An interesting new research summary from the National Bureau of Economic Research assesses our current state of knowledge on the connections between offshoring, international trade, and the deteriorating job conditions faced by many American workers.  The researchers, Ann Harrison and Margaret McMillan, summarize a host of studies that examine these connections. They find that, to date, researchers often present contradictory findings—with some asserting that offshorring leads to job loss, while others contend that the offshoring of low-wage and low skill jobs actually improves both job quality and quantity here at home.

Digging deeper, Harrison and McMillan depict a more nuanced reality. In general, offshoring costs jobs here at home.  But, if American workers and foreign labor work on different tasks, expanded domestic and multinational employment can go hand in hand.

But the picture still remains complicated and the general news is not good.  Offshoring puts great pressure on domestic wage rates and the downward spiral grew worse in the 1990s in comparison to previous decades.  Moreover, the researchers find that, when displaced workers obtain new positions in the manufacturing sector, their wages don’t change greatly.  However, if they move into new service sector occupations, wage declines are significant.  And, given the continued erosion of manufacturing jobs, most displaced workers follow this latter path toward service sector jobs.

So what does this all mean to the displaced American worker?   The best strategy is to find new employment in high paying manufacturing industries.   The second best strategy is to find a service sector job that pays comparable wages to the manufacturing sectors—not an easy task in today’s economy!    The authors note that this transition is not going to occur through the magic of the market.    They suggest that some kinds of “soft” industrial policies, such as investment in infrastructure or a strengthened education system, are needed.   In my mind, these suggestions represent a minimalist strategy.  We need even more aggressive and creative tools to help workers effectively respond to the new globalized labor marketplace.

If you’re a government program manager, it’s not likely that you’re looking forward to a new Government Accountability Office (GAO) on your work. It’s kind of like hearing that 60 Minutes wants to talk to you.  So, I’m sure that various workforce development programs across the US were a little worried about the findings of a new GAO study on the Workforce Investment Act (WIA) that was  just released today.

The report examines collaborations between employers and local workforce investment boards (WIBs) with a particular focus on 14 local programs that are especially innovative or promising.  What did GAO find?   Employers like the programs, partners are well-engaged, and, most importantly, local residents are gaining important job and career skills!!!  For those working in the field, this should come as no surprise. But, it’s nice to see a regular critic like GAO recognize the benefits of these investments.

The GAO did also highlight some challenge areas.  For example, collaborations are difficult to manage and current rules and regulations are too burdensome and complex.   Most of the indentified problems are fixable, but only if current WIA rules and regulations are updated and streamlined.  If not, WIBs must continue to operate via outmoded and antiquate rules and procedures.  Hopefully, Congress will listen as they consider new funding and reauthorization of WIA this year.  The time for change is now!

My good friend, Stu Rosenfeld, has a nice essay in the latest edition of the Daily Yonder blog.  For the last few years, Stu and his colleagues have produced a host of excellent studies highlighting the role of arts and culture in building more prosperous rural regions.   His latest essay highlights their recent work in Mississippi which is home to a sizable creative economy.  In fact, they estimate that more than 63,000 people are employed in the state’s creative economy.

The creative economy is not just about arts–it includes a diverse set of industries.  These include sectors that use design skills and technologies. including architecture, interior design, and various media.   As we noted in a previous post, the Mississippi Economic Council now recognizes the economic development importance of this sector; supporting the Creative Economy is one of its current top priorities.   We hope that other states and regions will recognize that creative enterprises are not just local amenities, but can be important economic engines of their own.

Last week, CFED released its annual Assets and Opportunity Scorecard.  This report is the latest incarnation of CFED’s Development Scorecard, one of the first comprehensive and rigorous efforts to benchmark states for their economic development capacities.  The Assets and Opportunity Scorecard takes a sligthly different approach–it focuses less on traditional economic development metrics and instead assesses “Americans’ ability to save and build wealth, fend off poverty, and create a more prosperous future.”

The scorecard assesses state performance and capacity in five key areas:

• Financial Assets and Income
• Businesses and Jobs
• Housing and Homeownership
• Health Care
• Education

Much of the report contains sobering news.  For me, one big point of worry is the statistic that 43% of American families have little or no savings to tide them over in a time of emergency.  This is based on CFED’s concept of “liquid asset poverty,” a measure that tracks household savings that can be easily converted to cash (and thus excludes items like a home, business, or car).  CFED also uses another measure for asset poverty, i.e. whether a household has sufficient savings to cover basic expenses in the event of job loss or another measure.  21% of American households face current asset poverty status.

The report also highlights the huge state-by-state differences in the safety net and other support systems.   Vermont, the best performing state, has 15% of its families in asset poverty.  Meanwhile, in Nevada, 45% of households are defined as facing asset poverty.   Overall, the best states in terms of supporting assets and opportunity are Vermont, North Dakota and Minnesota.  The worst performing states were Nevada, Alabama, South Carolina, and Mississippi.    The report’s findings tell us, that, even with some better economic news in recent weeks, we have a long way to go to provide opportunties and needed support for many American families.

