Do Unions Contribute to Economic Growth?

The traditional business-economic response is that labor unions benefit their members but they contribute to cost increases in companies that hurt corporate profits, which reduces available capital for investment. You may want to read this article, which suggests that under some circumstances labor unions contribute to economic growth.

The argument put forward is that since consumer spending is two-thirds of our economy, it helps if workers have more money to spend. That, of course, does not answer the question of how companies can remain competitive if they pay workers more. So, where are we? I would argue that you can afford to pay more for something, including labor, that adds to productivity. Skilled workers in manufacturing do that. Knowledge workers in manufacturing and services do that. Read the article and see what you think.

Louisville, KY Launches New
Job Tracking Website

This is one you may want to investigate if you are looking for a innovative but also sensible way to use the power of the Internet to track jobs in your area. The site's address is: www.kentuckianaworks.org.

Click here to read the article.

Economic Development's "Quiet Crisis":
Turbulence in Charlotte

The Cleveland Plain Dealer has undertaken a massive special series over the past year on Greater Cleveland's "quiet crisis," which is not so quiet any more. These two words seem to describe what may be happening in economic development nearly everywhere.

Just about the time you think you have everybody pulling in the same direction, people start pulling things a part. That's the message in Charlotte, NC, which is trying to keep its Regional Partnership in tact. Regionalism is not easy, especially with a scarcity of business investment projects to go around. Look around the country. Last Friday's lead ED Futures article spoke to the growing turbulence and unrest within the economic development industry from coast to coast.

Hey folks, don't despair. Fifty percent of the problem is the economy and the high level of risk and uncertainty out there. The other 50 percent is that economic development needs to move to a new business model that allows communities, regions and states across the U.S. and internationally to work together in addressing the major external factors driving growth in most local economies. None of us can do it alone.

Get the lowdown on Charlotte here.

Western North Carolina Gets It

A recent economic forum in Asheville summed up the mountain region's future economic prospects in one word: Knowledge!

"We keep harping on this, but it's knowledge," said Jim Roberts, executive director of the Mountain Council for Economic Development and the Blue Ridge Angels Investor Network. "There are no low-tech industries anymore, just low-tech companies in high-tech industries."

Jim, you are so right.

Go here to read more.

Oil Prices Jump and Its Not Just
Because of Iraq

According to the Economist, it's not just Iraq that is causing oil prices to move upward. Three other factors also come into play.

"One is the coldest winter in the northern hemisphere for many years. Demand for oil, always higher during the northern winter, has risen sharply. Another factor is the big drop in American oil stocks, now at their lowest level for years. Even the Bush administration’s declared readiness to release some of America’s massive contingency reserve of oil has failed to calm fears about the impact war might have on already tight supply. The third factor keeping the oil market tight is supply constraints outside the Middle East. The lengthy strike in Venezuela had a big impact, especially in America, its main customer. Although the strike has finally ended, experts reckon it could be months before Venezuelan exports are back to pre-strike levels. And traders are now getting rattled about possible interruptions to supplies from Nigeria if there is trouble there in the run-up to the presidential election in April."

Go here to read the article.

Science Parks

Looking for information about science parks across the world? You need look no further. Click here and learn about the International Association of Science Parks.

You will be amazed at how many innovative things are being done in this arena outside the United States. I especially like IASP's search engine designed to help corporate site locators find their way to the right science park.

European SME Study Hobbled and Humbled
by Research Data and Methods

A recent study of business demography in nineteen European countries has concluded that right now, given differences in data and study methods, an effective measurement of small and medium-sized (SME) business activity in Europe cannot be undertaken. That problem did not stop the European Commission from trying, but it was a humbling experience to say the least.

Good research is not easy, especially on relatively new issues, like the role of entrepreneurship in economies. Yes, many earlier researchers have tackled that issue, but not in a full-blown international environment.

Having reviewed the EU's study report I can understand the struggle, especially in attempting to undertake a 19-nation assessment. However, this is a useful piece of work, and actually one that teaches us here in the U.S. a trick or two about entrepreneurship and small business research.

My impression is that the Europeans will make better headway next time around in trying to understand the business demography of the EU. It is an important issue.

Go here to download the report.

Europe Gives Greater Attention
to Entrepreneurs

The European Commission just released its new Green Paper on Entrepreneurship, which is very well written and full of useful information about entrepreneurial development and is applicable anywhere in the world.

The Green Paper outlines what is entrepreneurship, what are its constituent parts, and it explains the importance of entrepreneurship and assesses the state of entrepreneurship in Europe.

Much of the research conducted on European entrepreneurship points to growing interest in it as a future regional economic development strategy. Yet, Europeans are still slow to start new businesses, especially when compared the the United States.

Two motivations are driving the Europeans' desire to jumpstart entrepreneurship: 1) need to diversify the European economy in new market and technological directions; and 2) need to increase the role of creativity and innovation in European industries.

Get the report here.

What Motivates Civic Entrepreneurs?
By Alec L. Hansen, Ph.D.
President, Economic Competitiveness Group, Inc.
GUEST AUTHOR

Around the world, the phenomenon of cluster-based economic development is gaining recognition. From Silicon Valley and Connecticut, to Mexico and Morocco, economic development professionals are finding that the competitiveness framework can revitalize regions and accelerate growth. However, many accounts of cluster development and regional competitiveness skirt around the fundamental driver of successful clusters: the role of the civic entrepreneur. These are the private-sector business owners and managers who bring their vision and commitment into the arena of regional cluster development.

How can we find them if we are not looking for them?

Development planners and government officials who find themselves poised to launch a cluster process often approach the prospect with some trepidation. They read about private sector involvement, even private sector leadership, but then find themselves organizing meetings in which only a handful of participants are actually from the private sector, but which are nevertheless called “cluster meetings.” Often private sector leaders are propped up as chairpersons of committees that they are not really leading, and they founder in that role, ineffectual and frustrated.

