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INTERNATIONAL ECONOMIC DEVELOPMENT
COUNCIL
AN OVERVIEW OF THE CURRENT ECONOMIC
DEVELOPMENT LANDSCAPE
IEDC BOARD STRATEGIC PLANNING RETREAT
May 31, 2014
www.iedconline.org
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International Economic Development Council
The International Economic Development Council (IEDC) is a non-profit membership
organization serving economic developers. With more than 4,200 members, IEDC is the
largest organization of its kind. Economic developers promote economic well-being and
quality of life for their communities, by creating, retaining and expanding jobs that facilitate
growth, enhance wealth and provide a stable tax base. From public to private, rural to
urban, and local to international, IEDC’s members are engaged in the full range of economic
development experience. Given the breadth of economic development work, our members
are employed in a wide variety of settings including local, state, provincial and federal
governments, public private partnerships, chambers of commerce, universities and a variety
of other institutions. When we succeed, our members create high-quality jobs, develop
vibrant communities, and improve the quality of life in their regions.
Bill Sproull, FM
President and CEO, Richardson Chamber of Commerce
Chairman of the Board
Jeffrey A. Finkle, CEcD
President and CEO, International Economic Development Council
This paper was authored by Shari Nourick, Economic Development Consultant, for the Board
of Directors of the International Economic Development Council.
Copyright © 2014, the International Economic Development Council, 734 15th St. NW Suite
900, (202) 223-7800, Washington, DC 20005, [email protected]
All rights reserved. This work is the property of the International Economic Development
Council (IEDC) and intended solely for member use. No part of this publication may be
reproduced, distributed, or transmitted in any form or by any means, including
photocopying, recording, or other electronic or mechanical methods, without the prior
written permission of IEDC, except in the case of brief quotations embodied in critical
reviews and certain other noncommercial uses permitted by copyright law. For permission
requests, write or email IEDC and address your correspondence to “Attention: Publications”.
3
Table of Contents
Executive Summary .................................................................................................... 7
Introduction ............................................................................................................ 12
I. The Current Economic Development Landscape ..................................................... 13
A. The Uneven Recovery ...................................................................................... 15
Unemployment .................................................................................................. 15
Job Losses and Gains .......................................................................................... 16
Long-term Unemployment ................................................................................... 16
Youth Unemployment ......................................................................................... 17
Veteran Unemployment ...................................................................................... 18
The Working Poor ............................................................................................... 19
Homelessness .................................................................................................... 19
Outlook for Graduates ........................................................................................ 20
Household Debt ................................................................................................. 21
Income Gap ...................................................................................................... 22
Consumer Spending ........................................................................................... 23
Commercial Real Estate ...................................................................................... 24
Residential Real Estate........................................................................................ 25
Retail Market ..................................................................................................... 26
Small Business Lending....................................................................................... 28
Impact of ARRA ................................................................................................. 28
Affordable Care Act ............................................................................................ 30
U.S. Public Debt ................................................................................................. 31
State Budget Shortfalls ....................................................................................... 32
Cutbacks at the Local Level ................................................................................. 33
Growth of Big Data ............................................................................................. 34
Education Crisis ................................................................................................. 35
Poor Balance of Trade ......................................................................................... 36
China’s Credit Crisis ........................................................................................... 37
European Debt Crisis .......................................................................................... 38
Shifts in Economic Development .......................................................................... 38
B. Demographic Shifts ......................................................................................... 42
Aging Baby Boomers .......................................................................................... 42
The Millennials ................................................................................................... 43
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Immigrant Population ......................................................................................... 44
Shifts in the Workplace ....................................................................................... 45
Trends in Housing .............................................................................................. 45
Cities and Downtowns......................................................................................... 46
Role for EDOs .................................................................................................... 47
C. Aging Infrastructure ........................................................................................ 48
Grading the Infrastructure ................................................................................... 48
Broadband ........................................................................................................ 51
Impact on Competitiveness ................................................................................. 52
States Take Action ............................................................................................. 53
PPPs for Infrastructure Improvement .................................................................... 54
Fundrising ......................................................................................................... 56
Federal Initiatives .............................................................................................. 56
Role for EDOs .................................................................................................... 56
D. Globalization ................................................................................................... 58
Changes for Global Corporations .......................................................................... 60
Opportunities for International Investment ............................................................ 61
Foreign Direct Investment ................................................................................... 62
Export Promotion ............................................................................................... 64
Federal Initiatives .............................................................................................. 67
Role for EDOs .................................................................................................... 69
E. Sustainability.................................................................................................. 70
Shifts in the Energy Market ................................................................................. 70
Energy Efficiency................................................................................................ 73
Sustainable Buildings .......................................................................................... 77
Renewable/Clean Energy ..................................................................................... 78
Green Manufacturing .......................................................................................... 80
Federal Initiatives .............................................................................................. 80
A New Financing Model ....................................................................................... 81
Role for EDOS .................................................................................................... 82
F. The Labor Market ............................................................................................ 84
Mid-Skilled Jobs ................................................................................................. 84
The Immigrant Labor Force ................................................................................. 85
Women’s Increased Role in the Workforce ............................................................. 87
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Moonlighting ...................................................................................................... 87
Freelancing ....................................................................................................... 88
Temporary Workers ............................................................................................ 88
Talent Attraction and Retention ............................................................................ 89
Foreign Talent ................................................................................................... 90
Manufacturing Shifts ........................................................................................... 91
Workforce Development ...................................................................................... 92
EDO-WIB Collaboration ....................................................................................... 94
EDO-Community College Collaboration ................................................................. 95
Fostering STEM .................................................................................................. 97
Federal Initiatives .............................................................................................. 99
Role for EDOs .................................................................................................. 100
G. Entrepreneurship ....................................................................................... 102
Post-Recession Highlights .................................................................................. 103
Demographic Data ........................................................................................... 104
Women Entrepreneurship .................................................................................. 105
Immigrant Entrepreneurship .............................................................................. 105
Rural Entrepreneurship ..................................................................................... 106
Regional Highlights ........................................................................................... 106
Home-based Businesses.................................................................................... 108
Franchises ....................................................................................................... 108
Fast Growth Companies .................................................................................... 109
Venture Capital ................................................................................................ 110
Crowdfunding .................................................................................................. 111
Culture and Entrepreneurship ............................................................................ 112
Economic Gardening ......................................................................................... 112
Federal Initiatives ............................................................................................ 113
Role for EDOs .................................................................................................. 114
H. Disaster Management ................................................................................. 117
Federal Disaster Assistance ............................................................................... 119
New Federal Initiatives ..................................................................................... 120
Asset Mapping ................................................................................................. 121
The Role for EDOs ............................................................................................ 121
II. Outlook for Growth ............................................................................................ 124
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A. Forecasts for Industry Growth ........................................................................ 126
Education and Skills ......................................................................................... 126
A Glance at Growing Sectors ............................................................................. 127
Fluctuating Sectors ........................................................................................... 139
B. Job Outlook by Location ................................................................................. 142
Metro Job Growth ............................................................................................. 142
Downtown Attraction ........................................................................................ 144
Data Centers ................................................................................................... 145
Manufacturing Jobs .......................................................................................... 146
Tourism Spurs Growth ...................................................................................... 153
Creative Class Jobs .......................................................................................... 154
C. Implications for Economic Developers .............................................................. 156
Role for EDOs .................................................................................................. 157
III. IEDC’s Commitment to Diversity ......................................................................... 161
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Executive Summary
This paper was developed for the Board of Directors of the International Economic
Development Council (IEDC) for the 2014 Strategic Planning Board Retreat with the aim of
exploring the most prevalent issues that the economic development profession is facing
today and contemplating how those themes impact the practice of economic development.
This examination is intended to provide background and a framework of current and
forthcoming concerns effecting the profession to better assist the IEDC Board of Directors in
the evaluation of the organization’s strategic priorities for moving forward in today’s volatile
economy.
The paper also identifies trends in the current economic development landscape and
provides observations as to how EDOs may have to modify strategies or incorporate new
techniques in order to successfully maneuver in today’s capricious and complex
marketplace. Importantly, considering the manner in which global shifts and nascent trends
impact local economies is essential to formulating any future plans. As such, the paper
additionally includes an in-depth review of sectors for growth over the next 5 to 10 years,
and analyzes the implications for economic development practitioners.
The paper includes:
An evaluation of the current economic development landscape;
An in-depth review of sectors for industry and job growth in the coming years;
A framework for IEDC inclusivity and diversity initiatives.
The current economic development landscape has notably been impacted by an uneven
economic recovery following the Great Recession. Demographic shifts, an aging
infrastructure, wavering globalization, evolutions in terms of sustainability, transformations
in the labor market, burgeoning entrepreneurship, and an increase of disasters are key
themes that have been influencing the economic development profession and will continue
to do so in the near future.
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The Uneven Recovery
It has been five years since the end of the Great Recession was announced. However, the
economic recovery has been uneven and unpredictable, with high corporate profits on one
end of the spectrum, and high unemployment and economic uncertainty lingering on the
other end. Manifestly, fundamental economic problems that loomed prior to the recession
have made it more difficult for the nation to recover. Moreover, the ongoing gridlock in the
U.S. government impedes the advancement of new initiatives. Taken collectively, these
factors have caused serious consequences for the national economy, not to mention
prolonging the suffering among many communities throughout the nation.
Demographic Shifts
Generational shifts and changes in immigration will impact the composition of the workforce
of the future. The forthcoming retirement of the baby boomers and the entrance of more
millennials into the workplace will transform the economic development landscape.
Significantly, the U.S. has also become an urban nation and this trend is influencing the
location decisions of many firms, as well as qualified talent. In the coming years economic
developers will need to be more attentive to these demographic variations when considering
new approaches and strategic plans.
Aging Infrastructure
Much of the U.S. infrastructure is outmoded and dilapidated, and over the years federal,
state and local governments have failed to enact sufficient formulas, incentives or
procedures to attract greater private investment. These deficiencies are also hindering the
nation’s potential for economic growth and competitiveness. As place-making grows in
importance as a vital economic development strategy, practitioners will need to understand
broader infrastructure issues and how they impact the country, in order to determine the
best approaches for improving infrastructure components their community.
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Globalization
While globalization created significant and unprecedented economic opportunities,
expanding some markets, it also created a more precarious and riskier world economy.
Notably, globalization has impelled economic developers to cope with similar challenges as
business leaders, balancing global demands in order to better serve their locality. In the
wake of the recession, different trends have emerged, somewhat slowing the momentum of
globalization. Cross-border capital flows have decreased and national governments in some
other countries have increased the use of protectionist measures. As some U.S. firms based
overseas consider a return to American shores, it will be essential for economic
development professionals to understand the complexities of the global marketplace and
how it impacts their community.
Sustainability
Sustainability entails the recognition of the need to support a growing economy while
reducing the environmental, economic, and social costs of growth. Evolutions taking place
in the U.S. energy industry are shifting the nation’s position in the global energy market,
and energy may be an important factor in a company's decision to invest or relocate in a
community. Understanding and acting upon the opportunities and challenges presented by
the greening of businesses and society will be imperative for economic developers in
maintaining competitiveness.
The Labor Market
Globalization and the Great Recession highlighted the urgency for U.S. firms to maintain
skilled personnel as a means of ensuring local competitiveness. A qualified labor force
pipeline renders economic mobility for workers, keeps businesses competitive, and
increases revenues and the quality-of-life for a community. For economic development
professionals today, encouraging the creation of jobs that create wealth is one of their
greatest concerns. Collaboration among community stakeholders will be imperative in the
future. The ability to close the skills gap and maintain qualified talent in the workforce
pipeline will make the difference between a struggling and a successful community.
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Entrepreneurship
Entrepreneurial firms have been the driving force behind economic recovery, job creation,
greater resiliency in the face of disasters, and regional economic growth. While there have
been fluctuations in entrepreneurial activity since the recession, currently interest in
entrepreneurship is on the rise, as financial lending opportunities open up and people seek
new ventures out of personal interest or economic necessity. For economic developers,
supporting entrepreneurship and small business development has become an essential
component for local economic growth. Developing a vibrant entrepreneurial infrastructure –
that includes streamlining regulatory and licensing processes, as well as fostering high
caliber partnerships through technical assistance and training for small businesses - should
be a key feature of any local economic development strategy.
Increase of Disasters
In the last decade, the world has seen an increase in natural and man-made disasters that
are severely impacting people and the communities in which they live. Reconstructing a
community is a colossal endeavor and post-disaster economic recovery is an imperfect
process. These disasters have forced economic development professionals to take an active
role in “resiliency” programs – i.e. assisting communities in pre-disaster preparedness as
well as post-disaster economic recovery, working alongside stakeholders at the local level as
well as with federal and state agencies, non-profit groups and the private sector.
Analysis of the Outlook for Growth
Significantly, in the wake of the Great Recession some industry sectors have shown signs of
growth, while others have contracted and risk becoming obsolete as the economy
transitions into uncharted areas. Moreover, as new technologies transform the nation’s
landscape, job growth has not reached the same level. In order to sustain long-term
growth and economic resiliency in a community, practitioners will need to focus on fostering
innovation, supporting the industries that create quality, high-paying jobs, and improving
the quality of existing jobs.
IEDC looked at predictions for sectors that show signs of growth for the future, examined
where in the country such growth may take place, and considered how these forecasts
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impact the economic developer. Awareness of sectors that are under threat can help
practitioners and policy-makers to develop plans to counter such trends, while forecasts for
growing sectors can help leaders to set goals that will strengthen their local economic base
and optimize resources in the future.
Diversity and Inclusivity
IEDC’s draft framework for diversity and inclusivity demonstrates the organization’s long
espoused initiatives to foster and encourage diversity and inclusivity among the Board of
Directors and membership. Notably, as demographic shifts impact the nation, they also
change the composition of IEDC membership. The importance of engaging young
professionals in the economic development community is part of this framework and is ever
more important as the forthcoming retirement of the baby boomers will leave gaps in
organizations all over the country.
It is our hope that the following pages provide Board Members with a framework to assess
the IEDC strategic priorities for the future, and that this information can be used to further
the creation of quality jobs and wealth in communities across the nation.
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Introduction
The International Economic Development Council (IEDC) provides economic development
leadership by promoting cutting edge professional economic development opportunities that
disseminate standards and core competencies. IEDC strives to make economic development
a priority in communities of all sizes and at every level of government, by professionalizing
the economic field, providing world class service to its members, increasing its policy and
advocacy efforts, and becoming the number one source for economic development
information and expertise worldwide.
For the past 15 years, economic development professionals have been navigating in a new
and more complex economic development landscape. Shifting global roles, demographics,
climate change, and advances in technology have all impacted the practice of economic
development, providing both opportunities and challenges. The Great Recession highlighted
the importance of consolidating efforts with policy-makers and business to develop
strategies to improve the quality-of-life in communities throughout the nation. The slow
and uneven pace of economic recovery following the Great Recession impelled economic
development professionals to re-evaluate their business practices, and economic
development organizations (EDOs) across the continent have altered strategies and
developed new economic opportunities in their communities in order to remain competitive.
Understanding how recent global shifts and emerging trends are impacting local economies
is essential to developing any future plans. The aim of this paper is to explore the most
pertinent issues facing the economic development profession today in order to help IEDC’s
Board of Directors to assess its strategic priorities for moving forward in this dynamic
economic development landscape.
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I. The Current Economic Development Landscape
Today we are five years past the trough of the Great Recession, however many communities
across the nation remain weakened by the devastation incurred. Following globalization and
the internet boom that marked the onset of the 21st century, the Great Recession hit the
world economy like a storm, and its impacts linger as the nation struggles through an
uneven recovery.
Communities today are grappling with the challenges of long-term unemployment, a public
budget crunch, cut-backs at the local level, neglected infrastructure, and difficulties in
supplying a qualified workforce. Other shifts deriving from an aging population, changes in
the energy market, the increase in disasters, and a gridlocked government are additionally
influencing the way economic development professionals are setting their strategic
priorities.
These global shifts and disruptions have instigated a reassessment of economic
development strategic priorities and the role of the practitioner in the community. At the
threshold of the 21st century, economic development professionals realized that they had to
become more nimble and more innovative to keep up with the pace of the new globalized
economy and technological advances. In the wake of the Great Recession, practitioners
today know that they need to be ever more strategic, and less tactical, building a resilient
local economic base and developing new approaches to support the prosperity of workers
and regions in the long-term. In this volatile and uncertain economy it is also essential that
practitioners clearly define the importance of economic development to community
stakeholders in order to ensure that they hold their place at the table among other local
leaders.
As economic development professionals strive to turn challenges into opportunities, there
are some key issues today that are impacting the national economy and that will continue to
influence the economic development profession in the near future. They are:
The Uneven Recovery
Demographic Shifts
Aging Infrastructure
Globalization
Sustainability
The Labor Market
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Entrepreneurship
Disaster Management
The following section will examine these principle issues more closely.
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A. The Uneven Recovery
In the wake of the Great Recession that began in the U.S. in December 2007 – and
technically ended in June 2009 – the nation’s economic recovery has been uneven and
unpredictable. The housing bubble burst of 2007 triggered a domino effect and by 2008, the
Great Recession was in full force. Despite government intervention through the American
Recovery and Reinvestment Act (ARRA) and other efforts to stimulate the economy, the
economy has sputtered and slipped in and out of recession over the past five years.
Indeed, today the stock market is performing well and corporate profits have rebounded,
but unemployment remains high and the impact of long-term record high unemployment
and underemployment of college graduates endures, as does household debt and the public
credit crunch. U.S. economic growth has been generally flat, and the Bureau of Economic
Analysis (BEA) reports that Real Gross Domestic Product (GDP) increased 1.9 percent in
2013 (from 2012) compared with an increase of 2.8 percent in 2012 (from 2011). The
housing sector has shown improvement, but remains fragile. Inherent economic and
structural problems that have existed in the U.S. for decades have made it more difficult for
the nation to recover. Moreover, the continued gridlock in the U.S government impedes the
advancement of any new initiatives. All of this has serious consequences on the national
economy and many communities across the country are still suffering.
Innovation and thoughtful investment will be the keys to the nation’s recovery and future
economic growth. The following pages will provide an overview of the uneven recovery in
the areas that are essential to economic development.
Unemployment
The economic recovery has been marred by persistently high unemployment. After five
years, employment growth has barely matched the expansion of the working-age
population. Of the 8.8 million jobs lost since the recession began in December 2007, only
one-fifth of them had been regained by May 2012. The unemployment rate more than
doubled from 4.8 percent in the fourth quarter of 2007 to 10 percent in the fourth quarter
of 2009. Between May 2009 and September 2010, unemployment fluctuated between 9.4
percent and 10.1 percent.
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Slowly dropping since 2011, in January of 2014 the unemployment rate was 6.6 percent,
and fell to 6.3 percent in April. However, this figure understates some important issues:
long-term unemployment, the working poor, the huge growth in underemployment
(involuntary part-time work), and a substantial increase in discouraged workers that are no
longer counted in the conventional unemployment figures. Moreover, the U.S. workforce
shrank by more than 800,000 workers in April. Labor force participation is thus 62.8
percent today, a decrease of 0.4 percent from the previous quarter. Notably, Albert Niemi
Jr., economist and dean of the Cox School of Business of Southern Methodist University,
predicts that it will take until 2029 for the U.S. to reach the level of job creation needed to
reach full employment.
Job Losses and Gains
Between 2009 and 2012, the public sector lost 430,000 net jobs, while the private sector
has added 980,000 net jobs over that same. In other words, more than 40 percent of the
private-sector job gains in the recovery through 2012 were canceled out by job losses in the
public sector. According to the U.S. Bureau of Labor Statistics (BLS), from March 2013 to
June 2013 the net employment gain of jobs in the private sector during the second quarter
of 2013 was 666,000. California had the largest net employment gain of 79,166 jobs,
followed by Texas with 65,907 jobs.
Manufacturing and construction lost over 2 million jobs respectively in each sector during
the recession. Since 2010, U.S. manufacturers have added 665,000 jobs. For the
manufacturing sector, at the current rate of job growth, predictions are that it would take
until 2037 to regain all the jobs it lost between January 2000 and December 2009.
Long-term Unemployment
Of the nation’s 11.3 million unemployed, over a third – approximately 37 percent - have
been out of work for six months or much longer.1 This is down from the 42.6 percent of the
long-term unemployed in 2012. Many long-term unemployed have settled for part-time
work as they struggle to makes ends meet, but it is insufficient for maintaining the same
quality of life prior to the recession. Long-term unemployed are coping with a significant
decrease of lifetime wages and the stress associated with instability.
1 The Bureau of Labor Statistics defines long-term unemployment as being out of work for at least 27 weeks
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Moreover, re-employment possibilities erode over time, and there is a general bias against
workers who have been jobless for several months or years. The Council of Economic
Advisers reports that an individual who has been unemployed between 27 and 52 weeks has
a 12 percent chance of getting a job, compared to a person who has been unemployed for
five weeks or less, who has a 31 percent chance of getting a job. For those unemployed for
more than a year, the odds drop to just 9 percent. Approximately 34 percent of the 4
million long-term unemployed are men between the ages of 25 to 54, and 29 percent are
women of that same age bracket. About 18 percent are young workers under age 25, and
15 percent are those workers reaching the traditional retirement age, between 55 to 64
years old. The 4 percent that remain are people who are 65 years or older, who would
prefer to be working.
A Glance at the Long-Term Unemployed:
Youth Unemployment
The nation’s youth are competing for the few jobs available to them and face an
unemployment rate that is double the national average. The youth unemployment rate in
the U.S. increased to 14.2 percent in January of 2014 from 13.5 percent in December of
2013 according to the U.S. Bureau of Labor Statistics (BLS). The youth unemployment rate
reached its peak of 19.6 percent in April of 2010.
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In November 2007, 63.8 percent of all 18 to 24-year-olds and 79.1 percent of 25 to 34-
year-olds were employed. By March 2013, these numbers had dropped to 54.6 percent and
75.4 percent, respectively. Based on this data, if the economy had maintained its pre-
recession levels of employment, over 3.4 million additional millennials would be employed
today.2
Many young people are discouraged, and “The Opportunity Index 2012” report estimates
that 5.8 million young adults are neither working nor in school. This impacts not only the
individuals’ livelihood, but communities around the nation will invariably suffer from this lost
tax revenue in the long-term. Notably, a new report from the non-partisan, non-profit
organization, the Young Invincibles states that persistent high unemployment among young
people is adding up to $25 billion a year in uncollected taxes.
Veteran Unemployment
Veterans who served in the military post-September 11, 2001 have had a higher overall
unemployment rate than their civilian peers. According to BLS, the unemployed rate for
veterans of this era dropped to 9 percent in 2013, down from 9.9 percent in
2012. However, many in the 25 to 34 age demographic (which includes more than half of
all unemployed post-9/11 veterans) had a 9.5 percent unemployment rate in 2013,
significantly more than the 25-34 civilian population that had unemployment rate of 7.3
percent during the same period.
Many veterans have a mix of health ailments ranging from war with bad backs, bad knees,
high blood pressure, and high levels of anxiety, bad memory and diminished cognition which
negatively impacts their ability to getting a job. Many report that they face
discrimination, based the way that post-traumatic stress disorder (PTSD) is portrayed in the
media. Moreover, with the Army's plans to streamline operations from the wartime peak of
about 570,000 active-duty troops to 420,000 by 2019, worries will grow concerning
the veteran employment situation, particularly for lower-performing soldiers who appear to
have the most difficulty of finding sustainable work options job in the civilian world.
2 Young Invincibles, "In this Together: The Hidden Cost of Young Adult Unemployment", R. O’Sullivan, K. Mugglestone, T.
Allison, January 2014
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The Working Poor
More than 46 million people, or about 15 percent of the U.S. population, lived below the
official poverty level in 2011, according to the U.S. Census Bureau. The overall rate of
working poor has climbed significantly since before the recession, rising from 5.1 percent in
2006 to 7 percent in 2011. A 2013 report from BLS found that 10.4 million people or nearly
a quarter of all those living in poverty account as the working poor.
The 2013 federal poverty guideline (FPG) defined poverty as below $11,490 annually for an
individual and below $23,550 for a family of four. A worker as the sole earner in a four-
member family would need to earn $11.32 an hour and work 40 hours a week to top the
FPG. With low-wage occupations dominating the recovery with 58 percent of the job gains
since 2010, prospects for improvement are slim. Notably, the BLS report shows that 3.3
million service workers - or 13.1 percent - fell below the official poverty level in 2011,
accounting for nearly one-third of all those classified as working poor.
According to BLS, more than 14 percent of the estimated 25 million part-time workers
currently in the labor force are classified as working poor, compared to 4.2 percent of full-
time workers. Notably, BLS reports that more than 60 percent of those that earned the
minimum wage in 2012 were in the hospitality, retail or leisure industries. Airport workers,
farming, fishing, forestry and construction and extraction also have high rates among the
working poor.
In terms of education’s influence, only 2.4 percent of college-educated workers fall below
the poverty line, as compared to 9.2 percent of workers with only a high-school degree.
There are also significant racial disparities, with 13.3 percent of Blacks and 12.9 percent of
Hispanics counted among the working poor, compared with 6.1 percent of Whites.
Homelessness
Homelessness has increased and is expected to rise in many cities across the nation,
according to the “2013 Hunger and Homelessness” survey conducted by the U.S.
Conference of Mayors. The survey, which covered 25 large and midsize metro areas,
demonstrated that cites such as Chicago, Dallas, Los Angeles, Philadelphia, Santa Barbara,
20
and Washington DC reported a 3 percent increase in homelessness, and that half of the
cities surveyed expected the number to rise in 2014. According to the U.S. Census Bureau,
the national poverty rate has shifted little over the past five years. It was 15 percent last
year, very close to the 15.1 percent high during the Great Recession.
Cuts to the Supplemental Nutrition Assistance Program (SNAP, or food stamps) and lack of
affordable housing are major factors impacting the homeless population. Notably, 19
percent of the homeless adults in the cities surveyed had jobs, and 21 percent of people in
need of emergency food assistance did not get it in 2013. Moreover, while median earnings
increased 5 percent between 2007 and 2012, rents rose 12 percent in the same period. The
National Low Income Housing Coalition estimates that in order to maintain an apartment, a
renter must make $18.79 an hour, which exceeds the $14.32 hourly wage earned by the
average renter.
Outlook for Graduates
College graduates have struggled since the onset of the recession. In April 2007, shortly
before the recession began, the unemployment rate for college graduates under the age of
25 was just 3.7 percent, according to the BLS. By 2009, that number had shot up to 8
percent, and nearly a tenth of college graduates under the age of 25 were unemployed
throughout 2010, as were nearly a quarter of high school graduates. The unemployment
rate for recent college graduates between the ages of 21 to 24 averaged 8.8 percent for
2013, according to U.S. Department of Labor (DOL) data. However, when considering
graduates who are working part-time for economic reasons, and those who have stopped
looking for a job in the last year, the underemployment rate is more like 18.3 percent.
Over the past five years, many students settled for working in menial positions unrelated to
their desired profession. In addition, graduates are competing against
unemployed experienced professionals that are accepting part-time, temporary, and
seasonal work, to remain in the workforce. In 2012, the National Association of Colleges and
Employers (NACE) reported that employers would hire 10.2 percent more new college
graduates than they did from the Class of 2011. For 2013, experts predicted that graduates
— either from high school, community college or a four-year college — would have better
career prospects. According to the NACE spring 2013 survey, companies were expected to
hire about 2.1 percent more college graduates from the Class of 2013, offering a higher
21
overall starting salary of $44,928 — an increase of 5.3 percent over last year. Notably, in
May 2013, DOL reported that college graduates have more job offers than others and they
command salaries that average nearly twice as much as high school graduates.
Nevertheless, for the approximately 1.7 million U.S. students who will earn college degrees
this year, the job market will remain very uneven. NACE reports that the biggest pay gains
are going to people entering health-sciences careers. They are being offered 9.4 percent
more than 2012 recruits. Graduates in the humanities and social sciences are still
struggling. Their job offers pay just 1.9 percent more than last year.
Household Debt
According to the Federal Reserve Bank of New York, household debt rose by $241 billion in
the fourth quarter of 2013, versus the third quarter. This is the biggest increase noted since
the third quarter of 2007. While this is generally viewed as a positive sign that consumer
confidence is on the rise and that people are borrowing again, much of the growth during
the quarter was attributed to a $152 billion surge in mortgage balances, due to reduced
foreclosures. Homeowners have been catching up on their monthly mortgage payments,
with delinquency rates falling from 4.3 percent in the third quarter to 3.4 percent in the last
three months of 2013.
Economists at the Federal Reserve Bank of New York compared borrowing behavior in 2006
with that of 2013, and found evidence that consumers are exhibiting more caution. Whereas
all types of consumers took on large amounts of housing debt before the crisis, today most
of the borrowing is among those with high credit scores.
In addition, a Bankrate.com3 study demonstrated that barely half the U.S. population has
more in emergency saving than in credit card debt, which was the lowest level since the
firm began its survey in 2011. Of those surveyed, 28 percent said that they owed more on
their credit cards than they had in savings, while 17 percent claimed that they had neither
credit card debt nor an emergency savings fund.
Household borrowing today is at 11.5 trillion, which is 9.1 percent lower than the
pre-recession peak of $12.7 trillion.
3 A financial research firm
22
Auto debt grew by $18 billion in the fourth quarter of 2013, to $863 billion.
Education borrowing increased by $114 billion in 2013 - to $1.08 trillion – up from
the fourth quarter of 2012, and student debt grew $53 billion in the fourth quarter of
2013.
o Additionally, in terms of student loan debt, there is an 11.5 percent rate of
delinquent payments, the highest among household debt categories. As
explained by the Center for Economic and Policy Research, the lackluster job
market and high education costs mean that many do not have the money to
reimburse the loans they took to pay for school.
Income Gap
With major corporate profits experiencing a strong rebound, U.S. stock indexes are near
record high. Meanwhile, the U.S. labor market is only about one-fifth of the way to a full
recovery, and as long as the jobs crisis lingers, wages will stagnate or fall for the vast
majority of workers.
According to a 2013 report, “Striking it Richer: The Evolution of Top Incomes in the United
States”4, the top one percent took home more than one-fifth of the income earned by
Americans in 2012, returning to the same level as before the Great Recession. Moreover,
the top 10 percent of earners took more than half of the country’s total income in 2012, the
highest level recorded since the government began collecting the relevant data a century
ago. The other 99 percent of the population experienced income stagnation between 2009
and 2011, and then growth by a mere one percent in 2012.
The increase for the top tier of the population was due in part to a one-time factor, i.e.,
Congress made a deal to avoid the expiration of all of the Bush-era tax cuts in January
2012, which included a number of tax increases on wealthy Americans, including increasing
levies on investment income. In preparation of tax changes, many companies gave large
dividends and investors cashed out. However, richer households have also
disproportionately benefited from the boom in the stock market during the recovery, with 4 University of California,“Striking It Richer: The Evolution of Top Incomes in the United States, Department of Economics, 530
Evans Hall #3880, Berkeley, CA94720. Saez E., Piketty, T. September 2013
23
the Dow Jones industrial average more than doubling in value since it hit bottom early in
2009.
Furthermore, a recent paper from the Economic Policy Institute5 concludes that financial
deregulation has contributed to the rising share of national income going to investment
income and the compensation of financial professionals — with the latter being a significant
driver of rising income share of the top 1 percent.
Consumer Spending
Over the past six years, consumer spending dropped to its rock bottom of $58 per day in
January 2011. Since then, spending has gradually increased, and last year was the most
robust since 2008. In December 2013, Americans spent $96 per day - the highest monthly
average since September 2008, according to pollsters at Gallup Economy. For the year
2013, consumer spending remained positive, surging 3.3 percent.
According to BLS, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1
percent in February 2014 on a seasonally adjusted basis. The all items index - which
includes food, energy and energy services, commodities, vehicles, apparel, shelter,
transportation, and medical services - increased 1.1 percent before seasonal adjustment
between February 2013 and 2014. Consumers increased their spending of goods, with
durables rising 7.2 percent for the year. Moreover, purchases of recreational vehicles and
goods rose 10.3 percent during the year, adding to the 5.1 percent growth rate from
automobile purchases, attributed to pent-up demand.
