BBA Economic Digest

December 17, 2019

 

 

Dare to Be Bold

 

Helping communities become "better" places for business and companies find "better" places for business is central to our BBA consultancy. But better is always tethered to the competition, which is limiting.

 

The idea of offering a better product or service is ingrained in us, but it is difficult to convey that in a community brand. Most economic development organizations will list features and benefits as proof that their community is indeed a better place.

 

But a brand is not features. Rather, it's a promise, a point of view, a forward leaning vision. Therefore, a more effective strategy to being "better" for economic development marketing purposes is to be bold and different.

 

"A lot of superior product and service companies still lose to brands that dare to be different in their perspectives," writes Jasmine Bina in The 16 Rules of Brand Strategy.

 

When I was newspaper columnist many years ago, I noticed that having a strong, somewhat irreverent, point of view created a loyal readership. I often tried to lead with a story that poked fun at myself, but which included tension. (Remember, a good story always includes conflict or tension. It just does.)

 

Even when my readers disagreed with me (sometimes I disagreed with myself in hindsight), they still wanted me to be bold and not bland and namby-pamby.

 

"If you’re placing your bet on a specific future vision, then you’re taking a risk. Placing bets on the future should feel risky," writes Bina.

 

Most ED marketing that I see is playing it altogether too safe. Hence it is boring and doesn't get read. The truth is that you earn authority by taking risks.

 

Writes Bina: "Don’t fall into the trap of being indistinguishable."  You may want to read that again.

 

Self Reinforcing and Destructive

 

Researchers call them “innovation” jobs. And while they account for only 3 percent of all U.S. jobs, they make up 6 percent of the country’s economic output. These jobs are found in about a dozen industries, including software, pharmaceuticals, semiconductors and data processing. 

 

About 45 percent of the work force in these industries has degrees in science, tech, engineering or math. And they’re clustered in just a few urban areas along the East and West Coasts, according to a recent report by the Brookings Institution’s Metropolitan Policy Program and the Information Technology and Innovation Foundation.

 

Indeed, five metro areas -- Boston, Seattle, San Diego, San Francisco and Silicon Valley -- captured 90 percent of the jobs created in these industries from 2005 to 2017, according to the report.

 

“These places enjoy the benefits of what economists call cumulative causation, through which their earlier knowledge and firm advantages now attract even more talented workers, startups, and investment, creating a gravitational pull toward the nation’s critical innovation sectors while simultaneously draining key talent and business activity from other places.”

 

About half of the country’s 382 metro areas, including big cities like Chicago and Philadelphia, lost innovation jobs. 

 

Wealth and productivity has become more concentrated in fewer, primarily coastal cities. One-third of the nation’s innovation jobs resides in just 16 counties; half are concentrated in only 41 counties.

 

Over this decade, “a clear hierarchy of economic performance based on innovation capacity had become deeply entrenched,” writes Brookings economist Mark Muro and co-author Rob Atkinson, president of the Information Technology and Innovation Foundation, wrote in the report.

 

This trend of the workforce separating into a group of highly productive and high-earning metro areas and everywhere else is becoming “self-reinforcing and destructive.”

 

While expensive housing, high wages, and congestion have prompted some tech companies to open offices outside of Silicon Valley, those moves have not been at scale. Most U.S. metro areas are either losing innovation industry jobs outright or gaining no share, Muro wrote.

 

 

Leave No One Behind

 

The concept of the Latin phrase "nemo resideo' or "leave no one behind," is a time-honored ethos of the U.S. military. I believe it should also be an underlying pledge of economic development.

 

This will prove even more challenging in an age of automation and artificial intelligence as we are entering uncharted territory in the future of work.

 

No doubt there will be disruption. There will be “jobs lost” -- those displaced by automation. So too will there be “jobs gained” -- created by economic growth, investment, demographic changes, and technological innovation.

 

And finally there will be “jobs changed,” which is probably applicable to all of us.

 

Even in some of the hottest labor markets in the country, some workers cannot find jobs that provide a middle-class income and don’t come with an expiration date.

 

“We’re not focusing enough on the people who have continued to be left behind by this recovery,” said Martha Gimbel, a manager of economic research at Schmidt Futures, a philanthropic initiative. “We have not talked enough about the workers who are still stuck even in a labor market that is this competitive.”

 

More Homes, More Affordability

 

On roughly 75 percent of land in most U.S. cities, it is illegal to build anything except single-family detached houses.

 

Using Washington, D.C. as a case study, Brookings researchers show how housing zoning rules can be relaxed to build more homes, improving affordability and economic opportunity for residents.

 

Nearly 11 million households managed to keep a roof over their heads only by spending more than 50 percent of their income on rent, sharply curtailing their spending on food, health care and other needs, according to The New York Times.

 

Millions more cannot afford to live in the neighborhoods where children are most likely to thrive, or in the cities where jobs are concentrated.

 

Main takeaways from the Brookings study:

 

• Building more housing on single-family parcels doesn’t require skyscrapers.

• Where land is expensive, building more homes per parcel increases affordability.

• Density supports neighborhood retail and a healthier planet.

• More homes equals more affordability and economic opportunity.

• Apartments are homes, not an “invasion."

 

 

Central to What?

 

From Maine to California, from Canada to Mexico, I cannot help but notice the many economic development organizations that tout the "ideal" and "central location" of their respective communities.

 

Look, geography and transportation infrastructure does matter, especially for manufacturers who need to move product and are dependent on suppliers. A several hundred mile difference in location can literally add a million dollars or more in annual logistics costs.

