Transcript BASIC PRINCIPLES OF AND TRENDS IN LOCAL ECONOMIC …

BASIC PRINCIPLES OF AND
TRENDS IN LOCAL ECONOMIC
DEVELOPMENT
The University of Tennessee Institute for Public Service
County Technical Assistance Service
In partnership with
Tennessee Dept. of Economic & Community
Development
1
Agenda
• 10 – Noon
Basic Principles and Trends in Economic
Development
Chuck Shoopman, UT Institute for Public Service
• Noon
Lunch
• 1–3
Economic Development Support
Panel Discussion
Kingsley Brock, TN Dept. of Economic and Community
Development
Joe B. Brandon, TN Dept. of Labor and Workforce
Development
Ray Knotts, TVA Economic Development
Beth Phillips, UT Institute for Public Service
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Basic Principles and Trends
in Economic Development
• What is Local Economic Development?
• What Key Economic Trends Will Impact My
Community?
•
•
•
•
•
•
Globalization
The Economic Growth Slowdown
The New Economy
The Service Economy
Retooling the Workforce
Quality of Life Focus
• Support for Local Economic Development –
Programs and Assistance
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What is Economic Development?
• Economic development is the process
of creating and sustaining wealth. We
know that it is occurring when:
• New jobs are being created
• Existing jobs are being maintained
• The standard of living is improving
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ECONOMIC DEVELOPMENT IS
HAPPENING WHEN:
• the standard of living is increasing
• a “real” increase in the level of average
household income is occurring
• the “equity” of income distribution is
improving
• the local tax base is keeping pace with the
mounting cost of government services
• business and industry are creating quality
jobs
• the local quality of life keeps getting better
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INCREASING INCOMES
The increase in local income is derived
primarily from:
• Companies that produce goods and services that
are sold outside the community, bringing in new
sources of income
• Tourists that bring new money into the
community
• “Active” retirees who spend money locally that
was earned elsewhere
• Reducing the “leakage” of purchases outside the
community
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U.S. and Tennessee Personal
Income Per Capita, 95-05
Area
1995
2000
2005
% Change
95-05
U.S.
$23,076
$29,843
$34,471
49.4
TN
$21,174
$26,097
$30,969
46.2
U.S. metro
$24,234
$31,473
$36,140
49.1
TN metro
$22,625
$28,079
$33,341
47.4
U.S. nonmetro
$17,683
$22,021
$26,161
47.9
TN nonmetro
$17,357
$20,883
$24,646
42.0
Source: Bureau of Economic Analysis
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ECONOMIC DEVELOPMENT
The process is facilitated through:
• Development of a skilled workforce
• Investment in the physical infrastructure
• Improvement of the business environment
• Availability of marketable land and
buildings
• Maintenance of the environment
• Improvement of the quality of life
• Promotion of the community and region
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WHAT KEY ECONOMIC TRENDS
WILL IMPACT MY COMMUNITY?
•
•
•
•
•
•
Globalization
The Economic Growth Slowdown
The New Economy
The Service Economy
Retooling the Workforce
Quality of Life Focus
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THE GLOBAL ECONOMY
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THE GLOBAL ECONOMY
• Many manufacturing jobs and service jobs
moving overseas to less expensive
locations and new markets
• Successful companies have to be able to
compete in the global marketplace
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THE GLOBAL ECONOMY
• Most new manufacturing jobs in the U.S.
are from foreign investment:
•
•
•
•
Automotive
Chemical
Pharmaceutical
Electronic
• Many of these firms are locating in rural
communities (168 Japanese firms
employing 42,000 Tennesseans)
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THE GLOBAL ECONOMY
• The Internet, satellites, and other
advances in telecommunication enable
companies to fully integrate their
operations globally
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THE ECONOMIC GROWTH
SLOWDOWN
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ANNUAL GROWTH IN PER
CAPITA INCOME -- U.S., 1950-2004
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U.S. EMPLOYMENT GROWTH
RATE (ANNUAL 1960-2004)
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THE LABOR FORCE
SLOWDOWN
• Why isn’t the labor force growing as fast
as it did in the 60s and 70s?
