1. 1
BASIC PRINCIPLES OF AND
TRENDS IN LOCAL ECONOMIC
DEVELOPMENT
The University of Tennessee Institute for Public Service
County Technical Assistance Service
In partnership with
Tennessee Dept. of Economic & Community
Development
2. Agenda
• 10 – Noon Basic Principles and Trends in Economic
Development
Chuck Shoopman, UT Institute for Public Service
• Noon Lunch
• 1 – 3 Economic Development Support
Panel Discussion
Kingsley Brock, TN Dept. of Economic and Community
Development
Joe B. Brandon, TN Dept. of Labor and Workforce
Development
Ray Knotts, TVA Economic Development
Beth Phillips, UT Institute for Public Service
2
3. 3
Basic Principles and Trends
in Economic Development
• What is Local Economic Development?
• What Key Economic Trends Will Impact My
Community?
• Globalization
• The Economic Growth Slowdown
• The New Economy
• The Service Economy
• Retooling the Workforce
• Quality of Life Focus
• Support for Local Economic Development –
Programs and Assistance
4. 4
What is Economic Development?
• Economic development is the process
of creating and sustaining wealth. We
know that it is occurring when:
• New jobs are being created
• Existing jobs are being maintained
• The standard of living is improving
5. 5
ECONOMIC DEVELOPMENT IS
HAPPENING WHEN:
• the standard of living is increasing
• a “real” increase in the level of average
household income is occurring
• the “equity” of income distribution is
improving
• the local tax base is keeping pace with the
mounting cost of government services
• business and industry are creating quality
jobs
• the local quality of life keeps getting better
6. 6
INCREASING INCOMES
The increase in local income is derived
primarily from:
• Companies that produce goods and services that
are sold outside the community, bringing in new
sources of income
• Tourists that bring new money into the
community
• “Active” retirees who spend money locally that
was earned elsewhere
• Reducing the “leakage” of purchases outside the
community
7. 7
U.S. and Tennessee Personal
Income Per Capita, 95-05
Area 1995 2000 2005 % Change
95-05
U.S. $23,076 $29,843 $34,471 49.4
TN $21,174 $26,097 $30,969 46.2
U.S. metro $24,234 $31,473 $36,140 49.1
TN metro $22,625 $28,079 $33,341 47.4
U.S. non-
metro
$17,683 $22,021 $26,161 47.9
TN non-
metro
$17,357 $20,883 $24,646 42.0
Source: Bureau of Economic Analysis
8. 8
ECONOMIC DEVELOPMENT
The process is facilitated through:
• Development of a skilled workforce
• Investment in the physical infrastructure
• Improvement of the business environment
• Availability of marketable land and
buildings
• Maintenance of the environment
• Improvement of the quality of life
• Promotion of the community and region
9. 9
WHAT KEY ECONOMIC TRENDS
WILL IMPACT MY COMMUNITY?
• Globalization
• The Economic Growth Slowdown
• The New Economy
• The Service Economy
• Retooling the Workforce
• Quality of Life Focus
11. 11
THE GLOBAL ECONOMY
• Many manufacturing jobs and service jobs
moving overseas to less expensive
locations and new markets
• Successful companies have to be able to
compete in the global marketplace
12. 12
THE GLOBAL ECONOMY
• Most new manufacturing jobs in the U.S.
are from foreign investment:
• Automotive
• Chemical
• Pharmaceutical
• Electronic
• Many of these firms are locating in rural
communities (168 Japanese firms
employing 42,000 Tennesseans)
13. 13
THE GLOBAL ECONOMY
• The Internet, satellites, and other
advances in telecommunication enable
companies to fully integrate their
operations globally
20. 20
WHAT’S NEW ABOUT THE
“KNOWLEDGE-BASED
ECONOMY”?
• Increasingly digital and information
driven
• Transformation to “e-businesses” that
use Internet-platforms for integrating
their entire operation
• Innovation leading to highly customized
information, services, & products
21. 21
WHAT’S NEW ABOUT THE
“KNOWLEDGE-BASED
ECONOMY”?
• Highly networked entrepreneurs who take
advantage of technology advances
• Growth areas characterized by high
concentrations of knowledge workers &
an ability to attract & retain these workers
• Skilled labor force is highly mobile
22. 22
THE KNOWLEDGE-BASED ECONOMY --
MORE THAN TRADITIONAL “HIGH TECH”
ALL industry sectors are transforming themselves
into information/knowledge industries
Examples:
Entertainment
(digital effects, Synthespians)
Distribution (supply-chain management, logistics)
Financial Services (on-line brokerages, banking,
insurance)
Healthcare (genetic engineering, telemedicine,
biomedicine)
Agriculture (precision ag, use of remote sensing,
Internet-based purchasing and sales)
23. 23
E -MANUFACTURING
Manufacturing becoming e-businesses
Integrated software systems
Flexible manufacturing systems
Supply chain management
Lean manufacturing and Six Sigma
Mass customization
Direct manufacturing – from digital
design files to product
Globally integrated production
Virtual production; emphasis on out-
sourcing
24. 24
TELECOMMUNICATIONS IS THE KEY
INFRASTRUCTURE CONSIDERATION
• Availability of high-
speed, broadband
telecom
• The future is wireless
• Technical support
needs to be readily
available
26. 26
SERVICES DOMINATING JOB
GROWTH (1990-2004)
-3,366
387
1,853
17,785
-5,000
0
5,000
10,000
15,000
20,000
1000’s
of
Jobs
JobGrowth
Mfg.
