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
1

• 10 – Noon Basic Principles and Trends in Economic
Development
Chuck Shoopman, UT Institute for Public Service
• Noon
• 1 – 3
Lunch
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
2

• 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
3

• 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
4

• 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
5

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
6

Area 1995 2000 2005
U.S. $23,076 $29,843 $34,471
% Change
95-05
49.4
TN $21,174
U.S. metro $24,234
$26,097
$31,473
TN metro $22,625 $28,079
U.S. nonmetro
$17,683 $22,021
TN nonmetro
$17,357 $20,883
Source: Bureau of Economic Analysis
$30,969
$36,140
$33,341
$26,161
$24,646
46.2
49.1
47.4
47.9
42.0
7

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
8

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
9

10

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
11

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)
12

THE GLOBAL ECONOMY
• The Internet, satellites, and other advances in telecommunication enable companies to fully integrate their operations globally
13

14

ANNUAL GROWTH IN PER
CAPITA INCOME -- U.S., 1950-2004
15

U.S. EMPLOYMENT GROWTH
RATE (ANNUAL 1960-2004)
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• Why isn’t the labor force growing as fast as it did in the 60s and 70s?
17

16 TO 24 YEAR OLDS AS % OF
LABOR FORCE -- 1960-2012
18

19

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
20

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
21

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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 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 outsourcing
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TELECOMMUNICATIONS IS THE KEY
INFRASTRUCTURE CONSIDERATION
• Availability of highspeed, broadband telecom
• The future is wireless
• Technical support needs to be readily available
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• 94% of all new jobs over the next 10 years
• 70% of U.S. employment
25

SERVICES DOMINATING JOB
GROWTH (1990-2004)
Job Growth
20,000
15,000
10,000
5,000
0
-5,000 -3,366
387
1,853
17,785
Mfg.
Wholesale
Retail
Services
Source: U.S. Bureau of Labor Statistics
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• 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
27

COMPARISON OF
AVERAGE HOURLY EARNINGS, 2004
INFO $21.42
PROF. SERV $17.46
FINANCE $17.53
RETAIL $12.08
TOURISM $9.91
$17.66
WHOLESALE
MFG.$16.14
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
AVERAGE HOURLY EARNINGS ($)
28

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• Education is tied to economic well being
• Most jobs require postsecondary education
• Skill requirements are changing quickly
30

Required Job Skills are Increasing
100 %
90
80
70
60
50
40
60
30
20
20
10
20
0
1950
Source: U.S. Bureau of Labor Statistics
35
45
20
1990
15
65
20
2000
Unskilled
Skilled
Professional
31

80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
$74,602
$51,206
$27,915
$18,734
Average Annual Pay
U.S. Census Bureau, 2005
Advanced degree
Bachelor's degree
H.S. diploma
No H.S. diploma
32

33

RETOOLING THE WORKFORCE
• Increased demand for technical & professional skills
• Need for continuing education
• Increased emphasis within companies on training & retraining
34

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
35

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
36

STRATEGIES FOR ECONOMIC
DEVELOPMENT
• Recruitment
• Retention & Expansion
• Entrepreneurs & Start-ups
• Community Development
37

• 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?
38

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.
39

EXISTING BUSINESS PROGRAM
• Provide business assistance
-- Marketing
-- Loans
-- Training programs
-- Buyer-supplier programs
-- Export assistance
-- Access to technology
• Remove local obstacles to business
40

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
41

42

SMALL BUSINESS
DOMINANCE
• 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
43

SMALL BUSINESS
DOMINANCE
• 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
44

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
45

SMALL BUSINESS ASSISTANCE
• Incubator
• Financial Assistance
• Marketing Assistance
• Management Assistance
• Educational Workshops
• Entrepreneurial Training
46

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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
48

QUALITY OF LIFE
• Variety of retail & customer services
• Lodging & restaurants
• Attractive & clean environment
• Good traffic flow
• Range of cultural & recreational opportunities
49

• 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
50

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
51

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• 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?
53

• Technical Assistance
• Marketing and Recruiting
• Existing Industry Services
• Small Business Development
• Workforce Development
• Incentives
54

• 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
55

Questions and Comments?
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