As a strong advocate for entrepreneur-driven economic development, I’m also an avid supporter of entrepreneurship education. We have reams of evidence—from groups like the Network for Teaching Entrepreneurship–that youth entrepreneurship education helps kids become better students, better workers, and, of course, better entrepreneurs. Thus, it’s a bit sobering and depressing to read the latest Survey of the States 2016 from the Council for Economic Education. The annual CEE survey assesses state policies toward economics and personal finance education. It finds that only 20 states now require high school students to take a class in economics, and only 17 states require coursework in personal finance. As a related 2015 Junior Achievement study shows, the state of entrepreneurship education is even more tenuous. At present, eighteen states require that entrepreneurship course be offered, but these are not prerequisites for graduation. (In many of these states, entrepreneurship education standards exist but are not actively promoted or deployed.) The CEE study highlights Virginia as good example of how states might embrace personal finance education—the Commonwealth requires all high schoolers to take one full credit course in economics or personal finance. These reports suggest that we will need to continue pushing to ensure that American high school students can get access to the economics and entrepreneurship training they need and deserve.
I just finished Robert Gordon’s new book, The Rise and Fall of American Growth. This volume is getting a lot of attention—see, for example, Paul Krugman’s recent book review, and it is definitely worth a read for folks interested in economic development. Gordon has long built his reputation as a naysayer about the information technology “miracle,” and his book builds on this perspective. Gordon’s basic thesis is as follows: the period between 1870 and 1940 was an almost magical era of great inventions. Nearly every technology that undergirds modern life—electricity, cars, mass communications—was invented and perfected in this era, and we’ve been reaping the benefits ever since. As these technologies were developed and perfected, they spurred massive productivity and prosperity gains. However, the pace of these benefits has slowed and the effects are seen in our stagnating economic growth since the 1970s. We’ve had some cool new technologies since then—like the computer, Internet, and many medical advances, but none of them have transformed life to the extent of innovations like electric light, the automobile, or mass electrification. Because the productivity enhancing effects of newer technologies are less profound, we are likely facing a future of lessened economic growth.
While I hope Gordon’s gloomy prognosis is wrong, he marshals lots of evidence to support it. Of course, new revolutionary technologies can always emerge, but there’s no guarantee on this front. The book is chock full of interesting histories of new technologies ranging from frozen foods to electric motors to the shopping mall to airplanes. Gordon contends that we still underestimate the economic impact of these older technologies—much as today’s technology advocates argue that we don’t effectively track the economic impacts of today’s new inventions. If Gordon is right, current trends of income stagnation and income inequality will continue and likely worsen. Gordon concludes with some common sense policy ideas for addressing these issues, but he doubts that we can avoid this fate. Whether you agree with Gordon’s thesis or not, this book is a sobering and worthwhile look at one potential economic future.
A new edition of our quarterly e-newsletter, EntreWorks Insights, is now available. This issue looks at how to better engage young people in community economic development planning and decision-making. You can subscribe and access past newsletters here.
It’s taken awhile, but policymakers around the world have finally gotten the message that future economic prosperity depends on innovation. Governments need to nurture innovation, and when necessary, also know when to get out of the way. Europe is now in the midst of this debate, as the European Union (EU) assesses the potential for a Europe-wide Innovation Council. The European Innovation Council concept was first broached by EU Research Commissioner Carlos Moedas as means to create something of a one-stop shop for EU-driven innovation policies. The jury is still out on the concept, but it is triggering an interesting debate on what the Council might do and what are the benefits of this type of organization. While the current tenor of the U.S. Presidential campaign does not suggest that we will soon engage in a reasoned debate about innovation policy, the EU discussions are relevant as the U.S. also thinks about how best to promote innovation. Whether we dust off older ideas about a U.S. Department of Competitiveness or think about other innovation policy models, we also need to be rethinking how best to foster innovation. For this reason alone, the EU Innovation Council consultations will be useful and instructive.
I’ve been a little skeptical of the hype over reshoring of manufacturing for some time. For me, this story is a little bit but like Santa Claus. I want it to be true, but the data just don’t seem to back it up. The latest bad news comes from the A.T. Kearney Reshoring Index, which showed its largest decline in reshoring activity in ten years. And, sadly, this has been a relatively consistent trend—with declines occurring in most recent years and growing in 2015. Meanwhile, offshoring to new overseas locations appears to be picking up. This index is only one data source, but other researchers also agree that patterns of large-scale reshoring do not exist. (NOTE: You can access a critique of the Reshoring Index data here.)
So, what does it mean? Primarily, it reminds us that there is no free lunch. We can’t just assume that higher costs in China and other factors will automatically send jobs back home. It means that we need to double down on the harder long term slog of building a world class workforce and enhance the skills and qualifications of workers in manufacturing and other sectors. This data should also be seen as a sign of strength in some ways. The ability to capture and manage global supply chains is a key competitive advantage in today’s global economy. This is a great underlying strength of U.S. firms that can and should benefit our economy for years to come. I will continue to wish for the reshoring story to become reality. In the meantime, I’ll still consider the glass to be half full.
At this time of New Year’s resolutions and planning for the future, many communities are also rethinking their economic plans and foundations. This is especially important for economically-challenged places, where an entire economic “reboot” may be needed. Often, this rethinking is easier said than done. The process of community change can be long, painful and wrenching. But, the conversation has to happen, building on new approaches, ideas, and strategies. If you’re embarking on this journey, or in the midst of it, you might get some inspiration from the conversations now ongoing in Maine where a group of committed folks are trying to spark a new conversation about Maine’s “next economy.”
