via The Wall Street Journal

By Conor Dougherty

AUSTIN, Texas—As the nation grapples with stubbornly high unemployment, Texas’s political and high-tech capital shows one way to create good jobs for people who didn’t go to college: Attract highly skilled entrepreneurs, and watch the companies they start hire lower-skilled workers.

Praxis Strategy Group, an economic-development consultancy, estimates Austin added 50,000 “middle-skill” positions in the past decade. These are jobs that require a two-year associate’s degree or the equivalent work experience, and pay a median wage of $17.30 an hour, or $38,000 a year. That pace of growth is roughly four times faster than the nation’s as a whole, three times that of New York and Portland, Ore., and twice that of Phoenix.

Austin’s success in creating middle-class jobs runs against the grain of national trends. As America’s shift from manufacturing to the service sector has accelerated, economists have noted a hollowing out of such jobs.

In recent decades, a select number of brain hubs like Austin have attracted a higher percentage of well-educated workers and a lopsided share of new investment and young companies. In 1970, the top 10 most-educated metropolitan areas among the nation’s 100 largest had an average of 23% of workers holding a bachelor’s degree or higher, compared with 10% in the bottom 10, according to an analysis of Census data by Harvard University economist Edward Glaeser. The 13-percentage-point gap has widened every decade since, and had doubled by 2010.



Click on the interactive graphic to see the growth in middle-skill jobs from 2001 in Austin and other regions.

Beyond creating new middle-skill jobs, such brain hubs have generally higher incomes and for the most part have performed better through the recession. In Austin, the 7.1% average unemployment rate in 2010 was well below the nation’s during the same period.

Of course, Austin also has a fast-growing population, which helps create jobs in any economic environment. And it’s not as if other cities can create a more-educated populace overnight.

Still, Austin’s success in creating middle-level jobs shows how a well-educated work force can raise the fortunes of lesser-educated workers as well. Raleigh, N.C., has benefited from the same dynamic.

One consequence of the economy’s shift away from production toward brain work is that companies are constantly seeking new ways to break down high-value intellectual tasks into smaller, cheaper bits. Much the same way that assembly lines created millions of new jobs by reducing mass production to a sum of tasks, employers in Austin and elsewhere are constantly breaking down higher-skill jobs to “create new middle-skill, middle-income specialties,” according to a recent report by the McKinsey Global Institute.

Take Homeaway Inc., a vacation-rental service founded here in 2005 that went public this year. Its rapid growth allows entry-level employees to substantially raise their income, said Brent Bellm, the company’s chief operating officer.

Mr. Bellm points to customer-service representatives, who earn from $25,000 to the low-$30,000s range and field phone calls and e-mails from people using the company’s website. About one-third of them are promoted annually to areas such as a security team that monitors the site for fraudulent listings and removes shoddy properties. “In a few years, you can go from the high 20s to the 50s,” he said.

Simply put, rapid growth boosts the value even of workers who have a limited education but possess knowledge of a company’s systems.

Enrico Moretti, an economist at the University of California, Berkeley, notes that highly educated cities see faster wage growth for less-educated citizens as well as the high fliers. One reason is that that many lower-level employees use the most productive technologies and act as complements to more-expensive and highly-educated workers, making it much easier for companies to raise their wages faster than overall inflation.

Another force, Mr. Moretti notes, is called “human capital spillovers,” a fancy way of saying that many “middle skill” workers begin to acquire skills that are much more valuable than their overall education level might suggest.

That’s how Douglas Kanneman went from a bored retail clerk feeling grim about his prospects to a computer-equipment technician with a four-bedroom house and the chance to let his wife work part-time while looking after their two children.

Mr. Kanneman, 37 years old, began his working life like a lot of people who didn’t go to college—at a retail store with low pay. Looking to better his prospects at 25, he went to community college for computer training and eventually landed a customer-service job at SolarWinds in Tulsa, Okla., which makes software that controls companies’ information infrastructure like computers and phone systems.

