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News
| Power Play | |
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Some of the nation’s governors are joining forces to promote high profile economic development issues in Washington D.C. Washington Governor Chris Gregoire is one of eight state governors behind a new coalition called “U.S. Tanker 2010” designed to support Boeing’s bid to win the $35 billion tanker contract from the U.S. Air Force. The coalition includes the governors of states where Boeing and its suppliers would employ large numbers of workers on the tanker, including Illinois, Missouri and Oregon. According to Gregoire, “The last time my state needed jobs this badly, Boeing was building the propeller–driven 247 airliner [in the 1930s]. It’s time for that tanker to be built in America.” This is a high stakes competition with Boeing vying against a partnership of Northrop Grumman and EADS, the European consortium that builds the Airbus. The Northrop Grumman–EADS tanker would be assembled in Mobile AL from parts made in Europe. In October 2009, government and economic development leaders in Alabama, Florida, Louisiana and Mississippi formed a coalition called the Aerospace Alliance in part to promote the Northrop Grumman–EADS tanker bid. Several other governors are joining forces to lobby on behalf of Toyota Motor Corporation which is facing intense scrutiny over multiple quality issues. The governors from Alabama, Indiana, Kentucky and Mississippi have sent a joint letter of support to committee leaders at the U.S. House of Representatives holding hearing on Toyota’s quality problems. Kentucky Governor Steve Beshear is leading the charge –– Toyota directly employs almost 10,000 people in Kentucky. Breshear outlined the group’s position in a news release: “Toyota… deserves a level and reasonable response from the federal government –– not one that is tainted by the federal government’s interest in some of Toyota’s competitors.” Toyota directly and indirectly employs over 172,000 people in the U.S. at its five major assembly plants and 1,200 dealers. Source: “Gregoire, 8 other governors back Boeing for tanker bid”by Kyung M. Song. The Seattle WA Times. February 22, 2010. “Daniels, Beshear among governors standing behind Toyota” by Brent Adams. Business First of Louisville KY. February 10, 2010. “Dealers To Lobby Congress” by Neil King Jr. The Wall Street Journal. February 23, 2010. |
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| Head of the Class |
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Women have vaulted to the head of the class. For the first time in history, women with college degrees now hold more non–farm payroll jobs than men. Data released by the Bureau of Labor Statistics show that this trend began just last year; in January 2010, women held 720,000 more non–farm payroll jobs than men. The reason for this change is clear. Women are earning significantly more college degrees than men –– in 2007, women earned nearly 166 associate and 135 bachelor’s degrees for every 100 earned by men. Women are also using their degrees to obtain jobs in fields that have been more stable during the recession including teaching, government and health care. Casey B. Mulligan, professor of economics at the University of Chicago, noted, “There are very high returns to education in the marketplace right now; it’s a fact that women have leveraged.” In a sense, it’s back to the future for women. Until the start of World War II, women in the U.S. were typically more educated than men. This changed after the war, when men went to college in large numbers thanks to the G.I. Bill while more women stayed home to care for growing post–war families. The momentum changed once again in the 1960s as both male and female baby boomers entered college. By the 1980s, women were earning more bachelor’s degrees than men in all fields except physical sciences, math, engineering, business and economics –– a trend that continues today. As Harvard University economist Claudia Goldin explained, “Men have traditionally needed less education, [because] guys can get good jobs in construction without a master’s in Education and women can’t, so education substitutes for that.” Here are several other job–related gender trends worth noting:
Source: “Education Gains Shield Women From Worst of Job Woes,” by M.P. McQueen. The Wall Street Journal. February 12, 2010. “How a New Jobless Era Will Transform America” by Don Peck. The Atlantic. March 2010. |
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| Manufacturing Reboot |