When one questions the organizers, one discovers that many of these well-intentioned officials think the notion of a private sector-led process is essentially rhetoric, and that clusters are driven by the usual cast of characters in most economic development programs – planners, officials, politicians, consultants and association executives – with a few business leaders included to lend legitimacy to the process. Perhaps unconsciously, they don’t believe that a busy, profit-oriented business owner would choose to spearhead an economic development initiative in his or her region.

Many accounts of clusters around the world gloss over the role of these private sector leaders. This article will attempt to rectify this omission, by focusing on the role of the civic entrepreneur, and considering the motivations of these remarkable individuals. With insights into what can bring out the best in potential cluster leaders, planners hoping to facilitate lasting change in their regions will be better able to support these civic entrepreneurs – the individuals whose actions are ultimately most likely to result in a transformation of a region’s economy.

Civic Entrepreneurs are generally CEOs and business owners, but can also be government officials, educators, union officials, or non-profit leaders. “When others see problems and gridlock, civic entrepreneurs see opportunity and mobilize their communities on a path forward.” Source: Henton, Melville and Walesh, Grassroots Leaders for a New Economy: Civic Entrepreneurs are Building Prosperous Communities, Josse Bass Public Administration Series, 1997.

The story of the rise of wine industry in California exemplifies the classic role of a civic entrepreneur.

How a Civic Entrepreneur Transformed a Region and an Industry

Robert Mondavi is the founder of the Napa Valley wine cluster in California, just north of San Francisco Bay. The Mondavi family was a well-established wine-making family in Northern California, owning thousands of acres. Their wines were what could best be described as “jug wines,” as were the other wines produced across the United States at that time. In 1962, Robert Mondavi took a trip to Europe where he was inspired by the European process of making wine. He felt that the Napa Valley region, with its intense sunlight tempered with fog near the harvest season, could also be a premier wine-making region, but that the approach to making wine would need to be completely transformed.

Mondavi’s older brother Peter did not share his vision, and in 1966 the two split. Peter kept the estates and wineries, while Robert bought 160 acres in Napa Valley – a tiny plot in a commodity business where quantity, not quality, was the traditional route to profits. Robert’s goal, however, was to combine European craft and tradition with the latest American technology, management, and marketing know-how.

To establish himself in the first year, he worked closely with top grape growers in the area. In doing this, he began to change the relation between growers and producers, opening up and transforming the grape growing industry. He introduced educational programs for the growers that would allow them to understand the “correlation between the quality of the grapes and the quality of the wine.”

He was also devoted to research and development, and wanted the winery to become a pioneer in research and a gathering place for the greatest minds in the industry. Mondavi’s vision was not just to produce the best wine in the world, but to ensure that wineries all over Napa Valley were operating at that level. Because a single winery has a difficult time making a name for itself, wines, like so many products, are known by their regions. Mondavi’s open and inclusive style was not a charitable activity, but motivated by his self-interest: how could he produce and market a premier product unless growers of grapes, suppliers of barrels, label producers, agronomists – in short the entire cluster surrounding him, were operating at his level?

Over the next decade, his techniques spread to other winemakers, and by 1976, Mondavi and his colleagues were ready. On May 24 of that year, a few bottles from Napa reached the legendary blind wine tasting competition in Paris, organized by the famed wine merchant Steven Spurrier. When the results were tallied, Napa wines had swept the top rankings. Among the white wines, Chateau Montelena’s Chardonnay captured 1st place, with other Napa wines capturing 3rd and 4th places as well. Among the reds, Stag’s Leap Wine Cellars’ Cabernet captured first, placing ahead of Chateau Mouton-Rothschild. Such a strong showing from a previously unknown region was a phenomenal surprise. “The French monopoly [on fine wines] was crushed permanently.”

In an ironic twist of fate, the shipment of crates from the Mondavi winery were delayed en route, and arrived too late to be judged.

However, Mondavi had achieved his goal – the recognition of Napa Valley as a premier wine-making region. Robert Mondavi wines won numerous awards in subsequent years, and his Special Reserve now sells for $200 a bottle. More importantly, the economy of the entire region has been transformed, with a quality of life unsurpassed among agricultural regions in the world.

Mondavi’s vision, combined with the opportunity afforded by his dispute with his brother, was responsible for a revolution in an agricultural region. Are other industries similarly susceptible to the actions of a few individuals?

The Interaction between Visionary and Catalyst

The arrival of a leading researcher in 1956 to Palo Alto, California was another “random” catalytic event, one that helped tip the region around Stanford University from a panorama of apricot orchards to a landscape dotted with Apple Computers, silicon chip fabricators and software powerhouses: Silicon Valley. The visionary in this story was Fred Terman, Dean of Stanford University's Department of Electrical Engineering. His vision of close industry-university partnerships had already encouraged several spin-offs, including William Packard and David Hewlett, but the Valley had not yet taken off.

The big break came when Terman convinced Dr. William Shockley, the inventor of the electronic transistor, to come to Palo Alto, rather than MIT, where the leading electronics researchers at that time were based. In 1956, Shockley Transistor Laboratory was established in the new Stanford Industrial Park, with a brain trust of young engineers from MIT and other East Coast universities. Their work was set to revolutionize the electronics industry, allowing the shift from bulky vacuum tubes to tiny circuits embedded in silicon.

However, frustrated and alienated by Shockley’s caustic personality, eight of the bright-est of these electronics specialists left Shockley to form Fairchild Semiconductor Corporation. It became the first firm to manufacture exclusively in silicon, and rapidly developed into one of the largest firms in the California electronics industry. More than 70 high-tech companies, such as Intel and Motorola, are direct or indirect descendants of Fairchild.

