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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
Agenda • 10 – NoonBasic 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
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
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
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
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
U.S. and Tennessee Personal Income Per Capita, 95-05 Source: Bureau of Economic Analysis
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
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
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
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)
THE GLOBAL ECONOMY • The Internet, satellites, and other advances in telecommunication enable companies to fully integrate their operations globally
THE LABOR FORCE SLOWDOWN • Why isn’t the labor force growing as fast as it did in the 60s and 70s?
WHAT’S 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
WHAT’S 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
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)
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
TELECOMMUNICATIONS IS THE KEY INFRASTRUCTURE CONSIDERATION • Availability of high-speed, broadband telecom • The future is wireless • Technical support needs to be readily available
SERVICE ECONOMY • 94% of all new jobs over the next 10 years • 70% of U.S. employment
SERVICES DOMINATING JOB GROWTH (1990-2004) Source: U.S.Bureau of Labor Statistics
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
WORKFORCE AND EDUCATION • Education is tied to economic well being • Most jobs require post- secondary education • Skill requirements are changing quickly
Required Job Skills are Increasing 100 % 15 Unskilled 90 35 80 60 70 60 65 Skilled 50 45 40 30 20 20 20 20 20 Professional 10 0 1950 1990 2000 Source: U.S.Bureau of Labor Statistics
EDUCATION PAYS U.S. Census Bureau, 2005
RETOOLING THE WORKFORCE • Increased demand for technical & professional skills • Need for continuing education • Increased emphasis within companies on training & retraining
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
BRAIN DRAIN Among the South’s 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 bachelor’s degree • 15.5% of those with a graduate or professional degree
STRATEGIES FOR ECONOMIC DEVELOPMENT • Recruitment • Retention & Expansion • Entrepreneurs & Start-ups • Community Development
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?
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.
EXISTING BUSINESS PROGRAM • Provide business assistance -- Marketing -- Loans -- Training programs -- Buyer-supplier programs -- Export assistance -- Access to technology • Remove local obstacles to business
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
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
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
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 ISP’s • Availability of suitable buildings and/or business sites for expansion
SMALL BUSINESS ASSISTANCE • Incubator • Financial Assistance • Marketing Assistance • Management Assistance • Educational Workshops • Entrepreneurial Training
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
QUALITY OF LIFE • Variety of retail & customer services • Lodging & restaurants • Attractive & clean environment • Good traffic flow • Range of cultural & recreational opportunities
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