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It’s time for a re–think and reboot for many marquee manufacturing corporations, as they report their 2009 earnings. Prompted by the economic recession, major manufacturers are re–evaluating their businesses to remain competitive and profitable. In some cases, this means shedding operations. One example is Dow Chemical which is selling its basic chemical factories –– a $2 billion operation –– in favor of more profitable specialty chemicals. The company is closing six chemical plants in Louisiana and Texas as part of this strategy. Whirlpool is also retrenching: it reduced its manufacturing capacity by 10% in 2009 and moved some operations to lower cost Mexico in response to a 9.6% sales decline. Jeff Fettig, Whirlpool chief executive, recently summed the situation up succinctly, “We are emerging from one of the most challenging economic environments we’ve seen in decades.” For others, it means expansion. Intel Corporation sees opportunity in semiconductors–– it made headlines in the midst of the recession by announcing an aggressive two–year $7 billion investment in facilities in Chandler AZ, Rio Rancho NM and Hillsboro OR. Analysts point to several broad changes currently underway across the manufacturing sector. First, many companies are shifting away from heavy sectors like automobiles and chemicals toward higher–tech products. Second, companies are being forced to adapt to lower demand for products; the auto industry, for example, is projecting sales between 11.5 and 12.5 million cars and trucks in 2010, well below the peak 17.5 million units sold in 2005. Third, manufacturers are controlling costs by relocating facilities to lower cost locations. This trend is already evident in the chemicals and appliance sectors. Peter Huntsman, chief executive of chemical manufacturer Huntsman Corporation, offers this blunt assessment: “The chemical industry is leaving the United States and it won’t be back. When demand picks back up, they’ll build new capacity overseas.” The numbers are startling. U.S. industrial capacity fell by the largest year–to–year decline in history –– a full 1% decline in 2009 as the goods–producing sector lost 2.3 million jobs in just one year. Overall, the U.S. capacity to produce autos and chemicals fell 4.4% and 1.7% respectively –– the largest declines since 1949, according to the Federal Reserve. Yet, U.S. capacity to produce semiconductors grew 10.4%. Economists are watching the manufacturing sector closely because responses by manufacturers in a post–recession world will determine when job growth resumes. Source: “Radical Shifts Take Hold in U.S. Manufacturing,” by Mark Whitehouse. The Wall Street Journal. February 3, 2010. |
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| Hot Jobs |
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The U.S. Labor Department has released its list of the ten fastest–growing job categories for the next decade. While there are several high skill positions on this list, manufacturing jobs are noticeably absent. Here’s the top ten list with percentage increase for each. Does your community have the educational providers in place to meet demand? Biomedical engineers: 72% Network systems/data communication analysts: 53% Home health aides: 50% Personal and home care aides: 46% Financial examiners: 41% Medical scientists: 40% Physician assistants: 39% Skin care specialists: 38% Biochemists and biophysicists: 37% Athletic trainers: 37% Source: “Ten hottest jobs for the next decade” by Henry Unger. The Atlanta Journal–Constitution. December 11,2009. |
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| Please Stay |
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U.S. colleges and universities have long been a magnet for international students seeking advanced doctorate degrees. But, is the U.S. able to retain this talent after they earn their Ph.D.’s? Recent data shows that the answer is Yes –– although there’s a caveat: this data only tracks activity through 2007, just before the recession started. In the aftermath of 9/11, the prevailing thought was that many foreigners who earned Ph.D.s in science and engineering in the U.S. would return to their native countries due to restrictions on immigrants and increased opportunities at home, especially in India and China. New data shows that the “stay rates” after 9/11 remain surprisingly strong: 62% of foreigners who earned their Ph.D.s in science and engineering in 2002 were still living in the United States in 2007. Of those who graduated in 1997, 60% continued to live and work in the U.S. in 2007. The data was compiled by the U.S. Energy Department’s Oak Ridge Institute for Science and Education for the National Science Foundation. The ability to attract and retain international students is important for two