Again, it was a combination of vision (Terman’s), and a catalyst (the arrival of Shockley and the fact that he couldn’t hold on to his talented colleagues) that spawned the economic miracle known as Silicon Valley.

Is it possible to replicate Mondavi’s success in other regions?

Robert Mondavi and Fred Terman were probably not familiar with the term “cluster” – they simply implemented a vision for their regions. The proposition behind cluster-based economic development is that there are potentially dozens of Robert Mondavis and Fred Termans in a given region – leaders who have vision and access to resources that can transform their region, but who lack a catalyst to get them started. Where a natural catalyst is absent, a cluster-based approach, mobilized by the economic development community, can act as the catalyst, propelling these civic entrepreneurs to implement their dreams.

Want to launch a cluster process? Give civic entrepreneurs a genuine role

For every account of cluster development processes supporting private sector leaders as they transform their regions, there are an equal number of well-intentioned efforts that started off with similar enthusiasm, but led nowhere. The difference often lies in the role in which private business leaders have been cast. If cluster organizers see private sector leaders as symbolically important, but too busy to get deeply involved, or only motivated by charity, cluster initiatives will be run by administrative organizers – not a bad outcome if the organizers are talented, but seldom transformational.

What if cluster organizers push the envelope, and genuinely trust that a handful of private sector leaders in their region are potential Robert Mondavis? The organizers become a catalyst for action, using cluster facilitation methods to craft events and structures that will convince industry leaders to take the plunge. Essentially, the cluster framework allows entrepreneurs to commit to realizing their economic vision – sometimes a vision they have held close to the vest for many years, but had always been reluctant to implement for fear that the risks were too great.

Industry leaders will commit to the process when they are convinced that their time will not be wasted, and that their leadership will be acknowledged rather than subverted by a state-driven, political agenda. By respecting the true motivation of these civic entrepreneurs, their sustained participation (and hence the successful transformation of the region) is more likely.

Ultimately, most private sector leaders are willing to invest their time in cluster development because of two intertwined motivations: a drive to make the region, and hence their company, an industry leader (the profit motive), and a desire to make the region sufficiently prosperous and economically diverse that his or her children will have desirable opportunities to return to after college.

Cluster organizers need to be willing to make room for local business leaders, and trust the vision and initiative of these civic entrepreneurs. When private sector leaders learn about the concepts and sense tangible support from cluster organizers, the vision will unfold – organically and powerfully, from the ground up.

Alec Hansen can be reached by email at this address: ahansen@ecgroup.com. Visit the Economic Competitiveness Group on the Web by clicking here.

Endnotes

1. This article was written Alec L. Hansen, Ph.D., President of the Economic Competitiveness Group, Inc., with research assistance from Kelly Cronen. Printed in March-April 2002 edition of Industry Focus Magazine.

Brain Drain, Education and Economic Development

Most economic developers have been chanting the "jobs mantra" for many years. "Jobs, jobs, we need jobs!" Jobs are very important because they provide an avenue to income, and hopefully prosperity, for individuals and their families. Current economic conditions have us sweating bullets about slow job growth. Dipping per capita personal income levels have us even more concerned.

Everybody everywhere is concerned about BD--Brain Drain, which is a very real problem. The Cleveland Plain Dealer has been researching the problem. We have been writing about it here at ED Futures. Write this down. "Smart people can be so quick on their feet because they are quick thinking." There is something more important than brain drain--that is "education." Not one-time education, but the capacity for lifelong learning. We might worry less about brain drain if we did a better job of educating everyone in the community. Education, especially lifelong learning, is everybody's job, not just teachers and professors.

Economic developers should learn a new chant: the "education mantra." "Learning, thinking, we need education!" Yes, I know many EDO's have been doing some great work in this area. Thank you and more power to you. All of us know that there is still much work to be done in this area.

What does education do for us? It provides us with the capacity to think. Employers need "thinking" employees, maybe even more than they need "trained" employees. Some HR managers will disagree with me of this issue. Truthfully, it is not an either/or issue. We need both.

Education does not happen overnight. It's not a quick fix where we simply "download" the latest information file. The Internet has conditioned us to "think" this way. Education is the ability to think and learn about a wide range of issues. It's the ability to use the Internet as a powerful tool to accomplish lifelong learning.

Places facing brain drain problems need to literally "think" their way out of these problems. I will make a prediction. People, jobs and businesses in the future will be attracted to "high-quality thinking and learning places." Some places are better at this than others. The better places will attract the next generation knowledge businesses and jobs.

Think about it.

Would the President's Fiscal Stimulus
Package Lift All Boats?

An interesting analysis by Economy.com suggests that the President's fiscal stimulus package will have a differential impact on states. In other words, the package would not lift all state economic boats equally.

The analysis says: "Overall, the Northeast and the West stand to gain the most from President Bush's proposed stimulus package. Given that the Northeast is arguably the weakest economy at the moment, the collection of tax breaks and the extended UI benefits would provide some needed support for this struggling region. Outside of Florida and the Chicago area, the Midwest and the South would enjoy a more modest economic boost."

If you subscribe to Economy.com, go here for more details.

Asian Economic Update

Something new is happening in several developing nations in Asia. Domestic demand is actually priming the pump for business investment and economic growth. Typically, Thailand, Korea, the Philippines, Indonesia and Malaysia have grown their economies through exports. This situation is contributing to some growth in this nations for now. Will it last? That's another question. Probably not for long without some overall improvement in the U.S. and global economies. If you subscribe to Economy.com, go here for more information.

Brain Drain 3: What are States Doing to Stem
Brain Drain?

State governments have been aware of the brain drain problem for some time. What steps are they taking to help? Here are a few examples from around the country.

Ohio: Governor Taft has launched a Graduate Retention Initiative that provides funding to local and regional groups to combat brain drain in their areas. Go here to learn more.