The rebound in residential markets and housing prices has also spurred consumers to spend
more on remodeling and furnishings. Consumption of furniture and household equipment
rose at an annual rate of 6.3 percent in 2013.
Notably, the government shutdown of October 2013 did not hinder business growth, as
businesses increased investments by 3.8 percent in the fourth quarter. For all of 2013,
business investments advanced at a rate of 2.6 percent.
5 Economic Policy Institute, Working Paper #296, “The Pay of Corporate Executives and Financial Professionals as Evidence of
Rents in Top 1 Percent Incomes”, Bivens J., Mishel L., June 2013
24
Commercial Real Estate
In terms of commercial real estate, nearly 26 percent of the commercial market was either
in default or had been foreclosed upon by April 2009, and by 2010 commercial property
values had fell more than 40 percent compared to the beginning of 2007. Since then the
demand for this type of property has accelerated significantly, and in 2011 much of the
space that had become vacant due to the recession was returned back into the market.
Inexpensive commercial real estate – due to business closures and foreclosures - opened
opportunities for other companies to move to a new location on lease terms that were not
available before the recession. In terms of economic development, these low lease and
interest rates have provided compelling arguments for expansion or relocation.
Sales of major properties (over $2.5M) advanced 19 percent year-over-year in 2013,
totaling $355.4 billion, according to Real Capital Analytics (RCA) data. RCA’s Commercial
Property Price Index reports that for 2013, prices advanced 15 percent across the nation.
Retail investments posted the highest gains, rising 23 percent on a yearly basis,
followed by a tie between office and hotel property prices, which rose 17 percent.
Retail space is seeing more absorption than construction, and retail spending only
increased 4.4 percent in 2013, as compared to a 6.2 percent gain 2012, and a 7.8
percent increase in 2011.
For lower priced properties (below $2.5M), sales volume advanced 8 percent on a yearly
basis, while prices increased one percent year-over-year, according on survey data from the
National Association of Realtors.
Industrial space is starting to expand, with more new deliveries than in recent years. Rent
growth for industrial space increased to 2.6 percent in 2Q13 from 0.8 percent in 2Q12, and
vacancy improved to 12 percent, compared to 13.1 percent in 2Q12.6 Net absorption was a
robust 46.5 million square feet in 2Q13, compared to 24.2 million square feet in 2Q12. This
is attributed to online retailers and their shippers leasing more warehouse space given the
increase in online shopping.7
6 CB Richard Ellis - Econometric Advisors (CBRE-EA), Overview & Outlook - Industrial, 2Q13
7 Ibid
25
Jones Lang LaSalle has reported that most of the improvement in the office market in 2013
was for Class A space. However, the availability of Class A office space in downtown areas is
dwindling. Deloitte’s annual commercial real estate survey notes that low construction
levels in office space should bode well for landlords’ future occupancy and rent rates in
2014.
Going forward, a focus on flexible work strategies and a desire to reduce rental expenses
through efficient space utilization will likely impact leasing decisions and result in lower
demand for physical space. Moreover, technology has been reshaping work space. Some
office tenants have been decreasing space per employee and/or introducing new office
environments to promote interaction and dialogue, with offices serving more as a meeting
space than a work space.
The pace of the commercial real estate industry’s recovery is likely to be moderate in 2014,
according to Deloitte & Touche LLP. Furthermore, the “Emerging Trends in Real Estate
2014” report - co-published by PwC US and the Urban Land Institute (ULI) - predicts that in
2014 many investors who have traditionally focused on large established markets such as
Boston, Chicago, Los Angeles, New York City, San Francisco and Washington DC, will be
expanding their focus to other cities in order to protect capital. It is critical for economic
development professionals to take the evolving customer and tenant needs that are
transforming the commercial real estate industry into consideration when developing future
strategies.
Residential Real Estate
The foreclosure crisis that began in 2007 resulted in a loss of $8 trillion in value for the
housing market. Home prices - as measured by the Case-Shiller Home Price Index -
declined by more than 30 percent from their peak in early 2006, and by 2011, 4.2 million
properties had been foreclosed. Approximately 1.4 million homes - or 3.3 percent of all
homes with a mortgage - were in the foreclosure inventory as of January 2012 according to
data analysts at CoreLogic.
However, in 2013 the housing market made some notable gains. New home sales surged 38
percent in the first half of 2013, over 2012, hitting a five-year high in June, according to the
U.S. Department of Commerce. Home prices recorded double-digit price appreciation in
26
2013. Prices across the 20 major U.S. metro markets were 12 percent higher in April 2013
than in 2012, according to the S&P/Case-Shiller Home Price Index.
Foreclosure activity is on the decline and RealtyTrac reports that some 800,000 properties
had foreclosure filings nationwide in the first half of 2013. This is a decrease of 19 percent
from the second half of 2012 and down 23 percent from the six months prior to that. Short
sales also increased in 2013, and in the first quarter of the year short sales increased 79
percent versus a year earlier.
The increase of mortgage rates has been a major worry among prospective buyers, but it is
currently over one-third cheaper to buy than to rent on average across the U.S., except in
places like San Francisco, San Jose, New York and Honolulu. RealtyTrac additionally
estimates that there are as many as 11.3 million borrowers holding mortgage notes worth
more than their homes, and as such, it could take another take two to three years before
homeowners have equity in their homes.
Moreover, institutional investors have been purchasing distressed single family homes and
converting them into rentals. RealtyTrac reports that institutional investors - defined as
entities that have purchased 10 or more properties in the past year - have increased in
southeastern markets such as Florida and Georgia, tallying over 200 percent yearly
increases. Experts expect to see more residential construction start in places like Texas,
the Carolinas, Northern California and other parts of country where there is strong housing
demand, boosting job growth in both construction and housing-related industries.
Retail Market
The recession altered American spending habits, and retail stores and shopping malls were
negatively impacted. The International Council of Shopping Centers (ICSC) reported U.S.
chain store sales for June 2009 were down 5.1 percent from June 2008. By second quarter
2010, nearly a fifth of the country's largest 2,000 regional malls were failing, impacting
communities already reeling from the recession and adding to losses in tax revenue and
jobs.
For 2014, mall anchors like JCPenney, Macy's, and Sears have all recently announced fresh
rounds of closures and layoffs. JCPenney is closing 33 stores, Macy's is closing five, and
27
Sears is closing its flagship store in Chicago, adding to the list of about 300 closures that
Sears has made since 2010. The loss of foot traffic at large malls has been a big factor, in
addition to consumers having less disposable income for impulse shopping at brick-and-
mortar stores. Many large retailers have now also decided they do not need as much space
as they used to because shoppers are not shopping in physical spaces as much as in the
past, due to the increase in online shopping.
Notably, outlet malls have expanded rapidly in recent years, making this the fastest-
growing segment in retail, and this trend is expected to continue. Previously built on the
outskirts of town, outlet centers are moving closer to major cities today. While big-box
retailers and grocery stores have long been among the most popular anchors for shopping
centers, today developers are seeking gyms, fitness centers and hair salons to help draw a
stream of regular customers that cannot be easily replaced by options on the internet.
On-line Shops
While traditional retail may never attain pre-recession levels, internet shopping is on the
rise. However, while sales for online shops have significantly increased by over 30 percent
in the last five years, the number of shops only rose by 12 percent and employment slightly
decreased, highlighting the way that automation is impacting job availability in the current
landscape.
Pop-up Retail
The pop-up retail trend has gained traction. Rather than entering a lease and investing in
full-fledged retail displays, pop-up shops resourcefully use relatively low-cost materials for
short-term, temporary events lasting from a day or two, to several weeks. They are often
used by marketers for seasonal items such Halloween costumes, or Christmas decorations
and other holiday themes. They may be located inside an anchor store, a mall, or next to a
strip mall. High retail vacancy rates facilitate this sort of operation. The chain Toys 'R' Us
opens hundreds of pop-ups during the Christmas holiday season, hiring thousands of
workers to run them during that time period.
28
Small Business Lending
The recession deeply impacted the financial markets and depleted the money supply,
causing a tightening of lending standards across the U.S. The unfortunate consequences of
tight credit translated into more jobs lost, the pruning of retirement plans, college
educations being deferred and lifestyles diminished.
Based on studies from the National Federation of Independent Business (NFIB), the number
of small-business owners possessing a business loan (not including lines or cards) fell
noticeably between 2008 and 2011, from 44 percent to 29 percent. In a 2010 NFIB report,
only 34 percent of small businesses claimed that they had received adequate access to
credit. In a similar survey in January 2014, only 29 percent of small business owners
reported that all of their credit needs were met, and 53 percent explicitly said they did not
want a loan.
However, business lending at U.S. commercial banks was largely improving as of 2012, and
the volume of commercial and industrial loans at all banks had almost completely recovered
from the recession’s impacts by 2013. Despite this, small business lending remains below
pre-recession levels, according to the Federal Reserve Bank of Cleveland. The reasons for
this are twofold: 1) there are less small businesses that wish to borrow than in the past,
and 2) the weak economy continues to depress small business results, decreasing loan
approval rates. Moreover, lenders view small businesses as less attractive and more risky
borrowers than they used to be.
Today, more lending is secured by collateral than before 2008. However, many small
business owners do not have the cash flow or collateral that lenders are requiring. According
to the latest Wells Fargo/Gallup Small Business Index, 65 percent of small business owners
said their cash flow was “good” in the second quarter of 2007, compared to only 48 percent
in the second quarter of 2013. As small businesses employ about half of the private sector
labor force and provide more than 40 percent of the private sector’s contribution to GDP,
restrictions on lending will invariably continue to stymie economic growth.
Impact of ARRA
The American Recovery and Reinvestment Act (Recovery Act or ARRA) was enacted in 2009
in response to the recession. The law led to increased polarization of the political parties and
29
angered those voters that believe that government has gotten too big and intrusive. As the
largest domestic economic development measure in U.S. history at $787 billion, the law
overshadowed the regular budget and appropriations8.
The Recovery Act was widely considered to be a stimulus for the economy, and it was never
intended to replace dollar for dollar or job for job what the nation had lost. It was designed
specifically to invest in projects that would sustain recovery and serve as an economic
stabilizer, especially for state and local governments. As such, the ARRA allocated large
sums to innovation, workforce development, entrepreneurship, infrastructure
modernization, and energy efficiency and bolstered traditional agents of economic
development. Notably, the EDA received $150 million and the CDBG program received $1
billion through the law.
As of its enactment in February 2009, $750.4 billion was paid out, broken down between
$297.8 billion in tax benefits; $229.6 billion in grants, contracts, and loans; and $223 billion
in entitlements. With the exception of the Weatherization program, all ARRA program
funding ended as of September 30, 2010.
The impacts ARRA had on economic growth peaked in the first half of 2010 and have since
diminished, according to the Congressional Budget Office (CBO). The 2013 economic
impacts of ARRA largely mirror those that the CBO published in February 2013 regarding
the economic impacts of 2012. For 2013, the CBO estimates that ARRA’s policies had the
following effects (compared to what would have occurred without the policies):
Raised real (inflation-adjusted) gross domestic product (GDP) by between 0.1
percent and 0.4 percent;
Lowered the unemployment rate by an amount between a small fraction of a
percentage point and 0.3 percentage points;
Increased the number of people employed by between 0.1 million and 0.5 million;
Increased the number of full-time-equivalent jobs by 0.1 million to 0.5 million.
8 When ARRA was being considered, the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation
estimated that it would increase budget deficits by $787 billion between fiscal years 2009 and 2019. As of February 2014, CBO now estimates that the total impact over the 2009–2019 period will amount to about $830 billion.
30
Affordable Care Act
The Patient Protection and Affordable Care Act (PPACA), better known as the Affordable
Care Act (ACA) is a federal statute signed into law by President Barack Obama on March 23,
2010. It represents the most significant regulatory overhaul of the U.S. healthcare system
since the passage of Medicare and Medicaid in 1965. The ACA was enacted with the goals of
increasing the quality and affordability of health insurance; lowering the uninsured rate by
expanding public and private insurance coverage; and reducing the costs of healthcare for
individuals and the government.
In a May 2010 presentation on "Health Costs and the Federal Budget", the CBO stated that,
"Rising health costs will put tremendous pressure on the federal budget during the next few
decades and beyond”. The ACA introduced several new measures — including mandates,
subsidies, and insurance exchanges — intended to increase coverage and affordability for
healthcare insurance. It also included expanded Medicaid eligibility and Medicare coverage,
and subsidized and regulated private insurance. Since its enactment, the law and its
implementation have continued to face challenges in Congress and federal courts, and from
certain state governments, advocacy groups and some small business organizations.
Under the law, those workers whose employers offer “affordable” healthcare insurance will
not be eligible for subsidies in the exchanges. To be eligible, the cost of employer-based
health insurance must exceed 9.5 percent of the worker’s household income. In January
2013 the Internal Revenue Service (IRS) ruled that only the cost of covering the individual
employee would be considered in determining whether the cost of coverage exceeded 9.5
percent of income. While the cost of a family plan is often higher, the ruling means that
those higher costs will not be considered even if the extra premiums push the cost of
coverage above the 9.5 percent income threshold.9 As reported in the New York Times in
2012, this could leave 2 to 4 million Americans unable to afford family coverage under their
employers’ plans and ineligible for subsidies to buy coverage elsewhere.10
9 The New York Times, “A Cruel Blow to American Families”, February 2, 2013
10 New York Times, "Health Law Critics Prepare to Battle Over Insurance Exchange Subsidies", Pear R., July 7, 2012
31
The federal government website HealthCare.gov allows people to apply for insurance
through the exchanges. Launched in October 2013, it crashed several times in the first
month and people were not able to access the website. While it remained open for
enrollment through the end of March 2014, many found that the plans offered through the
exchange were unaffordable and/or undesirable, with high deductibles and inconsistent
participation by local medical practitioners.
According to a February 2014 CBO report "The Budget and Economic Outlook: 2014 to
2024", the Affordable Care Act will increase the number of non-elderly people who have
health insurance by 13 million in 2014, then by 20 million in 2015, and by 25 million in
each year going forward through 2024. Despite this increase, the CBO found that
approximately 31 million non-elderly individuals will not have health insurance, with 20
percent of that group being Medicaid-eligible people who opt not to enroll, and another five
percent living in a state that has chosen not to expand its Medicaid program.
The CBO additionally predicts that the economy will have the equivalent of 2.3 million fewer
full-time workers by 2021 as a result of the law. This estimate considers the likelihood that
some employers will either cut employee hours, or hire fewer workers, or offer lower wages
to new workers in an attempt to avoid a new fine on employers that do not offer insurance
to employees who work more than 30 hours a week. Moreover, since insurance subsidies
under the law become less generous as income rises, some workers will have less incentive
to work more. CBO estimates that over two million Americans who would otherwise rely on
a job for health insurance will quit working, reduce their hours, or stop looking for
employment because of new health benefits available under the ACA. The report estimates
that the ACA will reduce the total number of net hours worked by up to two percent from
2017 to 2024.
U.S. Public Debt
Debt as a share of GDP has risen steeply since the 2008 financial crisis. Worldwide,
government debt in advanced economies has climbed to its highest level since World War II.
Gross debt levels in many nations, including Japan, Greece, Italy, Portugal, and Ireland, are
all above 100 percent. When the financial crisis began in 2008, the U.S. national debt stood
at $9.2 trillion. Based on White House calculations, the national debt will reach $20 trillion
32
by the end of this decade, which is about 140 percent of the current GDP. CBO estimates
that the deficit will total $514 billion in fiscal year 2014.
Based on information from the Treasury Office and the Government Accountability Office,
the public debt has increased by over $500 billion each year since fiscal year 2003, with
increases of $1 trillion in FY2008, $1.9 trillion in FY2009, and $1.7 trillion in FY2010. In
March 2012 the gross debt was $15.589 trillion, and increased over the year, hitting
$17.075 trillion by the end of September 2013, according to the Treasury Department.
As of the end of September 2013, 28.4 percent of the debt (about $4.76 trillion) was owed
to another arm of the federal government itself. The biggest creditors are Social Security’s
two trust funds, which together hold $2.76 trillion in special non-traded Treasury securities,
and the Federal Reserve system.
As of July 2013, China’s Treasury holdings amounted to about 7.6 percent or $1.28 trillion
of the total debt making China the U.S.’s largest overseas creditor, followed by Japan, which
holds more than $1.1 trillion in Treasuries. Currently, the U.S. government is paying
historically low rates on its debt, mainly due to the Federal Reserve’s efforts to keep interest
rates low. In fiscal 2013, according to the Treasury Department, the average interest rate
on the public debt was 2.43 percent.
Over the past three years, efforts were made to avoid a possible financial default. Starting
with the debt-ceiling crisis of the summer of 2011 and the subsequent legislation that ended
that crisis (the Budget Control Act of 2011, or BCA), sequestration11 was meant to force
Congress to make hard decisions and compromise on federal spending and a revenue
mechanism that would bring the deficit under control. However, both Congress and the
White House were ultimately unsuccessful in avoiding across-the-board sequestration cuts
in the first quarter of 2013, and for FY2013 all government departments suffered an 8 to 10
percent reduction of funding, hampering operations.
State Budget Shortfalls
State revenues fell deeply during the recession and remain morose. The impacts of high
unemployment and decreased housing values have left states with much lower sales tax
revenue, the main sources of revenue states use to fund education and other services. In
11
Sequestration refers to setting a cap on the amount of government spending within broadly-defined categories.
33
2013, state tax revenues remained six percent below 2008 levels after adjusting for
inflation.12
In 2009, the Center on Budget and Policy Priorities (CBPP) reported that 46 states faced
budget shortfalls for that fiscal year, totaling an estimated $99 billion. Thirty-one states
had budget gaps totaling $55 billion for fiscal year 2013. These shortfalls hit particularly
hard as temporary aid to states enacted in early 2009 as part of the Recovery Act helped
many states to avert some potential budget cuts in the 2009, 2010 and 2011 fiscal
years. However, that aid largely expired at the end of fiscal year 2011, leading to some of
the largest cuts to state services since the start of the recession. State education and health
care obligations continue to grow, despite the budgets shortfalls. Budget difficulties have
impelled at least 46 states to reduce services for their residents, including some of their
most vulnerable families and individuals. More than 30 states have raised taxes to some
extent.
Cutbacks at the Local Level
When the recession hit, municipal and county governments struggled to balance budgets as
cash-flows dwindled. Between 2008 and 2010, cities in the midst of redevelopment efforts
saw projects stall, or even stop completely, as access to capital became constrained by the
recession. A report from the NLC, the National Association of Counties (NACo), and the U.S.
Conference of Mayors (USCM) revealed that local government job losses in the 2011 fiscal
year amounted to 500,000, with public safety, public works, public health, social services
and parks and recreation hardest hit by the cutbacks. The consequences of these cutbacks
are substantial and the Economic Policy Institute estimates that for every 100 public sector
layoffs, there are 30 private sector layoffs that follow them. Moreover, local government
employment is about two to three times as large as state government employment in most
states, and it accounts for the largest number by far of government jobs that were lost in
the recession.
In 2013, data from the BLS demonstrated continued broad declines in local government
employment nationwide. State and local government employment combined accounts for
more than 19 million jobs or 14 percent of total employment in the U.S. With the
12
Census quarterly state and local tax revenue, http://www.census.gov/govs/qtax/
34
exhaustion of the Recovery Act funding assistance, continued job cuts in local public
services may reduce the quality and quantity of those services in cities and counties.
Moreover, local governments should prepare for further constraints in the future in terms of
federal government funding. President Obama’s 2015 budget, discuses decreases in critical
investments in infrastructure, education, and innovation from 3.1 percent of GDP in 2013 to
2.2 percent in 2024.13 Local government leadership will need to be ever more nimble and
innovative in securing sustainable investments for their communities in the years ahead.
Growth of Big Data
“Big data” refers to the enormous amounts of structured and unstructured information
collected primarily through electronic means such as social media, internet transactions and
sensors. Today, big data transcends across all industries and has the ability to transform the
way business is conducted, impacting everything from marketing to supply chains. A main
driver of big data is transactional data produced by companies, online applications, and
financial institutions.14 Notably, IBM reports that 90 percent of all data is less than two
years old.15 Forecasts for growth in big data vary, but the tech firm Gartner predicts that,
by 2016, the expansion of the information economy will produce six million tech jobs
globally.16
For economic developers, big data means that more valuable and up-to-date information
about the expansions and contractions of firms at all levels will be more readily available.
Research institutions such as the Kauffman Foundation and the Edward Lowe Foundation
have resources to identify high growth companies in order to provide them with increased
services.17 Having such relevant information so readily available will assist practitioners on
one hand, and require more dexterity on the other, as the pace of business activity will
invariably accelerate.
13
However, spending on mandatory programs will rise from 12.6 percent of GDP to 14.1 percent, an increase of almost $1.8 trillion per year, according to President Obama’s 2015 budget. 14
International Economic Development Council, “Looking Around the Corner: the Future Of Economic Development”, 2014 15
IBM,” IBM Big Data Success Stories”, 2011 16
United States Chamber of Commerce Foundation, “Big Data and What It Means”, Bradshaw, L, ,2013 17
International Economic Development Council, “Looking Around the Corner: the Future Of Economic Development , 2014
35
Education Crisis
The budget cuts on the federal, state and local levels have threatened public educational
institutions across the country since 2008. The cuts have consequences for both short and
long term public-and private-sector job loss. Significantly, at a time when the nation strives
to produce workers with the skills to master new technologies and adapt to the complexities
of a global economy, these cuts in funding for basic education threaten to undermine future
prosperity and competitiveness.
K-12 Budget Cuts
Between 2008 and 2011, local school districts had cut 278,000 jobs nationally. In the 2012-
2013 school year, elementary and high schools received less state funding than they did the
previous year in 26 states, and currently school funding now stands below 2008 levels in 35
states, according to the Center on Budget and Policy Priorities (CBPP).
The CBPP reports that as revenues have improved with the broader economy over the past
year, funding cuts have slowed and some states have gradually increased their school
funding. However, it will take years before state revenues are able to sustain services - like
K-12 education - at pre-recession levels. States will need to raise additional revenues to
prevent school cuts from worsening and to make progress in restoring school funding
without forcing cuts in other state services, such as police and fire protection.
Higher Education
Over the past five years, state cuts to higher education funding have been devastating.
Public colleges and universities remain under intense financial strain, and tuitions across the
country continue to rise steeply at a time when families need low-cost, high-quality schools
the most. Concurrently, these institutions have cut back on staff and spending,
compromising the quality of the education that they offer.
The CBPP compared 2013 state fiscal spending for public colleges and universities with
spending in fiscal year 2008 and adjusting for enrollment and inflation, they found that:
State spending nationwide is down $2,353 or 28 percent.
Every state except North Dakota and Wyoming has cut funding.
36
Thirty-six states have cut funding by more than 20 percent.
Eleven states have cut funding by more than one-third.
Arizona and New Hampshire have cut their higher education spending in half.
Virtual Competition
The legitimacy of online education is growing and this trend is sure to impact the industry
business model, including the way that schools compete for students in the following years.
Moreover, most business schools count on generating critical revenue from students
pursuing part-time and executive MBA degrees. These programs have traditionally been
geared towards working professionals who will soon have the option of taking similar
courses online. With more MBA programs now offering degrees online, some business
schools may start to consider consolidating or simply shutdown.
Poor Balance of Trade
The U.S. has run a negative balance of trade with the rest of the globe each year since
1976. By the end of 2009, the U.S. trade deficit plunged by 51 percent from September
2008 as both imports and exports fell, and the recession brought the deficit to $380.7
billion, nearly half the 2008 deficit.
The trade imbalances have a negative impact on the entire economy. The U.S. slowly loses
expertise and business to sites overseas, which influences the types of jobs available and
the standard of living in U.S. communities. This is particularly true for the manufacturing
sector which is so vital to U.S. global competiveness. Manufacturing serves as major driver
of investment in research and innovation, a key draw for foreign direct investment and
source of good jobs.
The trade deficit has fallen slightly since early 2012 and is notably lower than the record
imbalances reached before the recession. The U.S. trade deficit in 2013 was the smallest
since 2009, although it increased at the end of the year. Rising U.S. oil production as well
as the falling dollar - which makes U.S. goods more attractive to foreign countries – has
helped to narrow the deficit. In January 2014, the U.S. recorded a trade deficit of $39.1
billion as imports increased more than exports.
37
The January 2013 to January 2014 increase in exports of goods reflected increases in
industrial supplies and materials; capital goods; and foods and beverages. Decreases
occurred in consumer goods.
The January 2013 to January 2014 increase in imports of goods reflected increases in
capital goods; automotive vehicles, parts and engines; foods and beverages; and
consumer goods. Decreases occurred in industrial supplies and materials and other
goods.
The main U.S. trading partners are Canada, countries in the European Union, Mexico, China
and Japan. The European Union consumes nearly one-fifth of America's exports. The trade
deficit will continue to narrow through 2014 if the U.S. can maintain a smaller petroleum
trade deficit.
China’s Credit Crisis
Today, China’s economy is growing at the slowest pace in 13 years, and the real estate
market has weakened. Over the past several years, a myriad of so-called shadow banks
engaged in lending practices that resulted in a sudden shortfall in the cash market. Many
Chinese businesses that stock U.S. retailers with inexpensive gadgets were built on loans
they cannot repay. Moreover, banks have financed provincial governments to build cities
occupied by displaced farmers that have no jobs. The government raised interest rates to
gradually deflate stock and land prices, but now borrowers cannot pay those rates and
banks and private lenders could face ruin.
At least 25,900 lawsuits involving disputes over 46.2 billion yuan ($7.5 billion) in private
lending were filed in Wenzhou in 2012, more than six times more than the year prior,
according to the Zhejiang province’s supreme court. This epitomizes the difficulty of the
Chinese government to regulate informal lending. Estimates by banking group UBS put the
size of the Chinese shadow banking system at $3.4 trillion, equal to 45 percent of GDP.
This is of concern to the U.S., as a banking crisis in China would affect global economic
activity and impact the current high stock market in the U.S. Furthermore, the profits of
many U.S. companies depend on overseas markets, particularly in emerging countries.
Notably, more than 50 percent of S&P 500 profits are generated outside of the U.S.
38
European Debt Crisis
The European debt crisis is the term used to describe the region's struggle to pay the debts
it has built up in recent decades. From late 2009, fears of a sovereign debt crisis developed
among investors as a result of the rising government debt levels around the world combined
with a wave of downgrading of government debt in some European states. Unemployment
was reported at 12 percent for the first quarter of 2014, up from the 7.5 percent rate that
was noted before the start of the Great Recession. In some Eurozone countries –
particularly in Spain, Greece and Portugal – the unemployment level is higher, while
Germany - which is accounts for more than a quarter of total Eurozone output - has had a
strong employment recovery, and an unemployment rate of 5 percent.
While unlikely, if bond defaults or bank failures begin in Europe, the ripple effects on the
U.S. economy would be significant. Indeed, in today’s interconnected global financial
system, the European Debt Crises affects not only U.S markets, but also the U.S.
government budget. If one nation defaults on its sovereign debt or enters into recession,
the banking systems of creditor nations face losses as well. With the U.S. providing 17.7
percent of total International Monetary Fund (IMF) resources18, if the IMF has to commit too
much cash to bailout initiatives, U.S. taxpayers will eventually pay a large part of it. With
the U.S. debt steadily increasing, the events in Europe require close monitoring.
Shifts in Economic Development
The uneven economic recovery, rapidly changing technology and demographic shifts have
affirmed that business as usual or continuing with the status quo will no longer be enough.
Following shifts in the economic landscape, the practice of economic development has also
become more diversified and complex. Changes in funding sources, scrutiny over incentives,
and new definitions of success have inherently changed economic development practices
across the nation.
Shifts in Funding
Economic development funding has is undergoing a period of transition that began before
the recession and is continuing to evolve. Budget cuts at the state and local levels have
18
Congressional Research Service, “International Monetary Fund: Background and Issues for Congress”, Martin A. Weiss, March 2013
39
challenged many EDOs to do more with fewer resources. Traditional economic development
funding sources that may have previously included banks, utilities, and even newspapers
have seen their capacity to fund projects and programs diminish, prompting practitioners to
seek funding from previously untapped sources. Hospitals, universities, and sport venues,
as well as successful local firms such as cable companies, auto dealerships and law firms are
playing a greater role in economic development funding.
The increase in funding from the private sector over the public sector in the past several
years is notable. Data from 98 client organizations19 of the National Community and
Development Services (NCDS) - between 1998 and 2011 – illustrates that funding for
economic development activities had shifted from approximately 30 percent private and 70
percent public in 1998 to over 60 percent private and 30 percent public by 2011.
These new private sector investors tend to be more cautious than previous traditional
funders, and are less willing to make a long-term commitment. Nevertheless, public funding
still plays an important role for many organizations and accountability and transparency are
equally as important for them as for private sector. EDOs today need to communicate more
with funders and future funding is often based on performance-based metrics.
Incentives
Incentives have long been used by states and localities to influence business decisions
regarding attraction, expansions and the retention of firms in their jurisdictions. Incentives
can range from tax abatements, tailored workforce training programs, investments in
infrastructure or research capacity, and streamlined public services and permitting
processes. Opponents of tax incentives have argued that these funds could be used for
other needs such as education and or other public services. However, for over a decade,
proponents have argued that tax incentives fuel private investment that will deliver long-
term benefits to their jurisdictions, i.e., job growth, a larger tax base and increased
revenues that can lead to an improved quality of life.20
19
These organizations include local and regional chambers and EDCs that receive funding from municipal governments and the business community. 20
Bolnick, B., “Effectiveness and Impact of Tax Incentives in the SADC Region”, February, 2004
40
Used appropriately, tax incentives can prevent market failure by creating economic activity
that would not otherwise exist.21 Moreover, many of the indirect incentives – such as
permitting, tax increment financing, workforce programs and infrastructure improvements -
are largely unrecognized by most stakeholders. Many believe that incentives are crucial not
only in terms of competition with other communities within the U.S., but in terms of
international competition as well.
The debate over incentives was refueled in December 2013 following the New York Times
three-part series on the topic, drawing national attention. The series highlighted the lack of
information available on a national level on the incentives issue, stating that there is little
hard evidence available of what incentives really yield in terms of job creation and
investment, and noting that there is no central source available to consult on the costs and
benefits of incentives.
The series also drew a link between corporate incentives and funding for schools, implying
that money used to lure firms could be used toward the public school system. This struck a
nerve among economic development practitioners due to the fact that many intangibles,
ancillary benefits, and long-term ripple effects that occur when a company locates to a
community, cannot always be evaluated in the short-term. However, both the New York
Times and practitioners agree that there should be more transparency in financial incentives
negotiations. According to a January 2013 IEDC survey, 99 percent of economic
development professionals think that incentives should be structured in such a way that the
community receives a tangible return on investment, but acknowledge the difficulty of such
quantitative measurement.
Notably, a recent report from Good Jobs First22 finds that all but four states now post at
least partial information online showing which companies are receiving economic
development incentives, but the quality and depth of that disclosure varies widely.
21
Texas Business Review, “The Horse Before the Cart: Toward a More Rational Management of Economic Development Incentives”, Oden, M. D., June, 1999 22
Good Jobs First, ""Show Us the Subsidized Jobs: An Evaluation of State Government Online Disclosure of Economic Development Subsidy Awards and Outcomes", Mattera P., Cafcas T., McIlvaine L., Tarczynska K., Bird E. and LeRoy G., January 2014
41
Measuring Performance
The recession, shifts in economic development funding and debates over incentives have all
accentuated the need to be able to measure and articulate what success means in the
economic development field. EDOs have been under increased pressure to be accountable
to investors who want to know specifically what they are getting in return for their money
and are scrutinizing their investments more than in previous decades.
However, only two-thirds of EDOS nationwide regularly track their organizational
performance due to a number of practical challenges. Notably, in a 2013 IEDC survey, EDOs
identified difficulties in collecting pertinent data, confusion over what measures to use, and
post-recession standards of success as key obstacles to tracking performance.