reasons. First, the students are increasingly important to the research conducted at U.S. universities and research facilities. The percentage of Ph.D.s awarded to foreigners in science and engineering has increased from 30% in 1997 to 46% in 2007. Second, they are even more important in the years following graduation. Foreigners comprise about 40% of all science and engineering Ph.D.s working in the U.S. –– providing much needed intellectual capital to spur innovation. “Our ability to continue to attract and keep foreign scientists and engineers is critical to…increase investment in science and technology,” said Oak Ridge analyst Michael Finn. Graduates in the physical sciences and computer sciences are more likely to remain in the U.S. than other fields. Stay rates, however, vary by nationality. Oak Ridge’s data finds that Chinese and Indian students are more likely to live and work in the U.S. than students from Taiwan, South Korea or Europe. Among the 2002 graduates, 92% of the Chinese and 81% of the Indians remained in the U.S. in 2007 while only 41% of South Koreans and 52% of Germans stayed. Will the stay rates remain at the same high level following the recession? It’s too early to tell, but Vivek Wadwha, executive in residence at Duke University’s Pratt School of Engineering, believes that the stay rates will decline. Using social media like Facebook, Wadwha and several others questioned foreign students about their plans after earning degrees at U.S. institutions. Their results show that more than 50% of Indian students and 40% of Chinese students hope to return home within five years given the growing opportunities in their countries. For some foreigners, the time spent here is an investment they do not want to waste. Joy Ying Zhang, now a research assistant professor at Carnegie Mellon’s Silicon Valley campus, does not plan to return to China. “I have spent ten years here already, it took me some time to get used to American life,” he said. Zhang added that returning to China would be “reverse culture shock.” Zhang noted, however, that younger Chinese students have more options to study at home. “Life in China is getting better. There are research alternatives in China –– like Microsoft China. They can get good mentoring and advice there, instead of coming to the U.S.” For now, the U.S. still appears to be drawing its fair share of the world’s students. The National Science Foundation reports that the number of foreign science and engineering students enrolled in graduate programs in the U.S. increased 8% in April 2009 from the previous year. Over 158,000 foreign students are studying in the U.S. Source: “U.S. Keeps Foreign Ph.D.s,” by David Wessel. The Wall Street Journal. January 27, 2010. |
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| Colorado’s Competitive Clusters |
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A new study of Colorado’s key clusters has identified several opportunities to market the state for additional investment and job creation. The study identifies three clusters with consistent employment growth; it also downgraded the growth potential of two clusters –– beverage and data–hardware industries. “We’re focusing on those industries where we have a competitive advantage,” explained Vicky Lea with the Metro Denver Chamber of Commerce Officials believe that opportunities exist with the aerospace, broadcasting and telecommunications and financial services sectors because these are faring better in the state than the nation as a whole. The aerospace sector in the Denver metro region ranks second among the 50 largest metro’s and employs 20,000 workers. Among the region’s 90 aerospace companies, employment in the sector grew 13% from 2004–2009. The four U.S. Air Force bases in the state are an additional asset, contributing another 28,500 jobs. Employment in the broadcast and telecommunications cluster grew 2% while employment in the same sector declined 5% nationally. The sector ranks fourth nationally and employs 41,000 in the state. The financial services sector in Colorado also ranks fourth nationally and employs 43,000 people. Source: “Study: Strong job growth in geographic clusters of Colo. businesses” by Miles Moffeit. The Denver Co Post. February 19,2010. |
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| Silicon Valley Blues |
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Silicon Valley is on the ropes… again. The nation’s technology center was in a similar situation following the dot.com bust in 2005 but it rebounded. The current situation appears to be worse, according to the “2010 Index of Silicon Valley” report sponsored by two local groups. The report identifies several areas of concern.
