Driving Regional Economic Growth: Opportunities for Cook County

Driving Regional Economic Growth:

Opportunities for Cook County

Presentation to the Economic Development

Foundations Working Group

August 31, 2011 Robert Weissbourd

It’s One Economy

Agenda

“Metro-Economics”


Key Lessons and Next Steps

Discussion

Economic Development: Markets

Empowerment

Origins: From “Equity” to … “Equity”

Economic Development: Assets

Civil Rights

Putting the Economics in Economic Development

Poverty and Economic Development“… poverty has no causes. Only prosperity has causes. Analogically, heat is a result of active processes; it has causes. But cold is not the result of any processes; it is only the absence of heat. Just so, the great cold of poverty and economic stagnation is merely the absence of economic development. It can be overcome only if the relevant economic processes are in motion.”

-- Jane Jacobs

Photo from Shelf-Basin Interactions

Neighborhoods are Nested in Larger Systems Which Drive the Flows of People and Capital

ECONOMICSYSTEMS

POLITICALSYSTEMSSOCIAL

SYSTEMS

Labor Markets

Business Markets

Housing Markets

Capital Markets

Consumer Markets

GovernmentServicesInfrastructure

PublicGoodsGovernance

Social Capital

Civic Networks

Neighborhoods arise from the interaction of regional economic, social and political systems with physical place.

• Employment networks• Entrepreneurial opportunities• Business, real estate investment• Expanded products and services• Competitive, healthy communities

• Undervalued, underutilized assets

Poverty Productivity

Connectedness

Isolation

LIC economic development reconnects poorer people and places to the economic mainstream.

Market Failure in Lower Income Communities

The Pieces of Economic Development …

Education

Infrastructure

Business Development

Sustainabilit

y

Housing

Workforce Training

Strategic economic development designs and delivers the programs to create a whole greater than the sum of the parts.

Succeed or Fail “In Context” of Each Other

EducationBusiness Development

SustainabilityHousing

Workforce Training

Infrastructure

Why Metros?Economic Geography and Place-Based Development

The Goal is Economic Growth

Goal is economic development - that is inclusive and sustainable. Metros are the means, not the ends


Economic Growth Flows from Market Activity

The outputs we care about – jobs, income, assets, sustainability – are primarily a function of the complex interaction of housing, labor, business and other market systems, enabled and shaped by government and civic sector activity

Goal is to improve performance of these systems




Major Market Systems Operate at the Metro Level

System performance is function of interactions of people and firms in context of characteristics of place – “on the ground.”

Key geography of many of these systems and interactions is metropolitan region. (Metro includes, but is more than sum of, its neighborhoods. Best neighborhood development deploys people and assets into metro economy, improving both.)

Indeed, one of main reasons for very existence of cities is the agglomeration benefits of concentrating economic activity – an effect of place on market performance.





Improving Metro Economic Performance Entails Customized Analysis and Deliberate Activity

System and environmental characteristics, opportunities and challenges “on the ground” vary by place.

Particularly in the knowledge economy, increasing returns and imperfect competition are giving rise to specialization and divergence. It is more important than ever to be deliberate and strategic, as the economy no longer “takes care of itself.”





Improving Metro Economic Performance Entails Customized Analysis and Deliberate Activity


Economic growth entails strengthening metro economies, and that requires deliberate, ground-up, tailored activity.

It’s One Economy

Agenda




Discussion

Service Exports

75%U

.S. Air Cargo Weight

79%

Airline Boardings

92%

Population

66%

Graduate D

egrees

75%

Venture Capital Funding

94%

Patents

78%

Wind +

Solar Energy Em

ployment

76%

Top 100 Metros Share of U.S. Total

Sources: Brookings analysis of US Census Bureau, FAA, BLS, NIH, NSF, and BEA data; Brookings, ExportNation, 2010 (2008 data); Forthcoming research from Brookings and Battelle

Gross Product

73%

How Metro Economies Grow

Metro economy = total value of goods and services produced in the region

Growth is inherently business sector growth (number, size and profitability of firms)

Business sector grows through firm creation, growth and location decisions (retention and attraction)

Firm creation, growth and location depend upon increases in efficiency and productivity (of firm and system, including product innovation)

Core Question: What attributes of the region increase efficiency and productivity, leading to business sector growth?

