Presented at Wyandot County Economic Development Conference Upper Sandusky OH November 3 2011 Mark Partridge Swank Professor in RuralUrban Policy The Ohio State University ID: 716316
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The Power of Knowledge in Building A Strong Wyandot CountyPresented at Wyandot County Economic Development Conference.Upper Sandusky, OHNovember 3, 2011___________
Mark PartridgeSwank Professor in Rural-Urban PolicyThe Ohio State Universityhttp://aede.osu.edu/programs/Swank/Slide2
Outline Knowledge is King
I will give an economic outlook then a strategic discussion of local economic developmentToday’s moral is that the best strategy is using the assets inside your community.Two community assets I will stress:Your people and your businesses.Provide the right incentives, knowledge and skills for them to thrive.Leverage your colleges and existing institutions such community organizations to create the right local environment.2Slide3
Outline: Knowledge is King
Focus on attracting the right people and less on attracting (“bribing”) outside firms.“Bribing” outside firms is offering them a better deal than local businesses who don’t threaten to leave.Trying to lure outside firms with incentives and subsidies is typically ineffective. (Partridge and Olfert, 2011; Goetz et al., 2011).Make it that outside firms want to come to your great environment for people and businesses. I am not ruling out good marketing.3Slide4
State employment growth
(2006-07) on announced per capita million-dollar facilities (2005)4Source: Partridge and Olfert, 2011.Slide5
Outline: Knowledge is King
People worry that rural areas are doomed. However, nonfarm rural population is quite stable. Rural areas can prosper even if agriculture or manufacturing is smaller.5Slide6
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Outline: Knowledge is King
With this good foundation, your community will have the best chance to thrive. SIMPLE STRATEGY! Be patient and build from within while leveraging local and regional assets.7Slide8
Today’s Environment is Tough
National economy and state economies are weak. Wyandot county has survived some fairly severe blows since 2003.8Slide9
Manufacturing Employment Shares
9Wyandot County is not alone in facing severe manufacturing contraction but this is helping to promote long-term recovery.Slide10
U.S. Forecast
I use the NABE September Forecast. It reflects the average of 52 economists and does not have an agenda. http://www.nabe.com/publib/macsum.htmlNABE forecasts 1.7% GDP growth in 2011 and 2.3% in 2012 (about 1% lower than their May 2011 forecast.)A reasonable economic expansion should have > 4% growth for 2 years or so.IMF’s U.S. forecast is 1.5% and 1.8%.Also revised down by about 1% since June.10Slide11
US Forecast
NABE sees a very weak labor marketMonthly Nonfarm payrolls are expected to rise 124,100 per month in 2011 and 162,100 per month in 2012.At sustained monthly rate of at least 200,000+ is needed for a few years. UR rate will still be 8.5% at end of 2012US still 1 million jobs below 2000 level.Most panelists don’t see labor market recovery to pre-recession levels until 2015 and some don’t see it until 2017.11Slide12
U.S. Forecast
On the positive side, NABE seesExpansionary monetary policy (?)Growth in the rest of the world (?) Business investment and pent-up consumer demand (?) On the negative side:Low consumer and business confidenceUncertainty about future gov’t policies (?)I add uncertainty whether ‘Washington’ can do anything of consequence.Tepid housing market (2013 recovery?)12Slide13
U.S. Forecast
Negative Factors continued:Financial headwinds caused by tight credit conditions and balance sheet restructuringHigh federal deficits and the European debt (Greek) crisis weigh on the world economyIn this economic environment, while I do not see a recession, I have difficulties seeing how a President could be reelected. 13Slide14
Ohio Context
Ohio has added 1.6% jobs in the last year (as of August)US added 1%. Ohio Unemployment rate 9.1% in Aug 2011, 9.9% Aug 2010, and 8.6% in May 2011.14Slide15
Wyandot County’s Forecast
County has fared well in the face of major shocks 10 years ago.Place of work and place of resident employment data took a major fall 2003-2009. Place of resident employment growth is up about 3.5% between August 2009 and August 2011 (source, BLS.gov, Local Unemployment Data). Illustrates commuting in the region.Bear in mind, the data source is a rough estimate.15Slide16Slide17Slide18Slide19
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How can Wyandot County successfully compete globally?