One opportunity for the area appears to be green technology. From 2006 to 2008, the number of green patent registrations increased by 7%. Green jobs increased by 24% in the region from 2004 to 2008. However, venture capital for green technology has decreased in the region. Should the rest of the nation be concerned? Definitely, says Judy Estrin, a former Cisco Corporation executive and author of the book “Closing the Innovation Gap.” Estrin explains, “Silicon Valley is both a barometer of the rest of the country and a spark for the rest of the country, and if we don’t protect that innovation culture here, it’s going to be hard to sustain an innovation culture in the country.” Source: “Report says Silicon Valley economy sputtering” by the Associated Press. As seen in the Sacramento CA Bee. February 10, 2010. “Report Warns Silicon Valley Could Lose Its Edge,” by Claire Cain Miller. The New York Times. February 11, 2010. |
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| Passing Lane |
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While Canada is enjoying the glow from a very successful Winter Olympics, the Conference Board of Canada is giving the nation a D grade for its ability to innovate. Yet, there is some good news. The latest report from the Conference Board of Canada says that the nation is failing to turn its scientific discoveries into profit–generating, globally competitive products and services. The report looked at innovation leading to money–making products and services. Only Australia, Italy and Norway lagged behind Canada in innovation. The countries topping the list were Switzerland, Ireland and the United States. “The biggest challenge that we’re facing is to turn some of the great ideas that we have into products that we can sell on the global market,” said Gilles Rheaume, the Conference’s Board’s vice–president of public policy. With 12 indicators used to rank innovation, Canada scored a D in nine categories. Its highest ranking came in the number of scientific articles published relative to its population. The report noted that countries scoring higher than Canada spend more on science and technology and tend to focus on one key discipline like Switzerland and pharmaceuticals. Canada, once a leader in biotechnology, has fallen behind in that category due to slow regulatory processes. The report urged the country to take a leadership role in the biofuels sector. The good news? Prior to the recession, employment in research and development increased 2% in 2007 from 2006. 65% of the nation’s 228,000 full–time R&D workers are employed by the private sector and 26% are employed by higher education; the balance are employed by government and non–profit organizations. Almost one–half of Canada’s R&D workforce is located in Ontario (45%) while Quebec is home to 31%, British Columbia 10% and Alberta 7%. It remains to be seen how the recession has impacted R&D employment in Canada –– and elsewhere. Source: “Canada Gets D for Innovation: Conference Board,” by Derek Abma. The Vancouver Sun. February 2, 2010. “Canada lags peers in innovation” by QMI Agency. As seen in the London ON Free Press. February 2, 2010. “R&D employment rose in 2007” by the Canadian Press. As seen in the London ON Free Press. February 11, 2010. |
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| Battle of the Cantons |
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As a nation, Switzerland has long been a corporate location of choice in Europe, despite its small size. The centrally located nation offers significant advantages including top notch research universities, efficient public sector, strong intellectual property laws, sophisticated transportation infrastructure and a well educated workforce. Perhaps its biggest draw, however, is its low taxes –– just an 8.5% federal tax rate. When local taxes are included, the average corporate tax rate in Switzerland is 21.2% compared to 30% for Germany and 25.5% for the Netherlands, according to KPMG. As a result, Switzerland has successfully competed against nations like Ireland, the Netherlands, the U.K. and Germany to land its fair share of foreign direct investment, including the European headquarters of Kraft Foods Inc., Yahoo Inc. and Google Inc. Over 150 U.S. companies plus other international firms have located operations in the country. Among the Swiss cantons (the equivalent of states or provinces), Zug (pronounced tsoogk) has attracted the lion’s share of foreign investment since the 1960s. Just 22 km from Luzerne, Zug is the richest state in Switzerland and offers tax rates that are one–half the national average. It is home to multinational corporations including Johnson & Johnson, Siemens AG and Burger King Holdings Inc. Now, other Swiss cantons are ratcheting up the economic incentives to secure more investment and job growth, especially since Zug is facing a shortage of office and residential space. The canton of Schaffhausen cut its tax rate by 