The Retention Monthly

News


Destination California
California has taken some economic hits lately but it still wields significant clout. There’s no question that the state faces highly–publicized challenges, starting with its massive $19 billion budget deficit. Recent data suggest that the state’s economic rebound is lagging the nation –– for example, its 12.6% unemployment rate in April 2010 is significantly higher than the nation’s 9.9% rate. The state’s taxes, labor issues and environmental regulations are often cited as key impediments to business growth. Yet, California cannot be ignored because of its sheer size and influence. It has a $1.8 trillion economy that accounts for 13% of the nation’s economic output. The state boasts the nation’s largest consumer market with 38 million people –– that's 12% of the U.S. population. Corporations pay relatively low property taxes (courtesy of Proposition 13) and they enjoy generous tax credits for research and development. The state is a leader in green energy; Los Angeles, for example, plans to eliminate its coal–burning power plants and generate 40% of its energy from renewable sources, both by 2020. Imports and exports at the ports in Los Angeles, Long Beach and Oakland are significantly higher through the first four months of 2010 versus last year. While the headlines may be worrisome, the state continues to score economic wins... here’s a sampling of recent announcements. Aviat Networks will move its headquarters from North Carolina’s Research Triangle Park to Santa Clara CA where it already employs 300. A company spokesperson described Silicon Valley as “a fresh, inspiring new environment.” The company was created three years ago through the merger of Harris Corporation’s Microwave Communications in Durham NC and Stratex Networks in San Jose CA. The firm will retain operations in Morrisville NC but move corporate staff to its Santa Clara facility. Gilead Science will consolidate its research and development activities in Foster City CA over an existing R&D operation in Durham NC. The pharmaceutical firm is developing experimental treatments for hepatitis B and C. In May, Chinese manufacturer BYD selected Los Angeles for its U.S. headquarters. BYD (Build Your Dream) makes electric cars, solar panels and battery storage devices; it plans to ship its cars into the U.S. through the Port of Los Angeles and possibly establish a manufacturing operation there. Although the firm considered many locations for its headquarters, it selected Los Angeles because of the city and state’s commitment to renewable resources. BYD will locate its headquarters in downtown Los Angeles where it will employ 150 people. How did Los Angeles land BYD in the face of intense competition? Because it has limited financial incentives, the city opted to streamline its services. It expedited planning and permitting for BYD’s headquarters. To demonstrate its commitment to the firm, it is facilitating installation of charging stations in city parking garages and in the homes of residents who purchase a BYD electric car. The city coordinated meetings with solar panel installers and their unions to introduce them to BYD solar panels. It will display BYD cars at Los Angeles International Airport. The city is also purchasing 24 electric vehicles in a pilot study. The new focus on business–friendly service in Los Angeles is simple yet cost–effective... and a worthwhile model for the entire Golden State. Source: “LA’s new wheels: Chinese electric car company makes home in downtown” by Phil Wilion. Brand X Daily. May 21, 2010. “Los Angeles Offers A Lesson in Job Growth” by John O’Leary. Governing. June 1, 2010. “Calfornia Is Stuck in 1st Gear” by Cari Tuna. The Wall Street Journal. June 8, 2010. “Aviat moving HQ to California” by John Murwaski. The Raleigh–Durham NC News Observer. June 17, 2010. “Biotech firm to phase out 150 jobs” by David Ranii. The Raleigh–Durham NC News Observer. June 25, 2010.

Loo’ville Cool
A neighborhood–focused economic development program in Louisville called COOL has been so successful that it’s attracting national attention. Corridors of Opportunity in Louisville (COOL) is an initiative with two objectives: revitalizing run–down retail corridors along major commercial streets and bringing new retail and service businesses to residents in adjacent neighborhoods where choices are often limited. Since the program began in 2003 by Mayor Jerry Abramson, over 400 businesses, both local and national, have been attracted to the city. An added benefit: many of these new businesses employ local residents. The program conducts formal and informal surveys of residents to determine the type of retail and service establishments that they would like to see in their neighborhoods. The buying power of residents in adjacent neighborhoods is also analyzed. Using this information, city officials reach out to local businesses and encourage them to consider locations in strip plazas where rents are inexpensive and the demand for their services is well–documented. COOL also offers these business owners micro loans ranging from $10,000 to $30,000 and larger loans up to $100,000. They also provide technical assistance in meeting regulatory approvals. The city has also re–invested in the commercial corridors with new sidewalks, lighting, trees and parking. According to Mayor Abramson, “We began to think of economic development in a different way....It’s [COOL] worked exceptionally well. It’s given us an opportunity not only to fill the strip shopping centers, but to bring the kind of neighborhood economic development that enhances the quality of life for citizens.” Source: “Louisville’s COOL Approach to Growing Jobs” by Stephen Goldsmith. Governing. June 7, 2010.

