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Economic Development in the Next Economy: Charting a New Path to Growth and Prosperity
- 1. ECONOMIC DEVELOPMENT IN THE NEXT ECONOMY Charting a New Path to Growth and Prosperity Metropolitan Policy Program at BROOKINGS @BrookingsMetro @Amy_Liuw Westminster, CO • October 2, 2014 1
- 2. On the Surface, the Economy Has Recovered from the Great Recession 5,000,000 0 -5,000,000 -10,000,000 +865,000 jobs 2007 2009 2014 Metropolitan Policy Program at BROOKINGS Post-Recession U.S. Jobs Gap Since start of recession Source: Current Employment Statistics. 2
- 3. However, We Still Face a Growth Problem 5,000,000 0 -5,000,000 -10,000,000 Post-Recession U.S. Jobs Gap Since start of recession 2007 2009 2014 Metropolitan Policy Program at BROOKINGS 5.6 million missing jobs Payroll Count Jobs Gap Growth-Based Jobs Gap Source: The Hamilton Project analysis of Congressional Budget Office and Current Employment Statistics data. 3
- 4. 40% 30% 20% 10% 0% -5% 1990 2000 2012 Metropolitan Policy Program at BROOKINGS 36% 0% -4% We Also Face a Wealth Problem Change in Output Per Capita and Median Household Income Since 1990 Output Per Capita Median Household Income Output per capita: +$14,589 Median income: -$2,120 Source: Current Population Statistics, BLS Consumer Price Index, Census Population Estimates, Moody’s Analytics. 4
- 5. Finally, We Face an Inclusion Problem Income Growth During Recovery 2009-2012 Metropolitan Policy Program at BROOKINGS Unemployment Rate by Age Recession through 2013 2007 2012 Source: Current Population Statistics. 23% 16% 2007 2012 16 to 19 years old 6% 4% 0.4% 31.4% Top 1 Percent Bottom 99 Percent Source: Saez and Piketty, “ The Evolution of Top Incomes in the United States,” 2013. 13% 8% 2007 2012 20 to 24 years old 25 and Older 5
- 6. 1 2 1 2 3 The U.S. needs a new model of economic growth Regions will be key to delivering inclusive growth and opportunity Regional leaders must embrace new “habits” of economic development to improve prosperity 3 Metropolitan Policy Program at BROOKINGS 6
- 7. 1 2 3 The U.S. needs a new 1 model of economic growth Metropolitan Policy Program at BROOKINGS 7
- 8. Pre-Recession Economy DEBTSPECULATION CONSUMPTION DEBT DEBT CONSUMPTION CONSUMPTIONSPECULATION DEBT DEBT DEBT Metropolitan Policy Program at BROOKINGS Next Economy INFRASTRUCTURE HUMAN CAPITAL MANUFACTURING INNOVATIONSTEM ADVANCED ENERGY EXPORTS R&D OPPORTUNITY We Need New Growth Strategies 8
- 9. At the Same Time, We Need to Adapt to Macro Forces Globalization Technology Demography Metropolitan Policy Program at BROOKINGS 9
- 10. Global Competition Is Fierce, with Growth Shifting Away from the United States Share of Global Economic Growth Metropolitan Policy Program at BROOKINGS Middle Class Consumption 5.9% North America 53.2% China & India 2050 US Canada Mexico Source: Homi Kharas, “The Emerging Middle Class in Developing Countries,” OECD, 2010. 19.7% US 2013 – 2018 28.2% BIC Countries Source: International Monetary Fund, World Economic Outlook Database, April 2014. 10
- 11. Technological Advances Are Rapidly Disrupting Labor Markets $33 trillion Metropolitan Policy Program at BROOKINGS /YEAR McKinsey & Company: maximum estimated global economic impact of 12 technology platforms through 2025 Source: James Manyika and others, “Disruptive Technologies,” McKinsey & Co., 2013 Share of U.S. Jobs at Risk of Automation 47% 2013 – 2033 Source: Carl Benedikt Frey and Michael A. Osborne, “The Future of Employment,” 2013. 11
- 12. The United States Is in the Midst of a Huge Demographic Shift 24.5% Metropolitan Policy Program at BROOKINGS 53.7% minority population share of U.S. workforce by 2038 Source: Brookings/William Frey analysis of U.S. Census 2010 data. today’s U.S. workforce that will reach retirement age by 2030 12
- 13. Rapid Diversification Currently Comes with Wide Educational Achievement Gaps Metropolitan Policy Program at BROOKINGS Bachelor’s Degree Attainment 2012 50.5% Source: Brookings analysis of American Community Survey data. 29.1% Total Asian 32.5% 18.7% 13.8% White Black Hispanic 13
- 14. Trade Innovation Talent Leaders will invest in the drivers of growth and prosperity. Metropolitan Policy Program at BROOKINGS 14