50% in 2008 and attracted Unilever. The cantons of Lucerne and Obwalden have reduced their tax rates too. “Zug made an extremely good decision years ago to have a competitive tax code. Now you see a trend of neighboring cantons trying to attract business too” says Georges Meyer with PricewaterhouseCoopers in Zurich. With tax rates that are now lower than Zug, Obwalden has attracted 450 small companies in each of the past three years, creating 2,000 new jobs. With corporations increasingly focused on controlling costs, Switzerland’s cantons are playing an aggressive recruitment game that should be very familiar to economic development professionals in the U.S. and Canada. Source: “Switzerland’s States Compete on Tax Cuts,” by Deborah Ball and Cassell Bryan–Low. The Wall Street Journal. February 2, 2010. |
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| News Briefs |
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There’s no other way to describe it: state budgets are being slammed by the recession. State revenues declined for the fifth consecutive quarter at the end of 2009 –– the longest period of decline since the Great Depression, according to the Rockefeller Institute of Government. Nationally, revenues declined 4.1% in the fourth quarter of 2009 with the biggest drops in Oklahoma (26.9%) and Arizona (17.1%). Just a few states experienced increases in revenue thanks to tax hikes. The good news? The 4th Q 2009 drop in revenue was significantly lower than the record 16.6% decline for the 4th Q 2008. While tax revenues are expected to increase as retail sales recover, the report concludes that “State tax revenue will continue to be insufficient to support current spending commitments, and more spending cuts and tax increases are most likely on the way for many states.” It’s official. The incentive package offered by South Carolina to attract Boeing’s Dreamliner assembly complex to the Charleston area has been finalized. The state will provide incentives worth $270 million based on several conditions including: Boeing must employ 6,000 workers by the end of 2016; the company must retain at least 6,000 workers for another 13 years; if the firm fails to meet these employment levels, it would have to re–pay a portion of the incentive package, based on actual employment. Boeing has said that it will use most of the funds for construction of the $750 million complex. Economic development officials throughout South Carolina and neighboring states are positioning to attract suppliers for Boeing’s massive new East Coast airplane assembly complex. The Charleston area will face competition from places as far away as Savannah GA and North Carolina’s Global Transpark, which already have sizeable aerospace workforces. According to Ed McCallum, a Greenville SC site consultant, “You don’t have to be that close. Where they go –– whether it’s an hour away or two, three hours away –– it doesn’t matter for a major supplier.” Kia Motors is already planning to expand its new assembly plant in West Point GA. At the grand opening celebration on Friday, February 26, Kia officials announced plans for a second shift at the new $1 billion facility which produces the Kia Sorento. The second shift plus production of a still to–be–determined second model could increase employment from the current 1,200 workers to over 3,500 workers. In his remarks, Georgia Governor Sonny Perdue noted that it was a seven year effort by state officials to attract Kia’s first North American assembly plant. The Kia plant is 75 miles southwest of Atlanta on the Alabama border; it is generating a $4 billion annual economic impact in the state. BOOST is the name of an innovative new loan program that is expected to boost entrepreneurship in St. Louis County MO. Billed as an alternative to the Small Business Administration’s 504 loan program, the BOOST program offers less restrictive requirements to companies needing funds to purchase land, building, machinery and equipment. It is being sponsored by the St. Louis County Economic Council which is partnering with PNC Bank to provide $5 million in lending. Loans can be up to $500,000 with a 20–year term with either a fixed or variable rate. Up to 90% of project cost can be financed. Officials with the St. Louis County Economic Council believe that the BOOST program is the first of its kind in the U.S. Source: “Recession Tightens Grip on State Tax Revenues” by Michael Cooper. The New York Times. February 22, 2010. “Boeing package signed” by Katy Stech. The Charleston SC Post and Courier. February 4, 2010. “Area faces tough competition for supplier jobs” by Katy Stech. The Charleston SC Post and Courier. January 29, 2010. “Georgia Kia plant still looking for job applicants” by Jeffry Scott. February 26, 2010. “County Executive Outlines BOOST Loan Program.” St. Louis County Developments, the newsletter of the St. Louis County Economic Council. February 2010. |
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