In order to effectively measure performance EDOs must carefully select metrics based on a
complete understanding of their mission, functions and resources. Collecting the right data
and understanding how the variables interact with each other will provide valuable insights
into the EDO’s impact on the community. Having full leadership support, whether it is a
board of directors, city council, or other governing committee is vital to efficiently tracking
EDO performance.23
23
International Economic Development Council, “Making it Count: Metrics for High Performing EDOs”, 2014
42
B. Demographic Shifts
The U.S. has in some ways become an urban nation, with the majority of its residents living
in urban areas that have evolved into multiple nodes of employment, housing and
recreation. Forecasts are that the U.S. population will grow by an additional 150 million by
2050.
According to the 2010 U.S. Census Bureau, the first decade of the 21st century was the
slowest decade of population growth in 70 years. The country’s population only grew by 9.7
percent, a significant dip from the 13.1 percent growth in the 1990s. U.S. population
growth has been nearly stagnant in recent years, with the Census Bureau reporting growth
of .075 percent between 2011 and 2012 and then 0.71 percent by July 2013, or just under
2.3 million people. Fewer Americans are in their child-bearing years, immigration is down
and economic growth has slowed, all factoring into the decline in growth.
The South and the West were the nation’s leading regions in population growth and
California, Texas, New York and Florida remain the most populated states. Maine and West
Virginia experienced a population decrease in 2010 which has remained stable, while North
Carolina has experienced an uptick in population growth. North Dakota, boosted by an
ongoing oil boom, is the fastest-growing state, with a 3.1 percent increase, more than four
times the national rate. The Bookings Institute had anticipated a burst of growth in Florida,
Arizona and Nevada as the housing market improved, but each state only averaged about
1.2 to 1.3 percent growth.
Looking ahead, the single most important factor for economic success will be a talented,
dynamic workforce. Generational shifts and changes in immigration will impact the
composition of the workforce, and these demographic variations will need to be considered
by economic developers.
Aging Baby Boomers
The impact of the aging baby boomers on the economy is complex. The baby-boomers did
not have enough children to replace themselves, and thus as baby-boomers retire, there will
not be a sufficient amount of qualified workers to replace them. However, the population is
still expected to grow over the next 25 years due to an increase in life expectancy. Notably,
43
the first wave of baby boomers24 is hitting the age of 65, and most will shun retirement and
stay in the workforce, either by necessity or choice. Many, if healthy now, could still be alive
in 40 years.
The BLS predicts that by 2050, there will only be 115 people outside the workforce for every
100 in it, but that less than 45 percent of them will be children and more than 35 percent of
them will be over the age of 65. Looking ahead, a larger share of the population will be too
old to work, yet they will continue to be consumers of services from both the public and
private sectors. Japan experienced a similar situation, and some have argued that the aging
population there has been the basis of the decline in economic growth in the country over
the past two decades.25 Older populations tend to buy less, having made big purchases,
such as homes and cars, earlier in their lives.
The Millennials
The Millennials26 – or Generation Y – are the largest, most environmentally conscious and
most tech-savvy generation in history. Representing nearly 65 million people, these
children of the baby boomers have now begun to enter the housing market and workforce.
According the Pew Research Center, millennials are the most ethnically and racially diverse
cohort of youth in the nation's history:
o 18.5 percent are Hispanic;
o 14.2 percent are black;
o 4.3 percent are Asian;
o 3.2 percent are mixed race or other;
o 59.8 percent - a record low - are white.
Some other characteristics of millennials as noted by the Pew Research Center:
They are digital natives, i.e., they grew up with innovations of the digital era as
everyday parts of their social and work lives.
24
Those born between 1946 and 1964 25
Dent Research, “The Demographic Cliff: How to Survive and Prosper During the Great Deflation of 2014–2019,", Dent H., January, 2014 26
Those born between 1980 and 1995
44
They are relatively unattached to organized politics and religion, although they tend
to be politically progressive.
They are optimistic about the future, although they are burdened by debt.
Immigrant Population
Immigrants add to the available pool of workers in local and regional economies, feeding
into the cycle of economic activity, creating demand for goods and services. Within the U.S.,
the immigrant population varies.
The 2010 Census demonstrated that non-whites - largely Hispanics and Asians - made up
92 percent of population growth in the last decade. Foreign-born individuals accounted for
40.4 million, or 13 percent, of the U.S. population in 2010.
Immigrant Location Preferences
California, New York, Texas and Florida together are home to more than 50 percent of all
immigrants in the U.S.27 Moreover, seven of the 10 states with the highest percentage
increase in immigrants from 2000 to 2010 were in the Southeast, including Alabama,
Arkansas, Georgia, Kentucky, North Carolina, South Carolina, and Tennessee.28
The Lusk Center for Real Estate at the University of Southern California also reports that
while immigrants traditionally installed in "gateway" cities of Los Angeles, San Francisco,
New York, and Chicago, new immigrants are now heading for smaller metropolitan areas
like Detroit and Minneapolis, Colorado Springs, Sarasota and El Paso.29 According to Census
figures, a majority of every major racial and ethnic group in large cities also now lives in the
suburbs. Furthermore, the immigrants in these new places are likely to have been in the
U.S. fewer than 10 years, whereas immigrants in a larger city have likely been here much
longer. The Lusk Center study, “Immigrants and Housing Markets in Mid-Size Metropolitan
Areas”, also points out that those newer immigrants may have less English language skills
27
U.S. Census Bureau, “The foreign-born population in the United States: 2010. American Community Survey Reports”, Grieco, E., Acosta, Y.D., de la Cruz, P.G., Gambino, C., Gryn, T., Larsen, L.J., Trevelyan, E.N., & Walters, N.P., 2012 28
Center for Immigration Studies, “A record-setting decade of immigration: 2000-2010. Backgrounder” Camarota, S. A., 2011 29
This does not take into account legal status
45
and are less likely to own a home. According to the Federation for American Immigration
Reform, newer immigrants are likely to settle where there are job opportunities and
affordable places to live.
Shifts in the Workplace
As more baby boomers begin to retire, there will be an increase of millennials in the
workforce, and sandwiched between the two generations, Generation X, will wrangle with
balancing work with increased family demands. In the workplace, generational differences
may create new challenges.30
Notably, baby boomers hold senior leadership positions in nearly every industry and firms
and organizations will have to transition this generation out of the workplace while
preserving institutional knowledge. The differences in both style and standards between
generational groups will require attention in both individual places of work and in the larger
workforce.
Trends in Housing
The diverse lifestyle choices among the different generations will impact the housing market
across the country. A 2012 report released by the Bipartisan Policy Center31, "Demographic
Challenges and Opportunities for U.S. Housing Markets," determined that a strong economic
recovery with favorable housing market conditions would encourage substantial growth in
millennial households. Certain other trends impact housing:
Household size is shrinking, due to more people living alone, delaying marriage and
childbirth, and having fewer children;
Millennials are rejecting suburbia in favor of urban areas with updated amenities;
Only 12 percent of future homebuyers want the drivable suburban-fringe houses that
are in oversupply;
30
International Economic Development Council, “Looking Around the Corner: the Future of Economic Development”, 2014 31
Based on research from the National Association of Realtors®, the Urban Institute, and the University of Southern California
46
The Northeast and Midwest are most likely to see a large number of older
homeowners seeking to sell their homes;
Interest in energy efficiency and a low-carbon lifestyle is impacting personal location
decisions.
The preference for urban areas by millennials is also highlighted in Federal Highway
Administration (FHA) data that demonstrates that the share of 14 to 34 year olds without a
driver’s license increased by 26 percent in 2010 from 21 percent a decade earlier. Cycling,
walking and public transportation rose among 16 to 34 year olds from 2001 to 2009,
according to a study by the Frontier Group32.
Cities and Downtowns
Prior to the recession, cities and downtowns were impacted by the ever-increasing suburban
sprawl, whereby the populations of many of the nation’s largest cities declined. However,
recent Census data demonstrates a different story about some of these cities today.
Notably, even as citywide population declined in many cities, downtown population
increased, and in some cases quite dramatically. As such, there is an increase in demand for
downtown living in cities nationwide.
Findings based on 2011 Local Employment Dynamics (LED)33 data and 2010 Decennial
Census data demonstrates that in many of the largest cities of the most-populous metro
areas, downtown is becoming a place not only to work but also to live. Between the 2000
and 2010 censuses, metro areas with 5 million or more people experienced double-digit
population growth rates within their downtown areas (within a two-mile radius of their city
hall), more than double the rate of the overall area.34
Cities across the nation are diversifying local economies and revitalizing public spaces. While
Chicago experienced the largest gain in its downtown area, with a net increase of 48,000
residents over 10 years, New York, Philadelphia, San Francisco and Washington also
experienced large population increases close to city hall. Downtowns in New Orleans and
Baltimore experienced declines in their downtown areas however, as did Dayton and Toledo,
32
Frontier Group is a think tank affiliated with the Public Interest Network 33
Local Employment Dynamics (LED)33
data includes data-merging and mapping efforts from the U.S. Census Bureau and state labor market information (LMI) agencies. 34
International Downtown Association, “Downtown Rebirth: The Live-Work Dynamic in 21st Century U.S. Cities”, October 2013
47
both in Ohio. Furthermore, from 2000 to 2010, population increases in the central areas of
many of the largest cities were concentrated among the non-Hispanic "only white
population". The Washington, metro area exemplifies this pattern.
Role for EDOs
The demographic structure of a community impacts local growth. Going forward,
generational shifts and immigration will have repercussions on the composition of the
workforce, and demographics will also influence consumer spending and real estate
development decisions. The trend towards urbanization - with firms and people flocking to
cities and downtowns - will increase populations and development in those areas and create
challenges in suburban areas that will need to uncover new uses for vacant properties.
It is crucial for economic development professionals to consider these demographic
fluctuations when planning for the future. For example, statistics regarding the baby
boomer retirement can help economic developers to prepare for growth in the proportion of
dependents and unqualified workers, and a decrease in qualified workers over the next 20
to 30 years. With less qualified workers to go around, one community’s gain will thus be
another one’s loss.35 EDOs that are able to attract youth and a qualified immigrant
population to their community will be more apt to adjust to future shifts. Practitioners have
an important role to play in advocating for quality-of-place initiatives and providing
amenities that will be attractive to skilled talent and firms in order to sustain growth within
a region.
35
When the Boomers Bail: A Community Economic Survival Guide, Lautman M., Logan Square Press, 2011
48
C. Aging Infrastructure
The U.S. infrastructure is laden with significant problems that are severely impacting both
personal and economic health. Much of the infrastructure is outmoded and dilapidated, and
federal, state and local governments have failed to sufficiently enact formulas, incentives
and procedures to attract greater private investment. Once a world leader with the
interstate highway system, the U.S. transportation infrastructure system is now falling (or
has fell in some areas) behind Asia and Europe in terms of transportation investments.
According to the U.S. Department of Transportation, $20.6 billion in capital investment is
needed annually for U.S. roads just to improve current facilities without adding any new
capacity. Notably, these significant infrastructure deficiencies are also hindering the
nation’s potential for economic growth and competitiveness.
Having a developed and fully functioning infrastructure is essential to attracting and
retaining firms and talent, as well revitalizing local economies. As place-making grows in
importance as a vital economic development strategy, practitioners will need to understand
broader infrastructure issues and how they impact the nation, in order to determine the
best approaches for their community.
Grading the Infrastructure
Every few years, the American Society of Civil Engineers (ASCE) releases grades for its
Report Card for America’s Infrastructure. Since 1998, ASCE grades have been mediocre at
best, averaging only Ds, due to delayed maintenance and underinvestment across most
categories. The grades are determined according to the following criteria: capacity,
condition, funding, future need, operation and maintenance, public safety, resilience, and
innovation.
In 2009, the ASCE issued U.S. infrastructure a cumulative grade of D and noted the need
for a five-year investment of $2.2 trillion to improve conditions. Four years later, the ASCE
revised its report in 2013, issuing a cumulative grade of D+, and advising an investment of
approximately 3.6 trillion by 2020 to improve the nation’s aging and neglected
infrastructure.
49
Over the past four years, greater private investment for efficiency and connectivity brought
improvements in the rail category, and renewed efforts in cities and states helped address
some of the nation’s most vulnerable bridges. Moreover, several categories benefited from
short-term boosts in federal funding through the Recovery Act.
Highlights of the ASCE 2013 Report Card include:
Dams earned a grade of D. The average age of the 84,000 dams in the U.S. is 52
years old. Over 4,000 dams are deficient. The Association of State Dam Safety
Officials estimates that it will require an investment of $21 billion to repair these
dams.
Hazardous waste received a D. More than 400,000 brownfields sites await cleanup
and redevelopment, and funding for Superfund site cleanup is not sufficient. Over
1,280 sites remain on the National Priorities List and other potential sites have yet to
be identified.
Levees earned a grade of D-. The nation’s estimated 100,000 miles of levees are
aging and the cost to repair or rehabilitate them is estimated to be $100 billion by
the National Committee on Levee Safety. This is a critical investment as levees
helped in the prevention of more than $141 billion in flood damages in 2011.
Solid waste earned the highest grade of B-. Waste recycling has been steady over
the past 20 years.
Wastewater received a D. Capital investment needs for the nation’s wastewater and
storm water systems are estimated to total $298 billion over the next 20 years.
Fixing and expanding sewer pipes represent the largest capital need, comprising
three quarters of total needs.
Aviation earned a D. The Federal Aviation Administration (FAA) estimates that the
national cost of airport congestion and delays was almost $22 billion in 2012. If
current federal funding levels are maintained, the FAA anticipates that the cost of
congestion and delays to the economy will rise from $34 billion in 2020 to $63 billion
by 2040.
50
Bridges received a C+. Of the nation’s 607,380 bridges, one in nine is rated as
structurally deficient. Federal, state and local governments would have to boost
bridge investments by $8 billion annually (in addition to the $12.8 billion that is
currently being spent) to address the needs of deficient bridges across the country.
Ports earned a grade of C. Ports are vital to U.S. international competitiveness, and
more funding is needed in order to maintain, modernize, and expand our nation’s
ports.
Rail received a C+. Railroads are experiencing resurgence as both an energy-efficient
freight transportation option and a viable city-to-city passenger service. Due to
higher investments and ridership over the past four years, this grade was an
improvement over 2009.
Roads graded a D. Forty-two percent of America’s major urban highways remain
congested, costing an estimated $101 billion in wasted time and fuel each year. The
FHA estimates that $170 billion in capital investment would be needed on an annual
basis to significantly improve conditions and performance by 2020.
Transit earned a D. Transit plays a vital role in the economy, connecting people with
jobs, medical facilities, schools, shopping and recreation. However, 45 percent of
American households lack any access to transit, and millions more have inadequate
service levels.
Energy received a D+. While investment in power transmission has increased since
2005, ongoing permitting issues, weather events and limited maintenance have
contributed to an increasing number of failures and power interruptions.
Approximately 17,000 miles of high-voltage transmission lines and significant oil and
gas pipelines are planned over the next five years, but permitting and siting issues
threaten their completion.
Drinking water received a D. There are an estimated 240,000 water main breaks per
year in the U.S. The cost of replacing every pipe over the coming decades could
reach more than $1 trillion, according to the American Water Works Association
(AWWA).
51
Broadband
A viable information infrastructure is critical to U.S. competiveness. Broadband enables
communities to compete globally, attracting new firms, investments and jobs, and it is an
important factor for site selectors. The Brookings Institution reports that among U.S. states,
every one percent increase in broadband penetration projected an annual employment
increase of 0.2 to 0.3 percent.
Broadband became a major driver for people who lost their jobs during the recession to
begin the process of re-entering the workforce, joining support groups and even attending
on-line “how to look for a job” classes. The recession’s impact heightened the need to break
down the barriers of the digital divide in the U.S. and overcome the disparities in
access. Income remains one of the largest barriers, as not everyone owns a computer or
has income to pay for broadband access, which is comparatively high in the U.S.
Notably, the U.S. is falling behind other nations in offering high-speed and affordable
broadband service to people and firms. The World Economic Forum recently ranked the
United States 35th out of 148 countries in Internet bandwidth. In 2010, the Organization for
Economic Cooperation and Development (OECD) placed the U.S. 15th among developed
countries in broadband deployments per 100 people, and also in 2010, broadband providers
suggested that 37 percent of U.S. adults did not have access to broadband.
While the ARRA appropriated over $7 million to support the expansion of broadband
services to rural areas, many communities are still faltering in this area, and speed and
service varies widely across the U.S. Those cities with the fastest speed - such
as Chattanooga, Tennessee and Lafayette, Louisiana - have built municipal fiber-optic
networks. These locations also charge a high fee for the service, and disparity in pricing can
be extreme, with monthly fees ranging from $70 to $1,000 per month, depending on
location.36
There is also some controversy as to whether local governments should lead broadband
projects, and what works for one location might not be easily replicated elsewhere. For
example, in Chattanooga, the fiber optic system is laid over the city's smart grid network,
36
New York Times, "U.S. Struggles to Keep Pace in Delivering Broadband Service", Wyatt E., December, 2013
52
a digitally powered electric infrastructure that received subsidies though the Recovery Act.
However, a February 2013 bill introduced to the Georgia state legislature would limit the
power of local governments to expand broadband service.
In terms of place-making strategies, high-speed broadband access is not considered a
luxury anymore, and broadband accessibility has become an essential quality-of-life
amenity due the varied entertainment and communication options it provides. Google is
currently building its own fiber optic network in Kansas City, Kansas through a pilot program
that is intended to trigger greater industry competition and consumer demand for high-end
broadband.37
Impact on Competitiveness
Substantial investments in infrastructure would have a positive impact on the nation’s future
economic strength and quality of life. However, the U.S. currently lacks a comprehensive
national policy or the unanimous political will to develop a long-term approach to funding
the significant maintenance needs of aging U.S. infrastructure. In 2011, the U.S. was
spending only two percent of GDP on infrastructure, while China and India were spending 10
percent of their GDP on infrastructure investments. Continued neglect will mean that the
U.S. will lose talented workers and firms to nations and cities overseas that are committed
to infrastructure as an essential component of economic viability and innovation.
Among the other infrastructure deficiencies, the water infrastructure issues are particularly
urgent. With only three percent of all of the water on the planet potentially drinkable - and
as little as 0.03 percent of that feasible for human use – water waste could be catastrophic.
As highlighted in the Water is Your Business campaign report38, the nation has outgrown its
water system and nearly 25 percent of water mains are over 50 years old. Across the U.S.,
seven billion gallons of water are lost each day.
Today, firms are considering the water supply when making location decisions. While the
problems of water scarcity is more prominent concern in some overseas and/or developing
countries, California and other states have recently had to cope with prolonged drought or
other stresses on the water supply as well.
37
According to Google, Google Fiber is about 100 times faster than what most Internet users live with today. 38
A campaign in 2013 by the National Association of Water Companies (NAWC) and the U.S. Chamber of Commerce.
53
U.S. firms are increasingly conscientious of how much water they consume, and the results
of a recent Pacific Institute/Vox Global survey demonstrated that the majority large firms
are concerned over water risks impacting profits over the next five years. Strains due to
water shortages have already affected companies in the oil and gas industry that rely on
large volumes of water for fracking operations.
States Take Action
Most transportation experts claim that raising the federal gas tax - that has been stagnant
at 18.4 cents per gallon for the past two decades – is a necessary short term solution to
funding necessary infrastructure improvements. Notably, according to the U.S. Department
of Transportation, roadway fatalities across the U.S. increased in 2012, due in large part to
deficiencies in the roadway system. These crashes cost the U.S. economy $230 billion each
year.
Some state and local officials are going forward to address these issues independently. In
2013, governors in Virginia and Ohio increased funding to tackle road transportation issues.
Virginia replaced its gas tax with a sales tax to fund major improvements across the state.
Maryland, Vermont and Massachusetts are raising their gas taxes to adequately fund
maintenance of their roads and bridges. Wyoming additionally began funding new projects
with revenue raised from a gas-tax increase, and Pennsylvania also enacted a
comprehensive transportation bill in 2013 to inject billions of dollars into improvements to
the state’s highways, bridges and mass-transit systems.
Multimodal Transportation Infrastructure
While it is imperative to upgrade the fundamental aspects of our nation's infrastructure,
current trends indicate that future will not be built solely around the automobile. Today
cities and towns across the U.S. are increasingly looking for ways to create pedestrian-
friendly townscapes and cycling strategies, to transform the landscape and attract and
retain residents and talent that are more environmentally conscientious and appreciative of
vibrant downtowns and usable public spaces. These shifts in attitude will need to be
acknowledged in the rebuilding and revitalization process, but accessing funding for such
improvements is a challenge for places that are also struggling to upgrade highway, bridges
and sewer lines.
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Colorado has found an innovative way to make use of funds for multimodal transportation
items that were originally targeted for 'hardcore' transportation. Notably, a 2013 state law
grants cities and counties unprecedented freedom to spend tax dollars on transportation
projects other than roads and bridges.39 Communities in the state can use their share of
the $250 Highway Users Tax Fund (HUTF)40 on bike and pedestrian lanes and bridges, bus
purchases, rail-station construction and other transit-friendly projects.
Currently, not all lawmakers agree with this new law, arguing that repairing state roads
should be a priority. Proponents of the law counter that the spending qualifies as road
maintenance measures, as it pays for ways to reduce traffic and the wear and tear on local
highways. Depending on how this new legislation develops in practice, other states may
look to replicate Colorado’s approach.
PPPs for Infrastructure Improvement
As funding through the Recovery Act has come to a close, public-private partnerships (PPPs)
are increasingly being sought out by state and local governments that are turning to the
private sector for financing, design, construction and operation of infrastructure projects.
PPPs have the potential of improving the outcomes of infrastructure investments and
enhancing U.S. competiveness. The Brookings Institution's Hamilton Project estimates that
infrastructure PPPs have increased fivefold in the aftermath of the Great Recession.
Moreover, a recent study by the National Council of Public-Private Partnerships (NCPP)
reports cost savings of up to 24 percent over the life of a PPP project.
PPPs can be an important tool for governments hoping to address infrastructure shortages.
Today, more than 30 states have enacted legislation encouraging PPPs. Notably, former
Governors Ed Rendell of Pennsylvania and Arnold Schwarzenegger of California - along with
former New York Mayor Michael Bloomberg - established the Building America's Future
Educational Fund. It is a Rockefeller Foundation funded group dedicated to rebuilding
infrastructure via alternative methods that include PPPs. The interest in gaining access to
private capital and expertise through PPPs will likely accelerate as public funding sources
diminish. The cost savings from PPPs generally materialize in several different forms, such
as: 39
The Denver Post, "Colorado road money can now be used on transit projects", Whaley M., May, 2013 40
The HUTF money originates state fuel sales taxes and license plate fees.
55
Lower construction costs;
Reduced life-cycle maintenance costs;
Lower costs of associated risks.
PPPs can vary from one public agency and one private-sector company to multiple agencies
and companies. As these partnerships gain steam in helping to improve local infrastructure,
economic development professionals will need to understand how PPPs can help meet the
public needs in their communities. Any risks involved with PPPs usually range from issues of
design problems, waste and unrealistic expectations. Notably, a 2011 discussion paper by
the Hamilton Project41 outlines some best practice guidelines for successful PPPs:
Bundle responsibility for the initial capital investment with future maintenance and
operating costs;
Award contracts in competitive auctions and not through bilateral negotiations;
Consider not only the benefits, but also the costs, of PPPs;
Divide responsibilities among participating government agencies (at state and local
levels) to lessen the scope for corruption.
Land Value Capture
Localities today are also increasingly using land value capture (LVC) concepts to finance
public projects. The basis of LVC is that local land owners will benefit from improved
infrastructure, recovering all or some of the increase in property value generated by public
infrastructure investment. LVC strategies can be applied to developers or landowners, and
can help mitigate the challenges cities face in obtaining public funding, while also providing
benefits to private sector partners.
Land capture value may include tax-increment financing (TIF), special assessment districts
or improvement district fees, and infrastructure impact fees (such as traffic or utility fees).
The Metrorail in Washington, D.C. is a good example of a LVC. When the NoMa station
was added in 2004, one-quarter of the $110 million construction was financed by a 30-year
assessment of adjacent land owners who predictably would benefit from increased transit
41 Hamilton Project, “Public-Private Partnerships to Revamp U.S. Infrastructure”, Engel E., Fischer R., and Galetovic A., Discussion Paper, February 2011
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traffic. In less than ten years, the station has generated $3 billion in private investment and
land values increased from $500 million to $2.3 billion.
Fundrising
Fundrising is also a new approach to real estate fundraising. Similar to the concept of
crowdfunding for entrepreneurs, it allows average people to invest in property
development with little capital investment. In the fundrising process, a real estate company
creates a profile on the Fundrise website42 and lists the property details and all their
financial information and whatever the goals or visions may be for the property or the
neighborhood. The developer then asks Fundrise members if they want to chip in by
purchasing shares until they reach their goal.
For big developers, this sort of financial participation can help to fill in the funding gaps by
asking neighbors to invest in a myriad of items that can add up tens of thousands of dollars,
such as permitting, legal fees and environmental reviews. It also gives people in the
neighborhood the ability to influence how decisions are made in terms of development.
Currently, Fundrise is only available in big cities, but the model could be replicated to
smaller cities and towns if there is local interest.
Federal Initiatives
In his 2014 State of the Union Address, President Barak Obama stressed the importance of
investing in multimodal transportation. Thus far for 2014, it has been announced that the
Department of Transportation will provide $600 million for infrastructure projects
nationwide. The announcement marks the sixth round of funding authorized under the
department’s competitive Transportation Investment Generating Economic Recovery
(TIGER) grant program. This year’s allocation represents a $126 million increasing in
funding from last year.
Role for EDOs
To increase the quality-of-place, economic developers need to consider the demands of
diverse users in the community, while also leveraging public, private and community
42
https://fundrise.com/
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resources to achieve fundamental infrastructure improvements. Moreover, practitioners
have to evaluate how to balance resources between rural and urban areas that are
sometimes found within the same jurisdiction. Economic development professionals can
educate community leadership and stakeholders about the importance of upgrading the
infrastructure in terms of economic growth and resiliency.
Practitioners additionally play a pivotal role in channeling funds and in facilitating
connections between private sector developers and the public sector to create fruitful
PPPs. With limited public funding, economic developers will need to be even more
innovative in employing programs and tools such as bond financing, revolving loan funds,
tax increment financing, and tax credits to facilitate revitalization and investment.
Practitioners can also provide valuable technical assistance to developers in their dealings
with the public sector.
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D. Globalization
Globalization integrated markets around the world, changing the way communities and
individuals operate on a daily basis. While it created unprecedented economic opportunities
as some markets enlarged and grew, it also created a more uncertain and riskier economy.
As global markets became more connected, they also became more competitive. This
translated into a) more competitors in a larger marketplace, b) the emergence of the global
corporation, c) a wider space for entrepreneurship, d) the increase in wealth among the
BRIC countries (Brazil, Russia, India, and China), and e) the development of a new middle
class in emerging markets. International trade agreements and alliances surged, such as
the North American Free Trade Agreement (NAFTA) the World Trade Organization (WTO).
The economic development field was significantly impacted by globalization, and
practitioners had to learn how to balance global challenges in order to better serve their
locality. The Great Recession increased pressure on the economic development practitioner
in terms of business development and retention, impelling them to place more emphasis on
holistic strategies that tie in with foreign investment and export promotion.
In the wake of the recession, different trends have emerged, somewhat stalling the
momentum of globalization. Notably, prior to the recession, global commerce was growing
twice as fast as global economic output and the WTO has reported that the value of global
exports increased by nearly sevenfold between 1980 and 2007. Moreover, the McKinsey
Global Institute estimates that in the same period, capital flows rose from $500 billion to
$11.8 trillion. However, the Instituto de Estudios Superiores de la Empresa’s (IESE) 2013
study, ”The Depth Index of Globalization 2013” demonstrates a decline in cross-border
investment and trade flows worldwide in 2012, ending a two-year recovery after the global
financial crisis. The McKinsey Global Institute also reports that cross-border capital flows
today are only 60 percent of what they were before the recession.
While weak economic conditions in Europe and other developed countries contributed to this
downturn in trade, there has also been marked increase of protectionist measures by
national governments in the past few years, and multinational companies have not
capitalized on growth in emerging markets, significantly impacting trade flows. Notably, the
ISESE study determined that the 100 biggest companies headquartered in developed
economies only gleaned 17 percent of their revenues from emerging markets in 2010,
59
despite the fact that they were projected to contribute more than 70 percent of global
economic growth through 2025.
Therefore, while communities around the world continue to benefit from the lower
transportation costs and more extensive communication options catalyzed by globalization,
governments are taking a more timid approach today, imposing protectionist measures.
According to the think-tank Global Trade Alert, governments around the world imposed
three times as many protectionist measures than moves to expand internationally between
May 2012 and 2013. Notably, anti-trade policies are at their highest point since the 2008
financial crisis. Furthermore, the Petersen Institute reports that the increase of these
measures cost global trade 93 billion dollars in 2010. The notion of trade balancing is also
on the rise, as governments seek provisions to balance imports and exports, i.e., requiring
foreign manufacturers to offset imports with exports of local products.
As part of this trend, in the U.S., “buy-local campaigns” have emerged in communities
across the nation over the last decade. From support of local manufacturing to local food
sourcing for restaurants, an estimated 25,000 businesses now participate in some local
business alliance, according to an Institute for Local Self-Reliance report.
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Globalization today thus looks a bit different than it did at its onset. Today it is
characterized by a slower speed and more selectivity, as well as an increased level of
caution among governments and firms.
Changes for Global Corporations
Globalization significantly changed the way that global corporations operated, as they began
focusing on the production process and meeting demands worldwide, rather than by
location. Until 2008, “going global” was intriguing to most companies due the low-wage
labor and low operating costs in emerging economies. Advanced communication
technologies and transportation options facilitated operating over large distances, and
many U.S. jobs were lost to workers overseas as companies relocated operations and
activities to less expensive labor regions.
The impacts of the recession – including losses in manufacturing – as well as the realization
of the disadvantages of poor supply chain quality and compliance risks - instigated a re-
evaluation of such corporate decisions. Some firms have been relocating operations to the
U.S., while others are limiting relocation and expansion decisions to the U.S. market.
The Reshoring Trend
While manufacturing has picked up over the last two years, adding 665,000 additional jobs
according to recent data, the U.S. still has a long way to go to recoup the millions of jobs
lost in the sector over the last two decades. The notion of manufacturers bringing jobs back
to the U.S. from low-wage locations overseas and restoring the "Made in America" stamp
has been labeled “reshoring”, and building on this momentum could greatly enhance the
nation's ability to revitalize manufacturing, create quality jobs and increase exports.
Rising labor costs in overseas markets, construction and transportation costs in Asia and
Latin America - along with quality control issues and lax oversight of intellectual property -
are forcing many companies to take a closer look at the real and hidden costs of operating
overseas. Lower energy costs in the U.S. are also influencing decisions to reshore to the U.S
and some high-profile manufacturers such as General Electric and Ford have already shifted
production back to the U.S. from China and Mexico. Walmart, for example, plans on
increasing U.S. investments due to lower energy and transportation costs. The advantage of
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having personnel - i.e., the sales force, designers, and engineers - consolidated in closer
proximity is also a draw to some firms.
Significantly, the nation’s growth in energy production could be a game changer, drawing
both U.S. and foreign firms to U.S. shores and the Boston Consulting Group reports that
U.S. manufacturing could bring back $70 billion to $115 billion of export business by 2020,
as a result of reshoring. Therefore, as corporate leaders continue to view their businesses
globally, having the most efficient global supply chain is a priority and the U.S. can only
benefit from this trend if it can provide the best value at every link of the supply chain, from
the creation and development of products, to manufacturing and distributing them, to
marketing and selling. The quality of the workforce and local economic resiliency will also
play an important role.
Retaining Local Business
The dual impacts of globalization and the recession on local communities has underscored
the urgency of employing an effective business retention and expansion (BRE) strategy to
keep as many businesses operating in place as possible, as well as retaining the jobs that
are connected to them. The recession additionally magnified the importance of knowing the
conditions of local industries and understanding how companies operate. In order for EDOs
to best identify opportunities for securing funding and other assistance for local firms, it is
essential that they understand the complexities of the global marketplace and how it
impacts their community.
Opportunities for International Investment
U.S. communities are under increased pressure to diversify their industries and continue to
attract foreign investors in order to create high quality jobs and foster economic growth.
