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Insight & Intelligence : Sep 2, 2010
Court’s Halt of Federally Backed ESC Research May Impact Economic Growth
If the injunction sticks, U.S. firms will likely send ESC research jobs abroad.!--h2>
As the Obama administration struggles to find the right formula to cure our economic woes, part of the judicial branch seems determined to pull the oars in the opposite direction. The outsourcing of middle class jobs to developing countries has already decimated employment opportunities in manufacturing and technology-intensive industries, while the latest attacks have focused on the service industry. The last thing we need to do in this country is to force employers to go elsewhere to set up their laboratories, especially in the critical area of embryonic stem cell (ESC) research.
Despite President Obama’s guidance from a year ago that federal funds would be used to support ESC research, a judge has instituted a temporary ban while a case opposing the controversial research moves through the federal court system. ESC research is highly contentious to some members of our society because, unlike the use of adult stem cells, it calls for the destruction of human embryos.
The potential benefits of stem cell research are well documented. Christopher Reeve, a quadriplegic himself, lobbied on behalf of many people with spinal cord injuries and for human ESC research up until his death in October 2004. Trials that were to start earlier this month were designed to help patients with similar injuries.
The biotech industry was clearly disappointed in the ruling. It had been hoped that the treand of offshoring medical research jobs would be abated as ESC research was fortified in the U.S. However, major drug companies like Pfizer and Merck & Co. have continued their respective cost-cutting tasks by outsourcing white-collar jobs to lower-priced locales. As witnessed over the past decade, the search for knowledge does not respect national boundaries.
Labs are moving to more accepting places like Singapore, and other countries in Asia are rushing to replicate its success. The global nature of life science research suggests that international languages and currency trading skills may be part of the necessary credentials to qualify for employment. Controversial or not, the research will proceed because there is obvious demand for the potential cures and ample resources available to fund the necessary testing.
As a result, developing countries are now home to many life science companies. They are quickly becoming the low-cost service providers for pharmaceutical companies looking to outsource some of their internal programs in the development chain, especially offshoring of clinical trials. Biotechnology companies, in the meantime, may be less vulnerable to outsourcing because of their heavy reliance on innovation in developing new technologies and therapeutics.
Part of the problem facing domestic interests is the difficulty in measuring the drain on our economy on a finite basis to support arguments against offshoring. The Bureau of Labor and Statistics has no viable way of measuring outsourcing activity. The change in import prices is the only recurring evidence, but details are lacking when service-type jobs are the concern. Errors in productivity gains have revealed measurement issues in the manufacturing sector, but the loss of clinical research jobs has no ongoing measure that might be nearly as revealing.
From a financial perspective, many states and municipalities have identified the life science industry, and particularly biotechnology, as a high-growth economic sector that could bolster their declining tax-revenue bases. State legislators have continually passed bills that create lucrative tax incentives to lure biotech and medical-device companies to their respective regions.
It is unclear if these initiatives will increase domestic employment. A Forrester Research study released a few years back predicted that U.S. employers would move about 3.3 million white-collar service jobs and $136 billion in wages overseas by 2020, up from $4 billion in 2000.
The firm Technology Partners International attempts to measure the total contract value of offshoring contracts on a global basis. The Americas account for more than 51% of this activity, and the year-over-year growth, as of June 30, 2010, was up 21%, while the rest of the world declined 33%. Within these figures, healthcare and pharmaceutical contracts rose from $1.9 to $3.6 billion across the globe, a dramatic increase that suggests momentum is not waning.
Domestic growth is the cure for our economic recovery malaise. It necessitates domestic hiring but not if the judicial system stands in the way of progress. Scientific research of any type has always been a bulwark in our technology foundation. If we are to let the tides of public opinion wash it away without even so much as a fight, perhaps the time is upon us to rethink our position in the world of scientific advancement. If basic research cannot thrive here, with the proper amount of controls, then what is the prognosis? To live or let die? Sounds like a job for James Bond.
Jennifer Gorton (jennifer.gorton(at)forextraders.com) is the content manager of Forex Traders.
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