Economic Development needs Workforce Development:

by Christa Franzi 18. September 2014 09:38

Camoin welcomes Colleen LaRose, Workforce Development Specialist

We see it in nearly every community we work in: businesses are increasing demand for qualified workers and struggling to fill positions while jobless individuals lack the education and skill necessary to compete for these positions. In today’s world, workforce availability is among the top issues for business attraction, retention, and expansion. Economic development needs workforce development as a strategic partner.

Camoin Associates brands itself as a full-service economic development firm, which means as the field of economic development grows and transforms to include disciplines such as workforce development, so must we. To that end, we are excited to announce Colleen LaRose as the newest member of the Camoin team.  Colleen is a workforce development veteran with more than 20 years of experience in workforce development public policy. She has significant experience in issues related to improving literacy, helping people with mental and/or physical disabilities find employment, assisting youth with career awareness, as well as program and systems alignment. She is a champion for collaboration and widely recognized as the nation’s leading advocate for the integration of workforce development with economic development at the local, state, and federal levels. She is also the President and CEO of the North East Regional Employment and Training Association, (NERETA).

We will be combining Colleen’s knowledge, skills, and experience with Camoin’s strengths in data analysis, strategic, planning, and evaluation. Over the next several months, Colleen will be training our staff on occupational demand studies, workforce grant writing strategies, skills gap analysis, wage and salary surveys, and other methods in workforce-analysis. In addition, we will be working collectively on workforce and economic development alignment strategies in an effort to bridge the two disciplines.  

Welcome Colleen! We are thrilled to have you on our team and excited to join you in the charge to bridge workforce and economic development. As you said, “This is big stuff!”

In today’s economy, economic development needs workforce development.

 

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Camoin Associates completes Portland Economic Scorecard

by Camoin Associates 17. September 2014 17:16

The Camoin team recently completed work on Portland, Maine’s 2014–2015 Economic Scorecard (download here) for the Portland Chamber of Commerce. The City uses the scorecard, which is updated annually, to track a variety of economic indicators that it has aligned with its economic development plan. The scorecard compares Portland’s performance to that of the Greater Portland Region, the State of Maine, and the nation.

 

Camoin Associates has been working with the Portland Chamber of Commerce since 2010 to develop and complete annual updates to the Economic Scorecard. The purpose of the scorecard is to analyze the data in defined categories to help the City understand how Portland is performing economically, particularly as measured against other benchmark cities.

 

The scorecard presents 28 indicators that measure local and regional economic growth. These indicators represent a mix of measures that are directly related to economic outcomes such as employment, income, and earnings, as well as indicators that are secondarily related to economic outcomes such as education attainment, affordability, and transportation. The City of Portland and the Portland region are measured against reference cities and regions to gauge performance.

 

In addition to the data collection and analysis, Camoin Associates works with the Chamber to prepare a full report that is highly visual containing lots of charts to help with comparison.

 

The scorecard has received quite a bit of press in the last few weeks. Click here, here, and here for news articles covering the scorecard.

 

 

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Jim Damicis Wins NEDA 2013 Member of the Year

by Camoin Associates 17. September 2014 16:51

We can’t express how proud we are of our Senior VP, Jim Damicis, for being awarded Member of the Year by the Northeastern Economic Developers Association (NEDA). Jim was recognized for his continued commitment to NEDA and the economic development profession, including serving as an active board member since 2007, helping revitalize the Association’s education programing, and organizing the 2013 annual conference in Portland, Maine. Jim will continue his good work through 2015 as the organization’s incoming president. Congratulations Jim, this is a well-deserved honor.

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#BuildNEFuture

by Rachel Selsky 17. September 2014 16:34

We had an awesome time at the NEDA Build NE conference talking with other conference-goers about what will transform economic development in the Northeast. Watch for more information in next month’s newsletter.

Click on the image below to see the responses we received.  

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Working Together: Workforce and Economic Development

by Colleen LaRose 17. September 2014 15:33

It appears that there are some very big changes underway from both the Department of Commerce and the Department of Labor for both workforce development and economic development professionals that will significantly break down barriers and require collaborative strategic planning between these two entities.

Now before I tell you about those changes facing us on the horizon, permit me just a moment to reflect on where we have been and why these new changes are an important and dramatic step forward in securing economic viability of regions in the future.

