Transcript Community Cooperation or Community Collapse: The Reality

The Power of Knowledge in Building
A Strong Wyandot County
Presented at
Wyandot County Economic
Development Conference.
Upper Sandusky, OH
November 3, 2011
___________
Mark Partridge
Swank Professor in Rural-Urban Policy
The Ohio State University
http://aede.osu.edu/programs/Swank/
1
Outline Knowledge is King
I will give an economic outlook then a strategic
discussion of local economic development
1. Today’s moral is that the best strategy is
using the assets inside your community.
2. Two community assets I will stress:
•
•
Your people and your businesses.
Provide the right incentives, knowledge and
skills for them to thrive.
3. Leverage your colleges and existing
institutions such community organizations
to create the right local environment.
2
Outline: Knowledge is King
4. Focus on attracting the right people and less
on attracting (“bribing”) outside firms.
•
•
“Bribing” outside firms is offering them a better deal
than local businesses who don’t threaten to leave.
Trying to lure outside firms with incentives and
subsidies is typically ineffective. (Partridge and Olfert, 2011; Goetz et
al., 2011).
•
•
Make it that outside firms want to come to your
great environment for people and businesses.
I am not ruling out good marketing.
3
State employment growth (2006-07) on announced per
capita million-dollar facilities (2005)
Source: Partridge and Olfert, 2011.
4
Outline: Knowledge is King
• People worry that rural areas are doomed.
• However, nonfarm rural population is quite stable.
Rural areas can prosper even if agriculture or
manufacturing is smaller.
5
6
Outline: Knowledge is King
5. With this good foundation, your community
will have the best chance to thrive.
•
SIMPLE STRATEGY! Be patient and build
from within while leveraging local and
regional assets.
7
Today’s Environment is Tough
• National economy and state economies are
weak.
• Wyandot county has survived some fairly
severe blows since 2003.
8
Manufacturing Employment Shares
0.40
Wyandot County is not alone
in facing severe manufacturing
contraction but this is helping
to promote long-term recovery.
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
1972
1980
1990
2000
2006
US Employment Share in manufacturing
OH Employment Share in manufacturing
2010
U.S. Forecast
• I use the NABE September Forecast. It
reflects the average of 52 economists and
does not have an agenda.
– http://www.nabe.com/publib/macsum.html
• NABE forecasts 1.7% GDP growth in 2011
and 2.3% in 2012 (about 1% lower than their
May 2011 forecast.)
– A reasonable economic expansion should have
> 4% growth for 2 years or so.
– IMF’s U.S. forecast is 1.5% and 1.8%.
• Also revised down by about 1% since June.
US Forecast
• NABE sees a very weak labor market
• Monthly Nonfarm payrolls are expected to
rise 124,100 per month in 2011 and 162,100
per month in 2012.
– At sustained monthly rate of at least 200,000+ is
needed for a few years.
– UR rate will still be 8.5% at end of 2012
• US still 1 million jobs below 2000 level.
– Most panelists don’t see labor market recovery to
pre-recession levels until 2015 and some don’t
see it until 2017.
U.S. Forecast
• On the positive side, NABE sees
– Expansionary monetary policy (?)
– Growth in the rest of the world (?)
– Business investment and pent-up consumer
demand (?)
• On the negative side:
– Low consumer and business confidence
– Uncertainty about future gov’t policies (?)
• I add uncertainty whether ‘Washington’ can do anything
of consequence.
– Tepid housing market (2013 recovery?)
U.S. Forecast
• Negative Factors continued:
– Financial headwinds caused by tight credit
conditions and balance sheet restructuring
– High federal deficits and the European debt
(Greek) crisis weigh on the world economy
• In this economic environment, while I do not
see a recession, I have difficulties seeing how a
President could be reelected.
Ohio Context
 Ohio has added 1.6% jobs in the last
year (as of August)

US added 1%.
 Ohio Unemployment rate 9.1% in Aug 2011,
9.9% Aug 2010, and 8.6% in May 2011.
Wyandot County’s Forecast
• County has fared well in the face of major
shocks 10 years ago.
• Place of work and place of resident
employment data took a major fall 2003-2009.
• Place of resident employment growth is up
about 3.5% between August 2009 and August
2011 (source, BLS.gov, Local Unemployment
Data). Illustrates commuting in the region.
– Bear in mind, the data source is a rough estimate.
15
Total and Manufacturing Employment: Wyandot County
14,000
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
2003-2009: 2,634 lost
manufacturing jobs and
3,002 lost total jobs (about a
1.14 multiplier)
Total
Manufacturing
Source: Bureau of Economic Analysis: www.bea.gov
Total Employment Wyandot County, Ohio, and US
2000=100
120
110
100
90
80
70
60
Wyandot
Source: Bureau of Economic Analysis: www.bea.gov
OH
US
Ohio and Wyandot County Per Capita Income
Relative to the US: US = 100
100
95
90
85
Bust
80
Recovery
75
70
OH/US
Source: Bureau of Economic Analysis: www.bea.gov
Wyandot/US
OH and Wyandot County Annual Unemployment Rate
14
Beginning of economic recovery
12
10
8
6
4
2
0
Wyandot
Source: Bureau of Economic Analysis: www.bea.gov
OH
19
How can Wyandot County
successfully compete globally?