Foreign direct investment (FDI) attraction and export development are the two core
components that are part of an integrated effort to develop overseas opportunities for a
community.
Globalization provided new challenges to the U.S. as Brand America began competing with
BRIC countries for FDI due to their cheaper labor, rising middle class and advances in R&D.
Nevertheless, the U.S was able to retain its top spot for attracting foreign investment due to
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the breadth and depth of its skill base, its rule of law and ease in starting a new business,
and its increasingly advantageous energy market. Purchasing property in the U.S. and
proximity to major markets are also key positive features, as well as the nation’s pro-
business environment.
The World Economic Forum’s “2013-2014 Global Competitiveness Report”, finds that highly
innovative countries with strong institutions continue to top international competitiveness
rankings. The report’s Global Competitiveness Index (GCI) places Switzerland at the top of
the ranking, with Singapore and Finland retaining second and third positions respectively.
Germany has earned the 4th place and the U.S. reversed a four-year downward trend,
climbing two places to 5th. Ranking 7th and 9th respectively, Hong Kong and Japan are
among the top ten most competitive economies, along with Sweden, the Netherlands and
the United Kingdom. Among the BRIC countries, the failure of Brazil and Russia to initiative
necessary structural reforms has decreased their competiveness advantage, while India and
China remain top growth markets.
The U.S. remains a world leader in bringing innovative products and services to market, and
the rise in the rankings can be attributed to a perceived improvement in the country’s
financial market, as well as greater confidence in its public institutions. However, serious
concerns persist over its macroeconomic stability, which ranks 117 out of 148 economies.43
Foreign Direct Investment
Foreign direct investment (FDI) is an important source of capital, job creation, innovation
and trade. According to the United Nation’s Conference on Trade and Development
(Unctad), FDI capital inflows increased globally by 11 percent in 2013. The FDI inflows -
which included greenfield projects, mergers and acquisitions and portfolio investments -
were estimated at $1460 billion. These figures are attributed to an increase of FDI by
emerging countries, with Asia representing the biggest destination for foreign investment.
Notably, 2012 marked the first year in recent history that developing economies absorbed
more FDI than developed countries, accounting for 52 per cent of global FDI flows. Inflows
to the U.S. declined in 2013, but total capital flows to the North America increased overall in
2013, based on a 49 percent increase of capital flows to Canada.
43
World Economic Forum, The Global Competitiveness Report 2013-2014, Switzerland, September 2013
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The importance of maintaining FDI inflows to the U.S. economy cannot be understated. The
Organization for International Investment (OFII) reports that U.S. subsidiaries of foreign
companies and their suppliers add $2 trillion to the U.S. economy, or 14.2 percent of gross
domestic product (GDP). Notably, these subsidiaries employ 5.3 million workers directly,
and account for another 6.6 million through supply-chain jobs and 9.2 million jobs tied to
employee paycheck spending.
Acquisitions and mergers are also an important source of foreign investment, and recent
OFII studies demonstrate that foreign acquisition of U.S. firms results in an increase of the
industries’ economic performance. Foreign investors purchase local materials and supplies,
help to develop innovative workforce training programs, invest in R&D, and increase
compensation and benefits for employees, paying them an average of 22 percent above the
U.S. private-sector average.
Competition for investment with big emerging markets in China and India is projected to
continue, and cities in North American and Europe will continue to compete with leading
Asian cities like Hong Kong and Singapore. Western cities will need to harness their legacy
advantages and global connectivity to continue to compete and succeed against fast-
growing emerging market cities.44
Wavering U.S. FDI
The tale of the uneven recovery extends to FDI flows in the U.S. In 2010, the U.S.
attracted more FDI projects than any other country, while China attracted more valuable
projects and was the number one country in the world for capital investment and job
creation at the time. As the recession wore on, limiting companies' investment activities, the
U.S. began to slip in the rankings. Notably, UHY Advisors45 reports that over the past five
years, the U.S. has attracted FDI equivalent to 6.6 percent of its GDP, while on average,
countries around the world attracted FDI worth 17 percent of their GDP in over the same
time period.
Indeed, many structural features still make the U.S. economy extremely attractive, but as
the latest Global Competitiveness Report demonstrates, concern over macroeconomic
stability persists. Notably, over the past decade, R&D intensity – which determines how 44
http://www.economistinsights.com/sites/default/files/downloads/Hot%20Spots.pdf 45
An international accountancy network
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much of a country's economic activity or GDP is spent on R&D - has grown considerably in
Asia, while only remaining steady in the U.S.
Moreover, the Tax Foundation’s 2014 “State Business Climate Report” estimates that U.S.
tax codes are increasingly curbing FDI in some states. States that dropped in rankings -
such as Virginia, Texas, Kentucky and Massachusetts - have changed their tax policies in a
way that was deemed as more cumbersome and complex by potential businesses.
Corporate tax reforms in other countries during the 1990’s have also leveled the playing
field in that respect, and the rising cost of healthcare in the U.S. could potentially
undermine investment.
More positively however, investors have noted that U.S. banks and financial institutions are
rebounding, and this is reassuring. Furthermore, the boom in the U.S. energy market has
inspired a myriad of energy-related firms to rush to take advantage of the opportunity. The
weaker U.S. dollar and a rise in wages in many developed countries are additionally
boosting U.S. manufacturing opportunities, according to AT Kearney’s 2013 Foreign Direct
Confidence Index. In addition, with 20 free trade agreements secured with several locations
around the world, the U.S. is still a more open market than others, and such agreements
provide companies operating in the U.S. with access to almost 700 million consumers
worldwide.
Communities throughout the U.S have unique strengths and assets that appeal to different
types of foreign investors. Those communities that are able to formulate a cohesive region-
wide strategy, building on their individual assets and existing relationships, are more apt to
attract outside investment.
Export Promotion
Exports play a critical role in bringing economic prosperity to local economies by increasing
jobs, generating wealth and helping to grow local industry. Firms that export are more apt
to provide high wages, spur innovation and bring increased stability to their operations in
times of economic downturns. Moreover, connections to global supply chain networks have
become vital for the success of local firms.
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While the recession hit manufacturing faster and harder than many other sectors, impacting
six million jobs in the national economy, the U.S. still produced $1.4 trillion in goods in 2009
and is among the world’s leading manufacturers today. The Department of Commerce
reports that exports were up 44 percent in 2013, from the peak of the recession in 2009.
According to fDi Intelligence, exports accounted for 37.3 percent of U.S. GDP growth
between 2009 and 2012, playing a critical role in the nation’s recovery. In 2010, The
Brookings Institute reported that the number of U.S. total export-supported jobs increased
by almost 6 percent in 2010, even as the overall economy was still losing jobs.
Both Panama and Russia recorded some of biggest increases in demand for U.S. goods in
2013, up 25.9 percent and 20.3 percent respectively, from 2009. Other Latin American
countries, including Peru, Colombia, Chile and Ecuador, also recorded notable increases. The
upswing was attributed to the low value of the dollar and the efforts of global firms
specializing in motor vehicles, aircraft and petroleum.
Data from the U.S International Trade Administration (ITA) shows that in the first six
months of 2013, exports were high in all states, hitting $781 billion in total, compared to
the first half of 2012. Notably, states located on the east coast of the U.S. demonstrated
high export performance in transportation equipment and chemicals. Texas had the most
exports, at $134.4 billion, mostly due to petroleum and coal products. The state of
Washington on the west coast was the fourth highest exporter in the first half of 2013,
exporting $39 billion worth of goods, with $18.6 billion going to Asia. Ostensibly, stronger
exports have helped fuel a revival in manufacturing.
Notably:
Exports accounted for 37.3 percent of U.S. GDP growth between 2009-2012;
Exports grew at an average annual rate of 11.9 percent from 2009 to 2012;
Exports supported 9.7 million American jobs in 2011;
A World Bank study found that each dollar increase in export promotion expenditures
brought a 40-fold increase in exports;
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The ITA reports that every $1 B in new exports creates 5,400 new jobs.
Analysis from a Brookings Institution report, “Export Nation 2013”, illustrates that exports
drove post-recession growth in the 100 largest metro areas. From 2009 to 2012, exports
accounted for 54 percent of output growth in those areas, compared to 37 percent
nationally. Manufacturing exports in those metro areas grew to record levels in 2012, and
services accounted for more than half of post-recession export growth a handful of metros,
including San Francisco, Washington DC and New York.
Indicative of the uneven recovery, many of the exports have been generated by relatively
few large firms in key industries, in dynamic metro areas. Small firms still need substantial
support in developing their export capacities, as many are unaware of all the export and
financing resources available to them. Growth opportunities for U.S. companies in the near-
term will most likely come from emerging markets in Asia and Latin America. The rise of
the middle class in those places is creating an enormous base of global customers for U.S.
goods. Economic development professionals have a key role to play in educating small
businesses about the benefits and opportunities available for exporting.
Emerging Approaches
Strained budgets have led practitioners to develop to more innovative and creative
approaches to attract investment and engage in partnerships both at home and abroad.
EDOS have found value by taking advantage of the EB-5 visa program to attract funds for
the construction of buildings or infrastructure for new projects, as well as Free Trade Zones
(FTZ) to foster trade and employment at the local level.
The EB-5 visa program offers foreign investors the opportunity to receive an expedited
immigrant visa, or green card, in exchange for investing in job-creating ventures.
Of the 10,000 EB-5 visas available annually, 3,000 are set aside for those who apply
and invest at least $500,000 under a “Regional Center.”46 Communities or for-profit
entities can apply to the federal government to become a Regional Center. These
46
Regional centers are defined as “any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment.”
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entities act like investment funds, pooling individual investors and matching their
funds to qualifying projects. There are 210 regional centers throughout the U.S.
Foreign-Trade Zones (FTZ)47 serve the dual purpose of helping to attract offshore
activity while also encouraging the retention of domestic activity. Firms are able to source
materials and components from international suppliers at globally competitive prices, while
employing U.S. workers.
Foreign goods may be admitted to an FTZ without being subject to customs duties or
certain excise taxes. There are presently about 170 active zone projects across
the U.S. that employed 340,000 people in 2011.48
The U.S. communities can foster foreign trade and investment by:
Maintaining an innovative business environment;
Promoting the ease of commercialization and inventions;
Providing support in regulatory matters.
Federal Initiatives
The Federal government has several initiatives in place to support and promote FDI and
American exports in order to increase inward investment and level the playing field for U.S.
businesses, and creating new jobs for the nation’s workers.
SelectUSA is the U.S. federal initiative to promote and support business investment
in the United States. Housed in the International Trade Administration of the U.S.
Department of Commerce, SelectUSA is a part of the U.S. and Foreign Commercial
Service. The SelectUSA website provides state economic development agencies and
foreign and domestic businesses the information they need to better understand the
complete value proposition offered to firms located in the U.S.
The National Export Initiative (NEI) was introduced in 2010 with the goal to double
exports over a 5-year period by assisting firms to enter new markets. The NEI aims
47
Foreign trade zones are administered under regulations issued by the Department of Commerce and the Department of Treasury. 48
According to a recent report from the Foreign-Trade Zones Board
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to help all firms - and particularly small businesses - overcome the hurdles to
developing their export capabilities through financing opportunities and initiatives
that will create quality jobs and increase international trade, enabling U.S. firms to
connect with the 95 percent of the world’s consumers that live outside of the U.S.
o In 2011, the Brookings Institution developed the Metropolitan Export Initiative
(MEI) with the U.S. Department of Commerce to implement the NEI at the local
level. MEI is a ground-up effort to help regional civic, business, and political
leaders - with states - to create and implement customized Metropolitan Export
Plans (MEP).
The Advanced Manufacturing Partnership (AMP) was launched in 2011 as a national
effort bringing together industry, universities and the federal government to invest in
technologies – such as information technology, biotechnology, and nanotechnology -
that will create high quality manufacturing jobs and enhance global competitiveness.
The National Institute of Standards and Technology’s Hollings Manufacturing
Extension Partnership (MEP) works with small and mid-sized U.S. manufacturers to
help them create and retain jobs and increase profits. MEP also works with partners
at the state and federal levels on programs that put manufacturers in position to
develop new customers, expand into new markets, and create new products.
The online portal http://export.gov is a virtual one-stop shop for export promotion.
EDOs and firms can access federal government services regarding: licensing and
regulations, overseas assistance with international sales and marketing, assistance
with trade problems.
Export Assistance Centers are located in major metropolitan areas throughout the
U.S. Each U.S. Export Assistance Center is staffed by professionals from the Small
Business Administration, the Department of Commerce, the U.S. Export-Import Bank
and other public and private organizations. Their mission is to help firms to compete
in today's global marketplace.
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Role for EDOs
Economic development professionals are, among other things, connectors and advocates for
firms in their community. Practitioners have an important role to play in connecting firms
with the networks and tools that will enhance international trade opportunities and
investment. Economic developers can help firms navigate through the complexities of
international trade, assisting in the research of new markets and finding the funding needed
to expand an export business.
Understanding each community’s place in the larger global business sphere is vital. Strong
regional strategic partnerships are critical for fostering investments in technology and
infrastructure to match other developed nations, as well as to counter the threats of
emerging countries. Nurturing a skilled workforce to support the growth and success of key
industries - such as advanced manufacturing and materials, business services, high
technology and life sciences - is also critical for the long term resiliency of local economies.
Economic development professionals can enhance investment attraction by maintaining
close collaborative links to universities, research labs and research parks, incubators,
research hospitals and local corporations. Going forward, EDOs will need to re-think
traditional marketing methods and focus on target markets with less expensive marketing
strategies, such as social media, blogging and special events, with the aim of connecting
local businesses and start-ups to the global business community. Learning how to adjust to
global trends will be crucial to maintaining a competitive advantage and sustainable
investments in communities nationwide.
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E. Sustainability
The concept of sustainability implies the recognition of the need to support a growing
economy while reducing the social and economic costs of economic growth. Sustainable
development can foster policies that integrate environmental, economic, and social values in
decision making. From a business perspective, sustainable development favors an approach
based on capturing system dynamics, building resilient and adaptive systems, anticipating
and managing risk, and earning a profit.49
Sustainability has been transforming the economic development profession and the
businesses and communities they support. Driving forward a sustainability strategy is a
constant challenge; it can also enhance opportunities for innovation and growth. The
environmental and economic consequences of greenhouse gas emissions impacted costs of
production, altering the competitive position of industrial sectors and regions. In some
communities, the need to embrace sustainable practices emanates from new state and local
regulations. In other communities, leaders are tapping into the opportunities available
including green jobs, industries, and buildings.
The revolution taking place in the U.S. oil and gas industry is shifting the nation’s position in
the global energy market. To maintain competitiveness in today’s economy, economic
developers need to understand and act upon the opportunities and challenges presented by
the greening of businesses, society and the economy.50
Shifts in the Energy Market
The rising cost of energy has been a consistent strain for the U.S. economy for many years.
However, ongoing improvements in advanced technologies for crude oil and natural gas
production continue to lift domestic supply and reshape the U.S. energy economy, unveiling
unforeseen opportunities. Notably, U.S. oil production is up 50 percent since 2008, natural
gas production has increased by 33 percent since 2005, and shale gas constitutes about 45
percent of total natural gas production today. By contrast, U.S. coal production declined by
more than 7 percent in 2012, mostly in response to gas-on-coal competition. Increased
emissions requirements and limits on coal may further curtail coal production in the future.
49
Based on the definition used by the U.S. Environmental Protection Agency 50
International Economic Development Council, “Climate Prosperity Handbook”, 2009
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The U.S. Energy Information Agency reports that the net import share of total U.S. energy
consumption will be four percent in 2040, compared with 16 percent in 2012 and about 30
percent in 2005. In addition to an increase in domestic productive of energy, improvements
in vehicle efficiency are also considered in those predictions. These shifts in the energy
industry influence U.S. competiveness in the global economy, heralding a positive impact on
jobs and manufacturing output. Notably, a recent study by the research firm IHS, states
that unconventional oil and gas51 supported 2.1 million jobs in 2012 along the entire energy
value chain. That number is expected to rise to 3.3 million by 2020, as ripple effects reach
the services and information technology sectors.52
U.S. Oil
Crude oil production is approaching the historical high achieved in 1970 of 9.6 million
barrels per day, according to the EIA annual report, Energy Outlook for 2014. According to
the EIA, U.S. crude oil production will increase steadily through 204053. Higher production
volumes are attributed to an increase of onshore oil production, predominantly from tight
(very-low-permeability) formations.
Use of imported petroleum and other liquid fuels dipped below 50 percent in 2010 and fell a
further 40 percent in 2012. The import share is forecasted to decline to 25 percent in 2016
and then rise to about 32 percent in 2040 as production declines. The EIA predicts that oil-
directed drilling will pick up steam through 2040, as producers target new locations in the
deepwater and ultra-deepwater portions of the Gulf of Mexico.
The U.S. faces fierce competition from other top ranking oil producers in the Middle East,
notably Iraq and the United Arab Emirates, as well as China, Angola and Nigeria, which are
hotspots for oil exploration, production and construction activity.
51
These jobs include people working in the shale gas and tight oil industry 52
IHS, "America's New Energy Future: the Unconventional Oil and Gas Revolution and the Economy -- A Manufacturing Renaissance”, 2013 53
U.S. Energy Information Agency, AEO2014 Early Release Overview, December 16, 2013
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U.S. Natural and Shale Gas
In its annual 2011 Energy Outlook, EIA had more than doubled its estimate of technically
recoverable shale54 gas reserves in the U.S. to 827 trillion cubic feet from 353 trillion cubic
feet. According to the EIA AEO2014 Early Release Overview, the U.S. will become a net
exporter of liquid natural gas (LNG) in 2016, and become an overall net exporter of natural
gas in 2018. Pipeline imports from Canada are forecasted to fall steadily until 2033, and
then increase through 2040, while pipeline exports to Mexico are expected to grow by more
than 400 percent.
Moreover, according to the U.S. Census Bureau, oil and gas rich areas in and near the Great
Plains states - including North Dakota, South Dakota and Texas - are included in some of
the fastest-growing population areas in the nation due to the draw of jobs in the industry.
Some communities along and near the Gulf Coast are additionally experiencing high growth
due to the local energy market.
There has also been an increase of companies expressing interest in building or expanding
ethylene production facilities near shale gas production sites along the Gulf Coast and in
Appalachian states. However, there is some controversy related to the issue, as potential
benefits of fracking55 may be accompanied by environmental and public health risks, with
concerns over contaminating local drinking water and altering natural scenery. Notably, in
the Plains states, the surge in energy has put strains on roads, railways and housing.
Furthermore, constructing these plants is a long process, and obtaining government permits
for both building and permission to export take time. Financially, a single plant could cost
$10 billion to build. Potential investors in such projects will need to weigh the long-term
costs as well, since competition is rising in the LNG market as interest increases worldwide.
Despite current conflict in the Ukraine’s Crimea region with Russia, the region remains the
world’s largest LNG exporter and countries like Australia and Qatar - which previously only
traded LNG regionally - are entering the global market.
54
Shale gas is natural gas formed from being trapped within shale formations; - new sources of shale gas have offset declines in production from conventional gas reservoirs. 55
New applications in technology such as hydraulic fracturing and horizontal drilling are known as “fracking”.
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Coal Industry
The coal industry has been on a steady decline since the 1980s. Changes in the world's
approach to energy, as well as concerns about climate change, are driving policy that
prefers cleaner energy sources. The transition to newer forms of energy negatively impacts
regions that have been long reliant on coal for jobs and electricity.
The Environmental Protection Agency’s (EPA) recent new carbon dioxide and greenhouse
gas (GHG) emission limits for future energy plants impacts the industry further, and one
sixth of coal plants are set to expire by 2020. The EPA is mandating GHG levels no higher
than 1,100 pounds per megawatt hour, which is a goal that clean natural gas can meet.
However, the coal industry would need to implement a carbon capture sequestration (CCS)
process to do so, and industry leaders argue that CCS is not sufficiently developed to
feasibly implement into new coal plants within the next decade. Coal advocates also argue
that developing new coal plants with CCS would be too costly.
If indeed coal proves economically unsustainable, some places will experience energy
shortages and prices will rise. Notably, those coal dependent communities will be forced to
diversify their local economy in order to be able to continue to provide high-paying jobs to
workers there.
Energy Efficiency
Energy efficiency measures are cost effective ways to reduce energy costs for both
consumers and businesses. Beyond costs, International Energy Agency (IEA) reports that
measures to promote energy efficiency can lessen the effects of climate change. Energy
efficiency efforts can additionally promote technological innovation and stimulate economic
growth, creating new jobs in energy and related industries, as well as retaining and
strengthening the skills of those in traditional industries.
A 2012 study by the American Council for an Energy-Efficient Economy (ACEEE) states that
appliance, equipment and lighting standards will save businesses and consumers more than
$1.1 trillion. A more recent ACEEE report56 demonstrates that energy efficiency targets
56
American Council for an Energy-Efficient Economy "Energy Efficiency Resource Standards: A New Progress Report on State Experience", April, 2014
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implemented in half of U.S. states in 2012 saved enough electricity to power two million
homes for a year. Driven by energy efficiency resource standard (EERS) policies, utilities in
these states have invested in energy efficiency programs ranging from appliance rebates to
whole-building retrofits. A total of 26 states have adopted EERS, setting long-term energy
saving targets in utility sector energy efficiency programs. Furthermore, a 2011 study by
the Economist57 found that of 275 corporate executives interviewed worldwide, 49 percent
affirmed that energy efficiency programs improved their company's bottom line.
However, Forbes reports that 57 percent of the energy flowing into our economy is wasted -
either as heat, noise or leaks - costing U.S. businesses and households an estimated $130
billion per year. In addition, not all states agree with EERS policies, claiming that energy
efficiency targets are too costly to implement. Notably, earlier in 2014, Indiana canceled
their energy efficiency programs, spurring staff layoffs among many of the contractors
running programs in the state. Companies there report that 381 jobs directly related to the
programs will be lost, and an additional 1,200 jobs associated with supporting these
programs will also disappear, according to the ACEEE. In terms of revenue, it is estimated
that workers employed in these jobs would have produced $500 million in investment in
Indiana. Currently, similar legislation is being proposed in Ohio. Cut-backs in energy
efficiency efforts there will invariably trigger the same sort of job losses as in Indiana, and
will cause negative ripple effects to the firms that supply equipment and manufacture
energy efficiency products.
Achieving an energy efficient economy will thus require radical changes that range from
adjustments of lifestyle - such as patterns of work and leisure activities - to changes in
attitudes, to shifts in urban planning and transportation infrastructure. Efforts to enhance
efficiency are taking place at all levels:
On the Federal level, the Obama Administration launched the Better Buildings
Challenge in 2011, to improve the efficiency of American commercial, institutional,
and multifamily buildings and industrial plants by 20 percent or more over 10 years.
On the state level, the ACEEE 2013 State Energy Efficiency Scorecard shows that the
top 10 states for energy efficiency are California, Connecticut, Illinois, Maryland, New
57
The Economist Intelligence Unit, "Unlocking the Benefits of Energy Efficiency", 2011
75
York, Oregon, Rhode Island, Massachusetts, Vermont and Washington. California
leads in the category of best examples of state level energy efficiency initiatives.
o Wisconsin’s Focus on Energy programs have significantly helped residents
and businesses save more than $730 million by replacing refrigerators,
offering incentives for energy-efficient heating, and conducting free energy
assessments for small businesses.
On the municipal level Atlantic City, Boston, Chicago, Dallas and Minneapolis all rank
high for efforts in energy efficiency.
Firms Conserving Water
Droughts and other strains on the water supply are impacting local communities and big
corporations alike. While firms are paying more attention to water supply issues when
making location decisions, they are also began to monitor their own usage and are taking
steps to reduce consumption. Hershey, for example, invested in conservation technology
across their manufacturing network and decreased water consumption by more than an half
between 2009 and 2013. AT&T has also engaged in initiatives to conserve water used for
cooling towers. According to a Pacific Institute/Vox Global survey, firms are taking a pro-
active approach to water conservative due to concerns over pending negative impacts on
profitability and general business growth due to the issue.
Efficiency in Transportation
In the wake of the recession, U.S. automakers embraced the idea of leaner, greener
vehicles, and began re-hiring workers to build fuel-efficient and hybrid electric vehicles. The
industry also received government funding for cutting-edge auto technology. The Energy
Department for example, has made nearly 50 grants worth $2.4 billion for research and
manufacturing for the enhancement of energy efficient vehicles.
Moreover, the American Public Transportation Association reports that more Americans used
buses, trains and subways in 2013 than in any year since 1956 as service improved in some
areas, and travelers increasingly sought alternatives to the automobile for trips within
metropolitan areas. High levels of ridership in 2013 - when gas prices were lower than in
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2008 - undermines the conventional wisdom that transit use only rises when those prices
exceed a certain threshold. Today, other forces such as environmental concerns and more
awareness on the importance of energy efficiency are boosting enthusiasm for public
transportation.
In California, a 2014 Caltrans California Household Travel Survey demonstrates that 23
percent of household trips statewide now involve non-car transportation, over double the 11
percent recorded in 2000. The Caltrans report also notes that the percentage of bicycle trips
nearly doubled from 0.8 percent in 2000 to 1.5 percent 2012 and auto trips declined from
60.2 percent to 49.3 percent in the same period.
District Energy
An emerging trend for energy efficiency is "district energy". District energy systems produce
steam, hot water or chilled water at a central plant. The steam, hot water or chilled water is
then piped underground to individual buildings for space heating, domestic hot water
heating and air conditioning. The result is that individual buildings served by a district
energy system do not need individual boilers or furnaces, chillers or air conditioners.
Instead, the district energy system does that work. Benefits include:
Improved energy efficiency;
Enhanced environmental protection;
Fuel flexibility;
Ease of operation and maintenance;
Convenience for customers;
Decreased life-cycle costs;
Decreased building capital costs;
Improved architectural design flexibility.
Moreover, the use of district energy service frees up valuable building space by eliminating
the need for mechanical rooms. Notable communities around the globe that are using
district energy include Helsinki, Finland, St. Paul, Minnesota, and Aberdeen, Scotland. The
District Energy St. Paul was recently a recipient of the Global District Energy Climate
Excellence Award from the International District Energy Association (IDEA) for its role in
helping the community meet its sustainability goals.
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Sustainable Buildings
Despite the recession, sustainability flourished in the property industry and the green
building industry is expected to grow through 2014 and 2015, as the focus on energy-
efficiency broadens and interest in building automation systems increases. Today, most new
buildings are being built to meet tough environmental standards and policy-makers are
increasingly putting pressure on owners to make existing buildings more energy efficient.
Moreover, the focus of the green building industry is shifting from new buildings to the
greening of existing buildings. The Leadership in Energy and Environmental Design (LEED)
for Existing Buildings Operations and Maintenance (LEED O+M) has seen an increase in
certifications in the past three years, exceeding new construction certifications.
The U.S. Green Building Council estimates that green buildings reduce energy consumption
by roughly 30 percent, water use by 30 to 50 percent, and carbon emissions by 35 percent.
While many organizations have not been able to focus on improving their sustainability due
cutbacks during the recession, most big property investors – like pension and insurance
funds – want to be sure that they allocate funding towards sustainable ventures. Notably,
sustainability - from construction to retrofitting - is becoming less expensive as it becomes
more widespread. Former niche technologies and products are now considered normal in
many places and the construction industry has taken the lead in this respect. Some trends
for the U.S. in the near future include:
Green Buildings will increasingly be managed through building automation, facility
management, wireless controls and building services information management.
Given the water crisis, more steps to reduce water consumption will be implemented,
i.e., enforcing rainwater capture and innovative onsite water technologies as
standard practice.
Net-Zero Energy buildings will become much more commonplace in both residential
and commercial sectors.
The disclosure of green building performance will increase among communities, as
seen in California with its new carbon reduction requirements and the City of Seattle,
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and many others. Commercial building owners will have to disclose green building
performance to tenants, buyers and in some places, the general public.
There will be more green building mandates at the local and state government
levels, for both public and private-owned buildings.
Solar power use in buildings will continue to grow, and third-party financing
partnerships will increase, providing capital for large rooftop systems.
Renewable/Clean Energy
Upgrading all of the components of the energy sector will require a revolution in the
industry itself, as the industry must invest in a new generation of power plants,
environmental controls, transmission lines, and distribution system expansions and
upgrades, as well as the research and development of alternative solutions. The U.S.
Department of Energy (DOE) has stated that, “Developing domestic energy sources with
known and stable costs would significantly improve U.S. energy stability and security”. It is
an expensive undertaking, and the IEA predicts that the world needs to spend about $10.5
trillion in extra money from today through 2030 to foster new low-carbon energy sources.
Alternative energy projects will become increasingly more desirable and economically viable
as investments to enhance reliability, improve deliverability, and improve environmental
performance can help to mitigate future rate increases for consumers and decrease
greenhouse gas emissions. The industry for renewable energy has undergone a shift in the
last five years, as the industry grew from a novelty to one with worldwide revenues of over
$100 billion. The U.S. demonstrates global leadership in clean energy innovation and in
2012 the U.S. was a world leader in total corporate R&D investment for clean energy.
According to the Pew Charitable Trusts’ 2012 edition of “Who’s Winning the Clean Energy
Race?”, investment in the clean energy sector in 2012 was five times greater than it was in
2004, although overall 2012 investment levels worldwide decreased by 11 percent from
2011, reaching a level of $269 billion. China is currently the world leader in the clean
energy sector, attracting $65.1 billion in investment. Overall, the U.S. received $35.6
billion in investments.
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While there was a decline in investments in biomass geothermal, marine and small hydro
technologies (by $13.5 billion) in 2012, renewables still demonstrated resiliency, given the
withdrawal of some incentives offered by governments in numerous key markets.
Significantly, renewable energy relies largely on government support to maintain
profitability. Wind energy, for instance, owes 30 percent of its profits to tax credits.
However, fDi Markets predicts that renewable energy will take a larger share of the energy
market as technological advancements and ease of production will make it more
competitive. Notably, the use of renewables is becoming more mainstream in some areas
and solar panels are appearing on U.S. Walmart stores, as well as Ikea stores, in Florida.
The DOE undertakes efforts to promote renewables throughout the nation. In terms of solar
energy alone, the sector has more than doubled the U.S. supply of solar power from 2008
to 2012, reducing solar energy installation costs by more than 30 percent and employing
more than 100,000 people in all 50 states and several territories. Globally, revenue from
installation of solar power systems is predicted to rise to $112 billion a year in 2018, an
increase from 44 percent, according to analysts at Navigant Research. Forecasts are that
solar photovoltaic-produced power will be competitive with retail electricity prices by 2020.
The wind industry is also becoming mainstream, with the industry supporting 75,000 U.S.
jobs, including workers at more than 400 manufacturing plants in 44 states. Communities
like San Francisco, California and Boulder, Colorado are beginning to bypass local utility
monopolies, purchasing a larger portion of power from third-party solar and wind providers.
Chicago recently doubled the amount of power it buys from downstate wind farms. In
addition, electric co-ops are increasingly turning to wind power as a clean, reliable source of
energy that cuts carbon emissions and protects the environment. Two electric co-ops that
demonstrate leadership in wind energy on the rural level are Old Dominion Electric
Cooperative of Virginia and the Rural Electric Convenience Cooperative (RECC) of Illinois.
The American Wind Energy Association reports that states targeted for major growth in wind
energy in coming years include Texas, Iowa, Kansas, North Dakota and Michigan.
While public funds for renewable energy may be uncertain in the year ahead, experts
anticipate that private funding will make up for the difference in the future as public opinion
regarding energy efficiency and long-term benefits to business will be considered by
potential financers.
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Green Manufacturing
The term green manufacturing can be looked at in two ways: 1) the manufacturing of green
products i.e., those used in renewable energy systems and for clean technology equipment,
and 2) the greening of manufacturing, i.e., reducing pollution and waste by minimizing
natural resource use, recycling and reusing what was considered waste, and reducing
emissions. Customers, original equipment manufacturers (OEMs), policymakers and
regulators are putting more pressure on U.S. manufacturers to go green.