There’s actually a number of interesting efforts underway in Maine. First, a new book, appropriately titled Maine’s Next Economy, examines “how the state’s innovators, entrepreneurs, and doers are growing a new prosperity.” This is part of a larger statewide effort known as Envision Maine. Meanwhile, the Bangor Daily News is playing its own part with its #TheEconomyProject, a deep dive into the future of Maine’s economy. This interesting series is worth a look. Particularly informative is the poll of the top 10 ideas for changing Maine’s economic future. The top 3 vote-getters for the general public were: reducing energy costs, expanding broadband, and improving K-12 education. A separate poll of policy experts picked the following top 3: improve workforce quality, focus on entrepreneurs and innovators, and improve K-12 education.
The specific ideas and proposals being discussed in Maine may not be appropriate for your state or community, but all of these efforts do provide great ideas on how to spark community conversations about how best to build a future economy. This kind of community engagement is an essential prerequisite to local economic transformation.
As a consultant who often works in smaller communities, I get regularly frustrated by the absence of good (and updated) comparative economic data on small and mid-sized places. Most national benchmarking studies look primarily at large metros—examples include many excellent studies from the Brookings Metropolitan Studies Program and the Kauffman Foundation. (For example, Pittsburgh is the smallest community profiled in Kauffman’s new Metro Start-Up Index.) So, I’m very excited to see a new tool developed by the Atlanta Federal Reserve: the Small City Economic Dynamism Index. This excellent new on-line tool tracks economic dynamism (using 29 different measures) in 244 smaller U.S. cities, from Abilene TX to Yuma AZ and lots of places in between. The tool focuses on four categories of dynamism—population (e.g. growth and in-migration), economics (job and income growth), human capital (college attainment, new firms), and infrastructure (e.g., new building permits). Personally, I’d like to see more data related to business dynamics, but I also recognize that much of this data doesn’t exist in usable forms. So, consider this a minor quibble. For those seeking to understand what’s driving economies outside of our major metros, this resource is a great place to start.
I spent this morning at a Hamilton Project event focused on “Modernizing Labor Law in the Modern Gig Economy.” The event hosted the release of a new report from researchers Seth Harris and Alan Krueger, and included two very esteemed panels of experts and discussants. They all grappled with the thorny question of how do we update our labor laws, and our social contract more broadly, to adequately protect and support new ways or working. The report presents a preliminary proposal for tackling this issue—create a new work category of “independent worker” that covers those who work through intermediaries (such as Uber or Lyft) and provides them with protections such as the right to organize, tax withholding, and employer contributions to payroll taxes.
The proposal was met with some skepticism by most of the commenters who argued that we don’t yet know enough to effectively regulate and manage these new ways of working. And, of course, relying on Congress to develop forward-thinking and sophisticated new regulations may not be an idea that has legs now.
I had two takeaways from today’s discussions. First, I worry that the hype over Uber and its brethren may distract us from addressing larger issues related to independent work. As a related Hamilton Project working paper noted, those who work independently via intermediaries are still as small part of the overall 1099 Economy. Today, the online gig economy may employ around 600,000 people. This is a large and growing segment, but the overall independent workforce could be as large as 30-50 million workers. So, while we should address the impact of new business models like AirBnB and Uber, we also need to discuss other parts of the 1099 Economy—like, to give one example, the roughly 20% of manufacturing workers now operating as independent contractors.
Lastly—while the prospects for new federal rules appear limited, we can expect lots of action at the state and local level. In the field of economic development, we may even begin to see something of a competition as regions compete to be the “best place” for independent workers or, conversely, a place that focuses on supporting those in traditional full-time jobs. Regardless, we can expect that the future of the independent workforce will remain a hot topic for some time.
SmallBiz Survival is an excellent website and blog, run by Becky McCray, an Alva, Oklahoma-based entrepreneur and champion for small business owners operating in rural America. In addition to being a great resource for small business owner, Becky and her colleagues often undertake their own research on what’s happening with rural business. The latest helpful entry is their 2015 Survey of Rural Challenges, an informal survey of what keeps rural entrepreneurs up at night. Most of the surveyed respondents operate small town retail operations. Their top business issues include challenges with effective marketing and promotion, the need to hire more help (with limited resources, and a need for new and updated business ideas. Meanwhile, small business owners noted that their business challenges did not derive due to local poverty or a lack of local jobs. In fact, workforce shortages are a higher concern than a need to spur new job creation or attract new businesses to town. The survey did not identify a strong demand for new business loans—business owners want help with the nitty gritty issues of finding customers, growing their markets, and operating in an attractive and desirable rural downtown setting. While the survey results are probably not surprising to many, they are yet another reminder of the many challenges facing rural entrepreneurs. It should also further remind us all to continue to buy local and support them—not just on Small Business Saturday, but every day.
In today’s globalized economy, many regions face what economists call trade shocks, often in the form of a flood of cheap overseas imports. Cheap imports can be a good thing for consumers over the short term, but they can also create lower economic growth and lead to major job losses among U.S. based manufacturers—just ask anyone living regions long dependent on the textile or furniture industries, which have now moved most of their production overseas. These regions, and many others who saw local jobs overseas, now struggle to replace lost jobs and rebuilding a more stable and resilient local economy.
New research from Penn State University economists finds that a strong base of local entrepreneurs helps on this front. The study found that communities with higher levels of local self-employment do a better job of responding to trade shocks. The researchers, Jiaochen Lang and Stephan Goetz, suggest that self-employed workers are more flexible and adaptive, responding more effectively in the face of economic shocks. While this finding represents only one data point, it does suggest that fostering local entrepreneurship should be a core part of regional strategies to promote economic resilience and sustainability. (The article, “Self Employment and Trade Shock Mitigation,” appears in Small Business Economics (September 2015). The abstract can be accessed for free; full article access requires a fee.)