Economic Geography

Institutional Economics

What is it About Place that Affects Economic Performance?

New Growth Theory

Economic Geography

Institutional EconomicsNew

Growth Theory

Act Comprehensively – The Whole is Greater than the Sum of the Parts.

Develop Institutional Capacity and Intentionality.

Customize.

Keys to Influencing Economic Performance

Key Systems (Market processes – housing, labor, etc.; production dynamics – clusters, value chains, etc.; innovation dynamics - knowledge creation, networks, commercialization, etc.)

Local (Regional) Enabling Environment(Government regulation, tax and public goods, including

particularly infrastructure and education; civic institutions; qualities of place, including the natural environment; etc.)

Inputs to Production(Human capital; real estate; capital; natural and knowledge resources; etc.)

Economic Outputs(Businesses – gross regional product, profits; households – wages, other income, etc.)

Macro/Global Context & Trends

What Drives Inclusive and SustainableEconomic Growth?

Leverage Points

for Sustainable and Inclusive

Prosperity

Leverage Points

Leverage Points


Prosperity

EnhanceRegional

Concentrations

Leverage Points

Leverage Points


Prosperity

EnhanceRegional

Concentrations Deploy

Human CapitalAligned with

Job Pools

Leverage Points

Leverage Points


Prosperity

EnhanceRegional



Job Pools

DevelopInnovation-

EnablingInfrastructure

Leverage Points

Leverage Points


Prosperity

EnhanceRegional



Job Pools

DevelopInnovation-


Increase Spatial

Efficiency

Leverage Points

Leverage Points


Prosperity

EnhanceRegional



Job Pools

DevelopInnovation-


Increase Spatial

Efficiency

Create EffectivePublic & Civic

Culture & Institutions

Leverage Points

Global, Knowledge Economy

Specialization and Dynamism

Build on Your Assets

Coordinated, Cross-Sectoral, Flexible, Adaptive, Open,

Information-Rich, Inclusive,

Entrepreneurial

Compete on Value-Added

(not low-cost)

Intentionality

Economic Development

in the Next Economy

Metropolitan Business Planning: A New Way of Doing Business

Grounded in Economics and Business

Comprehensive, Actionable Strategies

An Ongoing Enterprise

Enables “New Federalism”

Northeast Ohio

Minneapolis-St. PaulPuget Sound

Source: Brookings Institution

Pilot Metro

Business Planning Regions

It’s One Economy

Agenda




Discussion

It’s One Economy

Agenda


Opportunities for Cook CountyOverall Regional Performance

By Leverage Point:

Definition and Practice

Regional Status

Exploring Roles for Cook County

Strong Assets

Switzerla

nd

Chicago M

SAPoland

Belgium

Sweden

Saudi Arabia

Taiw

an

Norway

0

100

200

300

400

500

600

Chicago Region's GRP in Context

GDP

in B

illio

ns o

f USD

Source: International Monetary Fund

If the Chicago MSA were a nation, it would have the 20th largest economy

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

Ratio of Chicago area per capita GRP growth to U.S.,

1980-2009

Losing Momentum

Source: Moody’s Analytics; MCIC

-5%

0%

5%

10%

15%

20%

25%

30%

23.2%

6.3%

Cumulative Job Growth, 1992-2008

U.S. Chicago MSA

Source: National Establishment Time Series

“Strong Balance Sheet, but Poor Income Statement”

