Rural Community College Report

For those of you looking for ideas on how to increase the contributions of your local community college to rural development, here is a source you might look at. Check out the Rural Community College Initiative's Strategies for Funders report.

You can download it here.

Early Retirement: Does It Make Sense for Employers?

In recent years, we have seen more companies move to early retirement/buy-out deals with their older workers. In these times of current downsizing and the present 6% unemployment, it's hard to imagine we might see a worker shortage. That is possibly what some companies will face by the end of the decade. In this light, do early retirements and buyouts make sense. Some companies are beginning to wonder.

Baby boomers, or those 78 million people born between 1946 and 1964, will start retiring within five years, with retirements peaking in 2015. The smaller Generation X, only 45 million strong, can't fill all those baby-boomer shoes, and if the Bureau of Labor Statistics is correct in predicting 22 million additional jobs by 2010, we'll face a major shortage of experienced workers.

Who will be most impacted by this trend? It's likely to be pharmaceutical, health care, aerospace, utility and old-line manufacturing companies, all of which grew in size decades ago and are now filled with large baby-boomer workforces.

Read the full article here, if you subscribe to Kiplinger Forecasts.

U.S. Metro Employment Outlook

Global Insights just produced the 2003 update of the Role of Metro Areas in the U.S. Economy report for the U.S. Conference of Mayors. The news is far from good, indicating that as a whole, U.S. metro areas will need at least another year to build their job bases back to 2000 levels.

From 1998 to 2001, the nation’s five largest metro areas (New York, Los Angeles, Chicago, Boston, and Washington, DC) added more than 786,000 jobs. The stretch from 2001 to 2004 will not on average yield any real job growth.

In 2001, 141 of the 318 metro areas lost jobs. In 2002, two-thirds (213) of U.S. metropolitan areas lost employment. The hardest hit in 2002 were New York (-117,700), San Jose (-94,200), Chicago (-79,100), Boston (-72,300), San Francisco (-65,200), Detroit (-59,600), and Dallas (-55,100). Five more lost more than 30,000 jobs (Seattle, Los Angeles, Denver, Cleveland and Minneapolis).

How are the top metros expected to perform through 2003? Overall, the 20 largest are expected to see average employment growth in the 0.1% range. Phoenix is expected to be the leader with a 1.6% growth rate, followed by San Diego at 1.0%, Chicago and Denver at 0.8%, Washington DC and Oakland at 0.7%, and Atlanta and Orange County, CA at 0.6%.

How did Ohio largest metros fare in 2002? Cleveland lost 55,000 jobs, Dayton dropped 16,800 jobs, Columbus lost 5,200 jobs, Toledo lost 12,300, Cincinnati lost 13,300 jobs, Youngstown lost 13,800, Akron dropped 5,200 jobs, and Canton lost 4,500 jobs.

Download the full report here.

Business Confidence

As my regular readers know, I report on business confidence on a fairly consistent basis. According to the most recent Economy.com poll, business confidence has remained unchanged over the past month, after it recovered significantly following the Iraq war. Confidence is the strongest in North America, and the weakest in Asia at this time. U.S. manufacturers remain fairly upbeat, while Asian travel companies are depressed. Weak sales remain businesses’ biggest concern at this time.

Asian and European business confidence levels are soft. Asian confidence may have hit bottom, as SARS has seemingly been brought under control. European confidence is softening, as the stronger euro is a growing matter of concern. The euro zone economy is seen by many as being back in recession, led by Germany's lackluster economy.

Article link. (If you subscribe to Economy.com.)

Geography, Politics and Economic Development

Someone asked me the other day what I saw as the biggest challenge facing economic development. After thinking for a moment, I replied that it was "managing geography and politics."

What do I mean? In simple terms, economic development is "place advocacy". Actually, it is advocating the economic interests of places in what is seen as a competitive environment where resources and opportunities are limited.

What's the problem? The problem is that we have become overly wedded to geographic and political boundaries, which has limited our ability to develop opportunities for people and businesses. Plain and simple, we pay too much attention to our boundaries and allow them to define our possibilities.