Connecticut: 21st Century UConn extends for ten years the UConn 2000 program, which is credited with reversing Connecticut's "brain drain." Go here.

Michigan: Has launched an aggressive talent recruitment initiative. Go here for more information.

Wisconsin: New comprehensive state ED strategy contains brain drain action plan. Go here.

New Mexico: Click here to see how NM plans to tackle its statewide nursing shortage, which relates to brain drain.

Indiana: Go here to see how Indiana is going in retaining its graduates.

Stay tuned. We will give continuing attention to this important topic.

New Rural Development Brief
Published by National Governors Association

Looking for ideas on how to strengthen rural industry clusters, encourage entrepreneurship and build new economic development infrastructure? Check out the NGA's new issue brief on rural economic development. Go here to download the report. While the report was intended as a guide to state governments and what they can do to help, many of the ideas are also applicable to community and region economic development organizations.

Brain Drain: Views from Around the World

Ohio and Greater Cleveland are not the only places concerned about brain drain. This article contains some excerpts from various news stories from around the world on the subject. Because I know that many of you will want to cut to the chase, I have put my conclusions up front and presented the examples of brain drain across the world after the conclusions.

Some Insights and Possible Answers

No matter where you are, brain drain is perceived as an concern. These news clips point to the ubiquitous nature of the "brain drain" problem that has Ohio and Greater Cleveland officials in a tizzy. What does this conclusion point up? Here are a few additional ideas that may contribute to a better possible solution:

1. Most places experiencing brain drain see it as a problem impacting their economic development potential. Most believe they need to do more to improve their local environment to retain and attract people with knowledge and skills. In many ways, this is true. At the same time, we need to be sensitive to our existing talent and ensure that we offer them the same opportunities as we offer newcomers. I believe in the final analysis, the answer to this problem rests in helping everyone advance themselves and renew their knowledge and skills on a regular basis. One bit of advice: Avoid potential bidding wars that cause us to overpay for talent of any type. That is a major problem in economic development today. Don't replicate this problem in the high-talent labor market. Do we really want to emulate the salary strategies found in professional sports or Hollywood today?

2. Brain drain is an issue for both developed and developing nations alike. Both see it as a growing concern. Foreign countries sending their best and brightest to American universities want these people back once they graduate. Once again, this is a global problem, and we need to be aware of this as we fashion solutions. Avoid the "us-versus-them" mindset about this problem.

3. Many places have recently implemented possible solutions to the problem. For most, it is too soon to tell whether these efforts are working. We should pay close attention to what Canada, the UK, and other places are doing in this area.

4. Even though this problem has evolved over a long time period, those places making an effort to stem their "talent loss" have resorted to short-term fixes, such as using incentives to slow their losses. Marketing and financial incentives seem most common. We need to mount a long term plan to ensure that we have more talent coming in then is flowing outward. We do not need to erect "trade barriers" that limit people's personal mobility. "Open-system" models that allow sufficient in and out flows will be the wave of the future, IF we can solve our current security concerns. If we do not, then many of our currently open systems may become more closed--especially in the immigration arena.

5. Most places with this problem seem to believe they have to fix the problem themselves, rather than working with other places to find solutions. I believe more attention should be given to "partnered solutions." Maybe the "shared talent pool" concept could have application to this problem. Knowledge is becoming increasingly global. We must recognize this reality. While we must remain aware of how the export of U.S. technology and knowledge can and will be used against us, we also need to be mindful of necessity of working together to solve a complex problem like this one.

6. I think it is possible that places facing this problem are either unwilling or unable to see four very fundamental trends (tendencies) that cut across cultures worldwide:

- People want to make a better life for themselves and their families, and they believe they must exercise their "best" options in accomplishing this goal. In many cases, that means doing exactly what their forefathers did: "Move to another place." As many have said, history does have a tendency to repeat itself at times.

- "Place" still plays a fundamental role in shaping people's sense of meaning and purpose in life. If where they live and work adds to this sense in a positive way, they stay. If it doesn't, they leave.

- Loyalty is a tough thing to find in the world today. Employees do not believe their employers are loyal to them. Employers do not believe that their employees are loyal to them. Community officials do not think their "best and brightest" are loyal to them. The "best and brightest" feel in many cases that current community leaders have betrayed them, hoarded all the seed corn for themselves, and have not been unwilling to allow new leaders to assume the reins.

- Finally, this is a very uncertain and risky time that we live in. We need to recognize the emotional mood of the populace. Fear about the economy, a possible war, terrorism and many other things are very much realities for all of us. Maybe the leading future source of competitive advantage for economic development will be to offer a higher "certainty factor" for people. Maybe those places that do a better job of "managing risk" will prove to be the winners in the future. How well are Ohio and Greater Cleveland doing in these departments?

Signs of a Worldwide Problem

This section contains clips from various world news articles about brain drain.

"Brain drain and a bevy of aging companies particularly in the manufacturing sector are two of the biggest obstacles to growth in Wisconsin's economy, a Federal Reserve Bank senior economist told 400 business, association and civic leaders gathered in Downtown Madison on Thursday." Source: Wisconsin State Journal, 2/14/03.

"The prospect of higher tuition fees in England has led to a surge in the number of students thinking about studying in the US and fears of an undergraduate brain drain." Source: The Australian, 2/12/03.

"From Mr Francis Davis Sir, Faced with the choice between a struggling British university and the intellectual power and cultural stimulation of the Ivy League, or for that matter Witswatersrand, Australian National, McGill, the Sorbonne or Beijing, we will not do our best by our children by encouraging them to opt for second-class facilities and faculty." Source: The Times, London, 2/7/03.

