BASIC PRINCIPLES OF ECONOMIC DEVELOPMENT

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BASIC PRINCIPLES OF ECONOMIC DEVELOPMENT
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AGENDA

• What is 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
• Building the Community

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WHAT IS LOCAL ECONOMIC DEVELOPMENT?
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ECONOMIC GROWTH VS. DEVELOPMENT

• WEED PATCH
• Unplanned
• Unpredictable Change
• Movement and Activity
• Reactive

• GARDEN
• Planned
• Improvement
• Progress
• Proactive

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Economic Growth

• Absolute increase in
• Jobs
• Population
• Labor force
• Traffic
• Government activity
• Student enrollments
• Building construction

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ECONOMIC DEVELOPMENT IS HAPPENING WHEN

• the standard of living is increasing
• a real increase in the level of average
  household income is occurring
• 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

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The Local Economy is a collection of many
companies Some more important than others?
O
O
x
x
x
x
x
O
x
O
x
x
x
x
O
O
O
x workplace
O worker
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The Economic Base companies in a community drive
all local growth through sales to national and
global markets
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Multipliers and Turnover
60 Leakage
Initial 1.00 of Exports
24 Leakage
40 Respent Locally
3 Respent Locally
1 Respent Locally
10 Leakage
16 Respent Locally
6 Respent Locally
3 Leakage
2 Leakage
(a)
(b)
(c)
(d)
(e)
(f)
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The increase in local income is derived
primarily from

• Companies that produce goods and services that
  are sold outside the community, but also from
• 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

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ECONOMIC DEVELOPMENT

• Economic development quiz

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ECONOMIC DEVELOPMENT

• The process is facilitated through
• Development of a skilled workforce
• Investment in the physical infrastructure
• Creation of new jobs at higher wages
• 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

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THE ECONOMIC DEVELOPMENT ORGANIZATION

• DOESNT
• Create new jobs in the community
• Make business location decisions
• Take care of everything in the community
  associated with economic development
• Spend enough time training/educating local leaders

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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

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THE GLOBAL ECONOMY
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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

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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

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THE GLOBAL ECONOMY

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

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THE ECONOMIC GROWTH SLOWDOWN
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REAL GROWTH OF U.S. GDP IN ANNUAL RATES
(1960-2003)
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ANNUAL GROWTH IN PER CAPITA INCOME -- U.S.,
1950-2003
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U.S. EMPLOYMENT GROWTH RATE (ANNUAL 1960-2003)
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U.S. LABOR FORCE GROWTH RATE (ANNUAL 1950-2003)
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16 TO 24 YEAR OLDS AS OF LABOR FORCE --
1960-2012
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THE NEW ECONOMY
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WHATS NEW ABOUT THE NEW 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

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WHATS NEW ABOUT THE NEW ECONOMY

• Highly networked entrepreneurs who both
  collaborate compete with one another
• Growth areas characterized by high concentrations
  of knowledge workers an ability to attract
  retain these workers
• Skilled labor force is highly mobile

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KNOWLEDGE-BASED ECONOMY

• The most important investment in the Information
  Age is undoubtedly in the human brain

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THE SERVICE ECONOMY
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SERVICE ECONOMY

• 94 of all new jobs over the next 10 years

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U.S. JOB GROWTH BY INDUSTRY(1980-2003)
Source U.S. Bureau of Labor Statistics
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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
• Grow in an environment of high quality of life
  attractive community

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RURAL SERVICES

• Rural services geared to tourism, recreation,
  regional trade, or retirement professional
  business services lacking
• Mostly low wage jobs rural not growing higher
  wage professions
• Larger rural communities now attracting certain
  back offices and call centers

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RETOOLING THE WORKFORCE
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RETOOLING THE WORKFORCE

• Increased demand for technical professional
  skills
• Need for continuing education
• Increased emphasis within companies on training
  retraining

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

• Gap between rate of jobs requiring college degree
  and rate of workers finishing college leading to
  increased wage gap between college-educated
  worker and those not

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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

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QUALITY OF LIFE
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LOOKING FOR A BETTER LIFE

• Availability of quality housing at reasonable
  costs
• Strong basic skills in education
• Presence of colleges universities
• Low crime rate
• Good medical health care

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LOOKING FOR A BETTER LIFE

• Variety of retail customer services
• Lodging restaurants
• Attractive clean environment
• Good traffic flow
• Range of cultural recreational opportunities

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4 LEGS OF THE ECONOMIC DEVELOPMENT TABLE

• Recruitment
• Retention Expansion
• Entrepreneurs Start-ups
• Community Development

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BUSINESS RECRUITMENT AND ATTRACTION
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BUSINESS RETENTION AND EXPANSION
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EXISTING BUSINESS PROGRAM

• Analysis of local business climate
• Set up an early warning system identifying
  at-risk firms
• Survey local firms and conduct business
  visitations

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EXISTING BUSINESS PROGRAM

• Provide business assistance
• -- Marketing
• -- Loans
• -- Training programs
• -- Buyer-supplier programs
• -- Export assistance
• Remove local obstacles to
• business

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ENTREPRENEURS BUSINESS STARTUPS
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SMALL BUSINESSDOMINANCE

• High growth in home-based business
• and lone eagles over ½ of small bus.
• Require business assistance and financing
• High risk and high rate of failure

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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