Green manufacturing has moved from being a trend to the forefront of the manufacturing
world. The global demand for sustainable products and services is projected to double to
$2.7 trillion per year by 2020, and worldwide clean energy investment is projected to reach
$2.3 trillion.58 U.S. Notably, consumers are increasingly looking for products that are made
in a green manufacturing process, and manufacturers can benefit from this trend by scaling
up production of American-made clean energy systems and components while
simultaneously helping to make U.S. factories more energy efficient.
Reducing the impact that production processes make on the environment can lead to
notable cost savings for a firm. Manufacturers can initiate efforts to enter the green
economy by closely evaluating all aspects of their supply chain, from purchasing, planning,
and managing the use of materials to shipping and distributing final products. By being
proactive and taking steps toward green and sustainable manufacturing, U.S. firms can
remain competitive and relevant in the global economy.
Federal Initiatives
Concerns over climate change have resulted in an increasing number of government
mandates aimed at limiting carbon emissions from vehicles and buildings. The federal
government is leading efforts in green retrofitting to cut its $25 billion energy bill by 28
percent by 2020. Other recent initiatives undertaken to support the energy sector and
decrease dependence on fossil fuels include:
58 Pew Charitable Trusts, "Who's Winning the Clean Energy Race: G-20 Investment Powering Forward", 2011
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The Environmental Protection Agency (EPA) established the first national standard to
reduce the emissions of mercury and other dangerous chemicals from coal and oil-
fired power plants;
The first-ever fuel efficiency standards for medium-and heavy-duty trucks and buses
was created, intended to prevent the release of 270 million metric tons of
greenhouse gases and reduce fuel costs for businesses;
Strict new safety regulations were established for offshore drilling projects in the
wake of the BP oil spill in the Gulf to prevent the same sort of risk-taking from
happening again.
Notably, in 2013, after 20 years in the American tax code, renewable energy tax credits
expired at the end of 2013. The expiration ends the Production Tax Credit (PTC) for a 10
year, 2.2 cent per-kilowatt-hour energy production tax credit for wind, biomass, geothermal
energy and others. Also affected is $1 per gallon credits for biodiesel companies and
ethanol, along with the end to tax credits for energy efficient appliances and improvements.
A New Financing Model
With federal subsidies on the decline, state and regions will need to find new ways to
finance clean energy and energy efficiency programs. For decades, state and local
infrastructure finance agencies have issued public finance bonds to fund the construction of
roads, bridges, hospitals and other infrastructure projects, and a recent Brooking's
Institute-Rockefeller Foundation report asserts that state and local bond finance also could
be an effective tool for future clean energy investment.59 The report offers the following
suggestions for developing a decentralized, yet sustainable model for financing clean energy
development in states and regions, as well as establishing a new clean energy asset class
that can easily be traded in capital markets:
Expand and scale-up bond-financed clean energy projects using credit enhancement
and other emerging tools to mitigate risk.
59
Brookings-Rockefeller, Project on state and Metropolitan Innovation, "Clean Energy Finance Through the Bond Market: A New Option for Progress", Milford L, Saha D, Muro M, Sanders R, Rittner T
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Improve the availability of data and develop standardized documentation so that the
risks and rewards of clean energy investments can be better understood.
Create a pipeline of rated and private placement deals (a new clean energy asset
class), to meet the demand of institutional investors for fixed-income clean energy
securities.
Notably, in 2013, New York State raised $24.3 million in the bond market to finance energy
efficiency projects as part of its statewide Green Jobs - Green New York program. Issued
through the New York State Energy Research and Development Authority (NYSERDA), the
bonds are the first of their kind in the country and provide an important source for funding
clean energy projects.
Role for EDOS
Energy prices impact the competitiveness of businesses and the communities where they
are located. The price of energy is just one factor in a company's decision to invest or
relocate in a community, but energy costs remain critical. The U.S. has gained a competitive
edge in the global economy, offering natural gas today that is three times less costly than in
Europe and four times less costly than in Japan. In some cases, American businesses with
operations overseas are returning to the U.S. to be closer to consumer markets and/or
necessary resources.
Increasingly, businesses that are using green technologies, as well as the communities in
which they are located, will have an advantage in attracting talent and investment.
Renewable energy developers and investors will seek places where there are opportunities
to attract major projects. They will be drawn to places with a green infrastructure and
culture for relocations and expansions. Inversely, companies that lack funds to
upgrade their operations may be adversely affected by impending state, local, or federal
regulations regarding energy efficiency, pollution control, or waste disposal.
EDOS can play a vital role supporting a green supply chain network by assisting large and
small firms to leverage green technology and take advantage of energy efficiency
assessments and upgrades to buildings. Practitioners also should work with local
stakeholders in the financial market to uncover innovative new ways to fund clean energy
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projects. Having a green infrastructure can be valuable in many ways, and EDOs are prime
catalysts to raising awareness on this local asset.
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F. The Labor Market
Human capital represents a valuable national resource that needs to be nurtured, and
creating jobs that create wealth is one of the greatest challenges for the economic
development community and governments today. Globalization and the Great Recession
highlighted the urgency for U.S. businesses to be able to maintain skilled personnel in order
to sustain a competitive edge, and at the turn of the 21st century, the U.S. workforce was
forced to compete with skilled workers in other countries as businesses began to relocate
operations to where they could easily access a less expensive skilled labor pool. Today, as
some companies seek to return to the U.S., the lack of qualified labor is proving to be a
major deterrent.
A qualified labor force renders economic mobility for workers, keeps businesses competitive,
and increases revenues and the quality-of-life for a community. However, the U.S. is the
only country today in the G20 where the incoming workers are less qualified than those that
are retiring. Indeed, demographic shifts have indicated for several years that there would be
a labor shortage in the U.S. in the near future, and today many of the younger workers lack
the qualifications to fill vacant positions. Concurrently, many older workers that decide to
stay in the workforce must modernize their skills in order to retain good paying jobs.
Since the recession, economic developers have enhanced cooperation with business and
workforce entities, as well as schools to retain talent in this volatile economic development
landscape. New technology, shifting business demands, and the uneven economic recovery
continue to transform the labor market. Some job markets are growing, while others are
lagging, and the way people work has invariably changed. Going forward, collaboration
among community stakeholders will be imperative and practitioners will need to further
learn how to close gaps and resolve shortages of talent in the workforce pipeline before they
become impediments to growth.
Mid-Skilled Jobs
According to the Federal Reserve, mid-skilled employment is declining in the U.S., falling
from 25 percent of the workforce in 1985 to just over 15 percent today. The Praxis Strategy
Group study also asserts that since 2010, the U.S. has 2 million fewer mid-income jobs than
at the onset of the financial crisis in 2007. Those mid-level jobs in manufacturing, office
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administration or construction have traditionally provided a decent standard of living.
However, the availability of these jobs remains below pre-recession levels, and a 2012 a
Pew study reported that a third of Americans labeled themselves as lower-class, compared
to about a quarter of the population prior to the recession.
Underscoring the uneven recovery, a 2010 study by Economic Modeling Specialists, Inc.
(EMSI) found disparity in mid-level jobs among the 50 states. Notably, between 34 percent
and 45 percent of all new jobs have been mid-wage positions in Wyoming, Iowa, North
Dakota, Michigan and Arizona. On the other end of the spectrum, Mississippi, New York,
New Hampshire, New Jersey and Virginia had the lowest amount of middle income jobs, all
averaging 14 percent or less. The EMSI data also suggest that states with expanding heavy
industries, such as oil and manufacturing, generate more jobs for mid-level workers in
positions like machinists, truck drivers and welders. Concurrently, the states with an equal
combination of low-wage industries, such as hospitality or retail, and high-paid professions,
including engineers or investment bankers, have fewer opportunities for middle-income
workers. Locally, according to the Praxis study, a handful of metro areas – including Austin,
Houston, Dallas-Ft. Worth and Oklahoma City – have more mid-level jobs today than in
2007.
The Immigrant Labor Force
As the foreign-born population has grown as a share of the total population, it has also
grown disproportionately as a share of the labor force. In 1970, immigrants made up
approximately five percent of the population and five percent of the labor force. By 2010,
immigrants were 16 percent of the labor force, but only 13 percent of the total population.
According to BLS 2012 data60:
Hispanics accounted for 48.3 percent of the foreign-born labor force.
Asians accounted for 23.7 percent of the foreign born labor force.
60
http://www.bls.gov/news.release/forbrn.nr0.htm
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About 80 percent of immigrants are between 18 to 64, compared to 60 percent of
the native-born population that falls between that age bracket.61
Today the immigrants who live in the country’s largest metropolitan areas are nearly evenly
distributed across the job and income spectrum. Immigrants are a significant presence in
industries that demand higher-skilled workers such as information technology and high-tech
manufacturing. In both of these sectors immigrants make up 23 percent of all workers.
Notably, in terms of manufacturing, the Partnership for a New American Economy reports
that for every 1,000 immigrants who live in a county, 46 manufacturing jobs are created or
retained.
Further, a 2013 report by the Americas Society/Council of the Americas and the Partnership
for a New American Economy demonstrates that the positive impact of immigration on job
growth in manufacturing can be witnessed in communities across the U.S. including places
like Harris County, Texas - where the petrochemicals hub has experienced the fastest
growth in manufacturing employment over the last four decades - and in Maricopa County
in Arizona, as well as in Orange, San Diego and Santa Clara counties in California. According
to the report, immigration has also spurred job-creation in rural communities, such as
Buena Vista County, Iowa, and in towns along the North Carolina coast.62
Foreign-born workers are also more likely than native-born workers to be employed in
service occupations; production, transportation, and material moving occupations; and
natural resources, construction, and maintenance occupations. In agriculture, immigrants
represent approximately one-fifth of all workers. Moreover, Census data of 2010
demonstrated that in 14 of the 25 largest metropolitan areas - including Boston, New York
and San Francisco - more immigrants were employed in white-collar occupations than in
lower-wage work like construction, manufacturing or cleaning.
61
2010 American Community Survey 1-Year Estimates, “S0501: Selected Characteristics of the Native and Foreign-Born Populations” 62
Americas Society/Council of The Americas, "Immigration and the Revival of American Cities: From Preserving Manufacturing
Jobs to Strengthening the Housing Market", September 2013
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Women’s Increased Role in the Workforce
Women were more resilient to the recession, according to BLS analysis, as more men work
in manufacturing, which contracted. There are more women than men working in the
service industry, which has expanded and more women are entering and staying in the
workforce than ever before. In 2013, approximately 76 percent of women aged 25 to 54
were in the workplace. In the top ten states for women’s employment the average
participation is 84 percent. Increasing total participation to this rate would increase the size
of the U.S. economy by three to four percent.63
As women move into prominence in the workplace, they generally bring with them different
skills and approaches to workplace challenges. In a new world workplace that rewards
collaborative models of a behavior, it is postulated that women will make key contributions
in that regard, which will have a positive economic effect.64 According to a 2013 study by
McKinsey, the top four most important leadership attributes - including intellectual
stimulation, inspiration, participatory decision-making and setting expectations/rewards -
were more commonly found among women leaders.
Moonlighting
Moonlighting – or working more than one job, in addition to a full-time position - has
increased since the recession. In 2012, according to BLS, 4.9 percent of working U.S. adults
had more than one job, with about half holding a full-time and a part-time position.
However, the government statistics may not reflect the real figures as the sluggish recovery
has fundamentally impacted the nature of the labor market and people's attitude about
work. As such the way that data is collected and analyzed on workers needs to change to
better illustrate the current landscape.
People have opted to remain in the shadow economy, either to supplement income or to
have an option if they lose their full-time or permanent part-time position. Many partake in
handyman repair jobs, or become tutors, or fix computers, accepting cash transactions as
pay. Research carried out in 2012 by the Federal Reserve Bank of Cleveland demonstrates
that more people are taking second jobs in a field that was previously a hobby. For
example, an avid yoga fan may become a part-time instructor. Others may be partaking in 63
McKinsey & Company, “Unlocking the full potential of women in the US economy”, Barsh, J., Yee, L., 2011 64
International Economic Development Council, “Looking Around the Corner: the Future Of Economic Development”, 2014
88
some sort of e-commerce activity from their home on a part-time basis. Bigcommerce65
reports that that about a third of its clients log in between 6 p.m. and 8 a.m., highlighting
the notion that people are supplementing their full-time jobs with e-commerce on the side.
Freelancing
Today, there are over 42 million freelancers in the U.S., and more are engaging in this type
of work. Notably, membership in the Freelancers Union has more than tripled over the past
six years with over 234,000 at the end of 2013. Freelancers are individuals that work in
nontraditional, impermanent jobs, including part-time employees and independent
contractors.
Emergent Research predicts that that the ranks of the independent workforce will continue
to grow over the next five years. Factors such as the rise of mobile communications
technology; employer concerns that Obamacare will drive up health-care
costs; corporations embracing a contingent workforce so they can be more flexible; retirees
seeking a new career; and millennials opting for entrepreneurial activities, all support such
forecasts.
Temporary Workers
Temporary workers are also on the rise. Research carried out by Economic Modeling
Specialists (EMS) - a company owned by Career Builder - found that 15 percent of all job
growth nationally from 2009 to 2013 was in temporary work. The American Staffing
Association also asserts that over the last three years, the industry has added more jobs in
the country than any other.
Post-recession, companies have found that temporary workers have provided them with the
flexibility to either quickly boost or decrease their workforce as needed. Over 2.9 million
U.S. workers were employed in temporary jobs in 2013, a 28 percent increase from 2010.
EMS research demonstrates that in some cities - including Chicago, Philadelphia, Kansas
City, Cincinnati and Milwaukee - more than 40 percent of new jobs in that three-year period
were temporary. Moreover, the number of professionals working on a temporary or
contractual basis is on the rise, including jobs in sales and nursing. Another CareerBuilder
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A firm that helps to set-up online stores and process credit card payments.
89
and Harris Poll study found that in 2014, 42 percent of employers said that they plan to hire
temporary or contract workers during the year, up from 40 percent last year.
Talent Attraction and Retention
Today, communities gain competitive advantages based on their ability to attract and retain
the best people. Communities that can foster an attractive quality-of-place are better
equipped to attract talent and generate economic growth. Communities must additionally
demonstrate an ability to grow local talent, recruit talent from competitive communities,
and hold on to that talent when recruiters from other places try to lure them. However,
workforce and talent shortages continue to plague communities across the U.S. Some
estimates state that for every two workers that retire, only one new worker will replace
them.
The retiring talent pool will affect all levels within the workforce from the shop floor to the
executive suite, to the economic development profession. Further, as a result of the
recession, the need to reduce costs is also fostering an increase in telecommuting. Factors
impacting the trend towards telecommuting include saving money on utility bills at the
office, or restructuring a workplace from employees to private contractors or temporary
worker arrangements. This trend highlights the importance of quality-of-place issues in
attracting those workers.
Tackling the Brain Drain
Additionally, many communities are suffering from a brain drain, or a mass exiting of their
college graduates and young talent to “creative-class communities,” and other areas that
offer a “Young Professional (YP)-friendly” lifestyle. As such, communities also need to be
able to appeal to the young and the restless. This is especially important in rural areas
where youth leave farms for more populated areas that offer more personal and job
opportunities.
Economic development professionals can help to create an environment that is conducive to
attracting in-demand workers. Having a structure in place where networks and
organizations in a community work in tandem to create a favorable environment that
supports inclusion is vital to making a community more attractive to talent. Internship
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programs that connect local students to local businesses can benefit all stakeholders,
boosting business retention and expansion efforts, preventing "brain drain," attracting
talented workers to a community, and bringing local citizens and businesses closer together.
Whatever type of approach an individual community takes, attracting and retaining young
talent cannot happen in a silo and it needs to be a community-wide effort.
Foreign Talent
The U.S. has long attracted high-skilled immigrants with the H-1B visa program, and the
U.S. government continues to supply thousands of visas a year to foreign-born workers who
have at least a bachelor’s degree. In the past 12 years, obtaining these visas has become
more difficult, due to both the September 11, 2001 tragedy and the recession, which
impacted U.S visa policy. According to a study the Oak Ridge Institute for Science and
Education, 71 percent of foreign citizens who received doctoral degrees remained in the U.S
to work in 1999. Today, the current visa restrictions have forced many foreign students who
would have preferred to work in the U.S. to accept jobs in their home country or elsewhere,
as both foreign workers and students are constrained by new restrictions.
Recent denials and delays in processing visas have cost U.S. businesses millions of dollars,
and filing fees to apply for an H-1B visa have increased, along with the visa rejection rates.
Notably, in 2013, the allotment of 85,000 H-1B visas were all taken within the first few days
after the application process opened. For 2014, the process is expected to be even more
difficult, as even more U.S. firms need visas for coders in the technology industry that they
cannot find in the local workforce.
The issue is complex and sensitive, as while the end goal is to employ American workers,
companies are often struggling to find a qualified local workforce in the immediate. While
U.S. businesses have worked for years to increase the cap for H-1B visas from its current
level, American companies that are heavy users of H-1B visas have also invested billions of
dollars into trying to improve the supply of qualified U.S. workers. For instance, the Bill and
Melinda Gates Foundation - funded by the sale of Microsoft stock - has donated more than
$2 billion to try to improve U.S. secondary education, with a focus on science and
technology, plus an additional $1.7 billion for college scholarship programs. The
corporations Intel and Oracle have additionally injected billions more into the U.S. education
system.
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The current urgency is also impelling some corporations to take a more strategic approach
toward immigration. The Orrick law firm in Silicon Valley asserts that several U.S. firms that
presently do not have an overseas office are considering opening new offices in another
country so that they can hire local workers there, and then transfer them to a U.S. office on
an L visa, which allows employees an opportunity to transfer from foreign to U.S. locations
in management positions within the same firm.
Companies are raising salaries for entry level workers and interns as they struggle to fill
open positions in the technology field (especially programmers), and are actively poaching
employees from other firms.
Manufacturing Shifts
Manufacturing accounts for approximately 12 percent of U.S. GDP and almost two-thirds of
U.S. exports. Manufacturing directly employs close to 12 million U.S. workers and supports
millions of ancillary jobs in other sectors. Manufacturers additionally fund about two-thirds
of the nation’s industrial R&D, fueling innovation.
The Great Recession severely impacted the U.S. manufacturing sector, and over 2.2 million
workers lost their jobs. To meet the challenges created by the recession, manufacturers of
all sizes began streamlining production, making their operations more efficient and cost-
effective. Today, leaner production methods and a reliance on automation, computers and
sophisticated machinery – known as advanced manufacturing - require only a few humans
for operations. Robots are capable of navigating warehouses and stocking shelves, allowing
manufacturers to consolidate plants and hire fewer workers. Notably, while the
manufacturing sector grew by 6.8 percent in 2010 (outpacing average U.S. GDP by 2.5
percent), only 665,000 jobs in the sector have been created since the recession, according
to White House figures.
Although manufacturers are not hiring many to do manual labor jobs, positions in creative
and analytical fields are much less likely to be replaced by robots, and manufacturers today
also need to hire tech-savvy employees who can program the robots. The advanced
manufacturing jobs that will populate plants in the future will demand more cognitive
knowledge as well as higher levels of team building and management skills. However, firms
report that they are having difficulties in finding the workers that they need, including those
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who have "shop math" knowledge, encompassing skills in trigonometry, calculus and
applied math. Those who are most proficient with these skills are older workers nearing
retirement age. Moreover, the U.S. Department of Labor is currently funding research that
is looking into the issue of why women are not taking these jobs to any large degree and
what can be done to encourage a more equitable distribution of employment between the
sexes.
The 3D Printing Boom
According to Oxford Dictionaries, 3D printing - also known as additive manufacturing - is a
process for making a physical object from a three-dimensional digital model, typically by
laying down many successive thin layers of a material. 3D printing enables a machine to
produce objects of any shape, on the spot and as needed.
In the past, the cost of 3D printing was expensive and time-consuming, requiring skilled
craftsmen and specific machinery, and the technology was only used by large corporations.
However the development of desktop 3D printers has made the technology more accessible
to small businesses and home users. Today, 3D printers can be used to create anything
from small toys to car parts to manufacturing prototypes for testing purposes. Moreover,
rather having to send modeling instructions to a production company, advances in 3D
printing have allowed businesses to in-source prototype production on a regular basis.
In the marketplace, 3D printing could impact freight and logistics flows as it enables
manufacturers to print parts for durable goods on location. Manufacturers of raw materials
used for 3D printing - such as powdered polymers and powdered metals - will benefit from
the increased usage of this technology. Notably, businesses across the supply chain will
need to rethink their strategies and operations.
Workforce Development
Today’s post-recession economy has taught us that having a well-prepared workforce can
exponentially help to reverse unemployment and increase opportunities. According to the
Site Selection Group a qualified workforce is the primary consideration for corporations
seeking a new location in the global marketplace. However, across the U.S., communities
lack the well-trained workers that are critical to future economic growth. Not only is this a
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major disadvantage to those communities in luring prospective employers, but it is a threat
to our nation’s overall competitive advantage. The McKinsey Global Institute that warns
that the U.S. could face a 1.9 M shortfall in technical and analytical workers in the future,
largely due to the retirement of the baby boomers. Communities face the threat of
employers leaving a region if they cannot meet their workforce demands there.
The severity of this dilemma was underscored in a January 2014 IEDC survey where 36
percent of EDOs responded that the lack of a skilled workforce was top challenge to their
region in 2013. This was a five percent increase from 2012, and a 17 percent increase over
2010. Moreover, in a 2013 National League of Cities survey, more than one in two city
officials (53 percent) reported that current local workforce skills were posing a problem for
the economic health of their communities.
In addition, in a 2013 CNBC survey of 500 corporate executives, 92 percent stated that the
skills gap was a tremendous problem. Some of the skills that they cited were not technical
in nature, but are deemed to be soft skills, i.e., communication, critical thinking, creativity
and collaboration, highlighting the importance of the entire workforce development (WFD)
system - including schools at all levels and the private sector - to do a better job of
preparing individuals to enter the workforce.
2013 CNBC/Adecco Survey Results of Corporate Executives on Workforce Issues:
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Enhancing the economic growth of a community through talent is not just about highly
skilled workers, but upgrading the skills and conditions for those in the manufacturing and
service sectors. Technological changes in services and manufacturing have resulted in a new
mix of specialized workforce skill requirements. Workforce development prepares the
workforce with the skills needed to meet anticipated labor needs, supports both job creation
and career advancement, and connects workers with employers in the labor market.
The Incumbent Workforce
For many communities, the bulk of their workforce is their incumbent workforce, and
incumbent worker training is critical to helping prepare a region’s current workforce for
emerging jobs in an economy that has been transformed by the recession, additionally
helping to strengthen the worker pipeline for the future. However, most of the WFD
programs in the U.S. have been focused on training without enough engagement on
determining what skills the employers in a region actually need. Significantly, even during
the depths of the recession, a third of manufacturers reported moderate to severe
workforce shortages.
Furthermore, the majority of workforce development programs have been targeted towards
low-skilled workers who will not be able to maintain meaningful employment without public
assistance. The challenge is that different industries require different skills at various levels
and that needs evolve over time due to changes in the economy. Training should ideally be
based on industry-standard competencies, and incumbent workers should be able to gain
competencies and certifications that will allow them to move up a career ladder. Notably,
according to the BLS “Occupational Outlook Handbook”, the best opportunities are emerging
for people who are willing to keep layering on skills involving electronics, software and
computer systems to their current job or skill-set.
EDO-WIB Collaboration
Since the recession, EDOs have collaborated more extensively with Workforce Investment
Boards (WIB). However, the economic development community has often grappled with
differences of culture, governance and funding sources with the traditional workforce
system. When forging these partnerships, it is important to consider different funding
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streams to employ a unified message to community stakeholders. Establishing a common
goal and bringing in other local stakeholders from the business community, the public sector
and educational stakeholders is also essential.
Successful EDO-WIB collaboration must bridge cultural differences with deliberate
measures. The most common activities that involve EDO and WIB collaboration are:
Coordinating efforts for retention/expansion activities;
Developing business-education partnerships with other stakeholders in the
community;
Identifying specific training and educational programs;
Designing incumbent worker training programs;
Developing aversion strategies for firms facing layoffs or closure;
Inviting WIB leaders to join EDO boards or other relevant committee;
Coordinating programs to encourage start-ups and entrepreneurship.
EDO-Community College Collaboration
With fewer opportunities today for a worker straight out of high school - and with most of
the jobs needed in the U.S. not requiring a 4-year degree - community college and EDO
partnerships are becoming crucial to developing a qualified workforce. Notably, BLS
occupational projections indicate that job categories for which the associate’s degree is the
most significant source of education and training will grow 19 percent through 2018.
Community colleges make valuable contributions to the communities in which they are
located by educating the workforce of today and tomorrow, and fostering the talent pipeline.
In parallel, EDOs serve as the linchpin between community colleges and industry, bridging
gaps to assist in the development of tailored training and certification programs to provide a
ready-to-go workforce.
With states and localities grappling with scarce resources, strategic collaborations between
EDOs and community colleges are not only essential to building local capacity, but they also
make good fiscal sense, and their economic impact cannot be underestimated. For
instance, a recent College Capacity-Building Study of community colleges in California
demonstrated that for every dollar spent on economic and workforce development programs
at community colleges, there is a $12 increase in California’s business income and employee
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wages. Likewise, a 2011 economic impact study conducted for Central Piedmont
Community College (CPCC) in Mecklenburg County, North Carolina reported that CPCC
students and graduates contribute an estimated $157.9 million in taxable income to the
state economy each year through their higher incomes and increases in business
productivity.
Importantly, vocational and technical schools represent an important avenue to
strengthening the local talent pool of workers to match the needs of regional employers.
EDOs can effectively assist community colleges in creating programs to meet industry
demands and they can additionally help to leverage financial resources available for
workforce-related issues.
State Workforce Programs
State workforce development and training programs vary across the nation, but
collaboration with community colleges is an emerging trend that ensures that employee skill
sets match employer needs and expectations. The guarantee of state funding towards a
training program is attractive to many firms seeking to relocate or expand. The examples
below are just two among many across the country that are increasing their investment in
human capital with community colleges and vocational schools.
The Minnesota Job Skills Partnership Program is a Minnesota Department of
The Southern Idaho Economic Development Organization’s Partnership with
The College of South Idaho
The Southern Idaho Economic Development Organization’s (SIEDO) partnership with
the College of South Idaho (CSI) exemplifies the benefits of EDO-Community College
collaboration. Since 2001, the region has sited nearly 30 new businesses and CSI has
been a vital partner in all community recruitment and expansion deals. Whether it
involved developing a new curriculum, providing targeted training or offering
classroom space, the coordinated efforts between SIEDO and CSI have resulted in the
creation of over 2,900 jobs and an economic impact of $1.2 billion to the region.
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Employment and Economic Development (DEED) program that is aimed at sustaining
Minnesota’s workforce and attracting firms and jobs to the state. The program
fosters collaboration between businesses and educational institutions for the training
of new or incumbent workers. Since the program began in 1983, more than $132
million has been awarded to educational institutions to train 261,200 Minnesota
workers. In 2013, state legislators approved $8.3 million worth of funds into the
Minnesota Job Skills Partnership Program.
o Recently, Lake Superior College in Duluth received an $89,265 Minnesota Job
Skills Partnership grant to develop a 60-hour Aircraft Maintenance and Support
Training program to provide a pipeline of jobs to the AAR Corporation, an aviation
company that conducts aircraft overhaul and repair services for Air Canada.
The state workforce development program in Georgia, Quick Start, has provided
tailored workforce training to qualified businesses in Georgia for more than 40 years.
As part of the Technical College System of Georgia, the program is offered as an
incentive to companies that will create 15 or more jobs within one year. Not only
does Quick Start train potential employees, but the training is offered free-of-charge.
This feature has helped to attract several big firms to Georgia, such as Baxter
International, Caterpillar, Kia and Starbucks, among others. Notably, in 2013 the
program directly impacted the creation or retention of 12,428 jobs in the state.
Caterpillar - which opened a $200 million, 1-million-square foot manufacturing
facility in Athens in 2013 - cited the Quick Start program as a key reason for their
site selection decision. By 2018 the company plans to employ 1,400 people, and
Quick Start will continue to train those prospective employees along the way.
Fostering STEM
Maintaining a strong base of knowledge workers in the science, technology, engineering,
and mathematics (STEM) fields is crucial to the continued competitiveness and economic
growth of communities and the country as a whole. Scientific innovation produced roughly
half of all U.S. economic growth in the last 50 years.66 Positions in STEM fields provide
66
Jobs for the Future. “The STEM workforce challenge: The role of the public workforce system in a national solution for a competitive science, technology, engineering and mathematics (STEM) workforce”, U.S. Department of Labor, Employment and Training Administration, 2007
98
worker security, and allow businesses to thrive, helping to generate the technological
changes that shape all other occupations.
The STEM fields, and those who work in them, are vital engines for innovation and economic
growth and a 2011 report from has the U.S. Department of Commerce's Economics and
Statistics Administration (ESA) shows that from 2000 to 2010, STEM jobs grew 7.9 percent
to 7.6 million (5.5 percent of the U.S. labor force) – three times the rate of other fields.
STEM workers are less likely to experience joblessness and are more resilient to economic
downturns than many other sectors. The Center on Education and the Workforce at
Georgetown University predicts that the share of STEM occupations in the economy will
grow to five percent through 2018, resulting in an increase of about 1.2 million jobs.67
Advanced manufacturing and technology companies across the U.S. seek well-educated and
technically savvy workers for engineering and technician jobs that require advanced science
and math skills. However, by the end of 2010, the U.S. ranked 25th among 34 OECD
countries on math performance, while China’s students placed 1st. The U.S. did poorly in
science as well, coming in 17th, exactly the middle of the pack. Less than 15 percent of U.S.
high school graduates have sufficient math and science preparation to begin pursuing a
degree in engineering.
According to the National Governors Association, the pipeline of STEM workers in the U.S.
continues to decline. Students in K-12 schools across the country lack preparation in STEM
competencies, and when entering college, only 25 percent of students choose to pursue
STEM related fields. If the gap between the production of U.S. STEM workers and STEM
workers in other countries continues, more than 90 percent of all scientists and engineers in
the world will live in Asia.68 Additionally, the U.S. will continue to lose its R&D capacity to
Asia - with its strong investments in science and engineering boosting their economies –
without a vibrant U.S.-based STEM workforce.
Immigrants have been fueling U.S. STEM industries for many years and foreign students
studying in the U.S. comprise a large portion of the total number of students seeking STEM
degrees. Immigrants are overrepresented among members of the National Academy of
Sciences and the National Academy of Engineering, among authors of highly cited science
67
Georgetown University: Center on Education and the Workforce, “STEM: Science Technology Engineering Mathematics”, Carnevale A.P., Smith N., and Melton M., 2011 68
Ibid
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and engineering journal articles, and among founders of biotech companies undergoing
IPOs.69 However, the difficulty of obtaining enough H-1B visas for this population highlights
the need to foster STEM education among the U.S native born population.
STEM Education
Stimulating the interest and passion of young people in science, technology, engineering,
and math (STEM) is the goal of educators, researchers and policymakers. While the
recession strained the education system around the nation, an increasing number of regions
across the U.S. have been implementing STEM programs at the elementary, middle and
high school levels to give students the skills they need to compete in an increasingly
technical workforce.
The Sarah E. Goode STEM Academy opened in Chicago’s South Side in 2012 and is
funded and in partnership with IBM. The school provides the opportunity for students
to attend high school for six years, graduating with a high school diploma and an
associate's degree. Students receive hands on technical and business training, and
the chance to land a job at IBM upon graduation.
Bolstering STEM education at an early age is vital to growing and sustaining the qualified
workforce pipeline.
Federal Initiatives
Budgets cuts at the federal level meant that much needed R&D funds were cut in 2013.
Notably, an Association of Public and Land‐grant Universities, Association of American
Universities and Science Coalition joint study quantified these significant rollbacks in
research and graduate programs:
70 percent of surveyed universities delayed research projects;
31 percent reduced student positions and 16 percent even laid off professors other
research employees.
