Fueling Jobs: How to Grow in the Next Decade
The research and analysis firm Gallup ties the behavioral economics of prosperity to include your career, social life, financial success, physical health and community well-being—and all of those categories are tied to your job.
The world faces tremendous challenge on the job front. The current number of U.S. jobs is seven million short of what was recorded in December 2007. Labor mobility within the U.S. has declined by half since 1985. Twenty percent of men in the population are not working today—that’s up from seven percent in 1970. New business creation has seen a 23 percent drop since 2007, and there is a significant shortage of college graduates in the workforce.
The world economic landscape has also changed dramatically in the last thirty years. It has moved from the concept of the First/Second versus Third World or North versus South, to Developed versus Developing or Industrialized and Emerging, and now to a concept as simple as High Growth versus Low/No Growth. This change reflects a process of global convergence – a result of the spread of technological breakthroughs and innovations in the wake of the second Industrial Revolution (1870-1970).
The process of global convergence was accomplished through a globally based enterprise system—one that demands a high level of standardization and which sometimes challenges government thinking. The result is the emergence of a globally based resource allocation, including labor, and thus “The Coming Jobs War,” a title used in Gallup CEO Jim Clifton’s latest book.
A pro-business environment is needed for the U.S. and other countries to remain competitive and to invest for prosperity, growth and continued leadership in the world. Our political leadership faces a burning question: How do you create good jobs? The simple answer is to invest because investment has two integral parts – capital and labor.
The next question: Where can we find the money to invest? The answer, as I see it, is to create an environment that fosters a virtuous circle for demand, and incentivizes entrepreneurs to grow their businesses.
Picture bicycle and pedestrian walkways across the Mississippi River from Memphis to Arkansas, with a variety of easy-to-access restaurants on both sides, along with new areas around Graceland and Beale Street for people to hang out and stay. If Memphis, TN, has a comparative advantage as a tourist city thanks to its heritage, or as an innovative city hosting important industry clusters such as medical device and services, or as a world class transportation hub with an aerotropolis thanks to the FedEx World Headquarters, then the city needs to find a way to package those advantages and strengthen them. The key is to provide an overall environment that makes every bit count in the context of value chain, and offers growth in each industry vertical while sustaining the overall economy.
This argument about environment reminds me of a debate at a Nobel laureate dinner during the World Economic Forum’s annual conference in Davos, Switzerland. A well respected Nobel laureate in physics pointed out that it was scientists who made discoveries which resulted in industrial revolutions, leading to the explosive growth in value creation that we witnessed over the past 250 years. He was immediately challenged by a Nobel laureate in economics who argued that it was “enlightenment” and famous economists like Adams Smith and David Hume, who helped create an environment that fostered scientific research and rapid advancement in the fields of arts and sciences, engineering, medicine and law. It was that environment that made the industrial revolutions possible. It was an interesting debate. It suggests that singular thinking or isolated design won’t work because they don’t address complex human behaviors and desires.
As many of us know, Silicon Valley is a symbol of U.S. entrepreneurship and innovation. It is an area where massive wealth is created year after year. In 2006 I participated in the Bay Area Economic Forum as a speaker. Since then I have been receiving local updates from the Bay Area Council Economic Institute. The institute put together a report called “The Bay Area – A Regional Economic Assessment” in which the status of the existing industry composition, evolution over time, and sources of local economic prosperity and impediments are discussed. The five questions in the latest report (October 2012) are:
- Does the region offer good access to markets – either local or global?
- Can companies access the necessary factors of production, particularly labor?
- Is the cost of doing business competitive with other locations?
- Are there unique sector strengths or characteristics that serve to concentrate activity, potentially mitigating high operating costs?
- And does the founder/decision-maker want to live in the region?
I often hear people say that Memphis is fortunate to have a global company like FedEx. FedEx not only created 300,000 good jobs worldwide, the company employs 30,000 people in Memphis alone. Job creation is one of entrepreneur Fred Smith’s many successes in building a value-creating business model which revolutionized global supply chain and fast cycle logistics. FedEx is also fortunate to have Memphis embrace what amounted to a young startup (Federal Express) just forty years ago. To strengthen the positive bond, FedEx continues to invest in the local economy, including collaborating with Mid-South Community College. FedEx donated a retired B727aircraft and other equipment to the school so that students could be well trained for their Airframe and Powerplant licenses, and potentially work at FedEx down the road.
We are bracing for major change. Based on a recent McKinsey study, from 2010 to 2025, the GDP of the top 600 cities that span the globe will rise by over $30 trillion (two times the current U.S. GDP), and account for nearly 65 percent of global GDP growth. Cities are expected to build floor space equivalent to 85 percent of today’s building stock – an area the size of Austria. A nearly 80 billion cubic meter increase in municipal water demand will occur, and the level of port infrastructure could nearly triple during the next decade. Memphis, as well as other cities in the U.S. and around the globe, need to participate in this wave of growth. The diversity of growth patterns suggests that there is no single path to economic success. U.S. cities will need to negotiate a path through evolving longer-term trends.
The late Nobel laureate Yale Professor James Tobin once said “economics in one word is INCENTIVE.” So what constitutes “the incentive” for entrepreneurship to grow and for business to invest? Based on experiences in other metro areas I think five levers would provide a common architecture to identify opportunities for growth:
- Identify economic sectors and clusters with respect to concentrations of industries, functions and occupations– namely their entire value chains
- Strengthen human capital in terms of talent production, attraction, retention, and matching to jobs; Link movement of goods, people, and information
- Foster an environment for innovation and entrepreneurship via government efficiency and efficacy, business environment, tax value proposition, innovation performance, and entrepreneurial ecosystem
- Build a strong physical and virtual infrastructure
- Improve public and civic institutions
This architecture provides a base for an environment conducive to economic growth and job creation. Under this framework, many specific ideas may emerge in different metro areas to more effectively answer the pressing challenges in the job front.
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September 16, 2019
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