BASIC PRINCIPLES OF AND TRENDS IN LOCAL ECONOMIC DEVELOPMENT

1
BASIC PRINCIPLES OF AND TRENDS IN LOCAL ECONOMIC
DEVELOPMENT

• The University of Tennessee Institute for Public
  Service
• County Technical Assistance Service
• In partnership with
• Tennessee Dept. of Economic Community
  Development

2
Agenda

• 10 Noon Basic Principles and Trends in Economic
  Development
• Chuck Shoopman, UT Institute for Public
  Service
• Noon Lunch
• 1 3 Economic Development Support
• Panel Discussion
• Kingsley Brock, TN Dept. of Economic and
  Community Development
• Joe B. Brandon, TN Dept. of Labor and
  Workforce Development
• Ray Knotts, TVA Economic Development
• Beth Phillips, UT Institute for Public Service

3
Basic Principles and Trends in Economic
Development

• What is Local Economic Development?
• What Key Economic Trends Will Impact My
  Community?
• Globalization
• The Economic Growth Slowdown
• The New Economy
• The Service Economy
• Retooling the Workforce
• Quality of Life Focus
• Support for Local Economic Development Programs
  and Assistance

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What is Economic Development?

• Economic development is the process of creating
  and sustaining wealth. We know that it is
  occurring when
• New jobs are being created
• Existing jobs are being maintained
• The standard of living is improving

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ECONOMIC DEVELOPMENT IS HAPPENING WHEN

• the standard of living is increasing
• a real increase in the level of average
  household income is occurring
• the equity of income distribution is improving
• the local tax base is keeping pace with the
  mounting cost of government services
• business and industry are creating quality jobs
• the local quality of life keeps getting better

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INCREASING INCOMES

• The increase in local income is derived primarily
  from
• Companies that produce goods and services that
  are sold outside the community, bringing in new
  sources of income
• Tourists that bring new money into the community
• Active retirees who spend money locally that
  was earned elsewhere
• Reducing the leakage of purchases outside the
  community

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U.S. and Tennessee Personal Income Per Capita,
95-05
Source Bureau of Economic Analysis
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ECONOMIC DEVELOPMENT

• The process is facilitated through
• Development of a skilled workforce
• Investment in the physical infrastructure
• Improvement of the business environment
• Availability of marketable land and buildings
• Maintenance of the environment
• Improvement of the quality of life
• Promotion of the community and region

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WHAT KEY ECONOMIC TRENDS WILL IMPACT MY COMMUNITY?

• Globalization
• The Economic Growth Slowdown
• The New Economy
• The Service Economy
• Retooling the Workforce
• Quality of Life Focus

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THE GLOBAL ECONOMY
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THE GLOBAL ECONOMY

• Many manufacturing jobs and service jobs moving
  overseas to less expensive locations and new
  markets
• Successful companies have to be able to compete
  in the global marketplace

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THE GLOBAL ECONOMY

• Most new manufacturing jobs in the U.S. are from
  foreign investment
• Automotive
• Chemical
• Pharmaceutical
• Electronic
• Many of these firms are locating in rural
  communities (168 Japanese firms employing 42,000
  Tennesseans)

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THE GLOBAL ECONOMY

• The Internet, satellites, and other advances in
  telecommunication enable companies to fully
  integrate their operations globally

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THE ECONOMIC GROWTH SLOWDOWN
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ANNUAL GROWTH IN PER CAPITA INCOME -- U.S.,
1950-2004
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U.S. EMPLOYMENT GROWTH RATE (ANNUAL 1960-2004)
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THE LABOR FORCE SLOWDOWN

• Why isnt the labor force growing as fast as it
  did in the 60s and 70s?

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16 TO 24 YEAR OLDS AS OF LABOR FORCE --
1960-2012
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THE KNOWLEDGE ECONOMY
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WHATS NEW ABOUT THE KNOWLEDGE-BASED ECONOMY?

• Increasingly digital and information driven
• Transformation to e-businesses that use
  Internet-platforms for integrating their entire
  operation
• Innovation leading to highly customized
  information, services, products

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WHATS NEW ABOUT THE KNOWLEDGE-BASED ECONOMY?

• Highly networked entrepreneurs who take advantage
  of technology advances
• Growth areas characterized by high concentrations
  of knowledge workers an ability to attract
  retain these workers
• Skilled labor force is highly mobile

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THE KNOWLEDGE-BASED ECONOMY -- MORE THAN
TRADITIONAL HIGH TECH

• ALL industry sectors are transforming themselves
• into information/knowledge industries
• Examples
• Entertainment (digital effects, Synthespians)
• Distribution (supply-chain management, logistics)
• Financial Services (on-line brokerages, banking,
  insurance)
• Healthcare (genetic engineering, telemedicine,
  biomedicine)
• Agriculture (precision ag, use of remote sensing,
  Internet-based purchasing and sales)

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E -MANUFACTURING

• Manufacturing becoming e-businesses
• Integrated software systems
• Flexible manufacturing systems
• Supply chain management
• Lean manufacturing and Six Sigma
• Mass customization
• Direct manufacturing from digital design files
  to product
• Globally integrated production
• Virtual production emphasis on out-sourcing

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TELECOMMUNICATIONS IS THE KEY INFRASTRUCTURE
CONSIDERATION

• Availability of high-speed, broadband telecom
• The future is wireless
• Technical support needs to be readily available

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SERVICE ECONOMY

• 94 of all new jobs over the next 10 years
• 70 of U.S. employment

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SERVICES DOMINATING JOB GROWTH (1990-2004)
Source U.S. Bureau of Labor Statistics
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SERVICE ECONOMY