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16 TO 24 YEAR OLDS AS % OF
LABOR FORCE -- 1960-2012
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THE KNOWLEDGE ECONOMY
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WHAT’S NEW ABOUT THE
“KNOWLEDGE-BASED
ECONOMY”?
• Increasingly digital and information
driven
• Transformation to “e-businesses” that
use Internet-platforms for integrating
their entire operation
• Innovation leading to highly customized
information, services, & products
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WHAT’S NEW ABOUT THE
“KNOWLEDGE-BASED
ECONOMY”?
• Highly networked entrepreneurs who take
advantage of technology advances
• Growth areas characterized by high
concentrations of knowledge workers &
an ability to attract & retain these workers
• Skilled labor force is highly mobile
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THE KNOWLEDGE-BASED ECONOMY -MORE THAN TRADITIONAL “HIGH TECH”
ALL industry sectors are transforming themselves
into information/knowledge industries
Examples:
 Entertainment
(digital effects, Synthespians)
 Distribution (supply-chain management, logistics)
 Financial Services (on-line brokerages, banking,
insurance)
 Healthcare (genetic engineering, telemedicine,
biomedicine)
 Agriculture (precision ag, use of remote sensing,
Internet-based purchasing and sales)
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E -MANUFACTURING
 Manufacturing becoming e-businesses
 Integrated software systems
 Flexible manufacturing systems
 Supply chain management
 Lean manufacturing and Six Sigma
 Mass customization
 Direct manufacturing – from digital
design files to product
 Globally integrated production
 Virtual production; emphasis on outsourcing
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TELECOMMUNICATIONS IS THE KEY
INFRASTRUCTURE CONSIDERATION
• Availability of highspeed, broadband
telecom
• The future is wireless
• Technical support
needs to be readily
available
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SERVICE ECONOMY
• 94% of all new jobs
over the next 10
years
• 70% of U.S.
employment
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SERVICES DOMINATING JOB
GROWTH (1990-2004)
Job Growth
20,000
17,785
1000’s of Jobs
15,000
Mfg.
10,000
Wholesale
Retail
5,000
387
1,853
Services
0
-5,000
-3,366
Source: U.S. Bureau of Labor Statistics
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SERVICE ECONOMY
• Rapid growth in productivity
• Highest job growth in:
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•
•
•
•
Computer-Related
Personnel
Management Consulting
Professional Services
Health Care
• High-growth jobs are high wage,
narrowing the wage gap with
manufacturing
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COMPARISON OF
AVERAGE HOURLY EARNINGS, 2004
$21.42
INFO
PROF. SERV
$17.46
FINANCE
$17.53
$12.08
RETAIL
$9.91
TOURISM
$17.66
WHOLESALE
$16.14
MFG.$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
AVERAGE HOURLY EARNINGS ($)
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RETOOLING THE
WORKFORCE
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WORKFORCE AND
EDUCATION
• Education is tied to economic well being
• Most jobs require postsecondary education
• Skill requirements are
changing quickly
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Required Job Skills are Increasing
100 %
90
Unskilled
65
Skilled
20
Professional
35
80
70
15
60
60
50
45
40
30
20
20
10
20
20
1950
1990
0
Source: U.S. Bureau of Labor Statistics
2000
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EDUCATION PAYS
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
$74,602
Advanced degree
$51,206
Bachelor's degree
H.S. diploma
$27,915
No H.S. diploma
$18,734
Average Annual Pay
U.S. Census Bureau, 2005
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EDUCATION COMPARISON
2003
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RETOOLING THE WORKFORCE
• Increased demand
for technical &
professional skills
• Need for
continuing
education
• Increased
emphasis within
companies on
training &
retraining
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GEOGRAPHIC CONSIDERATIONS
& THE WORKFORCE
• Companies will focus
on areas with pools
of skills and
graduating students
• Quality of life is
increasingly
important for
recruiting & retaining
technicians &
professionals
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BRAIN DRAIN
Among the South’s adult population, from
2000-2005 those moving out of state
included:
• Only 8.5% of those without a high school
degree
• 14.4% of those with a bachelor’s degree
• 15.5% of those with a graduate or
professional degree
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STRATEGIES FOR ECONOMIC
DEVELOPMENT
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•
•
•
Recruitment
Retention & Expansion
Entrepreneurs & Start-ups
Community Development
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BUSINESS RECRUITMENT
AND ATTRACTION
• Defining your “product” – what can your
community offer to a new business?