Some economic developers, like Rick Weddle, have talked about "seamless economic development." I like the notion, but even Rick admits that we are a ways from being able to truly look beyond our self-imposed borders.

I have suggested that EDO's need to work within broader national and global networks, which could be organized around shared interests. There is some evidence this is happening, but progress is slow because we continue to use "old goals and old performance metrics" to measure the success of the new approaches. Maybe economic development needs to explore new goals that focus squarely on building upon our economic interdependence and developing positive-sum, rather than zero-sum, opportunities.

I'd like to hear about your ideas in this regard. Who is doing anything that remotely relates to this idea?

Please email me if you have ideas. Thank you.

Spillover Effects: Word from the Latest Global Economic Outlook

Economy.com's latest global economic outlook report shows a few bright spots, but mostly points to lackluster economic performance for most countries around the world. One interesting observation is that the driving nations on most continents are clearly having serious negative "spillover effects" on growth on more dependent (or closely-linked) countries. The Netherlands economy is experiencing this phenomenon because of its ties to the German economy. Mexico is experiencing the same thing because of its ties to the U.S. economy.

The strong euro is clearly hampering growth throughout most of Europe.

These issues speak to two issues that local economic developers everywhere should bear in mind: 1) the global economic network is very complex and very strong in its influence on future economic growth prospects; and 2) macroeconomic factors (exchange rates, etc.) are likely to be even more influential in shaping future growth prospects of various nations and industries.

Go here, if you are an Economy.com subscriber.

It's Getting Mean Out There

Economic developers in some states are taking their boxing gloves off and really taking some hard shots. It's no secret that Nevada and a number of other Western states have benefited by California's tough regulations and high costs of doing business.

California Governor Gray Davis is becoming the butt of some unsavory jokes because of California's struggle to take control of its economy--no easy matter by the way. The latest is this: "Gray Davis: Head of Economic Development in Nevada?" Read and smile, and then remember that the same thing could happen in your state if things do not improve soon.

Article link.

Borrowing for Growth

Maine just took on $60 million in debt to finance its economic development program. In the absence of any financial reserves, more states and some communities are asking voters to approve bonds to support future ED programs and projects. Iowa has gone down the same approach and so has Pennsylvania.

One bit of advice if you are considering going into debt to finance your ED initiatives, make sure that the money you borrow is clearly being used to finance real "economic catalysts." Remember that somehow you will have to retire the debt. Bet on winners.

Article link.

Buffalo News Series on NY Empire Zone Program

For those of you interested in seeing how a newspaper can work over your incentive programs, take a look at the Buffalo News series on the NY State Empire Zone Program. Article link. This is the link to the first article on June 8. Other stories can be found on June 9-11.

In a nutshell, the article series pummels the state's Empire Zone program for being scattered geographically, unfocused in terms of business and industry targets and unable to hold companies using the program accountable.

I was interviewed for and quoted in the June 8 lead story. While clearly there are some examples of better run incentive programs out there, most "zone programs" are outmoded and they do little to reverse poverty and other economic problems in central cities, where they are the most needed.

Companies like tax abatement programs because they add to business profitability, but many of these programs basically amount to "growth shifting" strategies. The next generation of incentives should focus squarely on sparking "value-added" growth. More importantly, we should fix the underlying competitiveness problems of communities so we don't need these programs in the future. We may need an entirely new paradigm of economic development to accomplish this latter objective.

Ireland Seeing Shift in Inward Investment

According to a recent report on inward investment in Ireland, global economic changes are having a major impact on the nature of business investments occurring in the country. For one, they are becoming more skill-intensive, and for now, the number of new jobs being created is fewer.

The report says that competitiveness, in its broadest sense, is critical to winning new inward investment. In the past Ireland's competitive advantages relied on a low cost base for wages and services and on skills availability and incentives. These advantages have been eroded and Ireland's future competitiveness can only be based on knowledge, innovation, skills, education and research, on the quality of infrastructure and services in the economy and, clearly, on continuing the low tax regime.