Excelerate Labs

18h Street

Development

Corporation

Lake County

Partners

IL Clean Energy Community FoundationWill County Center

for Economic

Development

Metro Chicago

Healthcare Council

UIC Center for

Urban Economic

Development

Chicago

Manufacturing

Renaissance Council

Workforce Boards of Metro Chicago

Chicago Biomedical

Consortium

Apparel Industry Board

Metro Economic Growth Alliance

Back of the Yards

Neighborhood Council

Chicago Council on

Science and

Technology

Illinois Manufacturing

Extension Center

Greater SW Development Corporation

Choose DuPage

Clean Economy Network

Alliance

for

Illinois

Manufacturin

g

iBio

CMAP

CEDA

Chicago Workforce

Investment Council

Chicagoland Entrepreneurial

Center

World

Business

Chicago

The Delta

Institute

Chicago Southland EDC

DCEO

Chicago Jobs Council

Illinois

Medical

District

Global Midwest Alliance

DeKalb County

EDC NanoBusiness

Alliance

McHenry

County EDC

Center for

Nanoscale

Materials Illinois Venture

Capital

Association

Chicago Technology

Park

Chicago Council

on Global Affairs

Chicago Southland

Chamber

of

Commerce

Illinois Technology Association

Chicago

Convention &

Tourism Bureau

Illinois S

cience

& Technology

Coalition

Chicagoland

Chamber

of

Commerce

Lots of ED Activity; Little Coordination

Source: Regional Economy Initiative, Metropolis Strategies and RW Ventures.

Enhance Regional Concentrations: Industries, Occupations and Functions

What is it? How the firms and related institutions in the production side of

the economy interact and concentrate, or “cluster,” influencing their efficiency and productivity

Aspects to consider include: Current concentrations and their geography Areas of high growth potential What shared inputs, activities, infrastructure and other factors

contribute to efficiency/productivity of targeted clusters Extent to which clusters have already self-identified and

organizedStrategies might include:

Provide co-location opportunities (e.g., business parks) Strengthen institutional and network infrastructure Cluster-specific training, R&D, infrastructure, finance, etc. Cluster-specific innovation/entrepreneurship Attraction of complementary firms

Regional Status: Strong but Underperforming

Diverse economy, with complementary specializations, in both conventional and functional clusters

Many of the biggest clusters are growing more slowly than their national peers

Strengths in logistics, business services, food processing, metal/machinery manuf., health care/life sciences, …

Several groups are pursuing cluster studies, but few comprehensive, business driven cluster strategies are underway.-25000 -20000 -15000 -10000 -5000 0 5000

0

0.2

0.4

0.6

0.8

1

1.2

1.4Transportation & Warehousing

FIRE & Business Services

Consumer IndustriesHealth & Welfare

Durable Goods Mfg

Headquarters

Utilities

Construction

Tourism

Information & Media

Nondurable Goods Mfg

Local Share - Chicago Competitiveness, 2010

Loca

tion

Quo

tient

, 201

0

*Size of bubble represents 2010 Gross OutputSources: MCIC; Regional Economy Initiative, Metropolis Strategies and RW Ventures.


In Its Own Businesses Support business formation and growth in County

supply chains (e.g. Evergreen Cooperative Initiative…) Strengthen green buildings cluster by retrofitting

County buildings, driving demand for energy efficient products and services

In Its Economic Development Programming Target programs (e.g., WIA, CDBG) to support the

region’s most promising clusters, such as Freight and Logistics

Through New Initiatives and Partnerships Lead organization and development activities in Health

& Medical clusterPreliminary and Illustrative: For Discussion Purposes Only

Deploy High Human Capital Alignedwith Job Pools

What is it? Linked, mutually reinforcing human capital and job pools Efficient labor market deployment Opportunity and mobility

Aspects to consider include: Concentrations and growth prospects (both skills and occupations) Alignment of human capital and job market Quality of education/training systems (K thru lifelong learning) Attraction/retention record and factors Labor market efficiency

Strategies might include: Increase demand-side focus of workforce development Increase access, reduce transaction costs in labor market Establish career pathways, apprenticeships, etc. to foster

economic mobility Target and link production, attraction, retention of

workers and firms

Slightly above average in percent of knowledge workers

Attracting talent from around the world (as indicated by flow of high skilled immigrants)

