A Closer Look at Economic Opportunity in Rural California

John Melville

Collaborative Economics

Overview

• California Regional Economies Project

• Clusters of Opportunity– Health Services– Regional Experience

• Rural Entrepreneurship—Initial Findings

0.7%

3.2%

4.8%

-0.2%

-1.2%-6.4%

4.4%

9.2%

4.8%

1.9%

1.5%

-8.0% -3.0% 2.0% 7.0% 12.0%

Sierra

Valley

N. Sacramento

Sacramento

Border

N. California

Coast

SoCal

California

U.S.

Bay Area

(Percent Change in Total Job Growth, 2000-2003)

A State of Regional Economies

Clusters of Opportunity

ExportOriented

PopulationDriven

CareerPotential

Clusterof

Opportunity

Bridging Workforce and Economic Development Goals

WorkforceDevelopment

Cluster ofOpportunity

Economic Development

Rural Health Services Cluster

Major Export/ Pop. Driven

Support Sectors

Local Infrastructure

Hospitals

Medical Equipment and Supplies

Medical Diagnostic Laboratories

Home Health and Residential Nursing

Care

WIBs, Community & Technical Colleges,

Universities

Biomedical: Biotechnology and

Bioengineering

R&DVenture Capital

Federal and State funding

Offices of Health Practitioners:

Dentists, Physicians and Other

Other Health Services:

Ambulatory, Emergency and

Vocational Rehab.

A Growing Cluster in Every Region

36,875

3,898

16,911

21,429

100,965

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

Average Annual Growth Rate (1990-2002)

San Joaquin Valley

Central Coast

Northern Sacramento Valley

Northern California

Central Sierra

Size (2002), Concentration relative to CA (2002) and Growth Rate of Urban Health Care Cluster (1990-2002

Portfolio of Regional Health Care Clusters for California's Rural Areas

Em

ploy

men

t Con

cent

rati

on (

CA

Ave

rage

1.0

)

Health Services Hospital Care

Clinicians Home Health

Opportunities in Health Convergence

Health SciencesMedicine Pharmacy Biology

Bio-pharmaMedical DevicesClinical TrialsTele-medicineHealth policy

Health Care Career Potential

High 31%

Med 44%

Low 25%

Occupational Level

Leveraging The Rural Experience

Regional Quality of Place Infrastructure

Residential Infrastructure

• Home construction• Architectural services• Services to buildings/dwellings

• Maintenance

Global ConnectionsInfrastructure

• Telecommunications• Travel Arrangements• Air transportation• Business support services

Community Infrastructure

• Heavy construction• Utilities/public transit systems/waste mgt

• Accommodations• Civic/social organizations

Distinctive, Regional Quality of Life Experience

Natural Places History, Culture

Education

Specialty Food,

Beverages, Retail

Leisure

• Sightseeing• Tours• Recreation• Camping

• Museums• Art galleries• Live events• Educational (ag-tourism)

• Full service restaurants

• Wineries• Specialized retail

• Amusements• Gambling• Golf• Spectator sports

Long-term, Recent, & Potential Residents Current & Potential Visitors

The Progression of Economic Value

ExtractCommodities

Make Goods

DeliverServices

StageExperiences

Differentiated

Undifferentiated

Relevant to

Irrelevant to

Market Premium

Customization

Customization

Commoditization

Commoditization

CompetitivePosition

Needs ofCustomers

Source: Pine and Gilmore, 1999, p.72.

Value Chain Linking Goods, Services, and Experiences

Assets Goods Services Experiences

Natural Film, sunscreenEquipment rentals

Tours, educational programs

Historic Souvenirs Historic lodging Interactive sites, museums

Cultural Regional crafts Regional cuisine Festivals, performing arts

From Commodities to Experiences

Commodities Goods Services ExperiencesGrapes Wine Wine clubs Tasting rooms/tours

Packaging/shipping

Food and wine events

Vacation packages

Educational programs

Estimated 30% of Rural Job Growth From Leveraging Rural Experience

107,649

16,757

37,495

35,955

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Central Coast

Northern Sacramento Valley

Central Sierra

Northern California

X-Axis = AAGR 1994-2002

Portfolio of California's Regional Experience Employment by Region, 1994-2002

Em

plo

yme

nt

Co

nc

en

tra

tio

n:

US

=

1.0

Size (2002), Concentration relative to the U.S. (2002) and AAGR of the Regional Experience Clusters (1994-2002)

Limited Career Potential in Some Areas . . .

Quality of Life Experience Occupational Distribution

36,900

160,440

340,970

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

0% 20% 40% 60% 80% 100%

High-Level Mid-Level Entry-Level

Quality of Life Experience Occupational Clusters:Employment Size, Share of Cluster, and Wage Level

Source: California Employment Development Department, US Bureau of Labor Statistics

. . . But Better Potential in Other Areas

Quality of Place Infrastructure Occupational Distribution

543,550

1,288,730

713,280

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

0% 10% 20% 30% 40% 50% 60%

High-Level Mid-Level Entry-Level

Infrastructure Occupational Clusters:Employment Size, Share of Cluster, and Wage Level

Source: California Employment Development Department, US Bureau of Labor Statistics

The Key is Rural Entrepreneurship

• Total number of firms in rural California has grown by more than 20,000 since 1990 thanks to entrepreneurship

• Firms created in just the last few years now account for much of today’s rural California economies

• Headquarters operations account for most of total firms and employ most people in rural California

Rural California Full of Young Firms

Age of firms operating in rural California

40%

20%

40%

1990 and before

1996 through 1991

2002 through 1997

90% of Rural Firms are Headquarters

Firm distribution, according to ownership

90%

10%

HQ/IndependentBranch

Rural Headquarters Are Biggest Employer

Jobs, distributed by firm ownership

68%

32%

HQ/Independent

Branch

Rural Firms Stay Put

Firm Movement

97%

3%

Never moved between counties

Moved into or out of county

Targeting entrepreneurship in the Sacramento Valley

Habitat

Potential

Firms

People

Self-employment is growing faster than wage and salary employment

0.8

0.9

1

1.1

1.2

1.3

1.4

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Wage and salary employment

Non-farm self-employment

Indexed regional farm and non-farm self-employment compared with total wage and salary jobs in the Sacramento Valley Region, 1990 - 2002

Source: US Bureau of Economic Analysis

Firm creation and closure responsible for most “churn” in regional economy

139,181 firms created (1989-2002)

109,589 firms closed (1989-2002)

11,406 firms relocated or expanded into region (1989-2002)

6,448 firms moved out of the region (1989-2002)

15,526 firms moved within the Sacramento Valley from 1989-2002

Most new jobs are from new firms

New Jobs from new firms68%

New jobs from firm relocations/expansions into

region22%

New jobs from existing firms10%

Distribution of Job Creation Within the Sacramento Valley, 1989-2002

Jobs created by new firms comparable to those of existing and relocating firms

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

Operations of Outside Firms that Relocated or Expanded into the Valley Firms that Started in the Sacramento Valley

Firms that existed in the Sacramento Valley pre-1989 Headquarters that moved into the Sacramento Valley since 1990

To Find Out More . . .

• Health Services and Regional Experience Cluster Papers– California Regional Economies Project (

www.labor.ca.gov/panel/espcrepindex)

• Entrepreneurial Sacramento Valley– Great Valley Center (www.greatvalley.org)

• Stay Tuned: Patterns of Rural Entrepreneurship Paper, Clusters of Opportunity User Guide/Training