World study sees warning signs for future R&D spending

A decline in public-backed science and technology research in a number of countries could pose a threat to innovation at a time when global challenges like climate change and ageing populations demand solutions, according to new OECD data.

The OECD Science, Technology and Innovation Outlook 2016 shows that spending on R&D in government and higher education institutions in OECD countries fell in 2014 for the first time since data collection began in 1981. R&D spending in government and higher education labs, most of which is provided by governments, began flattening out in 2010 following three decades of growth.

While countries like Germany, Japan and Korea are spending more now on R&D than in 2000, as a share of total expenses, others including Australia, Finland, France, Italy, Spain, the UK and the US have reduced their R&D efforts.

Total government spending on R&D in the OECD area has been declining since 2009, following the global financial crisis.

The “warning signs” for an even bigger fall off in government-backed science are there, the report says, with competing policy priorities such as state pensions, health and social care absorbing a growing share of public resources.

On average across the OECD, public social expenditure rose from just over 15 per cent of GDP to almost 22 per cent of GDP between 1980 and 2014.

At the same time, governments are taking in less money, with multinational enterprises taking advantage of opportunities to greatly reduce the taxes they pay.

The use of legal arrangements that allow profits to be artificially shifted to low or no-tax locations “result in annual tax revenue losses conservatively estimated at between $100 billion and $240 billion,” the report says.

Increase in R&D tax breaks

With public spending squeezed, governments are focussing more on policy tools that do not require additional public spending in the short term, particularly public procurement and tax incentives for R&D and innovation.

Between 2006 and 2013, the amount of tax revenues foregone for R&D has increased. In Belgium, France and the Netherlands, for instance, the share of government funds going to corporate R&D has increased faster than the share going to public research.

Also partially making up for a drop off in government investment are charities, foundations and philanthropists, which funnel often-large donations from wealthy individuals into science.

This spending boost is typically concentrated in fundamental and translational research areas, and is estimated to provide almost 30 per cent of annual research funds in leading US universities.

Science careers impacted

In labs, falling public investment and growing automation, is reducing the demand for new researchers.

Job security in science is decreasing. Almost 90 per cent of PhD researchers in an EU survey, “Were in precarious working conditions with no or less-than-two-year contractual horizons,” the report says. “Training new researchers through the PhD and postdoc process will therefore need to broaden because many are discontinuing public R&D careers and moving into other parts of the economy.”

Following gradual improvements in recent years, the public R&D workforce is becoming more female however, and the OECD sees more women gaining senior positions in the future.

But glass ceilings remain. Even though women outnumber men at bachelor and masters levels of education, they are considerably less likely to enter advanced programmes in science, are less likely to occupy senior academic positions and are even less likely to head a university or public institute.

Research sweet spots

The report notes a general shift in national research policy agendas towards environmental and societal challenges since the late 2000s.

It also finds that countries are beginning to specialise more. The US has a clear policy orientation towards health R&D, which gets 24 per cent of its public R&D allocation in 2016.

The UK (22%), Luxembourg (18%), and Canada (17%), devote around a fifth of their R&D budgets to health issues, while Mexico (19%), Japan (11%) and Korea (9%) have prioritised energy R&D.

While militaries have for many years been among the biggest investors in scientific research, the proportion of government R&D expenditure devoted to defence in most OECD countries has fallen substantially since the end of the Cold War and is currently at historical lows.

This trend is slowly changing in the EU, with Brussels recently unveiling a range of new defence R&D schemes.