Monday, November 23, 2015

To the Far East, a Glimpse into the Future

By Evan Robertson, Senior Project Associate

In the world of community, economic, and workforce development, it is easy to be United States-centric. So much of our important work is deeply impacted by our national, state, and local laws and policies. Even within the United States, each region of the country has vastly different, contrasting, milieus of community, economic, and workforce development. Beyond our nation’s boundaries community, economic, and workforce development can look downright alien. From time to time, however, looking past these differences can yield insight into new possibilities and assist in identifying solutions to challenges that local communities are likely to encounter in the future. 

We at Market Street have been deeply concerned with the sustainability of the nation’s workforce for a great deal of time - education and talent development remain core components of our processes, we view workforce sustainability as THE issue in our field. Communities who take talent for granted are likely to find themselves at a serious disadvantage in the coming years – recent headquarter relocations such as Expedia’s move from suburban Seattle to its downtown area and the Mercedes-Benz headquarter relocation into the Atlanta area (hint: transit accessibility was a major location factor) are just a few recent talent-driven relocations that highlight businesses’ thirst for locating in areas they perceive as being attractive to tomorrow’s workforce. If talent availability is our key community, economic, and workforce development issue, then the retirement of the baby boom generation is our greatest challenge. Of course, there are many unknowns regarding how communities and businesses will respond to the retirement of the baby boom generation – we simply haven’t experienced such a large swath of our workforce entering retirement age in such a short period of time. Will we fill gaps through promoting immigration? Will robots replace certain types of work? Will businesses selectively downsize? Will GDP be impacted? 

Luckily, for us at least, Japan offers a rare glimpse into the potential challenges and outcomes of severe workforce shortages caused by retirees exiting the labor force. Working age adults typically support retirees by generating tax revenue which, in turn, is used to support social services such as Medicare and social security, or in the case of Japan, its national pension system (Kokumin Nenkin) and the national healthcare system (Kokumin-KenkĊ-Hoken). Inverse dependency ratios (i.e. the ratio of residents aged 15 to 64 aged divided by residents aged 65 and over) are a quick and easy way to determine just how many working age adults there are to support a nation’s retiree population. As the following chart displays, Japan’s number of working age adults relative to its retiree population has dropped precipitously since records began in 1920. In 1920, there were roughly 11 residents aged 15 to 64 for every individual aged 65 and over in Japan. By 2010, there were only 2.8 residents aged 15 to 64 for every individual aged 65 and over in the county. By comparison, the United States’ dependency ratio, while in similar decline, has been less severe (the United States’ dependency ratio stood at 5.8 in 2010). These figures are likely to slip further, Japan’s own population projections foresee a continually aging population long in to 2060. As Japan’s workforce continues to enter retirement age, well before the United States’ pending baby boom retirements, it offers communities a clear picture into their future. Thus far, the impact in Japan has been startling. 

Inverse Dependency Ratio for Japan and United States, 1920 - 2010 

Source: Ministry of Internal Affairs and Communications, Statistics Bureau; U.S. Census Bureau 

A recent Wall Street Journal article describes the profound impact talent shortages are having on Japan’s economy. The country’s gross domestic product declined at an annualized rate of 0.8 percent in the third quarter according to the article, this is particularly interesting since Japan’s unemployment rate stands at 3.4 percent. With the vast majority of the nation’s population employed, one would expect that gross domestic product would be on the rise. Due to the lack of available workers, Japanese companies are cutting back. One company detailed in the article had to close around twenty percent of its approximately 2,000 24-hour restaurants during late night hours. This would be akin to Waffle House locking its doors from say 12 a.m. to 6 a.m. not because there weren’t customers at those hours to sustain the business (trust me, there are), but there was simply no one available to tend to the store during that time. Japanese companies who require more highly skilled talent report intense competition for workers, with highly skilled employees often receiving numerous job offers from other competitors. 

As you might suspect, much akin to the United States, Japan’s urban centers typically possess a lower concentration of residents aged 65 and over compared to other areas of the country. As the following map shows, those prefectures in and around Tokyo; Nagoya, and Osaka generally possess a younger population. Much like in the United States, Japan’s urban cores and their ability to develop a built environment attractive to young Japanese residents as well as new immigrants alike will be central to the success or failure of addressing the country’s talent shortages. 