Not a Pretty Picture
Although unemployment rates are falling in most U.S. states, statistics for long–term unemployed workers are grim. Here are some details. 45.9% of unemployed workers are categorized as long–term unemployed –– i.e., unemployed for at least six months. Before the recession, just 18% of unemployed were long–term unemployed. Over seven million workers have been unemployed for at least 27 weeks; of these, at least 4.7 million or two–thirds have been out of work for a year or longer. The percentage of long–term unemployed is the highest in history; even in the 1980s, when unemployment topped 10% for several months, the percentage of workers out of work for six months or more was only 25%. Today, 5.6 Americans compete for every job opening; prior to the recession, just 1.5 Americans competed for each available job. The average long–term unemployed person is a white male with a high school education or less. Overall, men have been impacted by the recession more than women with huge job losses in male–dominated industries like construction and manufacturing. In contrast, women have benefitted from job increases in health care and nursing. For more on this, see “Head of the Class” in the March 2010 Archives. Experts believe that the rise in long–term unemployed workers may ultimately create a supply of permanently unemployed workers. “It’s a hidden crisis because the plight of the long–term unemployed is often lost in the celebration of the decline in the unemployment rate. While that’s good news, it’s really not having an impact of those who’ve been unemployed longer and are most in need of a job” notes Georgia Labor Commissioner Michael Thurmond. Source: “Chronic Joblessness Takes Toll” by Sara Murray. The Wall Street Journal. June 2, 2010. “Long–term jobless face bleak future” by Dan Chapman. The Atlanta GA Journal–Constitution. June 6, 2010.

Unpopular Science
American students, it seems, just aren’t interested in careers in science, technology, engineering and math (STEM)... and this is having a negative impact on the nation’s global competitiveness. Take a look at these numbers: In September 2001, there were 4,012,000 ninth–graders in the U.S. In June 2005, there were 2,799,000 high school graduates. In September 2005, there were 1,861,000 high school graduates with plans to enter college. Of these, 1,303,000 actually entered college. Just 277,000 majored in science or technology or engineering or math. Only 166,000 will graduate with a STEM degree. While the number of STEM graduates grows in China and India, experts are pointing to a STEM brain drain in the U.S. The rate of STEM to non–STEM graduates in the U.S. is 17% while the comparable percentage internationally is 26%. One example of the decline: the number of computer science degrees fell 27% in the U.S. from 2004 to 2007. The problem is that STEM disciplines are increasingly important in all kinds of enterprises. Case in point: Nationwide Insurance was surprised to find that their single largest employment category was “technology,” not “insurance.” Nationwide had to import a whole department of computer scientists from India to Columbus OH because they couldn’t find talent in the U.S. According to Brian Fitzgerald, executive director of the Business–Higher Education Forum, “You can be selling insurance or manufacturing cars but almost every American corporation has been turned into a technology operation.” Even good intentions are not enough. Just 50% of students who enter college to study one of the STEM fields actually graduates with a degree in the field. Yet, the nation produces 50 new MBAs and 18 lawyers for every Ph.D. in the physical sciences, according to the Aerospace Industries Association. Efforts are underway to reverse the STEM brain drain. Calculus courses are often described as “STEM killers” so colleges are redesigning calculus classes to be more interactive and computer–based. The Obama administration is earmarking $250 million to hire more science and math teachers. Time will tell if these measures –– and others –– will stem the tide. Source: “The STEM Challenge” by David A.Kaplan. Fortune. June 14, 2010. “Let’s get back to worksheets” by Bill Costello. Japan Today. www.japantoday.com September 2009.