In 2002, 11,700 new jobs were created by IDA-supported projects, compared to 13,300 in 2001, 23,000 in 2000, and 17,600 in 1999. The number of new investing companies numbered 1,094 in 2002 compared to 1,158 in 2001, 1,262 in 2000 and 1,261 in 1999.

How much is IDA spending to land the jobs it attracts? The average investment per job in the 1996-2002 period was $15,897, compared to $25,417 in the 1987-1993 period.

Download the full report and summary here.

New Boeing Plant Update

The new Boeing 7E7 plant is one of the most hotly pursued ED projects nationwide. Communities and states are hungry for a big deal, given the drought of business investment projects over the past three years. Everyone is looking for a "big" deal, and Boeing knows it. With a June 20 deadline approaching for communities to submit bids, several states are finalizing proposals on their advantages and financial incentives.

As communities around the country dream up tax breaks and financial sweeteners to persuade Boeing to build its next new jet in their states, there is one element missing in the 7E7 sweepstakes: the guarantee that Boeing will actually build the jet at all.

Chicago-based Boeing has been soliciting bids from states around the country who want to host the new factory where the proposed, mid-sized fuel-efficient jet would be built. The jet factory would mean about 800 to 1,200 direct jobs in assembly and support.

But all these proposals come months before Boeing's board of directors will make the most crucial decision - whether to proceed with the first all-new jet since the 777. The 7E7 is due to go before the Boeing board for approval in late 2003 or early 2004. Provided it is authorized, Boeing would officially launch the program in 2004 and offer the jet to airline customers.

Look for this one to get crazier as the deadline approaches.

Article link.

State Actions to Save Military Bases

With the Defense Department's announcement that it will close one-quarter of its military bases in 2005, states are scrambling to hold onto what they have.

What are states doing?

The Texas Legislature will send a constitutional amendment to voters in September asking for $250 million in bonds to improve infrastructure around its military facilities. That effort was started after an analysis in 2000 identified four bases as vulnerable to closure.

The San Antonio Military Missions Task Force is attempting to raise $1.25 million to protect bases.

In Florida, the state has spent more than $15 million since 1999 to improve defense infrastructure. It has purchased land, and continues to search for ways to acquire more land near military bases in order to stop encroachment.

Florida also has a grant program in place to save military facilities that could be closed, as well as an economic plan to help those communities decrease their reliance on national defense dollars.

Arizona has enacted legislation to protect its 83,000 Defense-related jobs and $5.6 billion in economic impact, although the state has not come up with any hard cash to apply to the problem yet.

Things are likely to heat up even more as the 2005 deadline approaches.

Article link.

False Prophets

A new book called "False Prophets: The Gurus Who Created Modern Management and Why Their Ideas Are Bad for Business," by James Hoopes, raises some very serious questions about the plethora of management ideas and philosophies circulating throughout society. Hoopes, an historian, looks at the spectrum of management gurus, including Frederick Taylor, Elton Mayo, Edward Deming, and Peter Drucker.

In the book's introduction, Hoopes says "this is a story of misfits and phonies, ruthless bosses and generous philosophers, shrewd executives and honest engineers. They were the management gurus who led the way in reconciling Americans to corporate life, sometimes by improving our understanding of human organization, sometimes by intellectural chicanery aimed at making us feel freer than we really are. They were the ersatz set of founding fathers (and mothers), jury-rigging an informal constitution for our other, unofficial government, not the political institutions that keep us free but the managerial corporations that make us rich."

In a nutshell, he says that the ideas of our leading management gurus are good for one thing: business profits, and contrary to claims otherwise, many of these ideas do little to liberate or advance society and the human condition. While silent on the subject of economic development, I suspect that Hoopes would level equal criticism at our avante garde thinking about how to make businesses, places and people more competitive.

As an historian should do, Hoopes reminds us of history and trends over time. That is a useful contribution of his book. He hits Tom Peters over the head for trying to make work "cool and groovy." Hoopes says the "Wow thing" is devious and just another way to bolster the productivity of the masses that work for other people. He also reminds us that Peters is far from the first to try to make work fun and still productive.

Where does Hoopes come out on the issue of the spiritual rewards of business? In a word, he says its overblown and yet another ploy to get people to work harder and make more money for their bosses.