 

For years now, I have been advocating for this collaboration between economic and workforce development because in most regions there is little to no information sharing between these entities as to what businesses want and need. Oh sure, if a company is closing, there is a rapid response team assembled and all kinds of supports brought to bear—but let’s face it, these closings don’t usually come about overnight—and the lack of information sharing has kept us from being proactive in dealing with the needs of companies until it is often too late.

 

So, a couple of years ago, I founded the North East Regional Employment and Training Association largely to create an opportunity for workforce development professionals to begin reevaluating their role (which has largely been seen as a social service agency role) and transform into becoming a part of the strategic planning team for their region (which means they need to actively engage with economic development). To say there has been reluctance to do this would be a considerable understatement. And, I laugh when they tell me that they sit on each other’s boards. My response (flippant, I admit) is typically, “Umm, yeah, so…how is that working for you?”

 

Let’s face it, workforce development and economic development don't speak the same language - and have very different agendas. I remember sitting in economic development meetings as a Workforce Investment Board director hearing about the percent of commercial rental space in each community…and thinking to myself, “What am I doing here? What has this got to do with workforce issues? I have a million fires to put out back at the office and this is a waste of my time.”

 

Well, fast forward seven years and now I can tell you I get it! But it took a lot of very kind (and very patient) economic developers that I met through LinkedIn groups to teach me about what they do and how relevant they felt workforce issues were. I was no longer a stranger in a strange land on those economic development LinkedIn groups—they wanted me, they needed me, and they wanted me to share the message with other workforce development professionals that they understood that workforce quality is not only critical, but in fact, the number one reason why companies now choose to locate in a region—surpassing tax incentives, quality of life, location, and all other important factors that businesses consider in site selection.

 

WOW! This is big stuff! And I was the only workforce development professional participating in these online economic development groups. So try as I might to get my colleagues on the workforce side to join me, they would not. I mean, they were really stubborn about it. And, truthfully, I understood why. The fear is that collaboration may lead to merging—that is, local regions may combine these two entities to save administrative costs on the local level. And you know what, that does happen, although from what I have seen, where the merging has been tried it usually just adds one more layer above and doesn’t cut any staff from below because these two entities have very different functions. But even if jobs were lost as a result of merging, fear of losing one’s job is not a good enough reason not to get these entities to collaborate. We must work together to support local businesses if our regions are going to thrive.

 

I had started thinking it was going to take an act of God to make this collaboration happen for all regions around the country since there was so much fear and distrust. I was wrong. It appears that Vice President Biden is going to pull this off without the need of God’s intervention. (Good thing, ’cause I think the Big Guy probably has bigger fish to fry.)

 

So how is Biden going to change the culture of these administrative entities to force them to work together on planning, sector strategies and business support tactics for their regions, and do so willingly and proactively? Well, nothing grabs attention like money—money that can be given, and money that can be withheld from regions who do not collaborate.

 

Let me explain: In the State of the Union address given by President Obama in January, he charged VP Biden to review all of the federal job training programs in the country and to give him a report in 180 days. So on July 22nd—the same day the new workforce law was signed (more on that in another article)—VP Biden delivered to Obama a report called “Ready to Work: Job-Driven Training and American Opportunity.”

 

Now I know you just clicked on that link, so you can see that there’s a lot of good stuff in this report, but for the purposes of this article, flip to the last paragraph on page 38 and the first paragraph at the top of page 39. Pay attention now, this is really very important:

 

“EDA will include job-driven training principles in its new CEDS content guidelines, which provide recommendations and tools to help regions develop strong CEDS. These new content guidelines will be released in fall of 2014 and will be available to the over 380 current regional planning organizations as they implement and update their CEDS as well as to any community looking to develop an impactful economic development strategy for its region [emphasis added]."

 

Translation: Every CEDS is going to have to include these job-driven principles. So just what are these job-driven principles that that paragraph is referring to? They are actually repeated twice in this report, on pages 8–10 and again on pages 29–32. There are seven of them. Briefly, these principles are:

ENGAGING EMPLOYERS

Work upfront with employers to determine local hiring needs, design training programs that are responsive to those needs from which employers will hire.