"As the aging work force approaches retirement, NASA has been left scrambling to attract and keep young talent. The average age at NASA is 45. Among those in the agency's crucial science and engineering fields, the ranks of employees older than 60 outnumber those younger than 30 almost 3 to 1. Roughly a quarter of workers are eligible to retire within the next five years. The years of cutbacks have created a so-called "brain drain." Source: Orlando Sentinel, 2/7/03.

"The education brain drain is particularly hurting large country schools in South Australia that are commonly short on specialists and must call on relief teachers to cover classes." Source: The Australian, 1/29/03.

"We are a welcoming country, a melting pot for immigrants, a society predicated on social openness and mobility. These values are at the heart of our democracy. They are also key to our continued market growth and dominance in the global economy. Economists attribute part of the unprecedented growth to the influx of a new labor supply. In contrast, countries that are not as willing as the United States to absorb new immigrants are suffering population implosion as well as brain drain. For example, Germany would have to grow its immigration rate by a factor of 20, and Japan by a factor of 50, to maintain the size of their current populations." Source: Centre Daily Times, 1/26/03.

"As for Frank Stronach's comments on lowering taxes to reduce the brain drain, studies have questioned that relationship. I also don't think Canada needs bright people who are simply concerned about keeping more of their paycheques. We need people who appreciate the role of good government and the fact that historically, our higher rates of taxation enabled us to sustain one of the highest standards of living in the world." Letter to the Editor, Toronto Star, 1/23/03.

"Give young Jordanians a fair chance to start their lives and careers in Jordan, first! Too many Jordanian professionals have given up on finding decent and well paying jobs in their own country and are desperate to leave-many of them for good. Let's not kid ourselves. Brain drain is endemic to Jordan as water shortages are in August." Source: The Star, Jordan, 1/15/03.

"Colombians call it their "fuga de cerebro," or "brain drain."Over the past decade, thousands of people from the upper and middle classes have fled civil war and a severe economic recession for life in the United States." Source: The News & Observer, Raleigh, N.C., 12/16/02.

"Strain of the Brain Drain: Thousands of young educated Slovaks are leaving the country every year to work abroad, even though there are enough good jobs for them at home." Source: Slovak Spectator, 12/16/02.

"America's move to shut the spigot on student visas after Sept. 11 has created a brain drain for universities that rely on top foreign students to help with scientific research." Source: Dallas Morning Star, 11/28/02.

"A seven-county Northwest Indiana planning group this week issued a compact to build these partnerships as they moved into the implementation phase, culminating a year-long study of work force needs. Committees announced target dates for programs to begin. The plan aims to better prepare young people for the world of work, train the current work force for upward movement, diversify the local economy and stem the problem of "brain drain," where graduates move elsewhere for high-paying jobs." Source: Munster Indiana Times, 11/23.02.

"A target of 2,000 research chairs by 2005 was the federal government's response two years ago to the brain drain, as reports mounted of top science and medical researchers abandoning Canada for more pay and better laboratories, mostly in the United States." Source: Toronto Star, 11/22/02.

"Just 1 percent of Tuolumne County has access to high-speed Internet connections via phone lines, and community leaders give their county a D+ grade for e-commerce, according to a report to be released Wednesday. That would help stop the "brain drain" of talented young people who move away to get better jobs, Lanthier said. Tuolumne County has a long way to go when it comes to high-tech telecommunication systems." Source: Modesto, CA Bee, 11/09/02.

"Bakersfield business leaders must develop more high-tech career opportunities and better-paying jobs if they hope to keep the best and brightest workers from leaving town. You've got to try and reverse brain drain, DeVol said. You've got to reach out to the students who are leaving to see what it would take to bring 'em back." Source: Bakersfield Californian, 11/01/02.

"Brain drain" cost the University of Arizona a Nobel Wednesday. Vernon L. Smith spent much of his career at the UA, but won the Nobel Memorial Prize in Economic Science yesterday at George Mason University -- just a year after being lured there by more money and research support." Source: Arizona Daily Star, 10/10/02.

"Two years ago, A. Chaedar Alwasilah, a senior lecturer in Bandung, wrote in this newspaper that improving higher education should account for geographical disparities, which have led to an increasing brain drain for the home provinces. It is therefore understandable, he continued, that most regions are unprepared for regional autonomy. Improvement should hence be more of a priority in universities outside Java." Source: Jakarta Post, 10/05/02.

"At the same time, the Taiwanese Government realised that it was facing a brain drain and started to provide numerous benefits to lure back its nationals, especially those involved in information and communications technology." New Straits Time, 10/01/02.

"A LEADING British businessman advised Scottish schoolchildren to leave their homeland before its self-centered and parochial attitudes stifled their careers. Don Cruickshank, the Scottish-born head of the London Stock Exchange and chairman of the SMG media group, told pupils at his former school in Aberdeen that a move away would provide them with a vigour for professional life that was not evident in Scotland. Politicians and business leaders accused Mr Cruickshank of arrogance, being out of touch with modern Scotland and encouraging a brain drain." Source: The Times, London, 9/21/02.

"That makes Signorelli a poster child for the nascent multi-pronged effort to stop the so-called "brain drain" of high-tech college graduates out of Indiana. The goal is simple: Get students working inside technology companies through internships, and they will be more likely to come back after graduation." Source: The Indianapolis Star, 9/10/02.

"How do you get college students to stay in the Philadelphia area when the whole world beckons? Why, show them the sights. That's what the Greater Philadelphia Chamber of Commerce has been doing this summer in an effort to stop the "brain drain" -- the loss of some of the best and brightest students to other regions. State figures show Pennsylvania lost more than 20,000 college graduates ages 20 to 29 between 1995 and 1997, the most recent period for which figures are available. Called PhilaSPIN, the program involves 171 students from 25 area employers and is funded with a $25,000 state grant." Source: Philadelphia Inquirer, 8/9/02.

