The future of economic development depends on adaptation

I recently spoke to several hundred economic development professionals at the IEDC Annual Leadership Summit about where the field of economic development was heading. Our nation is in the midst of an important debate about how to create an economy that benefits more people, and the work of economic developers is at the center of it. While many across the country are stepping up, in my speech, I noted that major political, economic, and social changes will require leaders to adapt further. I then outlined the five principles that defined a new, more inclusive view of economic development.

One such change economic developers must grapple with is the federal political landscape, which has shifted dramatically following the 2016 elections. Though the impacts of policies from the Trump administration and GOP-led Congress on cities remain unclear, two outcomes seem likely. First, there will be fewer dollars flowing to localities. The Trump administration and GOP-led Congress are reportedly considering across-the-board cuts to federal non-discretionary spending, which has declined steadily as a percentage of GDP since the recession and is already approaching 50-year lows. Second, there will be more discretion provided to states and local communities. President Trump has indicated a preference for block grants and devolving power from the federal government, declaring in his inaugural address that “today… we are transferring power from Washington, D.C. and giving it back to you, the people.” Both outcomes would place a greater burden on local actors to create good jobs and close income disparities in their region. In other words, the work of economic developers and their partners at the metropolitan and regional scale has never been more important.

Here are several other disruptive forces that I discussed in my speech.

Globalization has disrupted many communities, trade adjustment assistance concentration in the United States

Globalization’s impacts on local labor markets are not confined to rural areas or the Rust Belt

Recent Brookings research found that 2.2 million workers have received federal trade adjustment assistance since the program’s inception. These workers live in urban, suburban, and rural counties ranging from the Northeast, to Appalachia, to the Great Plains, to the Pacific Northwest. Half of all workers receiving trade adjustment assistance live within the nation’s 100 largest metropolitan areas. Given these realities, economic development leaders across the country must consider strategies to help retrain existing workers or out-of-work adults impacted by global competition.

Digital skills are in increasing demand. Share od U.S. employment by digital score from 2004 to 2014.

As technological advances continue to reshape our economy, the demand for digital skills is on the rise

A forthcoming Brookings report finds that in 2004, 34 percent of U.S. occupations required only low levels of digital proficiency. Ten years later, just 12 percent do. Meanwhile, the share of occupations that required high levels of digital skills more than doubled, from 10 to 22 percent. Technology is changing the nature of work: a recent McKinsey report estimated that 49 percent of time spent on work activities worldwide could be automated using existing technologies. Economic development leaders should assess whether their existing educational and workforce systems are adapting to keep pace with the changing demand for digital skills.

Urbanization has concentrated opportunity in large metropolitan areas, change in number of jobs from 2007 to 2014.

Urbanization has led to disproportionate economic growth in our largest metro areas, including their exurbs

By 2014, the United States surpassed its pre-recession jobs totals by 1.1%. However, job recovery has not been evenly distributed across geographies: the 100 largest metro areas gained a greater share of jobs than the national average, while smaller metros rebounded to (but did not exceed) pre-recession job totals, and rural areas did not fully recover jobs lost during the recession. Within the largest 100 metro areas, jobs were added fastest in the urban core, growing more slowly in older and inner-ring suburbs. These employment trends likely reflect ongoing demographic shifts towards urban centers and metropolitan areas as a whole.

Demographic change in ushering in a more diverse workforce, population composition by age and race in 2010

Rapid shifts in demography are creating a future workforce that is much more diverse than the one currently facing retirement

Hispanics comprise just 5 percent of Americans over the age of 85, but are one-quarter of all Americans under the age of five. Meanwhile, the share of white Americans is declining. Our country’s ability to replace an aging workforce is a competitive advantage that many modernized nations like Italy and Japan would envy – but only if we can ensure that the younger generation has the education and skills they need to participate fully in our society. People of color continue to disproportionately face barriers that limit their potential and life prospects.

The field of regional economic development has been evolving. Yet in this age of accelerations, local public and private sector leaders must adapt faster and embrace a broader definition of economic development that prioritizes quality jobs and better opportunities for people in their communities. Our nation’s economic success depends upon the continued creativity and collaborative spirit of these local leaders.