 

EARN AND LEARN

Offer work-based learning opportunities with employers, including on-the-job training, internships, pre-apprenticeships, and Registered Apprenticeships as training paths to employment.

 

SMART CHOICES

Make better use of data to drive accountability, inform what programs are offered and what is taught, and offer user-friendly information for job seekers to choose programs and pathways that work for them and are likely to result in jobs.

 

MEASUREMENT MATTERS

Measure and evaluate employment and earnings outcomes. Knowing the outcomes of individual job-driven training programs—how many people become and stay employed and what they earn—is important both to help job seekers decide what training to pursue and to help programs continuously adjust to improve outcomes.

 

STEPPING STONES

Promote a seamless progression from one educational stepping stone to another, and across work-based training and education, so individualsefforts result in progress. Individuals should have the opportunity to progress in their careers by obtaining new training and credentials.

 

OPENING DOORS

Break down barriers to accessing job-driven training and hiring for any American who is willing to work, including access to supportive services and relevant guidance. In order for training programs to work, they need to be accessible for the people who need them most.

 

REGIONAL PARTNERSHIPS

Coordinate American Job Centers, local employers, education and training providers, economic development agencies, and other public and private entities to make the most of limited resources.

 

Requiring these principles to be part of every CEDS plan now literally forces economic development to invite workforce development to participate in the planning of the region (because come on, what do economic developers really know about apprenticeship, career pathways, and breaking down barriers to employment?). And because these principles will also be a part of state WIB plans (and therefore undoubtedly also local WIB plans), we are going to find ourselves in completely new territory, learning each other’s language, breaking down barriers and fears, and ultimately building strong communities. But this is going to take some hand-holding. I get that! It is scary to step into new territory. I was terrified to go on those economic development groups on LinkedIn, but I knew I had to find out who “those people” were and what they did. And now you will need to find out who “those workforce people” are and what they do.

 

I have been thinking about your needs a lot around this and realizing the enormous challenges you are about to face by being forced to learn a new language. So, last week, I joined one of the most prestigious economic development firms in the country so that I can take on an active role in facilitating this bridging between these two disciplines. The North East Regional Employment and Training Association (www.nereta.org) will continue to do professional development for workforce development and economic development professionals, but when you need someone to work specifically with your region to help you make this collaboration work, as a member of the Camoin team, now we can do that for you as well. There is an old saying, “Collaboration is the stuff of growth.” True that!

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Featured Indicator: Trends in Manufacturing Output and Employment

by Tom Dworetsky 17. September 2014 13:59

Economic developers, planners, and politicians often speak about manufacturing in America as a declining phenomenon. We hear about large factory layoffs and manufacturing jobs shipped overseas, and considering  the highly visible abandoned factories and barren industrial wastelands that occupy land in our cities throughout the American Rust Belt, it certainly seems like manufacturing is in decline. As we point out in our article on Expanding Output and Shrinking Employment, however, there is more to it than that. Just because manufacturing employment is decreasing (and it has been for quite some time) does not mean that manufacturing output is mirroring that trend.

 

This month’s indicator tracks trends in U.S. manufacturing output and employment over the last 25 years. The chart below presents quarterly BLS data on (inflation-adjusted) output and jobs for both the manufacturing sector and the entire nonfarm business sector (which includes manufacturing) from 1989 Q1 to 2014 Q1. Values are indexed to 1989 Q1.

 

Several interesting trends are apparent from this chart:

  • Manufacturing employment has undoubtedly declined over the last 25 years. The U.S. has lost a third of its manufacturing jobs since 1989, a not insignificant figure. While the number of manufacturing jobs has increased slightly since the Great Recession, there is an unmistakable long-term downward trend.

  • By contrast, the number of nonfarm business jobs has increased by 20% since 1989. While this is a good sign—especially compared to manufacturing employment—almost all of this growth occurred prior to 2000.

  • Manufacturing output in real terms has increased by over 50% in the last 25 years, though again, almost all of this growth occurred before 2000. While it has not kept up with nonfarm business output which almost doubled over this period (and has continued to rise significantly since 2000), it is not fair to say that manufacturing is in decline.