"Under the project, highly trained academics from the Democratic Republic of Congo who used their skills to escape to the West are being paid to go home for short stints and to transfer their knowledge to today's students. As the brain drain leaches Africa of its intellectual riches, the scheme ensures that a few drops trickle back." Source: The Times, London, 8/7/02.

"It's happening in all fields from graphic arts to finance, though most of the stories I hear involve makeup artists, stylists and others in the fashion and beauty realm. They are bringing home with them such impressive experience, knowledge and connections that it will be fascinating to see where it all leads. Let's call this reverse brain drain "the brain gain." Source: Toronto Star, 7/4/02.

"Russian President Vladimir Putin said that Russia should develop decent living standards for its citizens to prevent so-called 'brain drain." Source: Interfax, 5/22/02.

Article Abstract: "Discusses the so-called brain drain of technology employees from East Asia to the region known as Silicon Valley, in Santa Clara County, California. Results of a survey which suggests that it is common for immigrants to export their experience back to their homeland, often in the form of start-up companies or investments; Spread of American entrepreneurial culture in Asia; Idea that the complex labor ties and economic relationship between Silicon Valley and East Asia is beneficial to both sides." Source: NY Times, 4/19/02.

"Sen. Byron Dorgan, D-N.D., on Wednesday renewed his call to develop a "research corridor" in the Red River Valley, similar to the famous Research Triangle in North Carolina. Dorgan said North Dakota is losing too many young people to states with traditionally well-funded research schools, where high-paying jobs are plentiful. He wants to reverse that brain drain by attracting more federal funding to UND and North Dakota State University in Fargo so research centers of excellence can be developed." Source: Grand Forks Herald, 1/03/02.

"The brain drain from Canada to the United States is small, but a disproportionate number of those leaving are among the country's most talented and best-paid individuals, according to a new study." Source: Toronto Star, 11/28/01.

"Kentucky started getting serious about its "brain drain" in 1999 when it discovered that 70 percent of the alumni of its prestigious Governor's Scholars program had left the state." Source: Messenger-Inquirer, Owensboro, KY, 9/7/01.

"Economic growth and development require many things but gradually it has crystallized that even with ample resources a country will not be able to climb up the economic ladder if it fails to develop human resources and to exploit such resources or add value to them. Therefore, the selection of human resources development as policy is nothing wrong. But the concern is, to what extent the policy is bearing fruit in the context of the unchecked brain drain in Bangladesh.

"The government is providing massive subsidies to create technically able manpower. But ultimately, such manpower is lost to the country and the resources prove to be wasteful because of brain drain. He pointed out that the country's premier technical institution, the Bangladesh University of Engineering and Technology (BUET) produces annually well qualified engineers, but cannot keep them in the country as they go abroad never to return. An engineering student at BUET pays as little as Tk164 as tuition fees - thanks to subsidized education - whereas the same student would need to spend at least Tk 100,000 per semester for the same degree in a private university." Source: The Independent, Bangladesh, 8/8/01.

Near Term Hiring Forecast

What's the job market expected to be like in the second quarter of this year? Of the nearly 16,000 employers interviewed by Manpower Inc. for the quarterly report released today, 22 percent said they expect to hire more workers, compared with 20 percent in the first quarter. Nine percent said they planned to reduce their work force, compared with 12 percent in the previous quarter. Sixty-three percent said they'd maintain current staffing levels.

Go here for more details.

How to Solve the Brain-Drain Problem
in Ohio and Greater Cleveland

Ohio, like many other states, is finding it harder to hold onto its “best and brightest,” especially its science, engineering and creative arts graduates from its top colleges and universities. This is also a major problem facing the Greater Cleveland region.

Recently, the Cleveland Plain Dealer Newspaper completed an analysis of where Ohio's grads are going after they receive their degrees. The study concluded that Ohio is retaining 72% (352,800) of the 490,000 graduates included in the 23-institution study remained in Ohio. The other 28% moved to other states. On the surface, this does not sound all that bad.

Also, the study found that 65% of the state’s doctorate grads, 51% of its masters grads and 31% of its bachelor degree grads in the sciences, engineering and the creative arts bolt Ohio in favor of other locations, such as Chicago, NY, Washington DC, San Francisco, LA, Atlanta, and Boston. Even Detroit, Pittsburgh and Philadelphia have been successful in attracting a significant number of Ohio's graduates. As the Plain Dealer correctly concludes, this is a major problem that could be limiting our ability to reach our state and local economic development goals. For more information about the Plain Dealer article, click here.

Most major cities and many rural areas are very concerned about the “brain drain” problem. The key question is: What can Ohio and Greater Cleveland actually do about the problem? Is this a problem that we can fix? Will the problem grow in the future?

Here are some thoughts, which build upon the Plain Dealer study.

First, this is a problem in many cities and regions across the country. Ohio is not alone. Have any of these other cities fixed their brain drain problem? From what I can see, most places with the problem have not done much to reduce it. Many are trying.

Places with declining economies and those offering insufficient cultural and social amenities to attract young educated people are having the hardest time. Some would say that is the “boat” Greater Cleveland might be in right now. To our credit, we have many wonderful cultural institutions, like the Cleveland Orchestra. We also have many first-class health and educational institutions, like The Cleveland Clinic Foundation and Case Western Reserve University.

How important is it to be a “cool” place? Carnegie Mellon's Richard Florida says it’s very important. Former Case Western Reserve University professor Paul Gottlieb says that amenities play an essential role in attracting high tech businesses and people. Many other researchers agree with these two academics.

I believe that amenities are very important, but the presence of high quality employers offering the best jobs and local cost of living economics could be even more important factors driving residential choice by talented people in the near term future. The successful cities luring talented and creative people offer the right “combination” of these things and more.

