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1 New Economy Development Strategies: Linking Workforce and Economic Development Prepared for Workforce Development Policy Forum 2000 National Governors’

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Presentation on theme: "1 New Economy Development Strategies: Linking Workforce and Economic Development Prepared for Workforce Development Policy Forum 2000 National Governors’"— Presentation transcript:

1 1 New Economy Development Strategies: Linking Workforce and Economic Development Prepared for Workforce Development Policy Forum 2000 National Governors’ Association Dearborn, MI – November 29 to December 1, 2000 Graham S. Toft, President Indiana Economic Development Council, Inc. 317/ ;

2 2 Economic Development Mantra: zOld Economy: “Build and they will come.” zNew Economy: “Train and they will stay.” Both are over simplistic!

3 3 What is Economic Development? zFinding, sustaining, and capitalizing upon locational advantage to create wealth and minimize poverty. (Note: economic development is about wealth creation and poverty reduction.)

4 4 What is Workforce Development? zStrengthening the localized talent pool of workers to match private investments in technology, capital, and product improvement. (Four macro trends in Midwest: skill- biased technical change, capital deepening, globalization, slow population growth in tight labor markets.)

5 5 Some Attributes of the New Economy zHigh productivity - low inflation. zRapid technological change zHigh capital-labor ratios (capital deepening) zDeregulation and market liberalization zGlobal marketplace zMobility of ycapital yinnovations/ideas ybusiness yPeople

6 6 Some Attributes of the New Economy (cont’d) zChurning ybusiness starts – business failures ybusiness in migration – out migration yjob gains – job losses ypeople come – people go

7 7 Goals of Economic Development zOld Economy: yCreate jobs y’80s: any jobs y’90s: quality jobs zNew Economy: yCreate, attract, and retain talent.

8 8 Design Features of a Talent Pool Strategy zInfluence learning aspirations (whole population) zCreate efficient, responsive and integrated education and training delivery system zProvide outstanding information on careers, programs, jobs, assessments zCreate amenity value and quality of life zBuild/extend career ladders (ladders for advancement)

9 9 Design Features of a Talent Pool Strategy (cont’d) zGrow high pay, high skill, rewarding jobs through capital deepening zCultivate Business Skills Alliances/ employer collaborations zIncentivize workers and employers to make human capital investments

10 10 In short, help people achieve the American Dream in your locality, region, state: ygood pay jobs ygreat place to live ygreat place for advancement yinvest in themselves (a home, education, a start-up business) (People attraction is as important as business attraction)

11 11 Some Tools zCustomized Training yprimarily an economic development tool yeasily becomes a transfer payment to the firm yfrequently an upfront grant; near term focus yif job specific, marginal benefit to worker

12 12 Some Tools (cont’d) zCustomized training (cont’d) yWays to improve xpay on outcome/performance of the firm xrequire portable skills/certificates of technical achievement xrequire firm to set up tuition reimbursement and related continuing education programs xencourage Skills Alliances that focus on the talent pool of like firms (industry clusters)

13 13 Some Tools (cont’d) zBusiness Tax Credits yblunt instruments (credit may not change behavior) yrequires additional tax reporting yadds to workload of Department of Revenue (tax assessment, auditing) ycomplicated, if targeted by type of training or workers ycan be of marginal benefit to worker yfirms training budgets are growing – why needed?

14 14 Some Tools (cont’d) zBusiness Tax Credits (cont’d) yWays to Improve xonly reward incremental investments above baseline (e.g., 3 year moving average) xtie to existing federal tax code – Section 127 tuition reimbursement xwidely promote through tax attorneys and accountants

15 15 Next Generation of Tools - Ideas zDesign factors: ylocal/regional initiative – local tax/incentive options ypositive feedback: the more capital investments and high pay jobs, the more incentives available youtstanding labor market and education/ training information, kept up to date yrewards both individual learner and the firm yfosters Business Skills Alliances yInternet enabled – accessible to learners and firms on the web

16 16 Next Generation of Tools – Ideas (cont’d) zComponents of Internet Site: ycommunity-based “Learning Manager” Web site; workshops for citizens on how to use it (key component of a “digital village” strategy) yworkshops for business accountants on: tuition reimbursement, job tax credits, individual development accounts and individual training accounts, education tax credits, education IRAs etc. ySweep Cards for all residents – shows scholarships, loan entitlement etc.

17 17 Next Generation of Tools – Ideas (cont’d) zComponents of a Corp. Income Tax Credit for Business Skills Alliances ypayroll tax increment financing ybaseline is state payroll taxes by group of firms yfifty percent of growth increment returned to the Skills Alliance ymatched by business 1:1 yused to upgrade the talent pool - - demand occupations/critical skills

18 18 Conclusion zLocal economic development and workforce development very difficult to do successfully in an open economy (high labor, capital and technology mobility) zMust be “embedded” in local/regional economies – in commitments of groups of firms; in career ladders for success; in local amenity strategies, etc. zDon’t have to be that novel – just reconfigure existing education and training institutions into an “integrated learning system” as essential first step


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