So, growth in inflation-adjusted output continues to outpace employment growth—an unavoidable outcome of increased labor productivity. Output per job has risen impressively in the last 25 years. As shown in the next chart, output per job for nonfarm businesses has risen by 61%. This is certainly not a trivial increase, but it pales in comparison to output per manufacturing job, which underwent a 125% increase!

 

This means that the average factory has been able to more than double the number of widgets it produces without having to hire a single additional worker (or, in many cases, produce the same amount while laying off half of its workers).


Why is this important?


So now we know that referring to manufacturing as being “in decline” is not entirely accurate, as it fails to account for the vast advances in productivity that the sector has made. Still, since around 2000, manufacturing output has not increased perceptibly and represents a declining proportion of our economy (2000 Q2 is the point where the two orange lines in the first chart above start to diverge). And even though manufacturing output is not falling, finding jobs for laid off factory workers and uses for vacant industrial properties remains an ongoing challenge.


And what’s more, not only are we contending with declining manufacturing employment, we are also faced with the fact that employment overall is barely above 2000 levels. (Take another look at the dashed blue line in the first chart.) Meanwhile, according to U.S. Census data the working-age population (all people ages 18 to 64) increased by nearly 14% between 2000 and 2013. If that trend continues, it's a future of fewer jobs and more people competing for them. Again, I refer you to our article on Expanding Output and Shrinking Employment for what this future might look like.

 

Click here to download data on employment, output, and output per job for the manufacturing and nonfarm business sectors.

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Conference Alert - Financial Analysis for Planners

by Rachel Selsky 17. September 2014 13:56

I am making the trek to Rochester, NY, this week with Michael N’dolo for the Upstate Chapter of the American Planning Association conference to present on financial feasibility analysis. The title of the conference is “Practical Knowledge for Practical Planners,” and we are honored to be asked to participate. The focus of the presentation will be laying out the basics of financial analysis so that planners can have the basic skills necessary to review development projects, especially when the developer may be asking for financial assistance to fill their “gap.” We will also be reviewing some example projects where we have used financial analysis during the planning process to determine whether a particular development concept will work or not.

 

We will start by outlining the 4 Ws and 1 H:

 

Who: Planners, economic development professionals, public officials, developers, property owners…. everyone involved in the project

 

What: Way to measure the financial feasibility of a particular project or development concept.

 

Why: To determine if a project will be viable as planned or whether there are “gaps” that need to be addressed.

 

When: After a development concept has been created but before public investment or commitments have been made.

 

How: Through a review of the cash flow, debt service coverage ratio and internal rate of return.

We are looking forward to it. Let us know if you’ll be at the conference. If you can’t make it this year but are interested in following along I will be tweeting from @rach017.

 

 

 

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Foreign Capital for Local Projects: The EB-5 Program

by Dan Stevens 17. September 2014 13:56

The EB-5 program is an oft-overlooked way to raise capital for local economic development projects. Since 1990 the little known program called the Immigrant Investor Program, or “EB-5,” has provided a way for foreign investors to earn conditional residency in the U.S. by investing in job creating ventures. In 2012 Congress modified the program so that investors can invest in a “regional center” rather than directly in a business venture. These centers are defined by U.S. Citizenship and Immigration Services (USCIS) as:

 

Any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment.

 

Regional Centers maintain a list of jobs-generating projects into which they direct foreign investments. Examples of these projects range broadly in type and have included the following:

  • Redevelopment of closed military installations

  • Development of senior housing

  • Restoration of historic buildings

  • Expansion of a ski-resort

  • Sports stadiums

  • Restaurants

  • Mixed-use developments


These projects are just a sample of what can be developed through the program. Most for-profit businesses are eligible as projects as long as they create enough jobs. Investors are required to make a capital investment of $1 million that must create at least 10 jobs. For some designated “target employment areas” investors only need to invest $500,000.

 

An added bonus of the Regional Center model is that jobs can be direct or indirect. That means that if the project will employ fewer than 10 people, it can still be eligible if jobs are generated elsewhere in the local economy as a result of the project.

 

The program has become increasingly popular in recent years. In 2014, the EB-5 annual visa quota of 10,667 was hit for the first time. According to the LA Times, the number of visa applicants has doubled almost every year since 2009 with Chinese nationals making up 85% of visa holders in 2014.