Wholesale
Retail
Services
Source: U.S. Bureau of Labor Statistics
27. 27
SERVICE ECONOMY
• Rapid growth in productivity
• Highest job growth in:
• Computer-Related
• Personnel
• Management Consulting
• Professional Services
• Health Care
• High-growth jobs are high wage,
narrowing the wage gap with
manufacturing
28. 28
COMPARISON OF
AVERAGE HOURLY EARNINGS, 2004
$16.14
$17.66
$9.91
$12.08
$17.53
$17.46
$21.42
$0.00 $5.00 $10.00 $15.00 $20.00 $25.00
MFG.-
WHOLESALE
TOURISM
RETAIL
FINANCE
PROF. SERV
INFO
AVERAGE HOURLY EARNINGS ($)
30. 30
WORKFORCE AND
EDUCATION
• Education is tied to economic well being
• Most jobs require post-
secondary education
• Skill requirements are
changing quickly
34. 34
RETOOLING THE WORKFORCE
• Increased demand
for technical &
professional skills
• Need for
continuing
education
• Increased
emphasis within
companies on
training &
retraining
35. 35
GEOGRAPHIC CONSIDERATIONS
& THE WORKFORCE
• Companies will focus
on areas with pools
of skills and
graduating students
• Quality of life is
increasingly
important for
recruiting & retaining
technicians &
professionals
36. 36
BRAIN DRAIN
Among the South’s adult population, from
2000-2005 those moving out of state
included:
• Only 8.5% of those without a high school
degree
• 14.4% of those with a bachelor’s degree
• 15.5% of those with a graduate or
professional degree
38. 38
BUSINESS RECRUITMENT
AND ATTRACTION
• Defining your “product” – what can your
community offer to a new business?
• Identifying your target audience – what
types of economic activity are you most
likely to attract?
• Clarifying your message – what are you
trying to promote about your community?
• Developing your marketing plan – what
marketing techniques will give you the
best results, given your resources?
39. 39
EXISTING BUSINESS RETENTION
AND EXPANSION
• Growth of existing business and industry
account for the majority of new jobs and
investment.
• Companies must be globally competitive.
40. 40
EXISTING BUSINESS PROGRAM
• Provide business assistance
-- Marketing
-- Loans
-- Training programs
-- Buyer-supplier programs
-- Export assistance
-- Access to technology
• Remove local obstacles to
business
41. 41
EXISTING INDUSTRY PROGRAM
BENEFITS
• Stop loss of direct & indirect jobs
• Less expensive to assist local firm expand than
to recruit new ones
• Potential for entrepreneurial spin-offs from
retained firms
• A happy local firm projects an important positive
image for outside firms
43. 43
SMALL BUSINESS
DOMINANCE
• Small businesses (under 100 emp.):
• create two-thirds of new private sector
jobs in America
• employ more than half of all workers
• account for more than half of the output
of U.S. economy
• Only a small percentage (3 to 6%) of small
firms grow rapidly (gazelles) – David Birch
44. 44
SMALL BUSINESS
DOMINANCE
• High growth in home-based business
– over ½ of small businesses
• Require business assistance and
financing
• High risk and high rate of failure
• More innovative – produce 13 times as
many patents as large companies do
45. 45
ENTREPRENEURIAL
DEVELOPMENT
What attracts entrepreneurs?
A local leadership that is committed to building a
positive business environment
An attractive community that has a good quality of
life
A good educational system
Opportunities for technical training and support
Access to capital
Small business support systems and an effective
local network for sharing information
High speed, broadband telecom and ISP’s
Availability of suitable buildings and/or business
sites for expansion
46. 46
SMALL BUSINESS ASSISTANCE
• Incubator
• Financial Assistance
• Marketing Assistance
• Management Assistance
• Educational Workshops
• Entrepreneurial Training
48. 48
QUALITY OF LIFE
• Availability of
quality housing at
reasonable costs
• Strong basic skills
in education
• Presence of
colleges &
universities
• Low crime rate
• Good medical &
health care
49. 49
QUALITY OF LIFE
• Variety of retail &
customer services
• Lodging &
restaurants
• Attractive & clean
environment
• Good traffic flow
• Range of cultural &
recreational
opportunities
50. 50
COMMUNITY DEVELOPMENT
• Build a “product” that can compete successfully
for jobs, business investment, tourists, retirees
• Involve local leadership effectively to determine
priorities, initiate action, and sustain momentum
• Access federal, state, and other outside
resources to expand the possibilities
• Minimize barriers to development
51. 51
COMMUNITY LEADERSHIP IS CRITICAL TO
ECONOMIC AND COMMUNITY
DEVELOPMENT
WHO NEEDS TO BE INVOLVED IN LOCAL ED?
• Local government
• Chambers of commerce
• Economic and community development orgs.
• Utilities
• Existing business and industry
• Faith-based institutions
• Educational systems
• Financial institutions
• Civic leaders
• Citizens
• Federal and state government
53. Economic Development
Support
• Importance of Partnerships
(Local, Regional, and State)
• How do the State and TVA work with
local communities?
• What programs are available to
enhance local economic
competitiveness?
53
54. 54
Economic Development
Support
• Technical Assistance
• Marketing and Recruiting
• Existing Industry Services
• Small Business Development
• Workforce Development
• Incentives
55. Panelists
• Kingsley Brock
Administrator of Business Development
TN Dept. of Economic and Community Development
• Joe B. Brandon
Assistant Commissioner
TN Dept. of Labor and Workforce Development
• Ray Knotts
Senior Advisor, Economic Development
Tennessee Valley Authority
55