52% of all Illinois jobs are “middle skill,” but in 2008 there was a 9% shortfall in workers with the skills to fill them

Production of human capital is mixed – world class universities, uneven community colleges, many failing elementary and high schools

HC development system fragmented and not sufficiently employer driven

Regional Status: Bifurcated

Sources: Brookings Top 100 Metros Metrics; Illinois’ Forgotten Middle-Skills Jobs, The Workforce Alliance, 2008; Graph based on data from U.S. Census Bureau, American Community Survey, 2005-2009 Estimates.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Percent of Population with At Least Each Level of Education

Cook County

City of Chicago

Suburban Cook

MSA

Illinois

USA


In Its Own Businesses Use the County’s human capital system to model skill

certifications, job ladders, mobility (focusing on healthcare and criminal justice)

In Its Economic Development Programming Tailor workforce development and prisoner reentry

programs to be more employer/market driven, and tie to needs of high-growth clusters (e.g., freight and logistics)

Through New Initiatives and Partnerships Consolidated County-City workforce investment

management

Preliminary and Illustrative: For Discussion Purposes Only

Develop Innovation-Enabling Infrastructure

What is it? New products, services and business models – the only long

term driver of overall growth

Aspects to consider include: Overall “ecosystem” – supporting institutions and networks Performance at particular stages (R&D, commercialization,

entrepreneurship) Cluster-specific innovation dynamics/opportunities Public-sector enablers/constraints Availability of stage-appropriate finance

Strategies might include: Strengthen regional R&D capacity (education, facilities, funding) Catalyze commercialization of knowledge through research-

industry linkages Foster entrepreneurship through capital access, technical

assistance, mentorship Develop rich networks supporting interdisciplinary cross-

fertilization and deal formation Support cluster-based innovation

Average levels of business churn and low numbers of high impact firms

Limited innovation networks, ecosystem, culture (but emerging, particularly in IT/digital)

Regional Status: Underperforming, but Improving

0.5

1.0

1.5

2.0

2.5

3.0

Total Patents Granted Index, U.S. v. Illinois

U.S. IL

Source: U.S. Patent & Trademark Office

NJ NC CO PA IL WA TX NY MA CA $-

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

$192,231,200

$575,407,500

Venture Capital Investments by State ($M)

20092010

Source: PWC MoneyTree

World class research universities and R&D centers, but limited commercialization

Uneven capital access for entrepreneurs (e.g. low SBA lending)

Sources: Regional Economy Initiative by Metropolis Strategies and RW Ventures; Brookings Top 100 Metros Metrics.


In Its Own Businesses Develop key innovations related to County

operations: digitalization of patient records; next gen. computer-based property assessment; hospital interpretive services; paperless permitting and electronic plan reviews

In Its Economic Development Programming EDA innovation grants?

Through New Initiatives and Partnerships Work with other stakeholders to create R&D centers

(e.g., patient records, foreclosure management, etc.)


What is it? The geographic arrangement of households and firms –

producers, suppliers and consumers – within the region determines transportation costs for people and businesses, and influences agglomeration benefits

Aspects to consider include: Public policies re: land use/zoning, infrastructure, etc. Degree of housing-jobs mismatch Access to transit, commuting times, etc. Spatial concentrations of firms, occupations, functions, etc.

Strategies might include: Focusing development in infrastructure-rich areas Transit-oriented and mixed-use/mixed-income development Affordable housing programs (inclusionary zoning, etc.) Avoid segregation and concentration of poverty Travel pricing strategies (e.g., congestion pricing)

Increase Spatial Efficiency

Housing sprawl and lack of transit investment have led to the 4th longest commutes to and from work, mostly by car

The metro area is the 3rd most congested in the nation, costing the region $7.3 billion annually in wasted time and fuel

Housing Costs as Percent of Income

Housing + Transportation Costs as Percent of Income

Regional Status: Dense Nodes, but Stuck in Traffic

79% of Northeastern Illinoisans have access to transit, BUT only 24% can use transit to access their jobs

The Chicago region is the 3rd most segregated of the top 100 metros

Lack of funding for needed infrastructure improvements

Sources: Housing and Transportation Affordability Index by CNT; Brookings Top 100 Metros Metrics.


