1. Workforce Training And Education Coordinating Board Bryan Wilson Deputy Director January 29, 2009 Targeting Industry Clusters as an Economic Development Strategy House Community & Economic Development & Trade Committee

2. 2 Workforce Training & Education Coordinating Board Industry Clusters A geographic concentration of interdependent competitive firms that do business with each other, including firms that sell inside and outside of the geographic region as well as support firms that supply new materials, components, and business services, and other institutions including government and education. Concentration. Regional. Related firms and institutions. Examples: Entertainment in L.A., Pharmaceuticals in Philadelphia, Finance in NYC, Wine in Walla Walla. All clusters involve a sector, but not all sectors are clusters.

3. 3 Workforce Training & Education Coordinating Board Why Focus on Industry Clusters? Because that’s where economic growth and innovation is most likely to occur. Factors of production already favorable. (The market selects, not the government) Location of supporting workforce, firms and institutions. Spin-offs. Face-to-face relations still matter.

4. 4 Workforce Training & Education Coordinating Board Why Focus on Industry Clusters? (continued) Because that is where workforce and economic development overlap Sectors spurring economic growth Clusters Sectors rich in jobs

5. 5 Workforce Training & Education Coordinating Board Why Focus on Industry Clusters? (continued) An organizing principle for coordination. A guide for strategic investments. One strategy. Not the only economic development strategy. Not the only workforce development strategy.

6. 6 Workforce Training & Education Coordinating Board What clusters have been identified? SHB 1091 workgroup: State and local process to identify clusters and strategic clusters. Phase I: Quantitative analysis of economic and labor market data. Location quotients (concentration of the industry in the region compared to national average). Strategic factors (wages, employment levels and growth, and other factors). Input-Output model to discover related industries in the region. Complete study located at: www.wtb.wa.gov/ClusterAnalysis.asp

7. 7 Workforce Training & Education Coordinating Board Seattle-King County Clusters Overhead Cranes & Hoist Mfg. (18.9) Software/Computer Services (15.4) Aerospace (14.5) Fisheries (10.6) Sporting Goods and Toy Mfg.(4.7) Water Transportation(4.3) Nonstore retailers (3.4) Heavy Truck Mfg. (3.3 Electromedical Apparatus (2.7 Travel Arrangement (2.7) Spectator Sports (2.5) Air Transportation (2.0) Performing Arts (1.7) Telecommunications (1.7) Scientific Research & Development (1.5) Custom Computer Programming (1.5) Depository Credit (1.5) Other Ambulatory Health Care (1.5) Other Construction (1.1) Source: Sommers et al's Industry Cluster Analysis for Washington State Workforce Development Areas, November 2008. Location quotients in parenthesis. 1 equals national average.

8. 8 Workforce Training & Education Coordinating Board Northwest Washington Clusters Primary Aluminum Reduction (59.3) Fishing & Seafood Processing (22.2) Petroleum Refining (16.7) Abrasive Products (16.4) Heating Equipment ex furnaces (8.5) Other Misc. Textiles (6.7) Agriculture-Food Products (6.4) Boat Building (5.7) Forest Products (3.5) Other State and local government enterprises (1.5) Source: Sommers et al's Industry Cluster Analysis for Washington State Workforce Development Areas, November 2008. Location quotients in parenthesis. 1 equals national average.

9. 9 Workforce Training & Education Coordinating Board What clusters are strategic? Analysis of 12 variables: 1. Location Quotient 2. Employment level 3. Output 4. Earnings/Worker 5. Percent of Industry Occupations with Earnings in the Middle 6. Percent of Industry Occupations with Earnings in the High End

10. 10 Workforce Training & Education Coordinating Board What clusters are strategic? (Variables continued) 7. Change in establishments 2001-07 8. Change in employment 2001-07 9. Change in wages 2001-07 10. Projected employment change 2006-16 11. R&D occupations as a percent of total employment 12. Exports as a percent of total output Include measures required by statute (size, growth rate, and wage levels) plus R&D and exports.

11. 11 Workforce Training & Education Coordinating Board What clusters are strategic? (Example) If all 12 variables are included, King County’s clusters: Software Aerospace Health Care Water Transportation Scientific Research and Development Non-store retailers Telecommunications

12. 12 Workforce Training & Education Coordinating Board What clusters are strategic? (Example) If all 12 variables are included, Spokane’s clusters: Health Care Professional and Technical Services High Tech Manufacturing Construction Sheet Metal Electric Power Metal and Machine Manufacturing

13. 13 Workforce Training & Education Coordinating Board What clusters are strategic? (Some remaining questions) Should all 12 variables be included and weighted equally? To what extent should different state and local organizations have different priorities? How should lists of strategic clusters be used?

14. 14 Workforce Training & Education Coordinating Board Next steps in cluster work 1. Complete Phase I Identification of Strategic Clusters 2. Phase II: – Discussion with local workforce, economic development, and industry leaders. – Local supplemental data. – Local strategic goals.

15. 15 Workforce Training & Education Coordinating Board Next steps in cluster work 3. Coordinate state and local planning around clusters (HB1323, SB5048) 4. Guide workforce investments to strategic clusters: e.g., Industry Skill Panels, Centers of Excellence, HSHW Strategic Fund.