While the program has some downsides including slow processing times and some high profile cases of fraud, it has been effective in raising capital for projects during difficult economic times. USCIS estimated that the program generated 49,000-plus jobs and $6.8 billion in new investment as of 2012.

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Agricultural Act of 2014 (Farm Bill): Implications for Economic Development

by Ian Flatt 17. September 2014 13:54

Camoin Associates is currently working with the Franklin County (NY) Industrial Development Agency to develop a Comprehensive Economic Development Strategy. Like in many communities throughout the U.S., agriculture is one of the pillars of Franklin County’s economy. While the county has enjoyed success in this industry for many years, specifically in the dairy and cheese production sectors, it faces many of the same challenges the agriculture industry is facing nationwide. Programs in the Agricultural Act of 2014 seek to address some of these challenges.

 

The Agricultural Act of 2014, also known as the Farm Bill, authorizes nearly a trillion dollars of spending on nutrition, agriculture, energy, and research programs over the next ten years. More programs and information are on the horizon, as some initiatives identified in the Act have not been completely developed. The contents of the Agricultural Act would be impossible to cover in a newsletter article, so this article will highlight the initiatives that are most pertinent to economic and rural development, including programs that support:

  • Beginning farmers and ranchers and military veterans

  • Regional food systems promotion

  • Organic food production 

  • Biomass energy production

More information on the full contents of the Agricultural Act of 2014, including changes to crop insurance programs, can be found on the Agricultural Act of 2014: Highlights and Implications page of the United States Department of Agriculture Economic Research Service website.

 

Programs for Beginning Farmers and Ranchers and Military Veterans

The farming and ranching industries are facing the challenges of an aging workforce. As more and more workers currently employed in this sector retire, they will need to be replaced by a new generation of skilled farmers. To generate interest in the agriculture industry and ease the transition of new farmers, the Agricultural Act identified several programs designed to assist “beginning farmers and ranchers,” as well as military veterans. These initiatives include training programs, favorable crop insurance rates, and low interest loans and grants. The Act also earmarked funding to help transition land from older farmers and landowners to younger farmers by helping finance the purchase through loans. These programs can help communities create the next generation of farmers and ensure the long-term sustainability of this important industry in the economy.

 

Regional Food Systems Promotion

As economic developers across the country have noticed, local food has become an increasingly important part of many communities’ food systems and local economies. The Agricultural Act also recognized this trend and has tripled funding to support developing this market. In the previous Agricultural Act, funding was limited to farm-to-consumer initiatives (e.g. farmer's markets). The Agricultural Act of 2014 has expanded this scope to include intermediaries, including local and regional food enterprises that process, distribute, aggregate, and store and/or market locally or regionally produced food products. This will greatly increase the size and viability of the local and regional food market. Farm-to-institution (schools, universities, hospitals) programs are also included in this expanded scope. A variety of organizations are eligible to apply for these grants, including nonprofits, local governments, and producer associations.

 

The new Agricultural Act is also offering grants to organizations for programs that encourage SNAP recipients to purchase local and regional fruits and vegetables.

 

Organic Food Production

According to the USDA, US demand for organic food exceeds the current supply. To address this gap, the Agricultural Act doubled funding to assist organic producers with the cost of organic certification. By capitalizing on this funding, producers across the country minimize the cost of becoming certified organic producers and handlers and can begin selling goods to this growing market.  The Act also enhances some crop insurance options for organic producers to more accurately reflect the prices of organic foods.

 

 

Biomass Energy Production

The Agricultural Act of 2014 provides support for the production, harvest, storage, and transportation of crop and woody biomass. Among the crops specifically identified by the USDA is shrub willow, an efficient source of biomass energy that can be grown on marginal land. Capitalizing on these programs will allow farmers to expand and diversify the markets for their crops and bring formerly unusable land into production. Energy programs identified in the Agricultural Act include:

 

Programs identified in the Agricultural Act are subject to change and some are still being developed. All programs have limited funding available and some have specific or rolling deadlines. More information of the variety of programs administered through the United States Department of Agriculture (USDA) can be found on the Department’s website. You can also follow the USDA on Twitter or Facebook for updates.

 

Again, more information about the new programs included in the Agricultural Act of 2014 can be found on the Agricultural Act of 2014: Highlights and Implications page of the USDA Economic Research Service.