- 15. Trade Supports Jobs in Non-Traded Sectors Metropolitan Policy Program at BROOKINGS Traded-Sector Job = Local-Serving Jobs Source: Ezell, Stephen and Robert Atkinson, 2012, “Fifty Ways to Leave Your Competitiveness Woes Behind,” ITIF. 15
- 16. Global Trade Creates Jobs, Generates Income, and Supports High Wages Metropolitan Policy Program at BROOKINGS International Exports’ Economic Impact 17.0% Manuf. Trade Wage Premium 29.9% GDP Growth ‘09 – ‘13 8.1% Direct Job Growth ‘09 – ‘13 20.0% Services Trade Wage Premium Sources: Moody’s Analytics; Brookings “Export Nation”; J. Bradford Jensen, “Global Trade in Services,” Petersen Institute for International Economics, 2011; David Riker, “Do Jobs in Export Industries Still Pay More?” ITA, 2010. 16
- 17. Innovative Industries Drive Value Creation and Productivity Growth Metropolitan Policy Program at BROOKINGS 60.0% Advanced Industries Share of U.S. Totals 37.9% 30.3% GDP Patents Share of GDP Growth ’09 – ’13 14.5% Share Job Growth ’09 – ’13 81.3% R&D 8.8% Jobs 17.8% Engineers *Advanced Industries spend over $450 on R&D per job annually and over 20 percent of jobs are in STEM occupations. Source: Brookings Institution forthcoming. 17
- 18. Talent Drives Prosperity and Fuels Innovation and Productivity Growth Metropolitan Policy Program at BROOKINGS Median Annual Wages by Education and Occupation In 1,000s $57 $50 $70 $29 $74 $53 $93 $45 High school or equivalent Associates or some college Bachelors Graduate Non-STEM STEM Source: Jonathan Rothwell, “The Hidden STEM Economy,” Brookings, 2012 18
- 19. Jobs in STEM Fields Are Growing and Accessible Metropolitan Policy Program at BROOKINGS 26 million STEM Jobs 20% 50% STEM Jobs as a Share of All Jobs Share of STEM Jobs Requiring 4-Year Degree Source: Jonathan Rothwell, “The Hidden STEM Economy,” Brookings, 2012 19
- 20. Infrastructure and Governance Enable Economic Growth and Prosperity Metropolitan Policy Program at BROOKINGS Infrastructure Governance 20
- 21. Together These Key Drivers Create Opportunity, Productivity, and Prosperity Infrastructure Governance Metropolitan Policy Program at BROOKINGS Trade Prosperity Innovation Talent Enablers Source: Brookings Institution, RW Ventures, and McKinsey and Company. 21
- 22. 1 2 2 3 Regions will be key to delivering inclusive growth and opportunity Metropolitan Policy Program at BROOKINGS 22
- 23. The U.S. Economy Is Made Up of a Network of Diverse Metro Economies Metropolitan Policy Program at BROOKINGS 23
- 24. Economic Challenges Vary Post-Recession Jobs Recovery by Metro Area Metropolitan Policy Program at BROOKINGS Pre-Recession Peak to 2014Q2 Recovered Not recovered Denver +5.5% Grand Junction -8.8% Portland +1.6% Detroit -9.0% Cleveland -3.8% 24
- 25. The Economic Recovery Has Looked Different Percent Change in Poverty Rate by Metro Area Metropolitan Policy Program at BROOKINGS 2000 to 2013 Increased < 50% Increased 50-100% Increased 100% or more Denver +89.4% Portland +71.4% Detroit +54.5% Cleveland +39.2% 25
- 26. The Largest 100 Metro Areas Concentrate Our National Assets Metropolitan Policy Program at BROOKINGS 26
- 27. Metropolitan Policy Program at BROOKINGS 75% GDP 66% population 12% land area The Largest 100 Metro Areas Concentrate Our National Assets 27
- 28. The Nation’s Key Economic Drivers Are Concentrated in Metro Areas 66% 72% Metropolitan Policy Program at BROOKINGS Largest Metros’ Share of U.S. Market Assets* 74% Bachelor’s Degrees 92% 82% Population Patents 75% Graduate Degrees 90% Advanced Industries *The 100 largest U.S. metropolitan areas. Source: Brookings analysis of US Census Bureau, FAA, BLS, and BEA data. Air Freight Services Exports 28
- 29. Metropolitan Policy Program at BROOKINGS “Something has gone terribly wrong when the biggest threat to our American economy is the American Congress.” Senator Joe Manchin III 29
- 30. Metropolitan Policy Program at BROOKINGS Cities and Metros States Feds 30
- 31. 1 2 3 3 Regional leaders must embrace new “habits” of economic development to improve prosperity Metropolitan Policy Program at BROOKINGS 31
- 32. “Without economic development, economic growth is limited.” — Dr. Maryann Feldman Heninger Professor of Public Policy at UNC Chapel Hill Metropolitan Policy Program at BROOKINGS Source: Maryann Feldman and others, “Economic Development: A Definition and Model for Investment,” Working paper, 2014. 32