69
Population Research and Policy Review, Exceptional contributions to US science by the foreign-born and foreign-educated, Stephan P.E. and Leven S.G., 2001
100
These cuts result in a less developed STEM workforce, at a time when the nation needs
increased investments. As Congress ended the year with agreement on a budget to rollback
some sequester cuts, it is possible in 2014 for conditions to improve for graduate programs
and research institutions.70
Investments for other initiatives intended to bolster labor force innovation include:
Hollings Manufacturing Extension Partnership (MEP): received $141 million, with an
increased focus on expanding supply chain capabilities and supporting technology
adoption by smaller manufacturers to better their competitiveness.
Advanced Manufacturing Technology Consortia (AMTech): received an additional $15
million to boost the role that this public‐private partnership plays in developing
technologies to address major manufacturing challenges faced by American
businesses.
National Institute of Standards and Technology (NIST): received $680 million for
cutting‐edge R&D. This will help the organization to hone in on top research areas
“such as advanced manufacturing, forensics, cyber security and disaster resilience,
and improve scientific facilities.
Earlier in 2014, the President announced $500 million in competitive grants, the fourth
installment of $2 billion for job training. These grants prioritize programs that include
partnerships between national industry groups and community colleges to improve the
alignment between course offerings and industry demands. An additional $100 million will
be allotted to apprenticeship programs. These efforts make use of existing federal money
and did not require the approval from Congress. Notably, the funding for the apprenticeship
program will come from fees collected from companies applying for H-1B visas.
Role for EDOs
Balancing the supply of qualified workers with the demands of business is a complex task.
When done correctly, efforts to strengthen the labor force build local capacity, support job
creation and retention, and help to foster innovative industry clusters. Bridging the chasm
70
International Economic Development Council, 2014 Federal Review, March 2014
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between businesses and training providers is the key to success, and this is where local
EDOs are playing an increasingly pivotal role in terms of attracting talent and developing a
competitive workforce.
EDOs excel at brokering strategic collaborations among business and educators, serving as
the critical link to developing tailored training and certification programs to supply local
industries with a ready-to-go workforce. EDOs are well placed to assess a firm’s needs and
match them to funding sources for training. As such, EDOs can effectively assist firms in
leveraging federal, state and local financial resources available for workforce development.
Local business surveys - long conducted by EDOs to determine short and long term
corporate demands - have additionally become a vital tool in determining companies’
current and future workforce needs.
Whether helping with hiring at a new firm, upgrading the skills of incumbent workers in an
established business, or developing a pipeline of talent in a particular industry, the
development and financing of workforce initiatives can be facilitated through the local EDO.
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G. Entrepreneurship
Entrepreneurial firms have been the driving force behind economic recovery, job creation,
greater resiliency in the face of disasters, and regional economic growth. Small businesses
represent the vast majority of all firms and at the height of the recent recession, regions
across the nation began recognizing that good paying jobs were originating with start-ups,
rather than bailouts.
The Kauffman Center for Entrepreneurial Leadership describes entrepreneurs as “generative
and self-renewing,” since they not only provide engines for innovation, but also smooth
exigencies in the business cycle.71 However, the current economic uncertainty has made
entrepreneurs more cautious, and they prefer to start sole proprietorships rather than more
costly employer firms.
Entrepreneurship activity peaked during the recession, and has dropped a bit since 2010
mostly due to the slow recovery and tight credit market, which made it difficult to attract
capital or attain a loan. However, interest in entrepreneurial activities are on the rise
again, as financial lending opportunities open up and many people seek new ventures out of
personal interest or economic necessity. Notably, the percentage of job seekers starting
their own businesses increased by 33 percent in the first half of 2013, according to the
consultancy Challenger, Gray & Christmas.72 The firm's quarterly survey of job-seeking
managers and executives revealed that an average of 4.1 percent started their own
business over the first two quarters of 2013, up from 3.0 percent of those starting
businesses in the same period a year ago.73
71
Foreign Affairs 83(4), Building Entrepreneurial Economies, Schramm C ., July/August 2004 72
Challenger, Gray & Christmas, Inc., Q2 2013 Start Up Report, August 2013 73
Ibid
103
Percentage of Job Seekers Starting their Own Business 2009-201374
Post-Recession Highlights
The slow and uneven recovery has reset the way people view entrepreneurship and in the
wake of the Great Recession, the Center for Entrepreneurship examined how
entrepreneurial activities have evolved, identifying eight unique emerging entrepreneur
development opportunities in the U.S.75 :
Economic Restructuring: the recession reshaped markets and threatened existing
businesses; fundamental economic restructuring is driving entrepreneurial behavior
and opportunity.
Under-Utilized Talent: with unemployment and under-employment at record
levels, some of this underused talent will engage in entrepreneurial activities, while
others may decide to participate in an existing venture.
74
Ibid 75
Center for Rural Entrepreneurship, "Entrepreneur Development Opportunities In the New Post-Recession Economy”, Macke
D., Hamilton-Pennell C., November 2012
104
Restarts: across the nation there are millions of people trying to restart their lives
by finding a new career, oftentimes by starting a business.
Immigrants: immigration is, and has been, a source of entrepreneurship and this is
expected to continue the U.S.
Retired Maybe: losses due to the recession mean that many retired - or on the
track to retirement - are choosing to stay in the workforce; some will become
entrepreneurs, some may become investors, and some may become key talent in
newer ventures.
Government Resets: with government contracting and defense spending likely
to contract, entrepreneurial ventures that rely on the government for revenue
will need to reposition into new products and markets.
Glass Ceilings: issues like gender, education, race, language and other factors still
create glass ceilings in many careers, which could motivate frustrated populations to
engage in entrepreneurial activity.
Technology: innovation is an economic driver; the need for new technologies
creates new entrepreneurial energy and opportunities.
Demographic Data
The Kauffman Index of Entrepreneurial Activity identifies some other trends regarding
industry and demographics.76 For instance, construction had the most entrepreneurial
activity in 2012, although it was slightly lower than 2011 (1.43 percent compared to 1.68
percent). Construction was followed by the service industry and the manufacturing start-up
rate was the lowest among all industries, with only 0.11 percent of non-business owners
starting businesses per month during 2011.
The Kauffman Index further indicates that the entrepreneurial activity rate among high
school dropouts decreased from 0.59 percent in 2010 to 0.57 percent in 2011, and declined
to 0.52 percent 2012. However, this still remains significantly higher than for groups with
76
Kauffman Index of Entrepreneurial Activity 1996-2012, Fairlie R.W., April 2013
105
other educational levels and has the highest rate of business creation, which may be due to
more limited traditional labor market opportunities.
Moreover, Kauffman’s research indicates that 35 percent of business created in 2013 was
started by individuals over the age of 50, highlighting the notion that baby boomers may
stay in the workforce as new entrepreneurs.
Women Entrepreneurship
Women are increasingly entering starting their own business. Notably, the Policy Dialogue
on Entrepreneurship reports that today women are starting 1,288 new businesses each day,
double the rate from three years ago. The states with the fastest growth of women-owned
firms over the past 17 years have been Georgia, Texas, North Carolina and Mississippi.
According the "2013 State of Women-Owned Business" report published by American
Express Open, the growth in the number of women-owned firms with $10 million or more in
revenues has increased by more than 56 percent over the past ten years. Moreover,
the "2014 State of Women-Owned Business" report predicts that in 2014, there will be 9.1
million women-owned businesses in the U.S., in comparison to 8.6 million in 2013. Those
firms are anticipated to generate more than $1.4 trillion in revenues and employ 7.9 million
people.
Immigrant Entrepreneurship
The Kauffman Index demonstrates that entrepreneurship rates for immigrants have been
trending sharply upward since 2006. Immigrants were more than twice as likely to start
businesses each month as were the native-born in between 2010 and 2012. Moreover,
Latino and Asian immigrants experienced rising shares of all new entrepreneurs, partly due
to rising rates of entrepreneurship, but also because of increasing populations.
However, following the trend of decreased activity overall in 2012, the immigrant rate of
entrepreneurial activity decreased from 0.55 percent in 2011 to 0.49 percent in 2012.
According to the Kauffman Index, the entrepreneurial activity rate among Latinos decreased
from 0.52 percent in 2011 to 0.40 percent in 2012, but remained at a high level relative to
previous years and other demographic groups. The African-American entrepreneurial
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activity rate decreased in 2012 from 0.23 percent to 0.21 percent, and the Asian rate
decreased slightly from 0.32 percent to 0.31 percent.
Notably, a Kauffman Foundation study on immigrant entrepreneurs found that between
2006 and 2012, 24.3 percent of engineering and technology companies had at least one
immigrant founder. In that same time period, those companies generated more than $63
billion in sales and employed more than 560,000 workers.77
Rural Entrepreneurship
According to a University of Missouri paper78, prior to the recession, individuals living in
rural counties were more likely to engage in entrepreneurial activities, when compared to
individuals living in more urban counties. The recession however marked a shift in the
motivation of individuals in rural communities to become self-employed. Notably, during and
after the recession, entrepreneurial ventures were often driven by necessity, due to lack of
options in the workforce. The report asserts that in all rural and mixed-rural counties,
college education positively predicted opportunity entrepreneurship (choosing to be an
entrepreneur), whereas individuals with incomes below $50,000 or working in a part-time
job were more likely to engage in entrepreneurship driven by need.
Rural locations often face even more limits on access to financial services, business capital,
technical assistance, energy solutions, and resources for entrepreneurial ventures than
urban counterparts. However, value-added agriculture and niche marketing can generate
wealth in rural communities, enhance farm or ranch profitability, and motivate young
families return to rural America. Fostering entrepreneurship in rural areas is thus an
important economic development strategy.
Regional Highlights
While entrepreneurial activity varies among geographic regions, rates remain highest in the
West and lowest in the Mid-West. According to the Kauffman report, the states recording
the most entrepreneurial activity in 2012 were Montana, Vermont, New Mexico, Alaska and
77
Ewing Marion Kauffman Foundation, ”Then and now: America’s new immigrant entrepreneurs, part VII”., Wadhwa, V.,
Saxenian, A., Siciliano, F.D., 2012 78
University of Missouri, Rural Entrepreneurship During Recession, Figueroa-Armijos, M., Dabson B., Johnson, T.
107
Mississippi. The states with the lowest rates of entrepreneurial activity were
Minnesota, Nebraska, Michigan, Wisconsin and Ohio.
The rankings below - from a special analysis carried out by Xavier University for the
American Dream Composite Index Data79 - demonstrates the top ten states where residents
have expressed the highest degree of satisfaction with the entrepreneurial spirit in their
state, as well as those states where residents rank the lowest satisfaction of entrepreneurial
activity.80 Interestingly, the perception of residents does not always correlate with the facts
in terms of entrepreneurial activities. For instance, Alaska and Vermont have a high rate of
entrepreneurial activity which is not the perception of residents in those states.
Top 10 Ranked States by residents for entrepreneurial activity:
Montana
Connecticut
Delaware
Hawaii
South Carolina
New Mexico
Mississippi
Nevada
Georgia
Florida
Bottom 10 Ranked States by residents for entrepreneurial activity:
Arkansas
Louisiana
Iowa
North Dakota
Rhode Island
South Dakota
Idaho
79
The American Dream Composite Index™ (ADCI) measures American sentiment regarding values about the American Dream
on a monthly basis. 80
The Burghard Group, creator of the Strengthening Brand America website, http://strengtheningbrandamerica.com
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Oklahoma
Alaska
Vermont
Home-based Businesses
Since the recession there has been an increase in home-based workers and businesses.
Home-based businesses (HBB) may be sole proprietors with their own LLC or S
corporations, or 1099 contract employees, as well as employees of companies that are
permitted to work from home. HBB appears to be a growth sector for employment in the
U.S. and according to the “2010 U.S. Home-Based Business Annual Market Review” by the
strategy consulting firm AMI-Partners, there was an 11 percent increase in those who
started their HBB due to downsizing in 2010. The 2012 Global Entrepreneurship Monitor
report additionally reveals that 69 percent of businesses now start in the home and 59
percent of established businesses continue to operate from there, long after they are up and
running.
Franchises
Franchises play a vital role in the economy and contribute to job creation in communities
across the nation. U.S. franchises support over 18 million jobs and provide over $2.1 trillion
in economic output. Following a decline that began at the end of 2008, franchising began
an upward incline towards the end of 2011, and has been on the rise since then.
Significantly, the latest report from the International Franchise Association (IFA), the 35th
Annual Franchises 500, reveals that franchises have hit a post-recession stride. The IFA
forecasts predict that the number of franchises in the U.S. will to grow by 1.7 percent in
2014, with employment in the franchising industry growing by 2.3 percent. The majority of
the new jobs are anticipated to be in quick service restaurants, representing 38 percent, or
75,596 new jobs. Other major jobs in the franchise industry are expected to be in business
services and commercial and residential services. The number of franchise businesses is
expected to rise in the U.S. by 12,915 in 2014, bringing the total number of franchise
establishments to 770,368.
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Fast Growth Companies
Fast growth companies - or “gazelles” - are more mature small to medium sized-firms that
are about 25 years old. They are called gazelles due to their propensity for rapid
growth, with their profits and employment numbers doubling over a four-year period.81
While gazelles only represent one percent of all firms in the U.S., they were also hit by the
recession. Gazelles are found in all industries, and they have a knack for finding the niche
that is working at the particular moment in time.
According to a new study published by the SBA Office of Advocacy in 201382, California
leads the nation in high-growth businesses that have the potential to enter the stock market
through initial public offerings (IPO), and Massachusetts is home to the highest
concentration of IPOs per capita. Florida, New York, and Texas are also considered to be
states with high gazelle potential. Notably, Minneapolis-St. Paul holds 10 percent of all the
IPOs in the medical instruments industrial sector and the Office of Advocacy report notes
that the Minneapolis-St. Paul area has strong potential to become a region that attracts and
fosters gazelles.
Given the importance and past successes of gazelles for innovation and job creation,
supporting gazelle growth is essential. Removing barriers that could impede the emergence
of high-growth companies among existing small business - such as access to capital,
taxation and regulatory burdens - is crucial to helping gazelles thrive. This is particularly
important for second-stage companies that have grown past the start-up stage, but have
not yet grown to maturity and lack funds to expand, or to engage a full-scale management
team. Universities can additionally play a vital role in fostering gazelles by breaking down
barriers in the commercialization process that impede university researchers from moving
their innovations into new companies, as well as by partnering with local high growth start-
ups.
81
The Organization of Economic Development and Cooperation (OECD) publication, Entrepreneurship at a Glance, reports less than one percent of companies with ten or more employees are gazelles. 82
U.S. Small Business Administration, Office of Advocacy, The Geography of Employment Growth: The Support Networks for Gazelle IPOs, Kenney M, Patton D., May 2013
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Venture Capital
Venture capital (VC) has played an essential role in fueling U.S business growth innovation,
but it also was impacted by the recession. The venture capital community’s positive impact
on the U.S. economy far outweighs its relative size. While investment in venture-backed
companies only equates to between 0.1 percent and 0.2 percent of U.S. GDP each year,
these companies employed 11 percent of the total U.S. private sector workforce in 2010 and
generated revenue equal to 21 percent of U.S. GDP.
The ability of VC-backed companies to outperform their non-venture counterparts – even in
an economic downtown – stems from venture capital’s focus on highly innovative, emerging
growth companies. The 500 largest public companies with venture capital roots increased
their collective market capitalization by roughly $700 billion, rising from $2.1 trillion in 2008
to $2.8 trillion in 2010. In 2013, financing provided by venture capital for young companies
- mainly in the high-tech sector - amounted to $33 billion in the U.S. This is significant
compared to $7.1 billion in Europe, $3.5 billion in China, and $2.3 billion in Israel.
According to the Dow Jones VentureSource, in 2013, 3,480 deals with business and financial
services received the largest investment allocation, with 207 deals amounting to $2.3bn and
accounting for 26 percent of total equity investment. The healthcare sector received the
second highest amount of investments, followed by information technology. Over the past
three years, investments decreased in very early stage companies. Reasons may include a
lower cost for entrepreneurs starting companies, or wariness by VCs. It also may mean
that seed stage companies are raising money from angel investors and others (i.e.,
crowdfunding).
Venture capital’s impact on the U.S. economy will likely increase in the future, as many of
the fastest growing venture-backed companies in the U.S. today have yet to go public. IHS
Global Insight research suggests that 92 percent of job growth for young companies occurs
after their IPOs. Forbes predicts that 2014 will be a stellar year in terms of venture capital
financing, noting drones, cyber-security, hardware, the ”Internet of Things” and even
revival of healthcare IT, as key factors. Rapid innovation and government regulatory
changes are fostering start-up growth and this will also impact venture capital engagement.
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Crowdfunding
A traditional form of funding community businesses in Korea for many decades,
crowdfunding is a trend on the rise in the U.S. Crowdfunding describes the collective
cooperation and trust by people who network and pool their money and other resources
together, often via the Internet, to support efforts initiated by other people or organizations.
Crowdfunding may involve an entrepreneur seeking funding - essentially seed money - for a
start-up company or small business. An entrepreneur seeking to use crowdfunding typically
makes use of online communities to solicit pledges of small amounts of money, or even
sponsorships, from individuals who are typically not professional financiers. Individuals and
businesses that need capital have access through the internet, social media and
crowdfunding platforms to capital that was not available prior.
The Jumpstart Our Business Startups (JOBS) Act, signed into law by the President in April
2012, eliminated many regulatory restrictions on small companies. This notably changed the
landscape for small investors, including accredited investors who have not traditionally
invested in privately issued securities. At the end of 2013 the Securities Exchange
Commission released some proposed rules that would allow for equity crowdfunding from
unaccredited investors sometime in 2014.
In 2012, $2.7 billion was crowd-sourced globally, compared to $1.5 billion in 2011. The rise
of numerous equity crowdfunding portals helped to create an entire eco-system in 2013 to
support the demands of the equity crowdfunding industry, developing products and services
for the system’s stakeholders including businesses, platforms and investors. Kickstarter, one
of the most popular crowdfunding portals, helped entrepreneurs and others raise almost
$480 million worldwide in 2013, up from 319.8 million in 2012.
A recent paper from TheCrowdCafe.com segmented crowdfunding companies into six
categories, ranging from start-ups created to solve new challenges of the equity
crowdfunding market, to those who help companies re-position their products/services to
the market. They include:
Technology infrastructure;
Financial and compliance infrastructure;
Due diligence products and services;
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Campaign products services;
Data and analytics;
Media and education.
For 2014, experts envision over $10 billion of crowdfunded transactions, as more individual
investors will focus investments on projects that are targeted on social, environmental and
cause related issues. Notably, millennials, are getting more involved with social causes and
philanthropy, and commonly prefer online giving through crowdfunding.
Culture and Entrepreneurship
The importance of cultural entrepreneurship has grown since the recession. Artists attract
anchor cultural industry firms in fields like publishing, advertising, music, design and
architecture. Moreover, artists are more likely to be self-employed than those in the
traditional workforce and the Kauffman Foundation report, "How Cities Can Nurture Cultural
Entrepreneurs,"83 notes that by attracting cultural industry firms and bringing in income
from outside the community through exports of books, recordings and visual art,
communities can attract other creative firms and talent.
However, artists’ high self-employment rates mean that they often lack adequate
workspace, or opportunities for business training appropriate to their aspirations.
Recommendations for community leaders, according to the report include:
Encourage convening and equipment-sharing artists' centers;
Develop sustainable artist studio and live/work buildings;
Provide entrepreneurial training tailored to artists and designers
Build networking and marketing opportunities for artists;
Embed artists in city development strategies;
Partner with local arts and policy faculty for entrepreneurial research and training.
Economic Gardening
Economic gardening - growing jobs in the community through entrepreneurial activity
and market expansion instead of recruiting them through attracting industry - can be 83
Ewing Marion Kauffman Foundation, "How Cities Can Nurture Cultural Entrepreneurs," Markusen A., University of Minnesota, Humphrey School of Public Affairs, November 2013
113
an effective response to fostering economic development as the economy recovers.
The concept of economic gardening originated in the small community of Littleton,
Colorado in 1989. Since that time, it has contributed to the doubling of the number of
jobs created there (to around 30,000), and has helped to boost sales tax revenue
nearly threefold, from $6.8 million to $19.6 million.
By providing sophisticated, tactical and strategic information that is difficult for
entrepreneurs to access elsewhere, economic gardening helps accelerate the growth of
local companies. The strategy can be adapted to any community, and it should be
integrated into the formal and informal systems that are already in place. What
differentiates economic gardening from other entrepreneurial development strategies is
its focus on providing market research and high-level technical assistance to small
growth-oriented companies. This includes information on competing firms, customers,
markets, and industry trends. Armed with this kind of information, a small business
owner can make better strategic decisions, avoid costly mistakes, and successfully
grow his or her enterprise.
Economic gardening strategies additionally help local small businesses discover how to
reach markets outside the region, and export-oriented companies can encourage local
business suppliers and service firms to support them, re-circulating wealth throughout the
local and regional economy. The National Center for Economic Gardening (NCEG), at the
Edward Low Foundation, based in Cassopolis, Michigan, helps state and regional EDOs
initiate economic gardening programs through the NCEG’s national research team. States
such as Kansas, Indiana, Florida and Georgia have incorporated economic gardening into
regional strategies. Notably, the program in Florida, GrowFL, created in 2009, has currently
assisted more than 700 entrepreneurial companies create at least 13,493 direct jobs across
the state, with sales output of $1.14 billion.
Federal Initiatives
Entrepreneurship has not always benefited from well-established federal or statewide
policies or execution strategies. The current Administration has introduced some initiatives
to foster entrepreneurship and innovation. These include:
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Regional Innovation Strategies Program: includes $25 million for economic
development projects that spur entrepreneurship and innovation at the regional
level.
SBA Emerging Leaders program: training initiative that specifically focuses on small
business owners of businesses poised for growth in historically challenged
communities.
SBA Boots to Business initiative: offering tailored assistance to returning veterans
who which to start a new business.
The National Science Foundation (NSF) Innovation Corps: launched to get more
taxpayer-funded research innovations from the lab to the marketplace.
USDA Rural Development: provides financing, technical and energy assistance
options specifically designed to meet the unique needs of the diverse businesses
operating in rural areas.
Start-up America: this is a White House initiative to accelerate high-growth
entrepreneurship throughout the nation. This coordinated public-private effort brings
together an alliance of the country’s most innovative entrepreneurs, corporations,
universities, foundations and other leaders, working in concert with a wide range of
federal agencies to dramatically increase the prevalence and success of the nation’s
entrepreneurs.
o The SBIC Program’s Impact Investment Initiative is part of the Administration’s
Start-Up America Initiative. SBA is ready to commit up to $1 billion to Impact
SBIC fund managers seeking to generate both financial and social return in areas
of national priority.
Role for EDOs
For economic developers charged with job and wealth creation in their communities,
supporting entrepreneurship and small business development has become an essential
component for local economic growth. During the recession, entrepreneurship proved to be
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an effective strategy for job creation for people of all skill sets, and as the economy
recovers, entrepreneurial activities are on the rise.
Developing a vibrant entrepreneurial infrastructure includes incorporating quality-of-place
initiatives as a central feature of any regional economic development strategy. This includes
providing budding entrepreneurs with an entrepreneurial-friendly environment whereby
knowledge, capital, talent and networks to other entrepreneurs are easily accessible.
Moreover, demographic shifts mean that more adults may choose to stay in the workforce
rather than retire and fostering entrepreneurship among baby boomers could emerge as a
strategy, particularly in places where there are many adults approaching retirement age.
For economic development professionals, some recommended approaches include:
Employing a variety of initiatives that include programs for opening new markets
and providing access to capital and technical assistance, management facilities,
and physical space. This may entail restructuring traditional incubators into
accelerators that speed up the process for entrepreneurs to prosper, by targeting
fast-growth companies that can commercialize new science and technology
innovations with high profit potential.
Reducing the burdens of burgeoning entrepreneurs by streamlining regulatory
and licensing processes to better support entrepreneurial activity. This entails
taking the cultural/artistic entrepreneurs into consideration along with high-
technology companies.
Fostering and expanding the growing solo worker economic base with specialized
amenities, services and incentives to increase earnings and improve the
competitive eco-system for these workers.
Advocating for public policy changes that benefit entrepreneurs, i.e. policies that
let early-stage companies preserve cash or tax benefits for angel investors.
Practitioners can also educate the public about new investing initiatives - such as
crowdfunding - and the opportunities it brings for businesses and the local economy.
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Importantly, the effective management of regional partnerships is imperative to building a
viable entrepreneurial infrastructure. Strong partnerships among leaders in academia,
industry, and local government are critical for attracting high-growth companies and
promoting R&D, as well as raising capital for new or existing ventures.
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H. Disaster Management
In the last decade, the world has seen an increase in natural and manmade disasters which
are increasingly impacting people and the communities in which they live. Hurricanes across
the Gulf Coast and Northeast, earthquakes and fires in the West, floods and tornadoes in
the Midwest, the Tsunami in Japan, the BP Oil Spill, and mudslides in the Pacific Northwest
– as well as the terrorist attacks of September 11, 2001 - have forced economic
development professionals to take an active role in assisting communities in pre-disaster
preparedness and post-disaster economic recovery.
Not only do these catastrophic events have devastating impacts on communities, but the
cost of recovery in terms of physical and economic damage has been staggering. Prior to
1987, the U.S. had never experienced a natural disaster with insured losses greater than
one billion dollars. In the last decade however, we have seen a 100 percent increase in the
amount of disasters. From 2011 to 2012 alone, the U.S. experienced 25 major disasters,
each accounting for at least a billion dollars of damage.
A 2011 report from the British Department for International Development predicts that by
2015, roughly 375 million people will be affected by climate-related disasters every year,
well above the 263 million believed to have been directly impacted by natural disasters in
2010. Non-climate-related disasters such as earthquakes and man-made disasters are
expected to affect many more. The global trend toward urbanization will also have an
impact, as more people will be living on marginal land, in overcrowded cities with poorly
planned housing, lacking access to adequate water and sanitation.
According to the 2012 report by the British Department Business, Innovation & Skills84,
eight out of the 10 most populated cities in the world risk being severely impacted by an
earthquake and six out of 10 are at risk for dangerous storm surges and tsunami waves.
Improving urban design and planning is imperative to making cities more resilient to
potential disasters and speeding the recovery process once one hits.
84
Government Office for Science, “Foresight Reducing Risk of Future Disasters: Priorities for Decision Makers”, Final Project Report, London, United Kingdom, 2012
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Economic Recovery
Reconstructing a community – regardless of its size - is a colossal endeavor and post-
disaster economic recovery is an imperfect process. While assessing direct losses such as
human lives, physical injuries, and property damages is fairly straight forward, some of the
indirect losses such as jobs, business profits, and fiscal deficits to cities and counties due to
reduced tax revenues are more complex to determine.
The direct losses of disasters include:
Human lives and health effects, injuries, and emotional distress;
Property loss: homes, commercial buildings, business fixtures, computer equipment,
phone and power; utilities, subway stations, planes, vehicles;
Costs to respond to the emergency, remove debris, stabilize buildings, and clean up;
Costs to provide temporary living assistance.
The indirect losses disasters may include:
Job losses and reduced employee income and business profits associated with
business closures or limited operations;
Small business losses;
Division of capital for reconstruction activities, and associated economic leakage as
materials are purchased outside of the local economy;
Spending reductions from other income losses due to firms that closed or cut-back;
Fiscal impacts such as reduced tax revenues (such as gross income losses);
Delays to travelers and commuters.
Comprehensive recovery efforts involve many moving parts, with stakeholders at the local
level working in tandem with federal and state agencies, non-profit groups and the private
sector. While businesses of all sizes suffer due to disasters, small businesses find
themselves in a particularly vulnerable position post-disaster. It is essential that economic
recovery efforts address the special needs of small businesses that lack the resources to
withstand more than a couple of weeks of business disruption. Significantly, a delayed
response in addressing the immediate issues of small businesses could hamper the ability of
the community to fully recover.
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Federal Disaster Assistance
Extensive paperwork, limited funds, a lack of flexibility and changing requirements are the
primary challenges involved with accessing federal funds to restore a local economy after a
disaster. The majority of federal funds in post-disaster scenarios have been devoted to
agencies focused on rebuilding infrastructure and housing. However, the agencies providing
economic assistance to businesses - such as the Small Business Administration’s (SBA)
Disaster Recovery Fund, the Economic Development Administration (EDA), and the U.S.
Department of Agriculture’s (USDA) Rural Development Disaster Assistance Fund - play vital
and highly active roles.
In the U.S., the Federal Emergency Management Agency (FEMA) helps to organize initial
response for disaster relief, following a Presidential Disaster Declaration. The Economic
Development Administration (EDA) then steps in through the National Disaster Recovery
Framework (NDRF)85. Notably, the NDRF introduced six Recovery Support Functions (RSF)
designed to provide a coordinating structure for core recovery capabilities among various
Federal departments and agencies. Led by the EDA, extensive recovery initiatives are
focused on:
Providing assistance to small businesses;
Leveraging resources to fund infrastructure and revitalization projects;
Investing in local entrepreneurs;
Developing tailored economic recovery strategic plans.
Participating agencies that provide critical support for recovery efforts are: the SBA, the
USDA, the U.S. Department of Housing and Urban Development (HUD), as well as FEMA,
the Department of Labor (DOL), and the U.S. Treasury.
The NDRF is particularly important to economic developers working to stabilize their local
economies in the wake of a disaster, providing points of contact and resources for varying
issues.
85
In 2011, the President endorsed the National Disaster Recovery Framework (NDRF), which provides guidance on how long-term federal disaster recovery assistance will be delivered through a new multiagency effort. The framework serves as a companion document to the National Response Framework (NRF), which was originally released in 2008.
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New Federal Initiatives
Disaster preparation and recovery is a priority for the U.S. government. In the wake of
Hurricane Sandy at the end 2012 - as well the tornados in the South and Midwest and
floods in the West over the past two years - the federal government was strained to provide
funds for recovery and relief, especially with the looming federal budget crisis. While federal
aid was allotted, it was a slow process, adding to the stress level of disaster impacted
communities.
Today, these disasters are now part of our reality and raising awareness and providing vital
information to actors in the public, private and non-profit sectors is essential to saving
money and livelihoods. Every community has its own unique assets and it is crucial that
they develop an economic recovery plan that not only protects lives and property, but also
the distinct local businesses and industries that are vital to their economic stability in the
aftermath of a disaster.
Recently, the Obama Administration launched the Climate Data Initiative. The
website is a centralized climate data center developed to make federal data more
accessible through www.climate.data.gov. Spearheaded by the National Aeronautics
and Space Administration (NASA) and the National Oceanic and Atmospheric
Administration (NOAA), the website consolidates all of the climate data that has been
spread among different fed agencies. It is intended to be a one-stop shop for federal
reports on long-term climate trends and outlooks regarding extreme weather events.
In relation to the Climate Data Initiative, the administration is launching a design
competition to demonstrate the extent to which Americans are vulnerable to coastal
flooding. The administration is additionally releasing a new federal map data to depict which
parts of the nation’s infrastructure are vulnerable to climate change, and is enlisting Google,
Esri and other private firms to distribute and store data.
RestoreYourEconomy.org
Effective collaboration for recovery has yielded positive results for disaster impacted
communities. Access to specific information regarding previous post-disaster economic
recovery experiences is fundamental to helping susceptible communities and their
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leadership to prepare. This is why IEDC - with support and generous funding of the EDA -
has created the web portal RestoreYourEconomy.org. This website is a one-stop shop
providing best practice information, resources and tools for public and private stakeholders
seeking to rebuild their local economies after a disaster, as well as assisting small
businesses to be better prepared.
Asset Mapping
It only takes minutes for a disaster to turn an entire neighborhood or city into an
unrecognizable mass of debris. Asset mapping and data collection before a crisis can speed
up immediate, short and long-term recovery efforts. With knowledge of the infrastructure,
businesses, and community and industry assets, first responders can make quick, informed
decisions to secure the area and provide the resources needed by impacted businesses.
Asset mapping can be time-consuming, but at its most basic level, it can provide community
stakeholders with an inventory of key resources to refer to in case of a disaster. With such
information readily available, economic developers can create short and long-term
strategies and identify gaps and inefficiencies in any current strategic plan.