In Its Own Businesses Provide employer assisted housing near large centers of County employment Incent alternative modes of transportation (providing

employees with transit benefits, free and secure bike parking, etc.)

In Its Economic Development Programming Promote spatial efficiency through Building and Zoning

activities Use NSP, HOME and other funds to support transit oriented

development and otherwise encourage spatial efficiency Through New Initiatives and Partnerships

Coordinate with regional affordable housing initiatives


Create Effective Public & Civic Culture & Institutions

What is it? The institutional environment, made up of governments,

private and civic associations, enables and influences the efficiency of economic activity

Aspects to consider include: Degree of horizontal and vertical fragmentation Tax/value proposition Governance: cross-sectoral partnerships; broader institutional capacity

and culture; transparency, openness, responsiveness Information: availability and use of data for economic development

Strategies might include: Inter-jurisdictional coordination/cooperation, including consolidation and

shared services Revenue sharing Strategic engagement of citizens, private and civic sectors (particularly

program-specific, such as community policing) E-government Open data/data-sharing initiatives Permit/license fast-tracking Special-purpose entities

Regional Status: “C”Government Coordination:

1,226 units of government within theseven-county metro area.

More governments per capita than 2/3rds of major metros

Lack of public trustTax & Regulation/Value Proposition

Complex, multi-faceted tax and regulatory systems. Value proposition uneven Illinois taxes fewer services than 46 other states and

has a sales tax rate higher than 46 other states.Governance

Uneven – selectively cross sector, open and inclusive; often top-down and “who you know”

Information Sharing The region is improving but still lags other metros in

transparency and public data.

Sources: “The Economic Impacts of GOTO2040,” RW Ventures, 2010; Brookings Top 100 Metros Metrics; “Public Finance Issues in the Chicago Metropolitan Area,” CMAP, 2009.

Exploring Roles for Cook County In Its Own Businesses

Act as model of transparent government, including data sharing Implement Government 2.0 practices to increase efficiency

and encourage citizen engagement Lower the sales tax rate and expand the tax base to include

many services Improve and make more transparent the value provided for

taxes Ensure sensible and consistent regulations and minimal

bureaucracy In Its Economic Development Programming

Pool funding within County programs and across other agencies for performance-based competitive grants

Through New Initiatives and Partnerships Convene, participate with other governmental, private and

civic actors in regional economic planning Promote shared services agreements


It’s One Economy

Agenda




Discussion

High Road Development

Low-wageRegulation

Subsidies

Low Road High Road

Good Infrastructure

SkilledWorkers

Key LessonsUndertake “high road” development

Build from your assetsCompete on value-added, not just low costTailor tax-value proposition

Be intentionalCustomized, integrated, tailored to local opportunitiesMetropolitan Business Planning

Act in contextDesign for whole greater than the sum of its partsAllow economics to dictate the geographyAlign equity goals with economic developmentUnderstand spectrum from social service to economic growth

“Metros are the solution, not the problem”Federal and state governments should invest in metros.

Next StepsOpportunities for

the Region (with County “lens”)

Roles for the County

Market Assessment Inventory assets and opportunities

Evaluate Cook government programs and competencies

Strategy Identification Identify high potential strategies integrating key market leverage points

Target strategies best suited to County business, programs,

capacities

Program/Product/Policy Development

Coordinate and create initiatives to implement

strategies

Reorient existing programs, create new ones, coordinate to implement selected strategies

Institutional Capacity Building

Regional business planning/execution (gen.

and project specific)

•Convene, participate in RBP•“Governance for the next

economy”


Discussion

Driving Regional Economic Growth:


Presentation to the Economic Development

Foundations Working Group

August 31, 2011 Robert Weissbourd

Economy & Finance

Driving Regional Economic Growth: Opportunities for Cook County