Hoopes' parting shot is at Enron and the corporate financial reporting scandel that we are still trying to work through. And yes, I am certain he would have had something to say about Martha Stewart, had her situation occurred before the publishing of False Prophets.

This is a healthy attack of management philosophy and our business sages. Every once and a while it helps to hear another take on reality. While I do not share the depths of Hoopes' skepticism about business intentions, I am inclined to agree that all of us have been taken for a ride by more than a few management ideas and theories.

Are there lessons in all this for economic development? Yes, there are many, starting with the efficacy of organizing our economic development world on business strategy ideas. It does not make sense to turn communities into businesses. Would Hoopes even dare to question the latest "cool buzz" in economic development about creativity? Probably so. And yes, he would probably say some things that would make Richard Florida flinch.

I say it sometimes takes a shake-up to make us wake-up!

Website link.

What Drives Business Site Selection Decisions?

Like most people in the economic development field, I read the monthly and quarterly industry trade magazines, such as Site Selection, Area Development, Expansion Management and the others.

The May issue of Area Development Magazine contains an article about driving factors influencing business site selection decisions. Economic developers across the country were asked to describe what factors were most important to certain specific business investment projects that occurred in their areas.

In reading the reasons listed, I observed two things. First, the reasons given were as different as the companies themselves, and where there were "tie breakers," they were things that the company really needed or wanted and one location could provide it better than others evaluated. Second, there does not appear to be much new in how and why companies locate their facilities. That is, the usual site selection factors were listed as the drivers, including labor skill availability, proximity to market, business operating costs, ED incentives, business-friendly environment, quality of life, etc.

On one level, it's comforting to know that the things that have always been important remain important. On another level, this picture of continuity makes me wonder if we might be missing something. Are there emerging undercurrents that do not appear on our radar screen, such as how companies are coping with rising risks and uncertainties in their business environment? I plan to do some digging in this area of the garden to see what I can find. I will get back to you on what I find.

Interestingly, not one of the 42 projects reviewed listed anything as glamorous as "industry cluster dynamics or advantages" as a driving factor, which makes me wonder how long the "cluster rage" will last in economic development. I was struck by the "meat and potato" issues that are considered most important to why companies choose particular locations. Then again, much of business is pretty "meat and potatoes."

In my assessment, business is trying desperately to return to normalcy, given the harsh state of world affairs during the last three years. I can understand and appreciate that. Many businesses want nothing more than to return to the routine matters of producing a product or service and selling it. And guess what? If they do that, they are providing much needed jobs in communities that need them. So, three cheers for "meat and potatoes!"

Article link.

U.S. Cities Losing Jobs

The 20 largest metropolitan areas in the United States lost 1.15 million jobs in 2001 and 2002, according to a report released Saturday by the U.S. Conference of Mayors.

The cities, which generate 80 percent of the nation's employment, income and goods and services, accounted for 91.6 percent of all job losses in the country, according to the report released at the mayors' annual meeting in Denver.

The report said that unemployment and sluggish economic growth in metropolitan areas, the nation's economic engine, affected the country's overall recovery.

Article link.

Keeping the Emerging Talent

Cincinnati's young adults are growing up and moving out at alarming rates, an Enquirer analysis of Census data shows.

More than 7,200 people born between 1966 and 1975 left Hamilton County Ohio in the 1990s - a nearly 6 percent loss. Only nine of the nation's 75 largest metro counties lost young people at higher rates. Now, the flight of Generation X is prompting a significant shift in urban approach - to lure and keep the young.

Rather than concentrate on winning new businesses and buildings, economic developers are pursuing a better quality of life. New plans promote sidewalk cafes, hip local music and an energized entertainment strip. Attention to arts, culture and downtown living are replacing old ideas about building new department stores and riverfront towers.

The Cincinnati area’s response to this problem is called Cincinnati Tomorrow, a grassroots group of young adults that was created last year to make Cincinnati more attractive to younger adults.

Will it work? Time will tell. One thing is for sure. Cincinnati and its sister cities across the U.S. must work harder at making themselves attractive to this emerging generation.

Article link.