Later, when SolarWinds moved to the tech hub of Austin, Mr. Kanneman went with it. As the company grew, he worked his way into the better-paying information-technology department. A year ago, he did something that he said validated the worth of his new skills: He quit for a higher-paying job elsewhere in Austin, and with overtime can now earn more than $90,000 a year.

“It proved that I was worth as much as I thought I was,” Mr. Kanneman said.

Write to Conor Dougherty at conor.dougherty@wsj.com

Harvard has released an interesting new index of “economic complexity” which is the productive knowledge of the economy, based on analysis of its output composition.

… the Economic Complexity Index (ECI) is based on the number and the complexity of the products that a country exports with comparative advantage. Empirically, countries that do well in this index, given their income level, tend to achieve higher levels of economic growth. The ability to successfully export new products is a reflection of the fact that the country has acquired new productive knowledge that will then open up further opportunities for progress.

The index is then used to make detailed growth projections, and identify export opportunities on a country-by-country basis. There are also interactive versions of most of these visualizations that you can explore and filter.

Download PDFs:
Full version

Part 1: Why, What & How & Rankings

Part 2: Country Pages

Interactive Visualizations



via

TIP Strategies was engaged by the Prosperity Partnership, a coalition of over 300 government, business, education, labor and community organizations serving the Seattle area, to update the region’s economic strategy. The foundation for this work is an occupation-based cluster analysis that matches regional workforce strengths with innovative assets. Our talent-based approach provides a new way of looking at the region’s economy and understanding its opportunities.

Why Talent?
The decision to use talent as a framework for economic analysis is a response to two things:

(1) The relationship between labor productivity and regional competitiveness. The presence of a skilled workforce continues to be a critical site location issue for businesses and economic developers.

(2) The limitations of current approaches to understanding industry competitiveness. Industry cluster analysis has become an important tool for economic developers; however, a fundamental flaw of this approach is the implicit assumption that the “health” of an industry is reflected by its employment levels. Manufacturing is a prime example; the sector has seen a steady decline in employment at the same time long-term gains in output have been achieved.

Typical workforce analyses focus on describing the available labor pool: the number of available workers, educational attainment levels, commuting distance, wage rates, and so on. The concept of talent goes a step further by considering the question of skills. As a result, a talent-focused approach adds a dimension not revealed by standard labor market data. When talking about the vitality of a region, this distinction can be instructive. Skill levels typically correlate closely with wages. The presence of a skilled workforce can also be an important driver of capital investment and innovation.

In other words, traditional approaches to cluster analysis overlook a fundamental aspect of a long-term strategy, namely whether or not a given region has the workforce necessary to support its industry clusters.

Methodology
The primary task for a talent-driven cluster analysis is devising a process for grouping occupations together. Existing approaches for clustering occupations—such as the Standard Occupational Classification (SOC) system used by federal agencies to organize data collection or the U.S. Department of Education’s Career Clusters Framework—do not fully capture the distribution of skills in the workplace. Businesses include a mix of occupations pulled from across the SOC system and industry needs are not necessarily aligned with the career paths of individual workers.

TIP’s methodology for defining talent clusters was formulated to serve the following objectives:

(1) Reconcile local policy goals and aspirations with broader national and global economic trends;

(2) Inject new conceptual thinking about evolving competitive challenges; and

(3) Preserve and utilize the region’s existing framework for addressing industry issues.

For our Puget Sound analysis, we used a three-step process to identify regional talent clusters:

1) Employment trends. First, TIP identified occupational strengths and examined relevant trends. For example, to understand which types of jobs were growing in the region, we examined changes by major occupations during the recent recession.

2) Occupational filtering. TIP filtered the region’s occupations to arrive at an occupational “short-list” for each cluster. The objective of this task was to devise a simple approach that focuses on critical mass, earning power, and opportunity.

In light of our objective, we placed the highest emphasis on two criteria: job quality (evaluated in terms of wages) and the presence of a “critical mass” in the region, awarding 70 percent of the possible 100 points for these criteria. For occupations that received full credit on these two criteria, the remaining 30 percent was distributed among the six additional criteria which considered factors such as the occupation’s strength relative to the nation, projections for growth, and the stability of the occupation over time.