1. Education and entrepreneurship are local forces that promote prosperity.2. Become more resilient to shocks.Ongoing global economic sluggishness. Wyandot’s manufacturing legacy has produced wealth, but creates huge risk and variability. As manufacturing has declined in size, this reduces variability and creates opportunities.20Slide21
Why the Race for Knowledge?
Individual earnings significantly rise with knowledge, skills, and education.21Slide22
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U.S. Census Bureau, Statistic Abstract of United States, 2012, Table 232, http://www.census.gov/compendia/statab/cats/education.htmlUS Mean Earnings by Educational Attainment, 2009Slide23
Why the Race for Knowledge?
This understates an individual’s gain to education as employment rates rise and unemployment rates fall with education. Source: OECD, 2010.September 2011 UR 25+ ≥ College Grad: 4.2%; UR no high school completion, 14.0%, Source, U.S. BLS, September 2011 Employment Situation Report.So they are more likely to work, and among those working, they are more likely to earn more.Educated workers suffer less in downturns in terms of unemployment—more resilient. 23Slide24
Why the Race for Knowledge?
Good for people, but what about communities?3. There are ‘social’ gains from greater education. People who work in areas with more education have higher earnings themselves (Source: Moretti, 2004).Knowledge spillovers.4. Places with a more educated population grow faster in terms of jobs and people. (Source: Simon and Nardinelli, 2002; Glaeser and Shapiro, 2003) 24Slide25
Why the Race for Knowledge?
Summary: Communities with a more educated population are richer, grow faster, have lower unemployment, and have greater resilience to withstand shocks.What about Wyandot County?Okay at the high school and Associate’s level, but not above.25Slide26
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How Can Wyandot County Win the Race for Knowledge.
Colleges and universities are key for rural economic development, especially community colleges because Associate Degree is underutilized.Business can count on a capable workforce.27Slide28
How can Wyandot County win race for Knowledge.
Ohio’s colleges and universities can be the clearing house for local rural economic development. Why—rural communities often lack the critical mass to coordinate their economic development.Community colleges already work on the regional scale that is necessary for coherent rural economic development. They unify regions.OSU Extension increasing works in regions.28Slide29
How Wyandot County can win race for Knowledge?
Colleges are also the institutions that create ‘public-private’ partnerships for economic development. They can spearhead business training and provide incubators.Ohio’s colleges and universities can coordinate training workshops for local officials from teaching best practice to teaching finance and tax policy. Coordinate with OSU Extension.29Slide30
How Wyandot County can win race for Knowledge?
21th Century will belong to places that use their knowledge to leverage their assets. Rural communities should be attractive to knowledge workers Quality of life, pleasant environment, sustainable development—this is good economics!Attract return migrants in their 30s after they have seen bright lights.30Slide31
Good Strategies--cont
Business retention and expansion is better than tax incentives for outside investment. Building EntrepreneurshipSmall businesses and self employment are strongly associated with growth in rural regions. (Goetz and Raupasingha, 2009; Stephans and Partridge, forthcoming 2011 Growth and Change)They are an internal engine of entrepreneurship.Small businesses buy locally and they are less likely to move or outsource.Build a more diverse economy that is resilient to shocks (Partridge and Olfert, 2011).Innovation comes from small firms. 31Slide32
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Good Strategies--cont
Promote small business entrepreneurship by:Business, Retention, and ExpansionBuild networks and identifies strengths and weaknesses in a community. OSU Extension is a good source.Treat all businesses alike.Government can help build larger lending pools to reduce credit risk.If you build a good climate for investment, your own businesses will thrive and STAY!33Slide34
Business Retention and Expansion
Take advantage of farm entrepreneurship. Research has found a greater farm share is positively linked to nonfarm entrepreneurship. (Source: Stephens and Partridge, 2011, in print).Today, farmers are great role models1. Tied to land—not outsourcing to China.2. Has experience managing medium sized business and has developed entrepreneurship.3. Understands futures markets, global markets, exchange rates, knows how to manage capital.4. Has financial wealth to invest.34Slide35
Good Strategy: Leverage Regional Strength?