• 1. Education and entrepreneurship are local
forces that promote prosperity.
• 2. Become more resilient to shocks.
– Ongoing global economic sluggishness.
– Wyandot’s manufacturing legacy has produced
wealth, but creates huge risk and variability.
• As manufacturing has declined in size, this reduces
variability and creates opportunities.
20
Why the Race for Knowledge?
1. Individual earnings significantly rise
with knowledge, skills, and
education.
21
US Mean Earnings by Educational Attainment, 2009
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Not a high
High
Some
Assoc.
school
school college, no Degree
graduate graduate
degree
only
Bachelor's Master's
U.S. Census Bureau, Statistic Abstract of United States, 2012, Table 232,
http://www.census.gov/compendia/statab/cats/education.html
Prof
Degree
Ph.D. or
equal
22
Why the Race for Knowledge?
2. This understates an individual’s gain to
education as employment rates rise and
unemployment rates fall with education.
Source:
OECD, 2010.
– September 2011 UR 25+ ≥ College Grad: 4.2%;
UR no high school completion, 14.0%,
Source, U.S. BLS,
September 2011 Employment Situation Report.
– So they are more likely to work, and among
those working, they are more likely to earn more.
– Educated workers suffer less in downturns in
terms of unemployment—more resilient.
23
Why the Race for Knowledge?
• Good for people, but what about communities?
3. There are ‘social’ gains from greater education.
People who work in areas with more education
have higher earnings themselves
–
(Source: Moretti, 2004).
– Knowledge spillovers.
4. Places with a more educated population grow
faster in terms of jobs and people.
–
(Source: Simon and Nardinelli, 2002; Glaeser and Shapiro, 2003)
24
Why the Race for Knowledge?
• Summary: Communities with a more
educated population are richer, grow faster,
have lower unemployment, and have greater
resilience to withstand shocks.
• What about Wyandot County?
– Okay at the high school and Associate’s level,
but not above.
25
60
2009 % Educational Attainment:
US, OH and Wyandot County
55
50
P
e
r
c
e
n
t
45
40
35
30
25
20
15
10
5
0
<High School High School
Some
Grad.
Grad
College, no
degree
US
OH
Associate Bachelor and
Degree
Above
Wyandot
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How Can Wyandot County Win
the Race for Knowledge.
• Colleges and universities are key for rural
economic development, especially community
colleges because Associate Degree is
underutilized.
• Business can count on a capable workforce.
27
How can Wyandot County win
race for Knowledge.
• Ohio’s colleges and universities can be the
clearing house for local rural economic
development.
– Why—rural communities often lack the critical
mass to coordinate their economic development.
– Community colleges already work on the
regional scale that is necessary for coherent
rural economic development. They unify
regions.
– OSU Extension increasing works in regions.
28
How Wyandot County can win
race for Knowledge?
• Colleges are also the institutions that create
‘public-private’ partnerships for economic
development.
• They can spearhead business training and
provide incubators.
• Ohio’s colleges and universities can
coordinate training workshops for local
officials from teaching best practice to
teaching finance and tax policy.
• Coordinate with OSU Extension.
29
How Wyandot County can win race
for Knowledge?
21th Century will belong to places that use
their knowledge to leverage their assets.
• Rural communities should be attractive to
knowledge workers
• Quality of life, pleasant environment, sustainable
development—this is good economics!
• Attract return migrants in their 30s after they have
seen bright lights.
30
Good Strategies--cont
Business retention and expansion is better
than tax incentives for outside investment.
Building Entrepreneurship
• Small businesses and self employment are
strongly associated with growth in rural regions. (Goetz
and Raupasingha, 2009; Stephans and Partridge, forthcoming 2011 Growth and Change)
• They are an internal engine of entrepreneurship.
• Small businesses buy locally and they are less
likely to move or outsource.
• Build a more diverse economy that is resilient to
shocks (Partridge and Olfert, 2011).
31
• Innovation comes from small firms.
25
Percent Nonfarm Proprietor Employ:
US, OH & Wyandot County
Declining Small Business
Capacity
22
19
16
13
Revival of Small Business
Capacity
10
Wyandot
Source: Bureau of Economic Analysis: www.bea.gov
OH
US
32
Good Strategies--cont
• Promote small business entrepreneurship by:
•Business, Retention, and Expansion
• Build networks and identifies strengths and weaknesses in
a community. OSU Extension is a good source.
•Treat all businesses alike.
•Government can help build larger lending
pools to reduce credit risk.