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Expanding Output & Shrinking Employment: Thoughts for Economic Developers on the “Decline of Manufacturing”

by Michael N'dolo 17. September 2014 13:50

 

“One of the economic tales of our times that continually puzzles me is the amount of effort that’s put into first describing and then providing causes for the decline of American manufacturing. The reason this puzzles me is because as far as anyone can tell there hasn’t been a decline in American manufacturing [emphasis added]. Far from it, output is at all-time highs.”

 

The above quote comes from a recent Forbes article that lays out fairly succinctly the case that manufacturing has not actually suffered the decline that we, as economic developers, have perceived as a multi-generational trend. To the contrary, manufacturing output is once again at an all-time, inflation-adjusted high (see this graph from the St. Louis Fed on industrial output). The author’s conclusions are that: (1) manufacturing as a percentage of both the U.S. and global economy has fallen as the service sector has expanded, and (2) manufacturing employment has fallen in the US (and elsewhere) because productivity has increased dramatically.

 

Simply said, we produce significantly more goods on a per-worker basis than our grandfather’s generation. Fewer workers today are needed to produce larger quantities of tangible goods like automobiles and refrigerators than a generation or two ago. Yes, outsourcing and offshoring have moved production jobs elsewhere in recent years, but productivity gains have played a fundamental role in this employment shift. Anyone who has toured a modern manufacturing operation has seen this as obvious as the day: low-skilled labor has been replaced by machines and vastly fewer (but more highly trained) technicians.

 

Of course, we have seen this jobs revolution before. At the time of the founding of the U.S., the majority of labor was concentrated in the agricultural sectors. Today, agricultural employment comprises less than 2% of the US workforce. Why? Because unskilled labor has been replaced by tractors, automated irrigation systems, industrially produced chemicals, seed technology gains, etc. The trend continues into the modern era, with the American Farm Bureau Federation claiming that we produce over two-and-a-half times the agricultural output of the 1950s with fewer inputs (including labor) to production.

 

And yet, few people decry the dearth of opportunities for low-wage, high-effort agricultural employment our great-grandfathers “enjoyed.” Manufacturing is a different story in that wages in that sector tended to be much better than farming and, theoretically at least, provided a “middle-class lifestyle” to many people in the middle of the last century (though the definition of what constitutes “middle class” back then is quite different than the “middle class” of today). While it is true that manufacturing jobs on average tend to be higher paid than low-skill service sector jobs, many are paid a wage that would not qualify as “middle class.” As economic developers, when we hear that employers are having a hard time finding enough quality employees to fill existing positions, we have to remember to ask what the wage on offer amounts to on an absolute basis. $12 per hour sounds a lot better than minimum wage (and it is, no doubt), but it is hardly a wage that provides a “middle-class” lifestyle by today’s definitions.

 

Indeed, we can view the shift in employment out of manufacturing in much the same way as the shift out of agriculture—the genius and the conundrum of capitalism itself—as Schumpeter’s creative destruction that re-allocates resources (labor) from less-productive to more-productive uses. (As an aside, Warren Buffett once commented that over the course of a single lifetime—his own—per-capita, inflation-adjusted output grew six-fold. In other words, people living in the present enjoy six times as many resources/consumption on average than those living at the time of Buffett’s birth.) But, unlike the shift out of agriculture and into industry, the question remains as to where the labor is going, or more formally, “Into what sectors are the resources (labor/jobs) being shifted?” Certainly, an argument can be made that the “services” sector is picking up a great deal of labor, and until the crash, “construction” employment was booming. We know how the construction employment picture ended and, while there has been a resurgence, it is unlikely to attain the elevated levels of the mid-2000s.

 

So, what about services? Services get a bad rap, partially deserved, because they tend to be associated with low-wage, dead-end jobs. The public’s collectively held image of this is the Starbucks Barista with a master’s degree in art history who cannot repay her student loans. As economic developers, we recognize that there are some quite acceptably middle-class service industry jobs, particularly as you rise up the skill and experience ladder. The question is, how much more labor can the service sector effectively absorb?