Recognize rural-urban interdependenciesIn 1950, communities detached from neighbors21st Century communities are linked in websGrowth spreads out a hundred of miles from a city as small as 30,000.Source: Partridge et al., 2007If someone can commute, they shop, utilize health care, participate in service organizations, etc.Regions share common interests and the gains should be exploited regionally.35Slide36
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36Rural Depends on Urban for:Urban Depends on Rural for:
EmploymentLabor Force
Private and Public Services
Market for Private and Public Goods and Services
Urban Amenities
Market for Urban Amenities
Market for recreation activities
Recreation
Market for agriculture products
Food Safety and Security
Demand for Environmental Stewardship
Natural Environment
Property taxes/land market
Land for Residential and Industrial ExpansionSlide37
Rural-Urban Shared Fates--cont
Economists contend gov’t jurisdictions should reflect common interests.Economic developmentTax sharing of common economic gain to share costsEnvironmental costs and sprawlInfrastructure is inherently regional37Slide38
Example of Action
Regions that realize they are linked will have a competitive advantage in the global economy.Lower taxes, better infrastructure, better public services, stronger economic developmentJust being a little more competitive will shift capital from around the world at the click of a mouse.Regionalism is the real sleeping giant for rural communities for sustainability.Again, a linking force is extension, colleges and universities.38Slide39
What you don’t want to do!
Don’t try to pick the next hot industry. Be sure hot industries/firms want to be in your community. e.g., Seattle 1978 and Microsoft. Economists say that governments can’t pick winners but losers know how to pick governments.Don’t follow the latest fads—e.g., green jobs, innovation clusters, biotech, high-tech, alternative energy, etc etc….Solar Energy and Wyandot County39Slide40
Reality Check
No Guarantees!! Not all regions will succeed!Even doing the right things is insufficient when conditions are unfavorable.Consequences of pursuing bad policies are high costs and it may prolong the ‘misery’ because people will be less likely to adjust by finding better opportunities. 40Slide41
No Silver Bullet
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Future Challenges for Regions
Globalization is likely to increaseGood: more market opportunities successfulBad: more competition and threat of outsourcing, for which rural areas are vulnerable.Technological innovations can change a region’s competitive advantage for good and bad—by definition hard to predict.Budget realities, austerity, and prolonged global sluggishness. 42Slide43
Future Challenges for Regions
Energy prices—the specter of high oil prices remain—costs of transportation and production would fundamentally change.Climate change will alter regional attractiveness for households and firms.Attractive climates as places to live will shiftAgricultural production patterns will shiftGoal is to make your community a safe haven for these emerging challenges.43Slide44
Conclusions
Build from within your community as the best strategy for success.Leverage your colleges as a source of educating your populace, retaining and expanding your local businesses, training entrepreneurs, and to be the focal point of regional efforts to promote growth.Leverage your broader regions to do things you can’t effectively do alone.44Slide45
Conclusions
Fostering local entrepreneurship is much better than hoping an outsider will ‘save’ your community. Your community has a wealth of good business ideas, including the agriculture community.No sure plan!Future challenges are immense—but wise communities can make these manageable or turn them into opportunities. 45Slide46
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46Thank you Presentation will be posted at The Ohio State University, AED Economics, Swank Program website: http://aede.osu.edu/programs/Swank/ (under presentations)Slide47
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Appendix SlidesSlide48
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48Great diversity in rural America:Slide49
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49491990/91-2006 North American Population GrowthSlide50
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Conceptualizations of CompetitivenessThe Porter Diamond Framework (Porter, 1998)Slide51
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NCC Competitiveness PyramidSource: National Competitiveness CouncilSlide52
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WY’s greater natural resource intensity did not produce faster growth