If there is one major takeaway, it is this: watch Japan closely over the coming years. They are the first nation to experience a severe workforce shortage caused by a large portion of their population retiring within a short window of time. The policy responses they formulate both at the local and national level may offer ideas to other communities on how to attract and retain top talent in a given community. They could very well earn the distinction of creating new, innovative talent attraction and retention best practices. Of course, some of the policy responses will be out-of-reach to local leaders stateside. A local community’s ability to impact national immigration policy is limited. Other policies, especially those that pertain to welcomeness, inclusion, and place making, will likely provide fertile ground for adoption or tailoring a particular policy to your local community.

Wednesday, November 11, 2015

Hancock County at a Bird's Eye View

By Ranada Robinson, Research Manager

In the first installment of our post about Hancock County, MS and its journey since Hurricane Katrina, we talked about the county’s success in bouncing back and rebuilding its community and economy. This installment takes a look at a few key indicators to begin to see the dynamics of that progress. This brief analysis is but a glimpse of the many data indicators we at Market Street explore during our strategy processes to understand a community’s story.

As shown in the following population table, Hancock County has not reached its population levels immediately before Hurricane Katrina hit, but it is very close and steadily growing. As shown clearly in the Population Index chart, which allows apples-to-apples comparison of growth rates despite geography size, Hancock County’s comparatively rapid population growth is catching up to the state’s steady growth over the time period.

In terms of age dynamics, in 2014, Hancock County has the same percentage of 25-44 year olds in its population (23.8 percent) as it did when Market Street developed the community’s Competitive Assessment in 2011, when the most recent age data available was 2009. The population of retirees (65+) has increased to 17.3 percent, while the proportion of children 17 and under has decreased to 22.1 percent.

Source: U.S. Census Bureau Population Estimates

Source: U.S. Census Population Estimates

In terms of employment, the county bounced back very quickly, then began a consistent incline until 2010. Since then, there has been a decrease in jobs, mostly in construction, administrative and support services, manufacturing, and transportation and warehousing. In the last four years, the greatest number of added jobs has been in retail trade, accommodation and food services, and healthcare and social assistance. Despite this shift, average annual wages have continued to rise, establishments are opening, and unemployment is still on the decline.

Source: Economic Modeling Specialists Intl. (EMSI)

Source: Economic Modeling Specialists Intl. (EMSI)

Source: U.S. Bureau of Labor Statistics

Source: Economic Modeling Specialists Intl. (EMSI)

Source: U.S. Bureau of Labor Statistics

For resident well-being, I took a quick look at per capita income and poverty rates. Per capita income shot up after Hurricane Katrina, presumably due to government assistance and those who took advantage of dividends and interest income to help them through the rebuilding phases. Since then, the PCI has returned to pre-Katrina levels, closer to the state PCI. Poverty and youth poverty are gradually increasing over time, which is also a national and state trend. 

Source: U.S. Bureau of Economic Analysis

Source: U.S. Bureau of Economic Analysis

Source: SAIPE

Source: SAIPE

Again, this is only a peek in the window of all the data that helps to tell Hancock County’s story. As with all communities, other indicators such as migration trends, educational attainment, racial and ethnic dynamics, economic structure analysis, and many quality of life indicators are instrumental in understanding how far a community has come and in what direction it’s going. Nevertheless, it is astounding the progress that Hancock County was able to make in just the couple of years following Hurricane Katrina. As it continues moving forward in the future, we at Market Street will continue rooting for them, and wishing them well in their efforts to increase their economic vitality, enhance their position as a community of choice, prepare a 21st Century workforce, and develop and support visionary leadership.

Thursday, November 5, 2015

If Increasing Automation Becomes A Reality, The Impacts Will Be Broad

By Matt DeVeau, Project Manager 

Confession time: I get sucked into reading a lot of clickbait articles. I believe (or rationalize, anyway) that I am a victim of circumstance. I have a public transportation commute that typically involves about 25-30 minutes of standing on crowded train or waiting for one, and the best way to pass the time is on my phone. It happens. 