• Identifying your target audience – what
types of economic activity are you most
likely to attract?
• Clarifying your message – what are you
trying to promote about your community?
• Developing your marketing plan – what
marketing techniques will give you the
best results, given your resources?
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EXISTING BUSINESS RETENTION
AND EXPANSION
• Growth of existing business and industry
account for the majority of new jobs and
investment.
• Companies must be globally competitive.
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EXISTING BUSINESS PROGRAM
• Provide business assistance
-- Marketing
-- Loans
-- Training programs
-- Buyer-supplier programs
-- Export assistance
-- Access to technology
• Remove local obstacles to
business
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EXISTING INDUSTRY PROGRAM
BENEFITS
• Stop loss of direct & indirect jobs
• Less expensive to assist local firm expand than
to recruit new ones
• Potential for entrepreneurial spin-offs from
retained firms
• A happy local firm projects an important positive
image for outside firms
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ENTREPRENEURS &
BUSINESS STARTUPS
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SMALL BUSINESS
DOMINANCE
• Small businesses (under 100 emp.):
• create two-thirds of new private sector
jobs in America
• employ more than half of all workers
• account for more than half of the output
of U.S. economy
• Only a small percentage (3 to 6%) of small
firms grow rapidly (gazelles) – David Birch
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SMALL BUSINESS
DOMINANCE
• High growth in home-based business
– over ½ of small businesses
• Require business assistance and
financing
• High risk and high rate of failure
• More innovative – produce 13 times as
many patents as large companies do
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ENTREPRENEURIAL
DEVELOPMENT
What attracts entrepreneurs?
 A local leadership that is committed to building a
positive business environment
 An attractive community that has a good quality of
life
 A good educational system
 Opportunities for technical training and support
 Access to capital
 Small business support systems and an effective
local network for sharing information
 High speed, broadband telecom and ISP’s
 Availability of suitable buildings and/or business
sites for expansion
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SMALL BUSINESS ASSISTANCE
•
•
•
•
•
•
Incubator
Financial Assistance
Marketing Assistance
Management Assistance
Educational Workshops
Entrepreneurial Training
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QUALITY OF LIFE
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QUALITY OF LIFE
• Availability of
quality housing at
reasonable costs
• Strong basic skills
in education
• Presence of
colleges &
universities
• Low crime rate
• Good medical &
health care
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QUALITY OF LIFE
• Variety of retail &
customer services
• Lodging &
restaurants
• Attractive & clean
environment
• Good traffic flow
• Range of cultural &
recreational
opportunities
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COMMUNITY DEVELOPMENT
• Build a “product” that can compete successfully
for jobs, business investment, tourists, retirees
• Involve local leadership effectively to determine
priorities, initiate action, and sustain momentum
• Access federal, state, and other outside
resources to expand the possibilities
• Minimize barriers to development
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COMMUNITY LEADERSHIP IS CRITICAL TO
ECONOMIC AND COMMUNITY
DEVELOPMENT
WHO NEEDS TO BE INVOLVED IN LOCAL ED?
• Local government
• Chambers of commerce
• Economic and community development orgs.
• Utilities
• Existing business and industry
• Faith-based institutions
• Educational systems
• Financial institutions
• Civic leaders
• Citizens
• Federal and state government
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Questions and Comments
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Economic Development
Support
• Importance of Partnerships
(Local, Regional, and State)
• How do the State and TVA work with
local communities?
• What programs are available to
enhance local economic
competitiveness?
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Economic Development
Support
• Technical Assistance
• Marketing and Recruiting
• Existing Industry Services
• Small Business Development
• Workforce Development
• Incentives
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Panelists
• Kingsley Brock
Administrator of Business Development
TN Dept. of Economic and Community Development
• Joe B. Brandon
Assistant Commissioner
TN Dept. of Labor and Workforce Development
• Ray Knotts
Senior Advisor, Economic Development
Tennessee Valley Authority
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Thank You
Questions and Comments?
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