• Rapid growth in productivity
• Highest job growth in
• Computer-Related
• Personnel
• Management Consulting
• Professional Services
• Health Care
• High-growth jobs are high wage, narrowing the
  wage gap with manufacturing

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COMPARISON OF AVERAGE HOURLY EARNINGS, 2004
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RETOOLING THE WORKFORCE
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WORKFORCE AND EDUCATION

• Education is tied to economic well being
• Most jobs require post-
• secondary education
• Skill requirements are
• changing quickly

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Required Job Skills are Increasing
100
Unskilled
15
90
35
80
60
70
60
Skilled
65
50
45
40
30
20
20
Professional
20
20
20
10
0
1950
1990
2000
Source U.S. Bureau of Labor Statistics
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EDUCATION PAYS
U.S. Census Bureau, 2005
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EDUCATION COMPARISON2003
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RETOOLING THE WORKFORCE

• Increased demand for technical professional
  skills
• Need for continuing education
• Increased emphasis within companies on training
  retraining

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GEOGRAPHIC CONSIDERATIONS THE WORKFORCE

• Companies will focus on areas with pools of
  skills and graduating students
• Quality of life is increasingly important for
  recruiting retaining technicians professionals

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BRAIN DRAIN

• Among the Souths adult population, from
  2000-2005 those moving out of state included
• Only 8.5 of those without a high school degree
• 14.4 of those with a bachelors degree
• 15.5 of those with a graduate or professional
  degree

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STRATEGIES FOR ECONOMIC DEVELOPMENT

• Recruitment
• Retention Expansion
• Entrepreneurs Start-ups
• Community Development

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BUSINESS RECRUITMENT AND ATTRACTION

• Defining your product what can your community
  offer to a new business?
• Identifying your target audience what types of
  economic activity are you most likely to attract?
• Clarifying your message what are you trying to
  promote about your community?
• Developing your marketing plan what marketing
  techniques will give you the best results, given
  your resources?

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EXISTING BUSINESS RETENTION AND EXPANSION

• Growth of existing business and industry account
  for the majority of new jobs and investment.
• Companies must be globally competitive.

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EXISTING BUSINESS PROGRAM

• Provide business assistance
• -- Marketing
• -- Loans
• -- Training programs
• -- Buyer-supplier programs
• -- Export assistance
• -- Access to technology
• Remove local obstacles to
• business

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EXISTING INDUSTRY PROGRAM BENEFITS

• Stop loss of direct indirect jobs
• Less expensive to assist local firm expand than
  to recruit new ones
• Potential for entrepreneurial spin-offs from
  retained firms
• A happy local firm projects an important positive
  image for outside firms

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ENTREPRENEURS BUSINESS STARTUPS
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SMALL BUSINESSDOMINANCE

• Small businesses (under 100 emp.)
• create two-thirds of new private sector jobs in
  America
• employ more than half of all workers
• account for more than half of the output of U.S.
  economy
• Only a small percentage (3 to 6) of small firms
  grow rapidly (gazelles) David Birch

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SMALL BUSINESSDOMINANCE

• High growth in home-based business
• over ½ of small businesses
• Require business assistance and financing
• High risk and high rate of failure
• More innovative produce 13 times as many
  patents as large companies do

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ENTREPRENEURIAL DEVELOPMENT

• What attracts entrepreneurs?
• A local leadership that is committed to building
  a positive business environment
• An attractive community that has a good quality
  of life
• A good educational system
• Opportunities for technical training and support
• Access to capital
• Small business support systems and an effective
  local network for sharing information
• High speed, broadband telecom and ISPs
• Availability of suitable buildings and/or
  business sites for expansion

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SMALL BUSINESS ASSISTANCE

• Incubator
• Financial Assistance
• Marketing Assistance
• Management Assistance
• Educational Workshops
• Entrepreneurial Training

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QUALITY OF LIFE
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QUALITY OF LIFE

• Availability of quality housing at reasonable
  costs
• Strong basic skills in education
• Presence of colleges universities
• Low crime rate
• Good medical health care

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QUALITY OF LIFE

• Variety of retail customer services
• Lodging restaurants
• Attractive clean environment
• Good traffic flow
• Range of cultural recreational opportunities

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COMMUNITY DEVELOPMENT

• Build a product that can compete successfully
  for jobs, business investment, tourists, retirees
• Involve local leadership effectively to determine
  priorities, initiate action, and sustain momentum
• Access federal, state, and other outside
  resources to expand the possibilities
• Minimize barriers to development

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COMMUNITY LEADERSHIP IS CRITICAL TO ECONOMIC AND
COMMUNITY DEVELOPMENT

• WHO NEEDS TO BE INVOLVED IN LOCAL ED?
• Local government
• Chambers of commerce
• Economic and community development orgs.
• Utilities
• Existing business and industry
• Faith-based institutions
• Educational systems
• Financial institutions
• Civic leaders
• Citizens
• Federal and state government

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Questions and Comments
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Economic Development Support

• Importance of Partnerships
• (Local, Regional, and State)
• How do the State and TVA work with local
  communities?
• What programs are available to enhance local
  economic competitiveness?

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Economic Development Support

• Technical Assistance
• Marketing and Recruiting
• Existing Industry Services
• Small Business Development
• Workforce Development
• Incentives

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Panelists

• Kingsley Brock
• Administrator of Business Development
• TN Dept. of Economic and Community Development
• Joe B. Brandon
• Assistant Commissioner
• TN Dept. of Labor and Workforce Development
• Ray Knotts
• Senior Advisor, Economic Development
• Tennessee Valley Authority

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Thank You

• Questions and Comments?