For the past year, EntreWorks Consulting has had the pleasure of working with the Region 2000 Partnership, an economic development organization serving the five county region surrounding Lynchburg, Virginia.  Earlier this week, we closed up on one project–the annoucement of a new regional small business and entrepreneurship development strategy—and announced an innovative new effort, the Region 2000 Entrepreneurship Initiative for Higher Education.  You can find news stories on these efforts here, here , and here.

We are all especially excited about the new higher education collaborative, which will bring together six local colleges and universities to jointly develop programs to help teach entrepreneurship and to help area students and residents consider, start, and grow new business and social ventures of their own.   The collaborative is quite unique because it includes a very diverse set of schools, including a large religiously-oriented university (Liberty), a community college (Central Virgnina Community College), several smaller colleges (Lynchburg, Randolph, and Sweet Briar), and a historically black college and university, Virginia University at Lynchburg.    The effort is just kicking off, but we are expecting exciting developments in the coming months.

The latest edition of our quarterly newsletter, EntreWorks Insights, is now available here.  This issue takes a look at the coming round of defense downsizing, and offers some lessons from the last big defense cutbacks during the end of the Cold War in the late 1980s/early 1990s.

If you want to catch up on the latest trends in business incubation, accelerators, and related strategies, you’d be wise to join the National Business Incubation Association at its Summit for Advanced Incubation Professionals, to be held in Tampa, FL, starting this Super Bowl Sunday (Feb. 5).   I’ll be there, hopefully sunning by the pool and particpating in a panel on legislative and policy trends affecting the industry.  As usual, I suspect I’ll be contributing  a tiny amount and meanwhile learning a ton from the many experts and incubation veterans brought together by NBIA. It should be a great event.

I just finished an interesting book, Small, Gritty and Green:  The Promise of Smaller Industrial Cities in a Low-Carbon World, by Catherine Tumber.  While I can’t say that I agree with all aspects of Tumber’s arguments, I can highly recommend the book.  Tumber’s thesis is that the smaller industrial cities of the Northeast and Midwest (places like Syracuse, Youngstown, or Flint) are ideally suited to prosper in an economy where
low-carbon, green businesses, and sustainability assume more prominence.   Until recently, these regions were viewed by many as lost causes or “shrinking cities.”  These locations enjoy several unique advantages, such as dense residential footprints, appropriate scale economies, and committed leadership, that should help them prosper in the 21^st century economy.

Tumber may be a little optimistic about the timeline for reaching a low-carbon economy as she wrote the book during the height of national interest in cleantech and the green economy.  But, her arguments about the inherent advantages of smaller cities are very compelling.   Also, she is a very good writer, able to jump seamlessly from the latest urban planning theories to real life examples of local residents who are leading the charge to transform their communities.    If you’re a fan of small cities or of new approaches
to community builidng, this book is definitely worth a look.

Tomorrow, I’m going to serve as a judge for the Hoya Challenge, a cool and fun business plan competition open to all students at Georgetown University.   Lots of schools sponsor business plan competitions–in fact, the Kauffman Foundation has even developed a web site (I-Start) to help schools manage these events.   The Hoya Challenge includes some interesting twists.  First, it operates along two tracks and offers prizes for both commercial ventures and for social ventures.  Second, it progresses along a very interesting phase of competitions as the ideas develop and become more concrete.  Along the way, the less compelling ideas fail to move forward–ala American Idol!

The Hoya Challenge’s  first two phases (already completed) judged ideas from Twitter feeds and from a one-page executive summary.  Tomorrow’s judging is the Rocket Pitch, where we assess short elevator pitch presentations.   The best Rocket Pitch ideas will then participate in a Final Challenge to be held in late March.  A lot of cool ideas have already been developed and some have already been turned into businesses.   Watch this space for future updates on the winners!!

Last week, GE released the second edition of its Innovation Barometer.  This is a very interesting look at how the world’s top CEOs view the global business environment, and innovation’s role in their company’s prospects.   The reports contain loads of useful information and the raw data and results can be downloaded here.  Let me highlight a few points that I found intriguing:

• It’s no surprise that CEOs view innovation as the key driver of company performance, job creation and economic prosperity.
• But, they think it’s getting tougher to innovate. This is mainly due to market uncertainty, but also due to a perception that government support for innovation was weakening.  This perception was most pronounced in Japan, Russia, Poland, and France.  It was not deemed a major challenge by US executives.  In fact, 76% felt that government support for innovation was efficiently organized.
• CEOs think innovation looks different today when compared to the past.  In their view, people’s creativity will assume prececence over scientific research in the development of new innovations.
• A “partnership paradox” exists.  86 percent say outside partnerships are critical in the new innovation models, yet only 21% feel that these partnerships matter for innovation on day-to-day basis.