and poor infrastructure are important barriers to entrepreneurship.

Only healthcare costs stand out as a major U.S. disadvantage: 64% of U.S. respondents cite healthcare costs as a barrier to entrepreneurship, compared to just 28% of non-U.S. respondents.

50% of U.S. respondents see entrepreneurship as being more accessible today than a decade ago, while 24% perceive declining access.

Lack of shared prosperity a major concern for American business leaders

This year’s survey took a close look at whether alumni want shared prosperity in America’s future or feel that unshared prosperity is acceptable. The findings give strong evidence that most respondents, though not all, consider shared prosperity a high priority.

From the survey:

When informed that total income of all U.S. citizens will increase by $9 trillion in the next decade, HBS alumni predict on average that the richest 1% will garner 41% of those gains and those in the bottom 40% of the income distribution will receive just 12%. In contrast, respondents prefer that the richest 1% and the bottom 40% get 16% and 33% of the gains, respectively.

Two-thirds of respondents consider it a higher priority for American society to address rising inequality, middle-class stagnation, rising poverty, or limited economic mobility than to boost overall economic growth.

Seventy-one percent of respondents say that rising inequality, middle-class stagnation, rising poverty, or limited economic mobility is a problem for their businesses.

On balance, respondents expect inequality, poverty, slow growth, economic immobility, and middle-class stagnation to intensify in the coming decade if current policies and economic institutions remain in place.

In addition to Rivkin, Porter, and Mills, Harvard Business School’s Michael I. Norton, Harold M. Brierley Professor of Business Administration, and Mitchell B. Weiss, MBA Class of 1961 Senior Lecturer of Business Administration, also contributed greatly to this research.

About the HBS U.S. Competitiveness Project
The U.S. Competitiveness Project is a research-led effort to understand and improve the competitiveness of the United States. The Project focuses especially on the roles that business leaders can and do play in promoting U.S. competitiveness. Current faculty research focuses on improving PK-12 education; closing the middle skills gap; and improving America’s aging infrastructure for moving people, goods, and information. For more information about Harvard Business School’s U.S. Competitiveness Project, please visit: www.hbs.edu/competitiveness and www.hbs.edu/competitiveness/survey/.

About Abt SRBI, which conducted the survey
Abt SRBI, a leading public policy and market research organization, is a subsidiary of Abt Associates, a mission-driven, global leader in research and program implementation in the fields of health, social and environmental policy, and international development. Abt SRBI is headquartered in New York City, with offices in Washington, DC; Chicago, IL; Cambridge, MA; Fort Myers, FL; Durham, NC; and other cities.

Contacts

Jim Aisner
617.495.6157
jaisner+hbs.edu

Todd Deutsch
202.551.9847
Todd.Deutsch@edelman.com