The Role for EDOs
Practitioners play a crucial role in disaster preparedness and post-disaster recovery. The
chart below illustrates both the traditional role of an economic development professional
and their additional responsibilities in the event of a disaster, as well as what they should be
doing to ensure their business community is better prepared. A clear understanding of these
roles and responsibilities will assist the professional in helping to spur economic recovery in
their disaster-impacted community.86
Pre-Disaster Role Post-Disaster Role
Analyst
Understand how possible disasters could impact
local businesses/industries
Understand current conditions/damage to
critical industries, businesses, property and
infrastructure
86
The chart is from the website RestoreYourEconomy.org
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Assess impacts on long-term viability of
businesses/industries
Provide cost/benefit analysis of recovery
projects
Catalyst
Establish Business Recovery Task Force to work
on preparedness activities
Participate in Business Recovery Task Force to
identify immediate and long-term recovery
efforts
Garner input and support for critical recovery
initiatives
Update strategic plans to match current
realities
Gap Filler
Outreach to public and private institutions about
setting up a bridge loan program for a disaster
event
Conduct concerted outreach to reconnect with
businesses and identify at-risk companies
Assist with bridge-loan financing until SBA loan
approval
Provide business recovery assistance and
services
Develop programs/initiatives as needed to
support long-term recovery
Advocate
Advocate for mitigation and preparedness efforts Seek funding opportunities for recovery
initiatives
Advocate for tiered business re-entry procedures Communicate priorities and need for policy
changes to state and federal leaders
Address impacts/adequacy of community’s
emergency management plan from businesses’
perspective
Educator Educate small businesses on business continuity Facilitate flow of accurate info to businesses
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planning
Educate business community on community’s
emergency management plan
Communicate “open for business” and “we
need help and resources” messages
Develop and distribute a disaster recovery
guide
Visionary
Engage key stakeholders in visioning process to
identify scenarios for post-disaster
redevelopment
Envision how community can build back
stronger, more resilient
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II. Outlook for Growth
In the wake of the Great Recession some industry sectors began showing signs of growth,
while others contracted and risk becoming obsolete as the economy transitions into
uncharted areas. In order to sustain long-term growth in a community, practitioners will
need to focus on creating quality, high-paying jobs, and improve the quality of existing jobs
in their region for long term resiliency. Forecasts of future growth can help economic
developers set goals and work with local business, boards of directors, investors,
educational institutions and other local stakeholders to strengthen the local economic base
and optimize resources.
Employment projections are estimates of employers’ future demands for workers who have
the skills to supply the goods and services that their customers want. Occupational
projections incorporate analytical decisions made at the national level regarding the effects
of technological change, organizational structure, and shifts in demand. Looking at recent
past and current trends, analysts are able to formulate forecasts that seem logical today.
Issues of long-term unemployment and the pending retirement of 30 million baby boomers
by 2020,87 underscore the urgency of communities to nurture a qualified workforce for
today and for tomorrow. Some sectors are threatened by the lack of a qualified workforce
that may impede future growth, and knowledge of these gaps can help practitioners and
policy-makers to develop plans to counter such trends.
Moreover, advances in technology are both creating and eliminating jobs across the labor
market. As new technologies transform the nation’s landscape, job growth has not reached
the same level. The 2012 U.S. Census report highlights that technology is significantly
helping to increase the productivity of some industries with fewer workers. The days in
which the sales and output of an industry corresponded to the amount of workers in that
industry are over. Today worker categories in a myriad of sectors are being eliminated as
technology and automation take over routine tasks and create new processes that enable
firms to do more with less people at a faster pace. Inherent to this uneven economic
recovery, some areas are thriving in the new economic landscape, while others continue to
struggle.
87
According to the U.S. Census Bureau
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The following sections will look at predictions of sectors that show signs of growth for the
future, examine where in the country such growth may take place, and consider how these
forecasts impact the economic developer.
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A. Forecasts for Industry Growth
Knowledge of the sectors that are displaying job growth today can help economic
developers plan for the future by devising strategies to foster growth in those sectors and
improve their community’s competiveness. With talent, advanced skills and industry
alignment increasingly on the minds of economic development professionals, understanding
industry shifts can help practitioners expand their community's pipeline of skilled workers.
The retirement of the baby boomers will transform the labor market, and a 2013 report
from Georgetown University’s Center on Education and the Workforce (CEW) predicts that
24 million new jobs will be available by 2020.88 BLS projections are a bit more
conservative, forecasting an overall gain of 20.5 million jobs in the U.S. over the same time
period. Regardless of variations in predictions, baby boomer retirement will catalyze job
growth in a variety of sectors across the nation. Whereas a recent Brookings Institution
study and analysis from Richard Florida89 notes that low-wage, low-skill service jobs and
high-wage, knowledge-intensive positions are seeing the most growth at the current time –
leaving out mid-skill level jobs - in the upcoming years, jobs will be more widely available at
all wage levels, as firms and organizations seek to replace retirees.
Education and Skills
In terms of educational expectations, BLS occupational projections indicate that job
categories for which the associate’s degree will become the most significant source of
education and training will increase by 19 percent through 2018, faster than any other
educational requirement. For those professions requiring a bachelor degree, the National
Association of Colleges and Employers (NACE) reported that for 2014, employers were most
interested in bachelor’s degree graduates in the business, engineering,
computer/information science, sciences and communications disciplines. The Georgetown
CEW report also concluded that STEM professions, healthcare professions, healthcare
support and community services will be the fastest growing occupations, but they will
require higher levels of post-secondary education.
88
Georgetown University, “ Recovery: Job Growth And Education Requirements Through 2020”, Center on Education and the Workforce, Carnavale A., 2013 89
Richard Florida is Co-Founder and Editor at Large at The Atlantic Cities. He's also a Senior Editor at The Atlantic, Director of the Martin Prosperity Institute at the University of Toronto's Rotman School of Management, and Global Research Professor at New York University.
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Over the next decade, employers will seek cognitive skills such as communication and
analytics from job applicants, rather than physical skills traditionally associated with
manufacturing. Moreover, in a 2014 NACE Job Outlook Survey, participants rated the top
four traits for candidates seeking a job today. They are:
o The ability to work in a team structure;
o The ability to make decisions and solve problems;
o The ability to plan, organize and prioritize work;
o The ability to verbally communicate with persons inside and outside the
organization.
The ability to obtain and process information, as well as the ability to analyze quantitative
data, also ranked high on the NACE survey as the most important skills for candidates.
A Glance at Growing Sectors
Looking forward to the next decade, a large portion of growth is linked to the aging
population, spurring growth in sectors that meet healthcare needs. Notably, a 2011
McKinsey Global Institute report notes that six sectors will account for almost 85 percent of
all new jobs in the next ten years: health care, business services, leisure and hospitality,
construction, manufacturing and retail.90 Healthcare, business services, and leisure and
hospitality will have a profuse influence on the total number of jobs generated. Business
services, for example, could create as many as 5.7 million of them or as few as 2.4 million,
according to the report.
The predictions below examine those sectors that are targeted for growth and provide some
insight into why some others may be contracting. These forecasts are based on statistical
analyses, as well industry knowledge and recent trends. As always, in this fluctuating
economic landscape, these forecasts incorporate a degree of uncertainty.
90
McKinsey & Company, “An Economy that Works: Job Creation and America’s Future”, McKinsey Global Institute, June, 2011
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Healthcare
Growth in the healthcare sector is being driven by the aging baby boomer generation.
Moreover, while some areas of the country are experiencing shortages of medical
professionals, there are overall more physicians entering the marketplace. Notably, BLS
predicts that offices of health practitioners – including doctors of all categories and dentists
- will see 3.2 percent annual job growth through 2020.
Ancillary jobs in outpatient and laboratory services – such as medical and diagnostic
laboratories that provide analytic or diagnostic services - as well as ambulatory care
services are also expected to see a 3.2 percent in annual job growth. In addition to
the aging population, growth in those areas can be attributed to increasingly
complex technology.
Medical and Health Service Managers - the people who deal with the administrative
aspects of the healthcare sector - will additionally experience 23 percent growth
through 2022, according to BLS.
According to the BLS Occupational Outlook Handbook91, as baby boomers age, more of the
population will be staying home, requiring more home nurses, physical and occupational
therapists, speech therapists, cardio technicians, audiologists, optometrists and dietitians.
Home health care services/home health aides are forecasted to see 6.1 percent
annual job growth, adding 871,800 jobs and reaching almost 2.0 million jobs by
2020.
BLS reports that real output in home health care services is expected to grow at 4.3 percent
per year through 2020, making the industry one of the fastest growing in terms of real
output over the period. Output is expected to reach $74.4 billion in 2020. Furthermore, a
2011 report published by the Urban Land Institute (ULI) and Seavest Inc., “The Outlook for
Healthcare”, notes that the increase in demand for medical services - combined with shifts
in strategies to curb the rising costs in healthcare - will prompt the need for new and
refurbished medical office buildings. BLS additionally predicts that both public and private
hospitals, nursing and residential care facilities will grow by about 25 percent by 2020. If
91
The BLS Occupational Handbook is a guide to career information on a myriad of occupations, http://www.bls.gov/ooh/home.htm
129
these forecasts are correct, the healthcare industry’s role as an economic development
driver in many regions across the U.S. could ostensibly magnify in the decades ahead.
Information Technology
Items that we use every day such as computers, smart phones, tablets, etc., all increase
the demand for the people behind the devices and software. In terms of information
technology, the research and consulting firm IDC estimates that one million new
technology-related jobs will be created over the three to six years - an increase of about 10
percent.
Computer systems design and related services will see 3.9 percent annual job growth
according to BLS, as new jobs emerge for software developers and programmers, analysts
and technical support. Importantly, in the future, computer programmers might be able to
enter the field with a two-year degree instead of a four-year bachelor's degree.
Software publishers - people who produce and distribute computer software, assist with
installation and provide support services to software purchasers – will see a 3.1 percent
annual job growth through 2020, according to BLS.
The information sector also includes the telecommunications industry, in which employment
is projected to grow 8 percent because of an increase in wireless and satellite
telecommunications services. Network architects and engineers, as well as website
administrators and developers all stand to gain by this trend.
In addition, with so much of today's storage stocked on datachips, competent database
administrators (DBAs) will be increasingly sought after to build and maintain the systems
used to house that information. Database administrators will thus see ample opportunity for
growth. Moreover, the intermingling of healthcare and IT - stemming from increased
pressure to digitalize all medical records - could significantly increase the number of new
jobs in this area.
Notably, with job training programs being scaled back or eliminated and tuition costs for
higher education increasing each year, many of the positions in the IT sector will require
skills and education that are simply beyond reach for many in this unstable economy.
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Data Centers
Big data is also driving the demand for facilities as companies seek secure locations to
house their data. The growth of cloud-based technology and U.S. regulations that are
requiring that customer and corporate data be stored in different locations is also spurring
growth in this industry.92 Notably, the business software group SAP conducted a survey in
2013 and found that 92 percent of respondent firms noted an increase in the volume of data
in their organization over 2012, and 75 percent of respondents stated that they needed
more data scientists to cope with the issue for their company.
Forecasts from analysts at Canalys assert that the data center market will grow globally by
five percent per year through 2016 and that North America will be the largest data center
market. While data centers do not create a large amount of jobs, they do provide revenue
to state and local governments. State governments can reap the sales tax from the
equipment used to create the center, and local governments are able to generate property
tax revenue.
Firms and people are still learning how to manage big data, and it is likely that new
technology firms will emerge to help businesses optimize their data storage capacities. This
will also include specialists that can keep data safe.
Finance
In today’s increasingly complex financial world, more people are needed to keep track of
more money. Accountants do not just keep the books, but they also advise companies on
the best ways to deploy their cash, and accounting jobs are expected to grow 22 percent
between now and 2018, according to the BLS. In addition, a 2011 Society for Human
Resource Management survey found that that 54 percent of employers would hire more
accountants and finance experts if they could find them.
A more financially intertwined world also increases the demand for expertise in international
trade and mergers-and-acquisitions rules, and large public accounting firms are hiring
finance professionals with specializations in international deals and compliance. Forensic
92
fDi Intelligence, US cities vie for data entries, Thuermer K., October/November, 2013
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accounting is one of the fastest-growing practice niches among CPA firms, helping
financially troubled clients navigate through uncertain times.
Since the recession people began to take their investments more seriously and there is a
greater demand for financial analysts and portfolio managers. BLS predicts that personal
financial advisors will see 30 percent growth over the next decade. Financial analysts
benefit from economic downturns, as businesses need to understand the ever changing
financial products and services, and projected job growth in the field is 20 percent.
Also in the financial sector:
Actuaries – those that measure the statistical probability of certain events occurring
– have a projected growth rate of 24 percent through 2020.
Bill collectors can additionally anticipate a growth rate of 19 percent through 2018 as
a consequence of continued economic instability and the rising cost of healthcare,
that will likely result in many unpaid bills.
Construction
While construction has not fully recovered from the recession, it is making a steady
comeback, rising from 8 percent from 2012 to 2013. Business and population growth will
continue to drive the demand for new homes and office buildings, and replacing retiring
baby boomers will also be a big factor. Annual job growth in the sector is forecasted to be
2.9 percent through 2020 according to BLS, increasing to nearly 7.4 million employees in
2020, up from 5.5 million in 2010.
Moreover, the U.S. Department of Labor predicts that a substantial number of construction
managers will retire between 2012 and 2022. Job growth for managers in the field is
expected to grow by 16 percent through 2020. Also related to construction:
Cement and concrete product manufacturing will additionally see a 3.2 percent
increase in annual job growth through 2020 as part of the construction revival.
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Veneer, plywood, and engineered wood product manufacturing will experience 3.9
percent annual job growth. This is attributed to the uptick in residential construction
and renovations and a partial industrial uptick.
Leisure and Hospitality
The leisure and hospitality sector is predicted to see output grow by 3.9 percent by 2020,
according to BLS. Job growth is expected to reach nearly 14.4 million, a gain of 1.3 million
jobs. Like many sectors, replacing retiring workers in the industry will be a priority. Two-
thirds of the employment increase will be in the food and drinking services sector, in which
employment is projected to increase from the 2010 level of 9.4 million to 10.2 million in
2020. BLS estimates that real output in food and drinking services is expected to grow by
$134.7 billion, reaching $615.3 billion in 2020.
Notably, the hospitality and leisure sector is vulnerable to economic downturns as well as
natural disasters, and employment dropped significantly during the Great Recession. The
sector also includes a large population of low skilled occupations. However, those entering
hospitality management careers will need to be highly skilled in the current technology and
keep abreast of any changes throughout their careers. Moreover, technology is reducing
opportunities for hotel desk service workers. Interactions with customers are often
conducted online and through kiosks, and thus fewer front desk workers will be needed.93
Other highlights from the sector include:
Meeting, Convention and Event Planners are projected to increase much faster than
average in the next decade, by more than 40 percent.
Lodging is expected to add 375,000 jobs over the next decade at a growth rate of 8
percent.
Tourism
While tourism is not an industry, per se, but a cluster of industries that encompass various
types of accommodations - such as hotels, motels, B&Bs, campgrounds, etc. - as well as
tours, attractions, parks and recreation, museums, restaurants and retail, and
93
Trailblazers, Employment Projections for Hospitality and Tourism, 2010-2020, April 2012
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transportation, it has the potential to bring new money rapidly into a community. Tourism
also generates significant multiplier effects to other businesses such as wholesale,
agriculture, fishing, banking, insurance, airports, government jobs, media firms, utility
companies and other service providers. Notably, the U.S. Travel Association reports that in
2013, tourism and travel generated $2.1 trillion in economic output, with $887.9
billion spent directly by domestic and international travelers that spurred an additional $1.2
trillion in other industries. In addition, the industry supported 14.9 million jobs, including
almost eight million directly in the travel industry and seven million in other industries.
Department of Commerce data asserts that one out of every 18 Americans works either
directly or indirectly in a tourism-related industry. While the jobs in tourism traditionally are
not as high-paying as other professional service jobs, there is a wide variety of positions
available in tourism that are assessable for workers from entry level to highly-skilled hotel
executives, financial professionals, engineers, entertainers and gourmet chefs.
Mining, Quarrying, Extraction
The 2012 Economic Census revealed that mining, quarrying, and oil and gas extraction
industries were the most rapidly growing part of our nation's economy over the last several
years. Mining and extraction sales notably grew by 34 percent between 2007 and 2012,
and employment rose by 24 percent to 903,641, mostly in support positions.
Mining and geological Engineers forecasts are for 12 percent growth through 2022,
according to BLS. However in terms of number of jobs, the outlook is not large,
adding only about 1,000 new workers to the occupation pool.
Employment in the mining sector is projected to rise to 680,700 in 2020, an increase
of 24,800 from 2010. The oil and gas extraction industry will account for almost all
the employment gains in the mining sector.
Employment in the industry is closely related to trends in the price of the goods being
mined and to increasing energy efficiency, as prices increase. Real output in mining also is
expected to rise, by $52.9 billion, at an annual rate of increase of 1.3 percent, reaching
$441 billion by 2020.
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Education
As the number of high school graduates increases and as a greater number of older workers
seek additional training in their fields in order to keep pace with newer employees, the
demand for other educational services will grow.
Educational services - which comprise business schools and computer and management
training, technical and trade schools, other schools and instruction, and educational support
services - is projected to increase by 182,900, reaching 787,100 workers in 2020, at an
annual rate of 2.7 percent. Junior colleges, colleges, universities, and professional schools
are projected to see employment rise from the nearly 1.7 million workers in 2010 to almost
2.2 million in 2020. In addition, the U.S. Department of Labor projects that elementary
school teacher retirement nationwide will spur job growth by 12 percent from now until
2022 in that sector of the industry.
Green Jobs
The job creation potential of the green economy is significant with jobs in renewable energy
and energy efficiency taking the lead. Green jobs can range from highly technical R&D
positions, to jobs that involve the design and installation of renewable energy systems (i.e.,
solar photovoltaic, wind turbines, and/or geothermal systems), to existing jobs in which the
workforce is retrained in green processes and techniques.
Existing workers who receive “green” training may include construction workers who learn
to install solar panels; or manufacturing workers who learn to build component parts for
wind turbines; or architects, planners, and designers who learn to incorporate renewable
and clean energy technologies.
The consulting firm Global Insight projects that up to 4.2 million new green jobs could be
created in the U.S. by 2038 with half of those jobs in high-paying science and engineering,
legal, research, and consulting fields. CleanEdison94 additionally estimates that by the
end of 2020, nearly 1 million people will be employed in green jobs.
94
CleanEdison promotes clean technology and sustainable practices throughout the U.S. by providing training, education and career assistance.
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While, the greening of the economy holds forth promising new opportunities for firms and
job seekers alike, it will require an eco-system and policies to support it.
Aviation and Aerospace
Aviation
Despite rising jet fuel prices and the unstable economy, the commercial aviation industry
has been recovering, albeit slowly. While the industry posted a net profit in 2012, the
commercial passenger carrier fleet is undergoing continued transformation with mergers,
consolidations and hub changes. The mainline carriers are in the process of retiring older,
less fuel efficient aircraft, such as the 737-300/400/500 and MD-80s, and replacing them
with more technologically advanced A320 and 737-700/800/900 aircraft. In 2012, the
mainline carrier fleet mainline carrier fleet was 15.8 percent below the level it was in 2000,
due in large part to airline consolidations.95
The Boeing Corporation estimates that global cargo and passenger traffic will expand five
percent annually through 2032, requiring more workers in the industry. Boeing also reports
that the demand for qualified pilots is growing and that 460,000 new pilots will be needed
from 2012 to 2031. BLS reports that jobs for airline pilots are expected to grow by about
five percent through 2020. Job openings are mainly attributed to the retirement of older
pilots and the growing market for travel, particularly in Asia and South America.
Notably, the average age of a U.S. airline pilot in 2012 was 44.7 years old. Student pilots
are important to the viability of the aviation industry and according to statistics compiled by
the FAA’s Mike Monroney Aeronautical Center, by the end of 2012, the number of student
pilots increased by only 1.1 percent from its 2011 level to 119,946. Airlines usually require
a 4 year college degree, although some airlines will consider pilots with just two years of
college. To become an airline captain or copilot, you also need an airline transport license.
The increase of air traffic and industry growth will not impact all jobs in aviation evenly:
Commercial pilots – those pilots who fly search-and-rescue missions or work in aerial
photography, traffic reporting or crop dusting - will experience high job growth
95
Federal Aviation Administration, "FAA Aerospace Forecast Fiscal Years 2013-2033", 2013
136
through 2020, with a projected increase in demand of 21 percent, according to the
BLS.
Aircraft mechanics and service technicians are expected to see job growth by 3,000-
3,500 workers by 2020, up by only two percent.
Employment in other jobs in the airline industry - such as bag handlers, reservation
agents and flight attendants - is expected to remain at current levels through 2020,
as new employees replace retiring workers.
Aerospace
Aerospace engineers are employed in industries whose workers design or build aircraft,
missiles, systems for national defense, or spacecraft and they are employed primarily in
analysis and design, manufacturing, industries that perform R&D, and the federal
government. They additionally test prototypes to make sure that they function according to
design. Through 2022, aerospace engineers are projected to add about 6,000 jobs, which is
a 7 percent increase. Also in the aerospace industry:
Employment of sales engineers in the sector is projected to grow 9 percent through
2022, up by 5,900 employees. With more technologically sophisticated products
arriving in the market, the demand to sell products and services related to those new
products will increase.
The aerospace industry also needs assemblers and fabricators to put together
finished products and the parts that go into them. Employment of assemblers and
fabricators is forecasted to grow 4 percent through 2022, according to BLS.
Auto Industry
The U.S. auto industry has bounced back since the recession, and car sales increased in
2013, with sales reaching approximately $15.5 million, the highest in six years. The higher
demand for cars will predictably spur demand for technicians, engineers and factory
workers. Across the industry many factories today are operating at 95 percent and are
running three shifts, which was usual prior to the downturn.
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Notably, auto technician jobs cannot be outsourced overseas and cannot be replaced by
automation at this time. Local workers will be needed to fill these jobs and automotive
repair and maintenance work is projected to see 2.6 percent annual growth through 2020,
according to BLS. Vehicles today are also are more dependent on computer technology,
which changes the educational requirements for the automotive service and repair sector,
and most of those jobs require at least a two-year degree, with additional training required
over the span of a career.
Automotive equipment rental and leasing - which is considered as part of the financial
sector as well - is expected to see a jump of 3.8 percent annual growth through 2020.
Social Services
Communities across the U.S. will need more people to take care of people over the next
decade. Individual and family services are forecasted to see 5.5 percent annual job growth
through 2020. This includes social assistance services to children and youth through
adoption and foster care, drug prevention, life skills training, and positive social
development. Marriage counselors and psychiatrists are also part of this industry, as well as
counselors to help families cope with aging family members.
Creative Class
Recent BLS analysis indicates that more than 43 million people are currently employed in
creative class work, a third of the workforce. These jobs overlap a myriad of sectors in fields
like science, technology, and engineering, finance, and management, law, healthcare,
education, and arts, culture, media and entertainment.96 The U.S. is projected to add
nearly 7 million new creative class jobs by 2020. Notably, the Martin Prosperity
Institute (MPI) reports that four in 10 creative class workers today do not currently hold
college degrees.
96
Atlantic Cities, “Where to find a Creative class Job in 2020”, Florida R., March 2, 2012
138
Other Growing Sectors
Facilities support services are predicted to see a 2.9 percent annual job growth
through 2020. These are the people who take care of buildings, from security
guards to receptionists to janitors. They will be in growing demand as the rest of the
economy grows, according to BLS.
Community and vocational rehabilitation services will see 2.9 percent annual job
growth, based on BLS data. Vocational training will be in high demand in an
uncertain and shifting job market. More community services will be needed for an
aging population.
Other professional, scientific, and technical services will experience 2.9 percent
annual job growth, according to BLS. This industry provides support for other white
collar workers and includes office clerks and other technical support positions. They
will be in demand as the rest of the economy grows and gets more complex.
Commercial and industrial machinery and equipment rental and leasing will also see
2.9 percent annual job growth. Mechanization has largely diminished the necessity
jobs for factory workers, but the people who sell, install and take care of the
machines will still be needed.
Management, scientific, and technical consulting services are predicted to grow by
4.7 percent annually through 2020, due to an increasingly complex global economy
that demands highly educated professionals.
Insurance agents and insurance sales managers will see a boost in demand through
2022, to increasing by 10 percent through 2022. The U.S. Department of Labor
attributes factors such as long-term healthcare needs and Medicare Part D for the
aging population, as well as demand caused by the Affordable Care Act, for this
uptick.
Interpreters and translators are needed in places like schools, hospitals and
courtrooms. Many who work in this sector are self-employed and employment in
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this field is expected to grow 42 percent by 2020. The increasingly diverse U.S.
population, and growing international trade, will drive growth. People who
interpret in American Sign Language will also see an increase in demand.
Fluctuating Sectors
The impacts of technological change vary from industry to industry and may take a long
period of time to significantly affect any given sector. Moreover, just because a job can be
automated does not necessarily mean that it will be. Manufacturing and the utility sector are
increasingly being challenged by technological advances making some jobs obsolete, while
output increases. Concurrently, the need to replace retiring workers in occupations that are
still relevant is a problem for many employers in those sectors.
Likewise, while the assumption is that the costs of technological innovations will fall on the
workers that are less skilled, the fact is that jobs that require a high level of transactions
with other people – whatever the skill level - are the ones that will continue to evolve and
remain relevant in local economies. The chart below demonstrates that some jobs across
the wage spectrum will remain safe, despite advances in technology. Most of these jobs are
dependent are personal interactions with others.
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Furthermore, analysis of employment data from BLS and the U.S. Census currently does not
track the income of workers who are making a living working freelance by selling items on
eBay, Yahoo, Etsy or some other online vehicle. With as much as one-fifth of the American
workforce fulfilling some sort of self-employed status97, the economic contributions of these
workers who may be early stage start-ups, creative class workers, or moonlighting can be
overlooked by traditional metrics. They may even make up a large share of the gap between
measured jobs and increased productivity.98 Traditional metrics also do not take into
account the virtual workplace or the fact that today people in many professions can work
anytime, anywhere.
A Glance at Manufacturing
Over the next decade, even as the overall economy grows, there will be fewer jobs available
in manufacturing, according to the federal government. More specifically, manufacturing’s
share of jobs will drop to seven percent in 2020 from its current 8.1 percent. Invariably, as
many higher-tech firms grow, other less-competitive firms will shut down.
Notably, BLS analysis shows that manufacturing sales rose eight percent between 2007 and
2012, hitting $5.8 trillion. In the same period payrolls dropped by $20 billion though,
underscoring the trend towards automation and the need for workers with a higher skill
level to work with the complex equipment. Semiconductor and other electronic component
manufacturing are also predicted to see a big increase in output through 2020, rising by 7.3
percent, but experts do not expect employment levels to follow.
Looking towards the future, all is not grim for the sector however, and there are a couple of
factors that may very shift the trend for manufacturing jobs. Firstly, many in the current
manufacturing workforce are older and getting ready to retire, and employers nationwide
are looking for skilled workers to replace the millions of retirees that will leave the
workforce by 2020. Secondly, the reshoring trend - bringing U.S. firms back to American
shores from overseas - could open up the job market in the sector. With firms such as GE,
Ford and Caterpillar shifting some manufacturing operations back to U.S - mainly due to
increased production and energy costs overseas – some regions may see a surge in
97
“The Forgotten Fifth? Understanding and Supporting Your Community’s Independent Workforce”, Pages, E.R., 2012 98
International Economic Development Council, “Looking Around the Corner: the Future Of Economic Development”, 2014
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manufacturing jobs. In these cases, economic developers will be to have to ensure the
supply of a qualified workforce to meet industry demands.
Furthermore, the impact of 3D printing on jobs remains unknown. According to the research
of “World 3D Printing to 2017”99, market demand for 3D printing is projected to rise more
than 20 percent per year to $5 billion in 2017. Some of the fastest growth will be seen in
the medical and dental market, with opportunities in dental applications such as braces,
prostheses, crowns, bridges, dental aligners and models for dental restoration procedures.
Other leading markets for 3D printing products include consumer products (such as jewelry,
toys, fashion and consumer electronics), automotive and aerospace.
Several metro areas across the nation are also trumping the national trend towards fewer
jobs in the sector, as a recent U.S. Conference of Mayors Advanced Manufacturing Task
Force reported. Notably, according to the report, metro area manufacturing employment
has expanded by an average annual rate of 1.7 percent over the last three years, and
energy intensive manufacturing employment will expand by more than one percent annually
nationwide through 2020.
Utilities
New technologies have led to more efficient plants that require fewer workers based in
newer facilities. The utility industry is projected to lose 35,500 jobs, falling to 361,400 (a
0.9-percent decline) by 2020, according to BLS analysis. Despite the drop in employment,
real output is expected to rise to $431.7 billion in 2020, an increase of $77.5 billion, or two
percent per year. Employment in electric power generation, transmission and distribution is
expected to decrease more than employment in any other sector in the utility industry.
However, as in other sectors, pending retirements will increase the turnover for utility
positions in the coming decade. In 2008, BLS reported that 53 percent of the utility
workforce was age 45 or older, impacting jobs of all levels in the industry, from support
staff to technology workers to analysts and managers. Moreover, water and sewage
systems are projected to see an employment increase over the next decade, rising from
46,900 to 59,000, adding 12,100 jobs by 2020. Population growth in some areas - as well
as the increase of Environmental Protection Agency (EPA) and state regulations - could also
spur the demand for workers the industry.
99
http://www.reportsnreports.com/reports/272154-world-3d-printing-to-2017.html
142
B. Job Outlook by Location
Economic development professionals strive to develop and sustain strong local
economies that attract talent and firms. Diversified economies that have reasonable costs-of
living with a broad-cross section of workers tend to maintain steady flows of business
investment and remain resilient to economic challenges. The ability to transform and adapt
to new technology gives communities a competitive edge over regions both in the U.S. and
overseas, and it is likely that those places that are more innovative and versatile will
continue to attract business and create jobs in the future.
The forecasts and trends in industry growth provide practitioners with not only with a vision
of what jobs may expand in the future, but also a sketch as to where they might be.
Notably, while a city, region or state may be on the top of a list today, it does not mean
that economic prosperity in the future is guaranteed. Economic development professionals
will have to work hard to ensure a skilled labor pipeline to meet industry demands and keep
up with advances in technology in order to maintain any current competitive advantage that
may be perceived.
The following section is intended to indicate where in the U.S. jobs in some key industries
are forecasted to expand in the next decade.
Metro Job Growth
While BLS makes occupational predictions for the nation as a whole, industry growth shapes
local economies and job growth varies greatly across the nation based on local industry
specialization, the local workforce, and other factors such as the cost-of-living and the
business climate. According to BLS, the top 10 U.S. metros with the greatest projected job
growth through 2020 are100:
Washington-Arlington-Alexandria, DC-VA-MD-WV
Bethesda-Rockville-Frederick, MD
Colorado Springs, CO
New York-White Plains-Wayne, NY-NJ
El Paso, TX
100
Of the 100 largest U.S. metros
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Springfield, MA
Baton Rouge, LA
Tacoma, WA
Baltimore-Towson, MD
San Antonio-New Braunfels, TX
The large proportion of professional service jobs in the Washington-Arlington-Alexandria
metro area is a key reason for the capital region’s top spot position. On the other end of
the spectrum, BLS has designated the top 10 metros with the slowest projected job growth
through 2020 (among the same 100 largest U.S. metros). They are:
Greensboro-High Point, NC
Gary, IN
Los Angeles-Long Beach-Glendale, CA
Grand Rapids-Wyoming, MI
Columbia, SC
Detroit-Livonia-Dearborn, MI
Cincinnati-Middletown, OH-KY
Milwaukee-Waukesha-West Allis, WI
Oxnard-Thousand Oaks-Ventura, CA
Salt Lake City, UT
Notably, Los Angeles’ low ranking is attributed to BLS’s forecast for a decline in apparel
manufacturing and a slight decline in movie industry employment. With other locations
offering attractive incentives and tax breaks for filming, Hollywood producers are flocking
not only to other states, but to other locations outside of the U.S., such as Canada and
Mexico.
On the regional level, BLS envisions that the Phoenix-Las Vegas region, California’s Central
Valley, Denver and Colorado Springs, the San Antonio-Dallas corridor, and Washington, D.C
will lead the nation among regional job growth by 2020.