One Mississippi... Two Mississippi...
It was a long count for those waiting for the jobs... but the delay is now over and the jobs are coming to Northwest Mississippi. In 2007, Toyota Motor Corporation selected a site in Blue Springs MS, outside Tupelo, for its newest auto assembly plant. After completing most of the factory, Toyota announced in late 2008 that it was postponing completion of the $1.3 billion plant. The delay was prompted by the economic recession and dramatic world–wide drop in car sales; Toyota’s headline–generating quality issues prompting the recall of 8.5 million vehicles only added to the concern. Now, Toyota has decided to complete and open the facility in 2011, with 1,000 production workers initially and 2,000 when fully operational. Workers will start at $15 per hour, rising to $21 per hour over five years. Local and state incentives total $294 million; the remaining $110 million is expected to be used for workforce training. The 18–month delay has prompted some changes to the plant. The Blue Springs factory will now produce the Corolla, not the hybrid Prius and Highlander SUV as first planned. Much of the equipment will be transferred from the recently closed NUMMI plant in Fremont CA which was a joint venture between Toyota and General Motors Corporation. Toyota is also shifting manufacturing equipment from other plants in Kentucky and Indiana. It is expected that most Corollas sold in the U.S. will ultimately be made at the Blue Springs facility. Sales of the Corolla have jumped 9% in 2010 over 2009. Overall, Toyota sales in the U.S. are up 11% this year, compared to a 17% increase industry–wide. Source: “Delay over for Toyota” by Jeff Ayres. The Jackson MS Clarion–Ledger. June 18, 2010. “Toyota Aims to Open U.S. Plant in 2011” by Mike Ramsey. The Wall Street Journal. June 17, 2010.

News Briefs
Business leaders in New Jersey are backing a new marketing effort called Choose New Jersey. 15 firms have committed $450,000 each over three years for the initiative. Described as Governor Chris Christie’s cheerleading squad, the CEOs will be active in marketing the state to new and expanding businesses. Choose New Jersey is part of a three–pronged effort to expand the state’s economy that includes the lieutenant governor’s office serving as a one–stop office for firms seeking to locate there and the Economic Development Authority acting as the lead agency for financing options. It’s a win–win for the sponsoring businesses and the state, according to Vince Maione, president of Atlantic City Electric Region, one of the sponsors. Maione noted, “The strength of our businesses depends on the overall strength of our local community and state economy. There’s a direct tie there, so if we can bring other businesses to the state, we’re helping to strengthen that economy.” It’s clawback time in New York City. In 2003, Pfizer Inc. was awarded $47 million in incentives by Mayor Michael R. Bloomberg in return for the firm investing $1 billion, creating 2,000 new jobs and retaining 5,500 jobs in NYC. Although the firm only received $12 million, the city may now seek double reimbursement because Pfizer has decided to layoff or relocate 1,400 NYC employees. Following the acquisition of Wyeth, Pfizer has been consolidating operations; the firm has since opted to close its Brooklyn factory and consolidate workers in New Jersey and Pennsylvania. Although the firm is selling its building in Manhattan, it will retain its corporate headquarters in New York City where it was founded in 1849. Since 2002, New York City has recovered over $48 million from 85 companies that received incentives but did not meet or maintain certain benchmarks. Efforts to attract foreign direct investment continue across the U.S. Tennessee Governor Phil Bredesen recently traveled to Germany and Spain to meet with Volkswagen AG officials and suppliers who may want to establish operations to support Volkswagen’s new assembly plant being completed near Chattanooga TN. The trip is also focusing on clean energy firms. Texas Governor Rick Perry completed an Asian trip with a visit to the headquarters of Samsung Electronics in South Korea. Perry thanked officials for the $3.6 billion expansion of its semiconductor plant in Austin TX (see this month’s Wins and Losses column for details). Buoyed by corporate donations, *Develop Indy* is embarking on an aggressive schedule of trade missions. During the summer months, the Develop Indy team will meet with firms in France (aerospace/defense and renewal energy), Brazil (clean energy, information technology), England (aerospace/defense) and Spain and Italy (clean energy). The schedule continues with at least one trade mission every eight weeks starting in September. Source: “N.J. companies pledge funds for ‘Choose New Jersey’” by Lisa Fleisher. NJ.com. June 2, 2010. “Choose New Jersey economic development group to market state” by Athena D. Merritt. The Philadelphia PA Business Journal. June 2, 2010. “Pfizer to Cut Jobs, Risking Repayment of Tax Breaks” by Charles V. Bagli. The New York Times. May 10, 2010. “Bredesen, Kisber going to Germany, Spain to recruit businesses” by staff. The Nashville TN Tennessean. June 4, 2010. “Perry makes South Korea stop to visit Samsung” by staff. The Austin TX Statesman. June 23, 2010. “New push overseas starts today for Indianapolis business recruitment team” by Tom Spalding. The Indianapolis Star. June 14, 2010.