3) Innovation and assets. Because of the strong connection between talent networks and business retention and formation, our next step was to consider the capital investment trends driving innovation nationally and in Washington State. Since venture capital (VC) is used to fund new ideas and business models, data on VC investments was used as a proxy for investment in innovation. We also considered how the region’s tangible and intangible assets were related to both the existing occupations and capital flows.


Linking clusters to strategy
In the central Puget Sound Region, both direct and indirect talent clusters emerged from this analysis. The direct occupational clusters align with the areas of innovation that emerged from this process: aerospace, logistics & infrastructure, information technology (IT), and life sciences. The remaining occupations that met our evaluation criteria fell into two key areas of support services: social development and business services. These two support clusters provide a foundation for the innovative clusters.

This cluster framework will form the basis for our work in the region. Talent clusters have been matched with industries, providing a new lens through which to understand the needs of the region’s businesses. Occupations have been linked with available training in the region to highlight potential gaps in the higher education network. The talent framework was used to drive the selection of peers, which will be used to document the region’s competitive position.

Concurrently, the consulting team is coordinating five working groups to formulate strategies and actions addressing key economic foundation issues in the region: higher education and workforce, business climate, physical infrastructure, entrepreneurship and innovation, and aerospace. The result will suggest strategic responses to enhance the region’s talent base; help align economic development, workforce, and education activities; and leverage regional opportunities for growth.

via NYTimes Bits Blog
by: Jenna Wortham

The battle royale brewing between New York and Silicon Valley to be the nation’s dominant epicenter for tech innovation and hot start-ups wages on. On Monday night in downtown Manhattan, Paul Graham stood before a packed auditorium of 800 entrepreneurs, developers, programmers and others who were curious about what makes a city a fertile environment for a thriving community of start-ups. Mr. Graham is a well-known investor and esteemed figure in Silicon Valley because he created Y Combinator, an incubator in Mountain View, Calif., that has given seed money and mentorship to start-ups.

At the Y Combinator event, Mr. Graham raised the question of the sustainability of New York’s future as a hotbed of technology innovation and whether the city could ever grow to rival Silicon Valley.

“The truth is that I don’t know what’s going to happen,” he said. “Hubs tend to stay hubs.”

Mr. Graham gave the keynote talk for the evening, but also welcomed several Y Combinator alumni to the stage, including Sam Altman of Loopt, Alexis Ohanian of Reddit and Joe Gebbia of Airbnb. Mr. Graham kidded that his speech could have been titled “On the Other Hand,” because for each theory he had about why New York, a decade after the dot-com bust, was springing back to life and whether it could give rise to the next Facebook or Google, he had a counterpoint to rival it.

He said that geographically speaking, there were several elements that contributed to a healthy ecosystem to nurture young start-ups. After all, he acknowledged, most start-ups don’t make it past their infancy.

“But places aren’t sprayed with start-upicide,” he said. “A start-up needs keys to success.”

He noted that New York, like Silicon Valley, had the same density of tech-savvy people working in similar industries required for the kinds of happenstance encounters and introductions that could revive a company’s flailing fortunes and help right its trajectory.

He recalled the serendipitous sidewalk meeting of Mark Zuckerberg and Sean Parker, the founder of Napster, who helped shape Facebook in its early days and became its founding president.

“The antidote for a failing start-up is Sean Parker,” he said.

However, Mr. Graham also said that New Yorkers tended to prize making money above all other goals — which could prove to be advantageous or disastrous for a fledgling company or business idea.

“The Valley is a magnet for nerdy visionaries,” he said. “New York is for rapacious deal makers.”

Mr. Graham went on to list a few other factors that detract from New York’s viability, including the distractions of city life and other, more lucrative industries, like Wall Street, along with the Valley’s perennially sunny climate.

But he did note that New York had surpassed Boston, long considered a nexus of technology and start-up culture.

“New York is solidly No. 2 right now,” he said.