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Downtown Attraction
The renewed popularity of downtowns has impacted the relocation decisions of many firms
to move from suburban locations to downtown areas. Significantly since the recession, this
trend towards urban areas and downtowns has left millions of square feet of suburban
corporate headquarter space vacant. The lure of young talent is a factor for many of these
companies, as well transit issues and the general push toward more environmentally
conscious development, driven by efforts to reduce energy use and lower carbon emissions.
Many communities are offering tax exemptions or other incentives to help write down the
cost of relocating a corporate headquarters.
As firms increasingly move to downtowns - and both millenials and retiring baby boomers
are choosing to reside in walkable cities - they are becoming major hubs of job growth.
According to the International Downtown Association (IDA), LED data and data from
OnTheMap101, America’s 150 largest cities account for 30 percent of all wage and salaried
employment in the U.S. today.102 Moreover, almost two-thirds of the jobs are in
commercial downtowns and town centers filled with professional, business, insurance and
financial services firms; real estate, communications, energy and technology employers;
and leisure, retail and hospitality industries.103 The one-mile area surrounding and including
the densest job nodes represents 48.1 percent of the jobs in these cities, accounting for
14.4 percent of all U.S. jobs. About 20 percent of jobs are found near an anchor institution
and include jobs at all levels in education and healthcare. The IDA concludes that office and
research parks in suburban-style campuses house the balance of jobs in those large metro
areas.
Not all cities are downtown-centric however, and across the major cities in the U.S. there
are some disparities in terms of downtown popularity for firms. For instance, the Flat Iron
District in Manhattan is becoming a new urban headquarter hotspot for corporations like
Time Warner and L’Oreal, and Chicago has also seen an influx of firms moving from the
suburbs to downtown. Nashville is attracting a diverse group corporate headquarters in a
range of industries in both in the downtown as well as the greater metro region, and in
101
This tool shows where workers are employed and where they live through an interactive and geographically flexible mapping interface. The maps, charts, and reports also provide detailed worker characteristics such as age, earnings, NAICS industry sector, as well as information on race, ethnicity, and educational attainment. 102
International Downtown Association, “Downtown Rebirth: The Live-Work Dynamic in 21st Century U.S. Cities”, October 2013 103
Ibid
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Atlanta firms have a preference for suburban office markets along the city’s northern
perimeter.
In order to keep jobs in cities and downtowns and spur growth, EDOs will need to
continuously work with local stakeholders to match the workforce with industry needs. An
attractive quality-of-life with a sound infrastructure and amenities will be vital to
maintaining a pipeline of talent and firms in the next decade.
Data Centers
While data center development is forecasted to boom over the next decade, on their own
they do not typically create a large number of jobs. However, they do create and attract
well-paying, high-tech jobs, as well as ancillary industries. Data centers also have a
tendency to cluster by location and support big firms from most sectors - ranging from
healthcare to finance, to logistics to entertainment to manufacturing - that are all
increasingly seeking reliable data centers.
Moreover, data centers create key benefits for developing infrastructure (such as roads,
fiber optics and water) in a community without affecting labor flow traffic, thus creating
positive advantages for incoming companies. State and local governments can also greatly
benefit from tax revenues from data centers and more communities are trying to lure firms
to set up data centers in their community. Cisco, for example, already operates 51 data
centers across the U.S., and most of these data centers average between 10,000 and
25,000 square feet. Since they consume a large amount of energy to run, locations where
power is less expensive and broadband connectivity is strong are more favored by firms
seeking a location for a data center.104
Manhattan has drawn firms like Google and Microsoft for data centers, and New Jersey is
benefiting from the proximity to New York, with its cheaper real estate. New Jersey is also
offering tax incentives to attract those firms that are looking at Manhattan.105 In addition,
states that run along the Rocky Mountains are gaining investment due to the boom in data
centers, as those mountain states have reasonable utility rates, lower property taxes than
cities along the coasts, and less risks of natural disasters than some other locations.
Oracle, for example, is developing a major data center in Utah, and Iowa and Nebraska 104
Digital Reality, North America Campos Data center Demand Survey Results, January 2013 105
fDi Intelligence, US cities vie for data entries, Thuermer K., October/November, 2013
146
have also drawn investments from Microsoft, Facebook and Google. Notably, Council Bluffs,
Nebraska plans on developing a business park solely devoted to attracting data centers.
In addition, since the recession, Loudoun County in Northern Virginia has emerged as one of
the biggest data center hubs in the country, housing 5.2 million square feet of data centers
within the county’s 521 square miles. Approximately 70 percent of all internet traffic flows
through Loudoun County data centers every day, according to the county department of
economic development. In 2013 the industry contributed about $5.5 million to the county’s
annual tax revenue.
Manufacturing Jobs
Manufacturing broadly impacts a myriad of industries from high to low technology and jobs
in the sector are peppered across the entire country. From late 2009 through 2013, the
largest amounts of manufacturing jobs were located in Michigan, Texas, Indiana and Ohio.
Firms in those states are manufacturing a wide assortment of products ranging from autos,
machinery, furniture, tools and toys, to computers, computer software, plastics and piping,
to chemicals, oil, gas, food and liquor. Texas’ job growth is notably driven by manufacturing
linked to the energy sector.
The chart below, created by the National Association of Manufacturers, illustrates the top 20
states for manufacturing between 2009 and 2013:
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Undoubtedly, the uptick in auto manufacturing had a positive impact on jobs in a few of
those states. Some notable auto industry announcements from 2013:
Chrysler announced that it would add 3,500 workers to plants in Indiana, Ohio and
Michigan to make transmissions and to build Jeeps and Ram pickups.
Ford announced that it would hire 2,200 workers in information technology, product
development and manufacturing, as well as 1,400 factory workers and recalling
another 2,000 laid-off employees, in Michigan and Missouri.
GM was predicted to hire 4,000 engineers and computer professionals at four
technical centers in Arizona, Georgia, Michigan and Texas to develop software and
other innovations, spurring growth in the sector.
Honda was slated to add 500 jobs in 2013 at factories in Ohio, Indiana and Alabama
as it moves more production to North America.
While Michigan benefited from the turnaround in the auto industry, the state is additionally
a manufacturing leader nationwide in terms of furniture, machinery, chemicals,
pharmaceuticals, lumber, tourism, energy and farming
Impact of Reshoring
The reshoring trend could greatly enhance the nation's ability to revitalize manufacturing,
create quality jobs and increase exports. One of the largest factors in determining
manufacturing costs is the price of energy within a country or region, and the development
of natural gas and oil drilling in the last several years could be a game changer for U.S.
manufacturing. Today, American energy prices have remained very low compared to other
parts of the world.
Significantly, the Boston Consulting Group (BCG) estimates that the U.S. could regain 2.5
million to 5 million jobs by 2020 due to reshoring. Lower labor costs is also a factor, and
certain states in the south and southeast have had the biggest advantage for attracting new
manufacturing plants over the past few years. States such as Alabama, Georgia, Louisiana,
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Mississippi, North Carolina, South Carolina, Tennessee and Texas have benefited from this
trend.
The BCG reports that rural counties in South Carolina have proven to be particularly
attractive to overseas companies looking to reshore. The state is actively luring off-shore
manufacturers that may be interested in moving production closer to consumers. The South
Carolina Manufacturing Alliance reports that manufacturers ranging from automotive to
paper production have re-located in the state, accumulating nearly $19 billion in capital
investment since 2008, and creating over 62,000 jobs.
According to BCG estimates, once all costs are taken into account, some states – including
South Carolina, Alabama and Tennessee – could end up being among the least expensive
production sites among the developed countries. States with right-to-work laws additionally
are attractive to manufacturers seeking to relocate.
States Transform
Not all states benefited from a turnaround in the auto industry or have rich energy
resources. Many states and several of the U.S. territories lost manufacturing jobs at the
onset of globalization due to less expensive alternatives overseas. Tobacco, garment
manufacturing, textiles and furniture manufacturing were among bedrock industries in some
states that bled jobs in last decade, leading to high unemployment and distress in many
communities. States that have employed strategies for training and innovation have been
able to transform local economies, developing a new basis for prosperity and job growth.
North Carolina is one state that is pining hopes on the aviation industry to make up for the
manufacturing job losses in the last decade due to globalization and the Great Recession.
According to U.S. Census Bureau, exports of civilian aircraft, engines and parts from
North Carolina increased by 14 percent in 2012 over 2011. In 2012, the aviation
sector accounted for almost four percent of the state’s exports, and predictions are
for continued growth. Training the workforce to fill these jobs has been a priority and
the Guilford Technical Community College near the Piedmont Triad International
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Airport, has benefited from foundation grants106, federal grants and local corporate
support to fuel growth in the aviation cluster there. Today there is a local workforce
of over 6,000 in the sector and firms like TIMCO Aviation Services - that repairs
planes from all over the world - and other aviation or parts manufacturing companies
such as B/E Aerospace, Honda Aircraft Co. and Triumph Actuation Systems are
increasing their share of overseas clients, boosting exports and job growth.
The automotive industry is transforming manufacturing in Mississippi and workforce
development is critical to the state for expanding the industry.
In 2003, Nissan North America Inc. decided to take a chance on Mississippi and
began manufacturing operations in the state in 2003 in Canton. Over a ten year
period, the company has produced more than two million vehicles and made more
than $2 billion in investments in region. Other automotive firms followed Nissan,
including Toyota Motor North American, Inc., PACCAR Inc. and GreenTech
Automotive Inc. The state has worked hard to develop customized job training
programs with 15 community colleges and the state’s universities to meet industry
demands. Notably, in 2010, the Center for Manufacturing Excellence opened,
providing cross disciplinary education in high-tech manufacturing. The Mississippi
Polymer Institute also researches and develops new composite materials for the
automotive and other high-tech industries there. Complementing the workforce
development advances in the state, Mississippi’s competitive utility costs and easy
permitting system work in the state’s favor as well.
In Colorado, an advanced industry strategy was developed as part of the Colorado Blueprint
initiative launched in 2011.
The Colorado Blueprint initiative aims to create and retain jobs through education
and training, nurturing innovation and technology in communities throughout state.
Notably, in 2013 the Colorado Office of Economic Development and International
Trade (OEDIT) announced the first round of grantees of the new Advanced Industries
Accelerator Grant Program – as part of the Blueprint initiative - to support key R&D
intensive sectors, ranging from aerospace to medical devices. The grants107 are open
106
Guilford Technical Community College (GTCC) received a $932,500 grant from the Cemala Foundation in 2013. The contribution is targeted to expand GTCC’s Aviation programs. 107
Colorado’s Proof-of-Concept grants
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to Colorado research universities, federal labs located in Colorado, and other private,
nonprofit and for-profit labs with valid technology transfer offices to help foster pre-
commercialization research and commercialization preparation. In 2013, Tennessee
created a similar initiative focused on its auto manufacturing industry, to foster
better paying jobs over the next decade.
In Virginia, a center for applied manufacturing was established to bridge the gap between
research performed at universities and product development performed by companies.
The Commonwealth Center for Applied Manufacturing (CCAM), in Prince George
County, accelerates the transition of research innovation from the laboratory to the
factory floor. The only collaboration of its kind in North America, the CCAM pools
resources to pursue university research authorized by member companies,
increasing the value of the R&D dollar. Members include global firms and three
Virginia universities. The project was supported by the Commonwealth of Virginia,
which provided $22M in infrastructure development. In alignment with Virginia’s
strategy for job creation, the CCAM is expected to spur job growth in the state
through its workforce development programs and by attracting new members that
may be candidates for future manufacturing investments.
Ensuring a skilled labor pipeline for local manufacturing firms is essential. With the visions
of shuttered factories only a decade behind them, a key struggle for some communities has
been convincing stakeholders that advanced manufacturing has a long and prosperous
future. Many still view manufacturing as a dirty, hard or dangerous job, rather than the
more technical and innovative profession that it has become. Practitioners will need to not
only advocate for more training in STEM skills, but they will also have to promote the value
of these new manufacturing jobs to local leaders and stakeholders. From the community
college level, to vocational schools to universities, educators and economic development
professionals will need to adjust programs and curricula to meet industry needs and sustain
a resilient local economic base.
Metro Manufacturing
The Brookings Institution report, “Export Nation 2013”, demonstrates that manufacturing
exports in the top 100 metros grew to record levels in 2012, with transportation equipment,
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petroleum and coal products, and computers and electronics accounting for nearly half of
post-recession export growth.
However, in 2013 only 12 of the top 100 metro were able to maintain the 15 percent
annual growth rate required to double U.S. exports according to the National Export
Initiative (NEI), suggesting there is still a lot more effort required to fully support the
expansion of exports and manufacturing at the metro level.
According to Brookings, the top metro areas on track to double exports are:
Youngstown, OH with non-ferrous metal products
New Orleans, LA with petroleum and coal products
Baton Rouge, LA with petroleum and coal products
Detroit, MI with motor vehicles
Salt Lake City, UT with non-ferrous metal products
Ogden, UT with non-ferrous metal products
Houston, TX with petroleum and coal products
Toledo OH with petroleum and coal products
Grand Rapids, MI with motor vehicle parts
El Paso, TX with non-ferrous metal products
Charleston, SC with aircraft products and parts
Louisville, KY with motor vehicles
Moreover, much of the growth was driven by large firms in dynamic metros. In order to
ensure and maintain growth in those metros in the future, smaller firms will need assistance
in developing their export capacity.
Energy Boom Fuels Growth
Exponential growth in U.S. natural gas production is fueling jobs and population in some
regions, as well as boosting manufacturing. The U.S. Census Bureau cited the energy boom
in the Plains states as the main driver for job and population growth in the region between
2012 and 2013. The Bureau of Economic Analysis additionally found that personal income in
those states producing natural gas excelled the rest of the nation, with North Dakota
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leading the group with income growth of 7.6 percent in 2013, followed by Utah, Idaho,
Texas and Oregon.
Several counties in or near the Great Plains appear in the lists of fastest-growing counties.
Among the top of the list are:
Williams County, ND
Stark County, ND
Kendall County, TX
Meade County, SD
Hays County, TX
MoneyRates.com recently named North Dakota the best state for young adults for economic
opportunity. In addition to the state’s meager 2.7 percent jobless rate in October 2013, the
state also has a higher proportion of 18 to 24-year-olds than any other state.
The local energy market has additionally benefited some communities along and near the
Gulf Coast, with more firms expressing interest in building or expanding ethylene production
facilities near shale gas production sites there. The Gulf of Mexico is also thriving due to oil
exploration there. The unemployment rate in the Houma-Bayou Cane-Thibodaux metro area
– which includes Lafourche and Terrebonne parishes - has been a mere 2.8 percent
because of the offshore oil drilling activity there.
If the shale energy boom continues on track, it could potentially create one million more
manufacturing workers by 2025. A recent PricewaterhouseCoopers, study “Shale Gas: A
renaissance in U.S. manufacturing?” estimated that abundant and affordable supplies could
translate to an annual cost savings of $11 billion for U.S. manufacturers, significantly
strengthening the U.S. economy. According to the study, companies that sell goods such as
metal tubular products, as well as drilling and power-generation equipment are likely to
experience at least short-term growth in sales as domestic natural gas production rates
move higher. Companies that produce petrochemicals and fertilizer, as well as food
producers and glass manufacturers, can also foresee boosts in sales and investment.
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According to Area Development, the top seven metropolitan statistical areas in the Plains
states for economic and workforce growth – including jobs in energy, manufacturing and
government - are (from first to seventh)108:
Bismarck, ND
Fargo, ND
Grand Forks, ND-MN
Lawrence, KS
Lincoln, NE
Manhattan, KS
Rapid City, SD
Tourism Spurs Growth
Tourism and travel combined is America’s largest service sector export, accounting for 25
percent of U.S. service exports and seven percent of all exports (including goods and
services), according to the Department of Commerce. Notably, some local economies
depend on tourism as their main industry. Alaska, Colorado, Florida, Hawaii and Nevada are
among states that count on tourism as a prime economic driver.
A 2010 report by Applied Analysis, “The Relative Dependence on Tourism of Major U.S.
Economies”, ranked Las Vegas as the most tourism-dependent economy, followed by
Orlando and Atlantic City. Las Vegas ranked first in leisure and hospitality employment as a
percentage of total employment, at 29.3 percent. Atlantic City ranked second at 27.4
percent, followed by Orlando (18.9 percent), Honolulu (14 percent) and New Orleans (12.9
percent). Las Vegas also ranked first in leisure and hospitality average annual wages
followed by Atlantic City, Orlando, Los Angeles and New York.
In many parts of the U.S. and particularly in the less developed areas, tourism marketing is
a function that is provided by economic development organizations. In more established
destinations, tourism is promoted by convention and visitors bureaus (CVBs) or destination
marketing organizations (DMOs). Whether or not there is a distinct organization to manage
108
Based the magazine’s Leading Locations for 2012 study.
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tourism marketing, the opportunities for economic developers to support tourism
development include:
Monitoring tourism statistics and trends - such as hotel occupancy rates, and taxes
paid - in order to help with local long-term planning.
Promoting workforce development programs that prepare local residents for jobs in
tourism, such as internships in hotels or CVBs, and partnerships with local
educational institutions and trade schools that offer tourism-related courses.
Encouraging investments in public facilities to make them more welcoming to
visitors, including the preservation of nature and heritage sites, enhancements to
historic downtowns, parks, museums, public picnic facilities, etc.
Moreover, agritourism is successful in many parts of the country and is a rising trend. The
Napa-Sonoma wine region of California is a well-known example, attracting five million
people each year to visit its vineyards and wineries.
The Shenandoah Valley of Virginia is another newer agritourism area. The region
generates an estimated $35 million annually due to its high concentration of farms
catering to residents of Virginia and elsewhere. According to a Shenandoah Planning
District Commission report, agritourism supported over 800 jobs in the region in
2011. The region recently received a $60,000 grant from the Building Collaborative
Communities109 program to foster the growth of the industry. Funds will be allocated
to develop partnerships, create business support services for farmers and
agritourism operators, and market the Valley’s agricultural offerings.
Creative Class Jobs
Based on BLS data, Richard Florida and the MPI looked at projected creative class job
growth across U.S. metros. The biggest regions are also the ones that will gain the most
109
Building Collaborative Communities is a broad-based program that brings together resources from a number of state entities, such as the Virginia Economic Development Partnership, the Department of Housing and Community Development, the Virginia Community College System and other agencies as appropriate.
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creative class jobs over the next decade, including New York, Los Angeles, Chicago,
Washington, D.C., Houston, Atlanta, Boston, Dallas and Philadelphia.
However, when MPI looked at growth in terms of percentage growth increase - rather than
the number of jobs - other smaller metro areas were highlighted. The increase in creative
class jobs by percentage is demonstrated on the MPI map below:
Notably, Rochester, Minnesota shows up as the biggest projected creative class job gainer
by 2020, with a projected 19.6 percent increase in creative class jobs. The other smaller
metro areas with predicted growth between 18 and 19 percent include Ocala, Florida; Punta
Gorda, Florida; Goldsboro, North Carolina; Steubenville, Ohio; Lima, Ohio; Sioux Falls,
South Dakota; Dothan, Alabama; and Huntington, West Virginia.
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C. Implications for Economic Developers
The recession heightened the importance of being attentive to the conditions of local
industries and discerning how companies operate. Knowledge of industry shifts, the way in
which some sectors are growing and others failing, and business trends that lean toward
consolidation and acquisitions provide economic development professionals with
opportunities to refine and expand workforce development and recruitment efforts.
Understanding the complexities of the global marketplace and how it impacts their
community is essential to maintaining a competitive advantage and sustainable
investments.
The analyses of growing industries and determining where growth will take place can be
valuable assets to economic developers. However, challenges like man-made disasters or
unforeseen economic crises will influence the value of any prediction made today, and
unforeseen disruptions have the potential to dramatically change industry decisions and
output over the next decade. In addition, with a myriad of forecasts to examine and lists to
pore over, at times it can be confusing for practitioners to reach any conclusion about the
path that they should follow to attain job growth in future.
Ranking Innovation
A recent analysis on innovation underscores the latent confusion linked to some of these
rankings. Innovation is commonly associated with scientific discoveries. But it can also be
as simple as how a product is introduced into the marketplace. Innovation thrives in places
with bountiful STEM professionals, as well as in places that have the support of state and
local governments. Innovation has traditionally been an important factor for sustained job
creation, fostering well-paying jobs and higher standards of living.
Notably, in 2013, a Bloomberg study110 analyzed all 50 states and the District of Columbia
based on several criteria including: the concentration of STEM workers; R&D spending; the
percentage of public technology companies; gross state product based on each employed
resident; and patent approvals, and came up with a list of the most innovative states in the
nation.
110
http://www.bloomberg.com/visual-data/best-and-worst/most-innovative-in-u-dot-s-states
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According to the Bloomberg analysis, the top ten states for innovation are: Washington,
California, Massachusetts, Connecticut, Oregon, New York, New Jersey, Colorado, Maryland
and Minnesota.
Washington State received the top spot in the ranking.111 Conversely, the states in the
bottom of the Bloomberg rankings are: West Virginia, Oklahoma, Montana, Kentucky,
Nevada, Louisiana, Tennessee, Wyoming, Mississippi and Arkansas.
For economic developers, these rankings can be perplexing, particularly due to the fact that
Washington, D.C. has shown up in other lists as top spot for job growth in the next decade,
and yet only placed 20th on Bloomberg's overall innovation rankings. Furthermore, despite
the strides that some states – such as Michigan, Indiana, Ohio and Texas - are making in
manufacturing, they are not included in the top 10 states of the Bloomberg list. These
discrepancies can be attributed to the fact that innovative activity of certain regions in each
state tipped the scales for the state rankings, in one direction or another. For instance,
much of the innovation in California is concentrated in Silicon Valley, which helped the state
to rank high on the percentage share of all utility patents.
Therefore, assessments on which places in the country are investing in innovative eco-
systems for the future will be a more favorable indicator than past rankings for practitioners
in determining where job growth may be.
Role for EDOs
Over the next decade, the traditional workforce eco-system will continue to evolve and
technology will give workers more flexibility and a choice of where and how they want to
work. As such, economic developers will need to capitalize on local amenities as an
extension of the workplace, incorporating quality-of-place initiatives in order to attract and
retain firms and talent. Moreover, practitioners will need to transition from the traditional
mind-set of counting the number of jobs per project to a focus on fostering an eco-system
that can support and sustain those industries that will spur a broad range of jobs with
opportunities for growth.
111
It is useful to note that while Washington State did not top other states in any single category of criteria, its total score (of 83.25 based on 100) brought it to the top of the list.
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Practitioners will also need to refine their know-how in terms of closing gaps and resolving
shortages of talent in the workforce pipeline before they become impediments to growth.
Nurturing a skilled workforce to support the growth and success of key industries - such as
advanced manufacturing and materials, business services, high technology and life sciences
– is critical for the long term resiliency of local economies.
Facilitating Collaboration
Economic developers can serve as drivers of effective innovative eco-systems, and
practitioners have a key role to play in fostering the process by facilitating collaboration
among all stakeholders at all levels of government. EDOs today already serve as the
linchpin between community colleges and industry, bridging gaps to assist in the
development of tailored training and certification programs to provide a ready-to-go
workforce. Continued collaboration with educators and industry to ensure that the
workforce of the future is developing pertinent technological skills should be incorporated
into any future strategy. These partnerships can be highly effective in creating sustainable
communities with well-paying jobs.
Importantly, practitioners can educate community stakeholders about emerging industries
and workforce opportunities, using local workforce data to inform new and existing
businesses about opportunities in their local labor market.
Harnessing Technology
The ability to harness the power of emerging technology will be a vital advantage for all
sectors across the economy in the future, including the economic development profession.
Organizations and firms of all sizes - as well as cities and regions throughout the globe - will
need to effectively communicate via virtual marketing and learn how to efficiently manage
content and data. Economic developers will additionally need to tap into new sources of
information – such as data sets to chart business activity - to stay abreast of industry
change and to seek out new opportunities.
The updated U.S. Cluster Mapping Project112 is one tool that can be vital to economic
development professionals in terms of measuring performance and competitive
112
http://www.clustermapping.us/home/
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strength to help better foster regional strategies. Based at the Harvard Business
School, and supported by Economic Development Administration, it aims to find
effective quantitative measures to understand regional economies. The
website, www.clustermapping.us/home/ examines states, economic areas,
metropolitan statistical areas (MSAs) and counties across the U.S. Data from the
website may be illustrated in charts or graphs, and can delve into subsets of
clusters of specified regions, comparing information such as wages and patent
performance across regions.
Enhancing Local Assets
Economic development professionals have a vital role to play in creating an environment
that will enhance a community’s ability to attract in-demand workers and firms.
Communities throughout the U.S have unique assets that appeal to different types
investors. Formulating a cohesive region-wide strategy that builds on community assets is
crucial to long-term sustainability. Some ways that EDOs can do this includes:
Economic developers can actively support a green supply chain network by assisting
large and small firms to leverage green technology and take advantage of energy
efficiency assessments and upgrades to buildings.
EDOs can effectively assist community colleges in creating programs to meet
industry demands, and they can additionally help to leverage federal, state and local
financial resources available for workforce-related issues, due to their familiarity with
state and federal agencies.
To attract and retain youth and talent, some EDOs have created internship programs
that recruit talented students to work with local businesses. These interns benefit
from learning the high-level skills that employers demand, and communities benefit
when students decide to stay and work for the businesses with which they interned,
or search for a position with another local company. This is especially important in
rural areas.
While strategies will differ among EDOs, practitioners hold the unique position of serving as
the connectors and conveners of all stakeholders in the community. Economic development
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strategies should always be flexible enough to adapt to any interruption in the local
economy, whether natural or man-made. Establishing a strong base of quality jobs that can
create wealth in the future will improve a community’s resiliency for the long-term, and
enhance the competitive advantage of regions across the nation.
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III. IEDC’s Commitment to Diversity
Updated Draft Framework for IEDC Diversity-Inclusivity Initiatives 2104
IEDC has long espoused, encouraged and fostered inclusivity and diversity among its Board
of Directors and membership. For years, IEDC has worked diligently and purposefully to
ensure that women and minorities are well-represented not only on the Board of Directors,
but also in highly visible and important roles at annual and regional conferences, and in key
organizational committees and programs. Over the years, many chairs of IEDC committees
have been women and minorities.
Just one example of how IEDC has expanded its active championship of diversity is its
current work with Delaware State University, an institution of higher learning that is among
the premier Historically Black Colleges and Universities in the U.S. IEDC’s work with
Delaware State entails assisting the university to develop a training program for economic
developers. The economic developers that go through the university’s program will likely be
100 percent African American.
In 2011, IEDC’s board established a Diversity Committee to provide a formal structure and
method to institutionalize this commitment. The goals of this committee are:
To improve the diversity of the board membership.
To provide coaching and guidance to individuals to support their endeavors to attain
leadership positions in the economic development profession.
To uphold and advance the standards of excellence and commitment to the IEDC
organization that have exemplified board service, ensuring that individuals who serve
are fully committed to the organization, demonstrated by their consistent and active
participation in the organization as conference hosts, AEDO communities, EDRP
members, Certification holders and graders, Chairs of Advisory Committees.
In 2013 IEDC’s Nomination Committee:
Nominated a woman to Vice-Chair of the board, making her likely to be chair in 2015.
Nominated two women and a minority male to serve as Committee Chairs. This is the
first time in the history of the organization that there were all women or visible
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minorities in these key leadership positions. This will chart the course for future
leadership.
These and other endeavors are yielding positive results as evidenced by the following:
o In 2011, 21 percent of IEDC’s board was comprised of women; in 2014, that
participation will have increased to 35 percent.
o In 2011, 20 percent of IEDC’s board was comprised of minorities; in 2014, the
minority composition of IEDC’s board will reach 25 percent with the addition of a
Latino board member; an additional African American and an Asian American.
Statement of Intent and Purpose
From IEDC’s perspective, diversity is all inclusive. Participation among racial minorities in
the economic development profession has evolved over time, advancing during the 1970s
and 1980s when urban revitalization/redevelopment were key Federal priories to address
racial/social strife in America’s cities, poverty, and the lack of economic opportunity. Also
in the late 1970s and 1980s, women and minorities began to “break through” into top jobs
in the economic development arena – jobs that historically had been held by a
predominance of Caucasian men.
As the profession has evolved, with ever more sophistication and specialization, more and
more minorities and women have established careers in economic development. Still, there
is a dearth of racial and ethnic minorities, as well as women, who hold top jobs in economic
development nationally.
Also in recent years, the IEDC has expanded its reach to recruit and connect young
professionals into economic development. The most coveted cohort that companies, cities,
and nations are pursuing is the college-educated, degree-holding 25 to 34 year old. For the
profession to thrive, it is imperative that young people are introduced to the career
pathways and opportunities that exist in economic development. Studies show that
mentoring is a key factor in successfully cultivating, attracting and retaining talent,
especially among young professionals from the Gen Y and Gen Z cohorts.
Mr. William Sproull, Chairman of IEDC, has made the inclusion of engagement of young
professionals in economic development a top priority during his tenure. He also recognizes
the critical importance of inclusivity for the entire profession, embracing the inclusion of
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gender, ethnic, minority, youth and immigrant professionals who seek careers in economic
development and are interested in becoming leaders nationally and globally.
Maintaining a Focus on Awareness
America is changing. The nation’s minority population has grown exponentially in the last
decade. Today, racial and ethnic minorities comprise 37 percent of the nation’s
population.113 The fastest growing demographic cohorts in the U.S.’s population are
minorities, and the trajectory is pronounced and irreversible. More than half of America’s
population is female.114
As the pre-eminent organization for the economic development profession, IEDC is
committed to further elevating the discourse about the critical need to ensure that economic
developers reflect the population of the communities, regions and states that they serve.
At its 2014 Leadership Summit, IEDC will continue to bring focus to inclusivity and diversity
with a series of roundtables, featuring speakers/experts who have valuable insights and
information to share about why and how the economic development profession can and
should promote opportunities for the advancement of women and minorities in top posts.
Approach
Convene/schedule panel presentations
o 2014 Leadership Summit - Shattering the Glass Ceiling: a panel
presentation featuring women who have “been there, done that” who will share
some hard-earned advice and valuable insights about how women can advance
into top economic development executive positions.
o 2014 Spring Conference – Minneapolis/St. Paul, June 1-3, 2014
The Talent Equation: a panel presentation focusing on the urgent need for
and proliferation of talent recruitment and retention strategies across
America, including best practices to cultivate, attract and retain young
professionals. 113
U.S. Census Bureau, USA Quick Facts. Retrieved September 19, 2013. http://quickfacts.census.gov/qfd/states/00000.html 114
Ibid
164
Sector-Based Talent Development Strategies: a panel discussion
featuring senior HR executives from leading firms as well as program
directors of economic/workforce development organizations who have
successfully addressed skills shortages.
o 2014 Annual Conference – Dallas/Ft. Worth, October 19-22, 2014
Attaining Diversity and Inclusivity at the Top: a discussion led by Dr.
Ioanna Morfessis featuring top executives from leading national and global
HR/executive talent and search firms to discuss the major opportunities,
leading trends and best practices in promoting diversity and fostering
inclusivity.
Convene roundtables that address specific aspects of inclusivity/diversity
o 2014 Leadership Summit - Mentoring Matters: Opening up Career
Pathways in Economic Development: a discussion led by young professionals
in economic development leadership positions that will focus on the importance of
mentoring.
o 2014 Leadership Summit - Mentoring Matters: Opening up Career
Pathways in Economic Development: Shifting Sands – Embracing Change
and Inclusivity: a discussion featuring racial/ethnic minorities who hold/held
top posts in economic development in some of the nation’s largest markets,
sharing lessons learned, lessons they want to forget.
Conduct/publish research
o Identify the “population” of women and minorities in the profession, including
those who hold top posts in economic development organizations, public and
private, at all levels.
o Define the opportunities and challenges confronting women and minorities in the
economic development profession.
o Define the opportunities and challenges of young professionals in the profession,
165
as well as barriers that inhibit young people from pursuing the profession.
Expand IEDC professional training and certification for women, minorities
and youth
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