With any problem, it is important to set reasonable expectations about how much of the problem can be solved. Neither Ohio nor Greater Cleveland has done a good job in this regard in the past. As a result, we launch a solution and nobody knows how much it is working. For example, it is very unrealistic to assume that we could or even should retain 100% of those we educate and graduate. I think the most important thing for Ohio and Greater Cleveland is to keep a steady “in-flow” of new blood (talent) all the time.

Studies by the World Future Society, the Upjohn Institute for Employment Research, the Hudson Institute and other groups suggest that people will change not only jobs, but also careers, more frequently in the future. This suggests that we need to provide more help to people here now on how they can successfully “reinvent” their work lives. This is more than job training. Also, people will be more mobile in the future because they must be to find new opportunities. Once again, this gets back to our definition of what the problem is and our expectations about solving it.

One of the most important questions we must face in tackling the brain drain problem is this one: “To what extent will people follow jobs or will jobs follow people?” The answer is both will continue to occur. Right now, more high quality jobs are following people. We should count on the fact that both will occur in the future. This is not a simple either/or problem. Jobs and people will continue to seek out the major knowledge centers worldwide in the future.

Ohio and Greater Cleveland officials should assume that they must “compete” for talent of all types in the future, especially the most gifted and talented. This is actually a very old problem. Companies have always competed for these people to fill their most important jobs. Universities have always had to compete for the smartest students. Here is another important point. Those with the best degrees and other socioeconomic advantages have always had more choices than those with less. Our economic development efforts need to work on helping all segments of the community succeed and prosper, not just the top ten percent. Actually those with fewer advantages need our help more. We need to remind ourselves of this reality.

Let’s return to this expectation issue. How much of the problem should Ohio and Greater Cleveland expect to solve?

First, is a 72% overall retention rate good or bad? I think it’s pretty good. It's certainly not terrible from an overall standpoint. Frankly, I thought this percentage would be even lower for Ohio. Where we have a problem is in the science, engineering and creative arts areas. This is where some research comparisons to other states and metro areas would be helpful. Personally, I think a metro area analysis of this problem is more useful than one at the state level. When people choose a place to live and work, they look much more closely at local and regional factors and conditions.

One thing we can count on is that the economy over the next decade is not likely to be much like the one we had in the past decade. Technology and globalization will see to that. Also, the amount and type of economic growth we experience is likely to be different as well. Will we see another nineties’ boom? Right now, it doesn’t look like it. If it does occur, it will not be based around the Internet. The next is likely to be centered on the life sciences, which is already capturing more of our attention and money.

As I look at economic development worldwide, I see some incredible changes in the “international division of labor” taking place. For many years, we worried about factory jobs leaving the country, and we still do. Now, the concern is focused on the loss of information and technology-based jobs. The “knowledge economy” is coming to places like China, India, Korea and other developing nations. I see the signs in my research everyday. These places will not be just “cheap places to do simple things.” We need to consider these realities as we work to shape a solution to the brain drain problem in Ohio and Greater Cleveland.
National security will continue to affect immigration policy, which could alter the in-flow of foreign students into U.S. universities. Safety and security concerns will be much larger ongoing concerns worldwide, including here in America.

There were many high tech jobs available in most of the out-of-state cities Ohio lost its grads to in the 1990's. How many “sexy tech” jobs will these cities develop in the next decade? Only those jobs that are absolutely needed will be created in the future. Right now stock market investors are not enthralled with Internet company stocks, especially the "fly-by-the-seat-of-the-pants" types we saw in the last decade. These are important issues to address in the next round of analysis that builds on the Plain Dealer's research.

Given the risky and uncertain state of current world affairs, we can count on two developments at least in the near term. First, as long as the economy continues to limp along, more people will stay in or return to college because there are not enough good jobs out there. College enrollments are growing now in most states.

Second, with a weakened economy everywhere, people may actually be somewhat less mobile in the next 2-3 years because they cannot afford to. Place shifting will not do much for those hot-shot grads that want to go to the Bay area and other "cool" places. Right now, there are not many available jobs there.

My recent economic development strategy work in California indicates to me that there are many people out-of-work in the Silicon Valley and other tech hotbeds. Guess what? You cannot afford to live in these places unless you make a lot of money. More people are leaving the very expensive coastal areas and settling in the Central Valley, where the cost of living is much lower and the pace of life is less hectic. A number are also moving out of state to communities like Henderson, Nevada, Prescott, Arizona and similar places. All this to say, moving away from Ohio may not be the best thing for these graduates in the next couple of years. Of course, if they stay, can we provide enough good jobs for them? That is also an important expectation issue we must address.

What action should Ohio and Greater Cleveland leaders take to solve their brain drain problem? I think that we need better thinking about this issue, and we need to set realistic quantitative goals that we work toward over the next decade.

The Plain Dealer article says we lost 28% of the 490,000 graduates over the last decade from the 23 Ohio institutions that were surveyed. This means we lost about 137,000 of them in the past ten years.

How much of this problem are we going to try to fix in the next decade? Allow me to answer that question with two related questions: 1) How much of this “loss” is a “problem?” and 2) “How much of the problem do we need to fix to grow our economy and increase prosperity in local communities?” That is the economic development question.

Let’s take a look at what the State of Ohio’s most recent ten-year occupational forecast has to say about the future “demand” for some of our knowledge workers. Ohio will need about 26,000 computer software engineers in 2010, which is 12,000 more than we have right now. We will need 1,400 chemical engineers, which is 40 more than we have now. We will need 4,400 electronic engineers, which is 200 more than we have now. We will need 2,600 life scientists, which is 400 more than we have right now. These are just a few examples illustrating how we should start thinking about the brain drain problem. We should start by looking at the “demand” side of the equation, and allow that to guide our decisions about how much “supply” we will need.