New York, Mr. Graham said, was ripe for the kinds of companies that can disrupt and transform some of the city’s legacy businesses, like fashion, advertising and finance. Whether or not they can give rise to a large-scale technology company along the lines of Google and Facebook, he said, remains to be seen for now.

However, even Mr. Graham isn’t immune to the siren call of the hot start-ups cropping up in the boroughs of New York. Although he said he had no plans to bring a version of his incubator to the East Coast, like Ron Conway, a lauded angel investor, and Accel Partners, a well-known investment firm, who each have turned a keener eye to New York in recent months, Mr. Graham did say that he hoped to lure more New Yorkers to the annual Y Combinator start-up class.

But for those entrepreneurs who are accepted into Y Combinator and, after finishing their three-month incubation period, want to move back to New York? He wishes them the best of luck on their journey.

“I don’t try to stop them,” he said.

via NYTimes




When the unemployment rate rose in most states last month, it underscored the extent to which the deep recession, the anemic recovery and the lingering crisis of joblessness are beginning to reshape the nation’s economic map.

The once-booming South, which entered the recession with the lowest unemployment rate in the nation, is now struggling with some of the highest rates, recent data from the Bureau of Labor Statistics show.

Several Southern states — including South Carolina, whose 11.1 percent unemployment rate is the fourth highest in the nation — have higher unemployment rates than they did a year ago. Unemployment in the South is now higher than it is in the Northeast and the Midwest, which include Rust Belt states that were struggling even before the recession.

For decades, the nation’s economic landscape consisted of a prospering Sun Belt and a struggling Rust Belt. Since the recession hit, though, that is no longer the case. Unemployment remains high across much of the country — the national rate is 9.1 percent — but the regions have recovered at different speeds.

Now, with the concentration of the highest unemployment rates in the South and the West, some economists wonder if it is an anomaly of the uneven recovery or a harbinger of things to come.

“Because the recovery is so painfully slow, people may begin to think of the trends established during the recovery as normal,” said Howard Wial, a fellow at the Brookings Institution’s Metropolitan Policy Program who recently co-wrote an economic analysis of the nation’s 100 largest metropolitan areas. “Will people think of Florida, California, Nevada and Arizona as more or less permanently depressed? Think of the Great Lakes as being a renaissance region? I don’t know. It’s possible.”

The West has the highest unemployment in the nation. The collapse of the housing bubble left Nevada with the highest jobless rate, 13.4 percent, followed by California with 12.1 percent. Michigan has the third-highest rate, 11.2 percent, as a result of the longstanding woes of the American auto industry.

Now, though, of the states with the 10 highest unemployment rates, six are in the South. The region, which relied heavily on manufacturing and construction, was hit hard by the downturn.

Economists offer a variety of explanations for the South’s performance. “For a long time we tended to outpace the national average with regard to economic performance, and a lot of that was driven by, for lack of a better word, development and in-migration,” said Michael Chriszt, an assistant vice president of the Federal Reserve Bank of Atlanta’s research department. “That came to an abrupt halt, and it has not picked up.”

The long cycle of “lose jobs, gain jobs, lose jobs” that kept Georgia’s unemployment rate at 10.2 percent in August — the same as it was a year earlier — is illustrated by Union City, a small city on the outskirts of Atlanta.

It suffered a blow when the last store in its darkened mall, Sears, announced that it would soon close. But the city had other irons in the fire: a few big companies were hiring, and earlier this year Dendreon, a biotech company that makes a cancer drug, opened a plant there, lured in part by state and local subsidies.

Then, this month, Dendreon said it would lay off more than 100 workers at the new plant as part of a national “restructuring.”

Union City, with a population of 20,000, now calls itself the place “Where Business Meets the World” and has been trying to lure companies by pointing out its low business taxes, various incentive programs and proximity to Hartsfield-Jackson Atlanta International Airport.

Steve Rapson, the city manager, said that the challenge there, as in much of America, has been to get employers to hire again. “It’s hard to get your mind around what can you do as a city to encourage future jobs and jobs growth,” he said.