- 33. Traditional Approaches to Local and Regional Development Are Insufficient Starbucks Stadia Metropolitan Policy Program at BROOKINGS Stealing Businesses 33
- 34. Local Economic Developers Need to Focus on the Real Sources of Job Growth Metropolitan Policy Program at BROOKINGS Source: Jed Kolko, “Business Relocation and Homegrown Jobs, 1992-2006,” Public Policy Institute of California, 2010. 56.3% job creation from startups 1.9% job creation from attraction 41.8% job creation from firm expansion 34
- 35. Dozens of Metro Areas Are Pursuing Transformative Approaches Portland Export Plan Los Angeles LA 30/10 Metropolitan Policy Program at BROOKINGS Houston Neighborhood Centers New York City Applied Sciences Northeast Ohio Manufacturing Network Denver FasTracks Chicago Business Plan Detroit Innovation District 35
- 36. Metropolitan Policy Program at BROOKINGS 7 Habits of Highly Effective Regional Leaders 36
- 37. Region Value People Trade Networks Outcomes Chicago: 3 states Metropolitan Policy Program at BROOKINGS Assets Habit 1: Embrace Regional Markets 3rd largest metropolitan economy in the United States 6 satellite cities 14 counties 554 municipalities 37
- 38. Region Value People Trade Networks Outcomes Metropolitan Policy Program at BROOKINGS Assets Habit 2: Compete on Value, Not Cost 38
- 39. Region Value People Trade Networks Outcomes Metropolitan Policy Program at BROOKINGS Assets Registered Apprentices and Programs 500,000 375,000 250,000 125,000 0 2003 2005 2007 2009 2011 2013 Habit 3: Prioritize People, Not Just Profits 40,000 30,000 20,000 10,000 0 Apprentices Programs Source: U.S. Department of Labor. 2003 to 2013 39
- 40. Habit 4: Invest in Market Assets, Do Not Just Recruit Them Region Value People Trade Networks Outcomes Albany Nano-Tech Metropolitan Policy Program at BROOKINGS Assets Impact of Relocating Firms* 15,536 23,158 2004 – 2009 $146,488 $127,654 IN OUT IN OUT Move-related Jobs Sales Per Job Source: Brookings and research partners’ analysis of NETS data on inter-metropolitan firm relocations in a large name-withheld midwest metropolitan area. 800,000 sq ft integrated research, development, prototyping and educational facilities $1 billion from State of New York $13 billion invested by 300+ affiliated firms 2,600 R&D jobs on site Focus on nanotechnology “cluster” is building a base of manufacturers, suppliers and engineering facilities - including a $4.6 billion investment from Global Foundaries in Saratoga County 40
- 41. Habit 5: Invest in Trade, Not Consumption 2% tradable sectors’ share of net job growth in the U.S. between 1990-2008 Region Value People Trade Networks Outcomes Metropolitan Policy Program at BROOKINGS Assets Michael Spence, “The Evolving Structure of the American Economy,” CFR, 2011 41
- 42. Habit 6: Build Networks Instead of “Going Alone” Region Value People Trade Networks Outcomes Metropolitan Policy Program at BROOKINGS Assets Government Economy 42
- 43. Habit 7: Track Long-Term Outcomes, Not Just Short-Term Tactics Region Value People Trade Networks Outcomes Metropolitan Policy Program at BROOKINGS Assets Track What Matters Objective: Improve economic and governance capacities to move regional economies onto a faster, more sustainable long-term growth trajectory. Performance Metrics: • Economic Growth • Jobs, Output, Startups • Wealth and Income • Productivity, Output per capita, Wages, Income • Equity and Inclusion • Labor Force Participation, Unemployment, Socio-Economic Disparities vs. Traditional Metrics “High performance economic development is the dedicated pursuit of any objective, no matter what the current objective may be, coupled with measured progress along the way.” Performance Metrics: • website unique visits • conversations with companies that are relocating Source: withheld. or expanding • jobs announcements • investment announcements • jobs created per week 43
- 44. Metropolitan Policy Program at BROOKINGS “Begin with the end in mind.” — Dr. Stephen R. Covey Author, “Seven Habits of Highly Effective People” 44
- 45. ECONOMIC DEVELOPMENT IN THE NEXT ECONOMY Charting a New Path to Growth and Prosperity Metropolitan Policy Program at BROOKINGS @BrookingsMetro @Amy_Liuw Westminster, CO • October 2, 2014 45