 

But whether a community or region is "central" or "ideal" will always be relative to the specific needs of a company. It may be for one but not another, depending on their distinctive operations.

 

 

In with the Old

 

To prepare for the new, let us return to the old. To prepare a workforce for the Fourth Industrial Revolution with automation and artificial intelligence, the centuries old practice of apprenticeships is one viable answer.

 

Apprenticeship programs are changing the way people reach white-collar professions, leveling the playing field for careers that once required a bachelor’s degree or more. In two years, more than 700 apprenticeship programs have sprung up in the U.S., opening job opportunities in fields such as cybersecurity, financial services, information technology and health care, reports The New York Times.

 

The model, long popular in Europe, combines classroom learning with paid-on-the-job experience. This year, an estimated 1 million Americans have participated in some type of apprenticeship program.

 

Economic developers should embrace and foster apprenticeship programs in their communities. An individual employer, group of employers, labor organization, education institution or an industry association can sponsor an apprenticeship program.

 

Sponsors design and execute the programs, provide jobs to apprentices, oversee training development, and provide hands-on learning and technical instruction for apprentices.

 

By the numbers from the U.S. Department of Labor:

 

• In FY 2018, more than 238,000 individuals nationwide entered the apprenticeship system.

 

• Nationwide, there are over 585,000 apprentices currently obtaining the skills they need to succeed while earning the wages they need to build financial security.

 

• 71,700 participants graduated from the apprenticeship system in FY 2018.

 

• More than 47,000 veterans are participating in apprenticeship programs.

 

• There are more than 23,400 registered apprenticeship programs nationwide.

 

 

Real Estate for Economic Developers

 

Land becomes more useful and more valuable when people are attracted to an area for whatever reason. But it is safe to say that new jobs are the primary driver for real estate development. Simply said, where the jobs are, people will follow.

 

More people means more demand, which means that real estate in growing areas will increase in value because of its location, which will in turn dictate its use. Traffic patterns, transportation infrastructure, and living/work patterns all figure in on how land is used.

 

Those uses fall into five general categories -- single-family residential, multi-family residential, commercial, industrial, and agricultural. All effect and are important to local economic development, but typically commercial (of which industrial is a subset) -- that which is not residential in nature -- is the most important.

 

When a company or investors is interested in buying a property for commercial use, they will typically want to know the demographic makeup of an area. It often includes race, education levels, household income, average age, and how many children per household, all of which could have an important impact on the commercial viability of the property.

 

Remember, foremost in an investor's mind in commercial property is return on investment -- the income stream produced as a result being in a particular spot.

 

 

What We're Reading

 

Clotilda: Journey of the last American slave ship  National Geographic

 

'The Simpsons' turns 30  USA Today

 

Are anti-competitive firms killing American innovation?  The Economist 

 

Fashion Nova’s Secret: Underpaid Workers in Los Angeles Factories 

The New York Times

 

AT WAR WITH THE TRUTH: The Afghanistan Papers  Washington Post

 

Where the 5G Data Storm Will Hit First  Wired

 

 

Pew's 19 Striking Findings from 2019

 

At the end of each year, Pew Research Centers compiles a list of some of its most noteworthy findings. Here is a synopsis.

 

1. Hispanics are projected to be the largest racial or ethnic minority group in the 2020 U.S. electorate, overtaking the number of black eligible voters for the first time.

 

2. The decline of Christianity is continuing at a rapid pace in the U.S.

 

3. The U.S. no longer leads the world in admitting refugees. Canada does.

 

4. The share of Americans with an unfavorable view of China reached a 14-year high amid a protracted trade dispute between the two countries.

 

5. Three decades after the fall of the Berlin Wall, people in many former communist countries in Europe see greatly improved standards of living. (I would say, "duh.")

 

6. The foreign-born share of the U.S. population is at its highest point since 1910.

 

7. Most U.S. military veterans say the wars in Iraq and Afghanistan were not worth fighting. (See AT WAR WITH THE TRUTH above.)

 

8. Most Americans do not think it is possible to go about daily life without corporate and government entities collecting information about them.

 

9. U.S. newspaper circulation has fallen to its lowest level since 1940. 

 

10. Two-thirds of Americans support the legalization of marijuana, a dramatic reversal from two decades ago. (I support decriminalization but not legalization for recreational use.)

 

11. The number of people living in the U.S. without authorization has decreased over the past decade, driven by a sharp decline in unauthorized immigrants from Mexico.

 

12. Sixty three percent of Americans say the legacy of slavery still affects black people in the U.S. today. (I'm in that camp.)

 

13. Political independents who don’t lean toward one party or the other account for only 7 percent of Americans. (I'm in that small minority.)

 

14. Despite the economic troubles facing the news industry, 71 percent believe their local news media organizations are doing well financially.

 

15. The most active 10 percent of adult Twitter users in the U.S. produce 80 percent of all tweets. (I can think of one of them.)

 

16. Thirty five percent of Gen Zers say they know someone who prefers to be referred to using gender-neutral pronouns.

 

17. The U.S. public renders a harsh judgment on the state of political discourse in the country today. (I believe most people would like to see government actually work.)

 

18. Concerns about climate change have risen in the U.S., but most of the change has come among Democrats. (I think that will eventually change to include more.)

 

19. A person watching YouTube videos for eight hours a day with no breaks or days off would need more than 16 years to watch all the content posted by just the most popular channels on the platform during a single week. (To which I say, so what.)

 

 

 

Three Chords and the Truth (Click and Ye Shall Find.)

 

 

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