The reordering of the nation’s economic fortunes can be seen in the Brookings analysis, which found that many auto-producing metropolitan areas in the Great Lakes states are seeing modest gains in manufacturing that are helping them recover from their deep slump, while Sun Belt and Western states with sharp drops in home values are still suffering. The areas that have been hurt the least since the recession, the study said, rely on government, education or energy production. Places that were less buoyed by the housing bubble were less harmed when it burst.

In Pennsylvania, the analysis found, the Pittsburgh area — which is heavily reliant on education and health care — is weathering the downturn better than the Philadelphia area. In New York, areas around long-struggling upstate cities like Buffalo and Rochester are recovering faster by some measures than the New York City metropolitan area. And the rate of recovery in Rust Belt areas around Youngstown and Akron, two Ohio cities that were hit hard, has outpaced that of former boomtowns like Colorado Springs and Tucson.

In a sign of how severe the downturn has been, the Brookings analysis found that only 16 of the nation’s 100 largest metropolitan areas have regained more than half of the jobs they lost during the recession.

The toll on the nation’s millions of unemployed people has been harsh, with the Census Bureau reporting that the United States had more people living in poverty last year than in any year since it began keeping records half a century ago.

Joblessness is taking a toll on states, too. This month, 27 states will have to pay $1.2 billion to the federal government in interest on the $37.5 billion that they borrowed in recent years to keep paying unemployment benefits.

What is most striking about the high unemployment rates, several economists said in interviews, is how they continue to afflict wide parts of the country.

“It just seems to be so pervasive across the country — except for the breadbasket area — that it’s hard to pick out anybody who is bouncing back,” said Randall W. Eberts, the president of the W. E. Upjohn Institute for Employment Research in Michigan.

Dr. Eberts pointed to another feature of the downturn: people are much less likely to leave their jobs voluntarily. Before the recession, he said, about three million people voluntarily left their jobs each month. Now, around two million people do — leaving fewer openings for job seekers.

So what happened in South Carolina? Richard Kaglic, a regional economist at the Federal Reserve Bank of Richmond, Va., said the state’s lingering troubles reflect what happened when its construction and manufacturing industries were hit hard by the recession. Mr. Kaglic, who is also a pilot, used an aviation metaphor to explain what he meant.

“If your nose is high, if you’re climbing faster and your engine cuts out, you fall farther and it takes you a longer time to recover,” he said. “The conditions we experienced in late 2008, 2009, are as close as you come to an engine-out situation in the economy.”

But Mr. Kaglic said that the recent return of manufacturing jobs was giving him hope, and that one reason for the high unemployment rate was that more people were now seeking work.

“I would look at it as our dreams are delayed,” he said, “rather than our dreams being denied.”

SPRING HILL, Tenn. — When General Motors stopped building cars here two years ago, as the auto industry hit rock bottom and tens of thousands of assembly-line jobs evaporated nationwide, Chad Poynor packed up and moved to Michigan to keep working at another plant.

Mr. Poynor said he made the nine-hour drive back to Tennessee to see his wife and three children 24 times in the first year alone. “I’d go back tomorrow if I could,” Mr. Poynor said Wednesday after finishing his overnight shift in Lansing, Mich. He and hundreds of other autoworkers may get that chance.

In a glimmer of light in a mostly downbeat economy, G.M. and the United Automobile Workers union have agreed to give the plant here a second chance as part of a tentative new labor contract. It is highly unusual for an automaker to bring jobs back to a factory all but left for dead, and several G.M. plants, including Spring Hill, will be adding work that had been headed to Mexico.

“I actually have a smile on my face today,” Mike O’Rourke, the president of U.A.W. Local 1853 in Spring Hill, said after learning the details of the contract. “It was very much gloom and doom. I lost all my hair and gained 50 pounds.”

The resurrection of Spring Hill would be another milestone in the fortunes of the domestic auto industry and, in particular, G.M.’s comeback from its government bailout and bankruptcy in 2009. The promise in the new contract of 6,400 jobs over the next four years, including 1,700 here, is being seen as a vote of confidence that autoworkers in the United States, even unionized ones, can compete with lower-wage nations.