Lately I’ve been falling for “robots are going to take all the jobs!” headlines. On some level, these kinds of sensationalist pieces are understandable. Let’s say that within the next few decades, a huge portion of existing jobs are lost to automation or increasingly advanced algorithms and are not replaced by new kinds of work for whatever reason. In that scenario, it’s not hard to imagine that every facet of society – economy, culture, politics, and so on – will be radically altered. That’s scary! And that’s why it makes for good #content on certain websites. 

To be sure, there are plenty of serious and worthwhile pieces about the “future of work” in an increasingly automated world – Evan Robertson briefly touched on the topic in this post from September. It’s fun to think about the theoretical aspects of these articles and think through the long-range questions they raise. But as an economic development professional, I’m also drawn to some practical questions: what types of occupations are most at risk and how are these jobs distributed geographically? 

These are obviously enormous questions that can’t be adequately addressed in this space, but I took a quick initial look at the issue using findings from existing research and EMSI occupational data. The foundation for this brief analysis is a 2013 study from Oxford University titled “The Future of Employment: How Susceptible are Jobs to Computerization?” The authors, Carl Benedikt Frey and Michael A. Osborne, devised a methodology to estimate the probability that 702 occupations can be automated. Each occupation is ranked on a scale with a number between 0 and 1, with 1 representing the jobs that are most likely to be computerized. 

I looked specifically at the 171 occupations with a probability of 0.9 or higher. This “high-risk” category accounts for nearly 45 million jobs, roughly three out of every 10 positions in the United States. It includes the nation’s most common job – retail salesperson – and some of its most obscure. (Side note: there are apparently 3,774 bridge and lock tenders in the United States.) A large majority of these jobs, however, were clustered into four major occupational groupings: 
  1. Office and Administrative Support Occupations (14.0 million) 
  2. Sales and Related Occupations (9.9 million) 
  3. Food Preparation and Serving Related Occupations (8.1 million) 
  4. Production Occupations (4.5 million) 

The above categories all make sense in light of advancements in fields such as robotics, mobile payments technologies, big data, and machine learning. We might also add a fifth category based on another emerging technology, self-driving vehicles, but while many Material Moving occupations had high computerization probabilities, most fell below the 0.9 threshold. In any case, the diversity of the above categories indicates that no regional economy is completely immune from the threat of automation. In the nation’s 300 largest metro economies by total employment, the 171 “high-risk” occupations account for anywhere between 18.9 and 40.5 percent of local jobs. A further look at the regional economies in which these occupations are most concentrated also reveals a pattern. The following table shows the ten regions with the highest combined location quotient for the 171 occupations: 

Ten Regions With the Highest Proportion of Jobs at High Risk of Computerization Among the Top 300 MSAs by Total Employment 

Source: EMSI 

All of the above regions have a location quotient of 1.94 or higher in either the Team Assemblers or Waiters and Waitresses occupation, reflecting a heavy concentration of economic activity around manufacturing or travel and tourism, respectively. Conversely, the following table shows the communities with the lowest concentration of high-risk jobs: 

Ten Regions With the Lowest Proportion of Jobs at High Risk of Computerization Among the Top 300 MSAs by Total Employment 

Source: EMSI 

In most of these communities, there is a dominant industry that does not rely heavily on or more of the above 171 occupations: government in Washington, DC, destination healthcare in Rochester, the military in Clarksville, Fayetteville, Jacksonville, and Killeen-Temple, and agriculture in Bakersfield, Salinas, and Yuma. The outlier is San Jose, which has strong location quotients in occupational categories related to computers (4.05) and engineering (3.09). These occupational categories just so happen to contain many of the jobs (e.g. software developers) that are at a relatively low risk of computerization in the coming years. 

Silicon Valley is a completely unrealistic point of comparison for just about every other regional economy in the United States. But even in the nation’s premier technology and software hub, more than 275,000 jobs – roughly one in four positions in the region – are in occupations that have a high probability of computerization. Put another way, if impending automation is a concern for a full quarter of workers in the place where a lot of the software is actually being developed, it’s a concern for everyone.