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U.S. economy losing competitive edge: survey

By Scott Malone

BOSTON (Reuters) - The United States is becoming less economically competitive versus other nations, with political gridlock and a weak primary education system seen as the main drag, according to a survey released on Wednesday.

In particular, the nation is falling behind emerging market rivals and just keeping pace with other advanced economies, according to a Harvard Business School survey of 9,750 of its alumni in the United States and 121 other countries.

Seventy-one percent of respondents expected the U.S. to become less competitive, less able to compete in the global economy with U.S. firms less able to pay high wages and benefits, the study found.

The findings come at a time when high unemployment is a major concern for Americans, with 23.7 million out-of-work and underemployed, and the economy the top issue ahead of November's presidential election.

"The U.S. is losing out on business location decisions at an alarming rate" said Michael Porter, a Harvard Business School professor who was a co-author of the study.

U.S. companies, which slashed headcount sharply during the 2007-2009 recession, have been slow to rehire since the downturn's official end and some have continued to cut. This month, Archer Daniels Midland Co , Kraft Foods Inc and Novartis AG all said they would be cutting U.S. jobs this year.

Survey respondents said they remained more likely to move operations out of the United States than back in. Of 1,005 who considered offshoring facilities in the past year, 51 percent decided to move versus just 10 percent who opted to keep their facilities in the country, with the balance not yet decided.

Respondents, graduates of the prestigious business school who were polled from October 4 through November 4, were particularly concerned about how the United States was shaping up versus emerging nations such as China, Brazil and India, with 66 percent saying the United States was falling behind.

WEAK POINTS

Among respondents who had decided to move operations out of the United States over the past year, 70 percent cited lower wages as the reason they chose a new location, pointing to what is widely seen as emerging markets' main advantage.

While the United States held up better compared to other advanced economies, with about 70 percent saying it was keeping pace competitively, 21 percent said the U.S. was also falling behind other wealthy countries, such as those in Western Europe and Japan.

The United States' main disadvantages compared with other advanced economies were the complexity of its tax code, the ineffectiveness of its political system and the weakness of its educational system from kindergarten through high school.

Higher education fared better, with respondents citing high-quality universities as the nation's top competitive advantage.

Asked what the U.S. government could do to improve its competitive position, respondents top recommendations were to simplify the tax code, reform immigration policies and reduce the corporate tax rate.

(Reporting by Scott Malone; Editing by Tim Dobbyn)

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