•If you build a good climate for investment,
your own businesses will thrive and STAY!
33
Business Retention and Expansion
• Take advantage of farm entrepreneurship.
Research has found a greater farm share is
positively linked to nonfarm entrepreneurship.
(Source: Stephens and Partridge, 2011, in print).
• Today, farmers are great role models
• 1. Tied to land—not outsourcing to China.
• 2. Has experience managing medium sized
business and has developed entrepreneurship.
• 3. Understands futures markets, global markets,
exchange rates, knows how to manage capital.
• 4. Has financial wealth to invest.
34
Good Strategy: Leverage Regional
Strength?
Recognize rural-urban interdependencies
• In 1950, communities detached from neighbors
• 21st Century communities are linked in webs
– Growth spreads out a hundred of miles from a city as small as 30,000.
–
Source: Partridge et al., 2007
• If someone can commute, they shop, utilize health
care, participate in service organizations, etc.
• Regions share common interests and the gains
should be exploited regionally.
35
Rural Depends on
Urban for:
Urban Depends
on Rural for:
Employment
Labor Force
Private and Public Services
Market for Private and Public
Goods and Services
Urban Amenities
Market for Urban Amenities
Market for recreation
activities
Market for agriculture
products
Recreation
Food Safety and Security
Demand for Environmental Natural Environment
Stewardship
Property taxes/land market
Land for Residential and
Industrial Expansion
36
Rural-Urban Shared Fates--cont
• Economists contend gov’t jurisdictions
should reflect common interests.
• Economic development
• Tax sharing of common economic gain to share
costs
• Environmental costs and sprawl
• Infrastructure is inherently regional
37
Example of Action
• Regions that realize they are linked will have a
competitive advantage in the global economy.
– Lower taxes, better infrastructure, better public
services, stronger economic development
– Just being a little more competitive will shift capital
from around the world at the click of a mouse.
• Regionalism is the real sleeping giant for rural
communities for sustainability.
• Again, a linking force is extension, colleges and
universities.
38
What you don’t want to do!
• Don’t try to pick the next hot industry. Be
sure hot industries/firms want to be in
your community. e.g., Seattle 1978 and
Microsoft.
– Economists say that governments can’t pick
winners but losers know how to pick
governments.
• Don’t follow the latest fads—e.g., green jobs,
innovation clusters, biotech, high-tech,
alternative energy, etc etc….
– Solar Energy and Wyandot County
39
Reality Check
•No Guarantees!! Not all regions will succeed!
•Even doing the right things is insufficient
when conditions are unfavorable.
•Consequences of pursuing bad policies are
high costs and it may prolong the ‘misery’
because people will be less likely to adjust by
finding better opportunities.
40
No Silver Bullet
41
Future Challenges for Regions
- Globalization is likely to increase
- Good: more market opportunities successful
- Bad: more competition and threat of
outsourcing, for which rural areas are
vulnerable.
- Technological innovations can change a
region’s competitive advantage for good
and bad—by definition hard to predict.
- Budget realities, austerity, and prolonged
global sluggishness.
42
Future Challenges for Regions
– Energy prices—the specter of high oil prices
remain—costs of transportation and production
would fundamentally change.
– Climate change will alter regional attractiveness for
households and firms.
• Attractive climates as places to live will shift
• Agricultural production patterns will shift
– Goal is to make your community a safe haven for
these emerging challenges.
43
Conclusions
• Build from within your community as the best
strategy for success.
• Leverage your colleges as a source of
educating your populace, retaining and
expanding your local businesses, training
entrepreneurs, and to be the focal point of
regional efforts to promote growth.
• Leverage your broader regions to do things
you can’t effectively do alone.
44
Conclusions
• Fostering local entrepreneurship is much
better than hoping an outsider will ‘save’ your
community.
• Your community has a wealth of good
business ideas, including the agriculture
community.
• No sure plan!
• Future challenges are immense—but wise
communities can make these manageable or
turn them into opportunities.
45
Thank you
Presentation will be posted at The Ohio State
University, AED Economics, Swank Program
website:
http://aede.osu.edu/programs/Swank/
(under presentations)
46
Appendix Slides
47
Great diversity in rural America:
48
1990/91-2006 North American Population Growth
49
Conceptualizations of Competitiveness
Context for
Firm
Strategy
and Rivalry
Demand
Conditions
Factor
Conditions
Related and
Supporting
Industries
The Porter Diamond Framework (Porter, 1998)
50
NCC Competitiveness Pyramid
Source: National Competitiveness Council
51
Wyoming: Alberta on Steroids!
AB 1981-2004 population growth
39.6%
AB 1981 mining share
7.13%
WY’s greater natural resource intensity did
not produce faster growth
3%
WY 1981-2004 population growth
14.43%
WY 1981 mining share
0%
5% 10% 15% 20% 25% 30% 35% 40% 45%
52