 

Taken to its extreme, if we continue to progress in terms of productivity at even half the rate of the last century, we should assume additional massive dislocation of jobs, and not just from the manufacturing sector. Automation is affecting all sectors, to be accelerated by the “internet of everything” that is coming into being. Where, if at all, will those people put their labor resources to use? There are only a few options:


Employment expands in an existing sector

  • Health care is the often-touted growth sector that could, in the mid-term, absorb additional labor as the baby boomers (and everyone else) require ever-higher levels of medical care. Automation is affecting this industry already, but it likely to be swamped by the sheer quantity of demand for services and will therefore lead to a growth in employment.

  • Perhaps the services sector will continue to grow in the short term (albeit with the concern from above in consideration regarding productivity and automation), with additional amenities becoming commonplace. Remember how a good cup of coffee was not typically available in the 1980’s? Well, now you have Baristas at every corner. What is the next got-to-have-it-right-now consumer demand?

  • There is an interesting counter-intuitive argument that the agricultural sector could experience a new demand for labor (think substitution of more labor in lieu of the chemical-intensive practices today, a move towards more healthy foods that require more manual labor such as pastured cattle versus their feedlot brethren). Any shift, however, is likely to be relatively small.

     

The labor force shrinks

  • Informal work: We witnessed a massive change in the 50s as women joined the workforce en masse. This created new opportunities and new challenges, particularly with respect to childcare, education, and care for the elderly. Should we expect that trend to reverse (i.e., women and men deciding to remain outside of formal employment to assume informal, unpaid work)? Although we do not measure it, there is clearly a utility to society for these informal sector efforts.

  • Involuntary removal: One of the most unfortunate trends of the financial crisis was a steep increase in the number of Americans on disability, who are often thereby effectively removed from the workforce entirely until the age of retirement. (Too long a discussion for this article, but we note that the incentives for those on disability are misaligned with the return to the workforce and the opportunities to leave the disability safety net are very slim).

  • Voluntary removal: In classical economics, there is a discussion of supply and demand from the point of view of the provision of labor. If the clearing price of the prevailing wage rate is low due to oversupply of labor compared to demand, a segment of the “supply” (i.e., those of working age) will simply choose to not work. “Early retirement” is one example of predominately skilled workers voluntarily leaving the workforce prior to the typical retirement age to take advantage of the leisure of not working. The incentives to continue in a formal productive role are not adequate. Likewise for volunteerism, informal jobs, side businesses, etc. as either additional income generation or for enjoyment and fulfillment. We note a trend in this domain is already apparent. Here, the question is either one of vocation or simply one of only partially participating in the formal economy.

 

Persistent and rampant underemployment

The dystopian view of productivity gains is not a pretty one, where whole segments of the population effectively cease to be employable and turn into a massive social headache.

 

This last alternative is worrisome. It begs the question, “Have we reached a point where the size of the available workforce has perhaps exceeded the total demand for labor in the formal economy?” It need not be a dystopian vision, however. After all, everyone working 80 hours a week is not exactly a fun vision either. Substituting leisure, early retirement, volunteerism, work in the informal economy, etc. could all be positive things—the 40-hour work week is a novel and much appreciated change to the lifestyle of our agrarian ancestors. As a society, the key will be making the transition a happy one to the benefit of all and not just the ultra-skilled (the current beneficiaries of the productivity gains of late).

 

As economic developers, we could be wildly successful at our jobs (i.e., attracting and retaining employers, encouraging entrepreneurship, doing our economic gardening, etc.) and still face a situation of persistently high unemployment unless we deal with this “labor allocation challenge.”

 

What to do?

 

We have to recognize that much is outside of our control. What is in our control is how we measure our own successes as a community of professionals. Counting jobs is not likely to be the measure by which we should gauge our success. In future posts, we hope to provide a few “out-of-the-box” ideas that we can consider for the future of our profession. I would love to hear from any and all as to the ideas you may have to solve the “labor allocation challenge” and/or how we as economic development professionals can react to this challenge.

 

For more on this subject, take a look at our monthly indicator for some data on manufacturing employment and output. 

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About Camoin Associates

Camoin Associates is a professional service firm that utilizes its understanding of the public and private sector investment process to assist businesses and developers in capitalizing on funding, financing and tax programs established to encourage private investment. We also specialize in advising economic development organizations and municipalities in creating strategies, policies and programs that support investment and job creation.   [Click Here for More]

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