For illustration sake, let's assume that our overall analysis concludes that Ohio will need 110,000 scientists, engineers and creative artists in the year 2010. Furthermore, we find that we need to increase our supply of engineers, scientists and creative arts workers by 25 percent over the next decade to meet forecasted demand. This means Ohio must develop or attract 27,500 people with these skills to fill jobs in these three broad occupational areas. We must remind ourselves that we also must retain the people we have working in these jobs now, and find replacements for those who leave these jobs through retirement and turnover. How are we going to tackle this complex challenge?

First, what strategies might help? Here are the basic strategy options: 1) increase the supply of high quality jobs to attract this talent; 2) market more aggressively to attract new and retain existing talent; 3) provide greater incentives to keep existing talent; 4) train more people in these fields; 5) change our "amenity mix" to make Ohio communities more attractive to these talented people; and 6) change our culture and values, which is in part what Richard Florida recommends. I think we need a mix of all six. None of these jobs will be easy.

Who should be a part of the solution? The team should include the business and institutional employers that need these people. They stand to gain or lose the most. Second, the colleges and universities themselves should play a stronger role in this area, especially in ensuring that their students’ “educational experience” is a valuable and high quality one. In the Greater Cleveland region, the Northeast Ohio Council on Higher Education (NOCHE) should play a role. Third, our economic development, community and government leaders have a role to play. Fourth, our foundations need to invest in talent retention and attraction initiatives. Finally, there is the need to create momentum through new groups like the Greater Cleveland’s Connection Series and Cleveland Clicks.

We need a plan to apply the resources of these groups to the six solutions identified earlier. Maybe Governor Taft should challenge Ohio’s communities and regions to develop talent retention and attraction strategies, and maybe the State of Ohio should put some money into these initiatives.

In conclusion, some mix of all six strategies will be needed in all Ohio’s metro areas. Some strategies may be more important in some Ohio cities than others. That should dictate the strategy mix. I would advise against putting all our resources into just ‘marketing.” Marketing is needed and it is a sexy thing to do, but it is only part of the solution. I would also urge these efforts to approach their job in a “performance-based” way so we can measure their success.

These are some immediate ideas sparked by the recent Plain Dealer article. We will continue to think about this issue and hopefully provide some additional guidance on how to tackle this problem.

Santa Fe New Mexico: The Latest to Wrestle
With Local Minimum Wage Law Issues

Santa Fe, New Mexico is the latest community to debate the benefits of living wage and other types of local minimum-wage laws. A recent article in the Santa Fe New Mexican covered one such debate at a recent Santa Fe City Council meeting.

The Santa Fe City Council has scheduled a February 26th public hearing to consider an ordinance that would make it mandatory for private companies with more than 10 employees to pay a minimum wage of $8.50 starting July 1. The federal minimum is $5.15. The proposal calls for Santa Fe's minimum wage to rise to $9.50 by July 1, 2005, and $10.50 by July 1, 2006.

Here is our advice on this issue:

1. The pros and cons of local minimum wage laws should be judged on an individual basis. These costs and benefits should be assessed in an objective and unbiased manner.

2. While a number of cities--maybe 100 or so--have adopted this legislation, it is important to understand their rationale for adopting these laws. Some communities believe they are saddled with too many low-paying jobs and not enough good paying jobs exist in the community. Before jumping to a solution, it may be helpful to investigate why your community is such a good place for lousy paying jobs. Maybe your community should work harder at creating more high-quality jobs that pay more. In other cases, we find these efforts are strictly politically-motivated and have no economic grounding whatsoever.

3. Look at what is happening across the country on this issue. Go here to see what the states are up to with respect to state minimum wage laws. Listen to what those for these laws have to say. Go here. And listen to what those against these laws have to say. Go here.

4. Employers for the most part do not like local living and minimum wage laws. In some case studies we have examined, these laws do not appear to have any impact on developing more high-quality jobs in communities. We find instead in talking with businesses searching for new business facility locations, that these laws are seen as a negative in their own right and they are seen as an indicator of a unfriendly local business climate.

5. As we look at economic growth drivers both nationally and globally, productivity and value-creation will be most important to growth, especially in an unforgiving economic environment like the one we have today. Local minimum wage laws do not give incentive to productivity-based growth. From this perspective, we are skeptical of the benefits of local living-wage and minimum-wage laws.

6. We advise our economic development clients that they should work to create a balanced mix of employment opportunities for the community. This mix should be evaluated on a regular basis because work design and job content are very dynamic. We also advise them to create high-multiplier jobs that trigger other job growth in the community. Done right, industry cluster strategies can accomplish this for a community.

7. As we look at longer term technological forecasts, we see more automation of low-paying routine jobs in most industries. This job elimination trend will be forced by increasing pressure for businesses in all industries to meet global competition standards. This suggests that communities with workforces not ready for higher skilled jobs will need to strengthen their job-skill upgrading efforts to ensure that local workers can compete for better jobs as they come.

8. Our research finds a correlation between low-skilled and low-paying jobs and the presence of consumer and retail service industries, which as a rule do not drive growth in local economies, even in tourism-based economies. Economic growth is driven by export-based industries and industry clusters that bring new income and other economic resources to the local economy. That is not to say retail and consumer service jobs are not important, because they are important in supporting local consumers and in some cases visitors. Generally, these are not the jobs that most communities should provide incentive to in order to grow in the local economy. They tend to grow when local disposable income grows.

This is a complex issue that we have seen in many communities, both large and small, across the country. Our overall advice is to put your energy into economic development efforts that are consistent with the drivers of economic growth. Don't create job creation penalties in your community.

Arkansas Signs New ED Bill

As the economy continues to limp along, more attention is being given to economic development. Budgets remain tight in most communities and regions, but some areas are preparing their areas for the upturn when it happens. Arkansas, for one, is over-hauling its incentives in hopes of gaining some ground on its competitiveness. Go here to read more.