Some of the jobs here will go to current G.M. workers at full wages of $28 an hour, but many of the workers will be hired on G.M.’s second-tier pay scale, which would start around $15 an hour in the new contract.

“We’re bringing back a lot of work that left this country,” the U.A.W.’s president, Bob King, said of the contract, which is subject to ratification by G.M.’s 48,500 workers in the United States.

Perhaps nothing better symbolizes the ragged journey of Detroit’s Big Three in recent decades than the Spring Hill plant, which was built in the 1980s as the launching pad for G.M.’s highly promoted Saturn division. In the 1990s, thousands of Saturn owners traveled here for “homecoming” parties to celebrate their bond with the vehicles and the workers who made them. The plant became known to TV viewers after G.M. hired the advertising agency famous for creating President Ronald Reagan’s upbeat “Morning in America” re-election ads. Commercials featured the plant and its workers with the slogan, “A different kind of company, a different kind of car.”

But the Saturn brand never lived up to its promise and is now a casualty of G.M.’s bankruptcy. The only work being done at the plant here, 30 miles south of Nashville, is a much smaller operation making engines. James L. Bailey, the mayor of Maury County, which includes Spring Hill, described the past two years as “a time of trauma.”

Unemployment in the county rose as high as 17 percent after the plant closed; the rate is now about 13 percent. In nearby Columbia, where many G.M. workers lived, downtown storefronts emptied and homes went into foreclosure. The Santa Fe Cattle Company, a steakhouse with a U.A.W. flag in its foyer, closed, and this year’s graduating high school class lost 85 students after the plant shut down.

“They bought a lot of things, they did a lot of things,” Mr. Bailey, who works out of a cramped, century-old courthouse in Columbia’s town square, said of G.M. workers. “When they went away, it affected a lot of businesses here.”

G.M. declined to publicly comment on the Spring Hill decision. The company has avoided discussing specific terms of the agreement until it is approved by members. People with knowledge of the negotiations said that union leaders pressed hard in the final stages of the talks for Spring Hill to be reopened. Michael Robinet, an analyst with the research firm IHS Automotive, said the company saw an opportunity to make inroads with the U.A.W. while bringing back a facility at a relatively low cost.

“The Tier 2 workers definitely changed the economics of the plant,” he said. “It’s definitely a win for the union. I can’t recall the last time a plant of this size was brought back after it was closed.”

How quickly workers may be able to return to Spring Hill is not known, and for some the situation is complicated by relocation agreements they signed requiring them to spend a certain length of time at another plant. Union officials said that about 600 jobs would be created by the end of next year, followed by 1,100 more in 2013. G.M. said it planned to invest $419 million in the plant so that it could build two new midsize vehicles. The sense of anticipation in Spring Hill, whose population increased twentyfold in the two decades after G.M. began making Saturns amid rolling farmland near a Civil War battleground, was palpable this week.

“I can see the light at the end of the tunnel now,” said Todd Horton, a G.M. worker who stayed after being laid off in the hopes of getting called back. Mr. Horton, a married father of two, turned down a transfer offer two weeks ago, even though supplemental unemployment benefits from the company were about to run out and there had been no word that the plant would reopen.

“My hope is just that the economy can sustain it and they can follow through with the plans,” said Mr. Horton, whose final responsibility in the plant’s training department was helping his coworkers move elsewhere.

Many of them are in Lansing, Mich., having followed production of the last vehicle built in Spring Hill, the Chevrolet Traverse Crossover. Glenn Tucker, who is a little more than a year away from being able to retire from G.M. with full benefits, is waiting to learn how quickly he can come back. His wife, Danean, stayed in Tennessee to keep her job managing a restaurant and so that their son could graduate from high school.

“There was no hope for most of us that it would ever reopen,” Mrs. Tucker said.

Said Mr. O’Rourke, the local union official, “All you got to do is drive around any big city — Detroit, Milwaukee, Chicago — and you can see a lot of empty factories that have never reopened.”

NYTIMES By NICK BUNKLEY and BILL VLASIC
Nick Bunkley reported from Spring Hill, Tenn., and Bill Vlasic from Detroit.