Study Hall
Here’s a recent study with worthwhile information for economic, workforce and community development professionals. The National Chamber Foundation (NCF) has released a study called "Enterprising States" that is based on two premises: The U.S. needs to create 20 million new jobs over the next ten years –– seven million to replace jobs lost during the recession and 13 million additional jobs to meet demand. The U.S. faces what author Joel Kotkin describes as a “demographic dividend.” Between now and 2050, the U.S. workforce (ages 14 to 64) will grow 40%. In contrast, this same pool of workers will decline 15% in China, 25% in Europe and 44% in Japan. As Kotkin explains, this demographic dividend presents a major opportunity for the U.S. but only if the nation’s private sector companies can create jobs for a growing workforce. "Enterprising States"analyzes programs and policies in each state that encourage economic and job growth. It looks at the ten best states across five factors and then ranks the top ten states for overall growth. The usual high growth states appear in many of the top ten lists; at the same time, there are states with effective programs and policies that may surprise some readers. For example, the top ten in overall growth include states like Virginia and Texas but it also includes North and South Dakota, Iowa and Montana. Be sure to review the states that make the top ten list for the following factors. Top entrepreneurial and innovation states Top exporting states Top infrastructure states Top workforce development and training states Top states with most favorable tax and regulatory climates To view the report, go to: http://ncf.uschamber.com/enterprising–states/ Source: National Chamber Foundation

Study Hall Part Two
"The State of Metropolitan America" is a new report from the Brookings Institution that looks at the nation’s top 100 metro areas in advance of the release of the 2010 census results. It analyzes these communities based on five factors: Growth and outward expansion Diversity, especially ethnic diversity Aging of population Educational levels of population Income distribution and polarization The study presents seven “typologies” which characterizes each of the metros based on growth, diversity and educational attainment. The Next Frontier: Nine metro areas that are above national average for growth, diversity and educational attainment. New Heartland: 19 metro’s that are fast–growing, have high educational attainment but are not attracting immigrants. Diverse Giants: Nine metros with growth below national average. Border Growth: 11 metros along the nation’s border with high growth and diversity but low educational attainment. Mid–Sized Magnets: 15 regions with high growth, low diversity and educational attainment. Skilled Anchors: 19 metros that are primarily manufacturing centers with low growth and diversity but high educational levels. Industrial Cores: 18 struggling metros with low scores for all five factors. To view the report, go to: http://www.brookings.edu/metro/StateOfMetroAmerica.aspx Source: The Brookings Institution

Around the Globe
IBM Corporation will establish its ninth global research center in Brazil which will be its first in South America. The R&D center will develop technology focused on natural resources and large–scale events such as the Olympics which will be held in Rio de Janeiro in 2012. IBM will hire 100 researchers to work at existing IBM facilities in Sao Paulo and Rio de Janeiro. The center will be developed with the cooperation of the Brazilian government. “We are very excited about Latin America and Brazil in particular. Some of the pressing problems around sustainability are present in Brazil,” noted Robert Morris, an IBM vice president. Despite the ongoing violence from the drug cartels, multinational firms in the maquiladoras in Juarez, Mexico have added 27,000 jobs in the past 10 months, after experiencing major layoffs during the recession. The advantages of the special investment zones are hard to resist even with the sustained violence: a competitive tax environment, low wages (as low as $4.21/day) and government–sponsored workforce training. The proximity to the huge U.S. market is another plus –– something that a location in China cannot match. “From taking the order to delivery, our Juarez plant can get the job done in three to four weeks. When you throw in ocean shipping, it sometimes takes our China plant 10 weeks to fulfill an order,” explains Derek Johnson, who owns a Denver CO–based firm that makes store mannequins. Just six months into 2010, the industrial parks in Juarez have landed more business in 2010 than all of 2009. In the last 28 months, drug violence in Juarez has led to 5,200 murders in a city of 1.5 million. Ironically enough, it sits across the Rio Grande River from El Paso TX –– which ranks second in safety among large U.S. cities. Source: “IBM To Open Research Lab in Brazil” by Spencer E. Ante and Nathan Becker. The Wall Street Journal. June 9, 2010. “Bloodied, Juarez Still Lures Big Companies” by Christopher Power. Bloomberg Businessweek. June 14–20, 2010.