Regional Competitiveness Impacts Your Local Economy

Facing realities about the regional competitiveness of your metropolitan area, compared to others, is a healthy step toward economic reinvention for your area.

Often communities try to ignore a failing or stagnant economy, in comparison to sector employment and income growth or decline in other metropolitan regions.

But if your region has completed a careful cluster analysis of what might be successful in the region, that's a gold mine of ideas to fuel local economic innovation.

To the ordinary citizen, cluster analysis can be considered research into patterns of related industries or businesses that already have settled in your area and therefore give you a competitive edge over other metro areas that haven't developed that economic specialty.



If you look at similar sizes of cities and find that regional competitiveness is lacking, step one is to overcome denial. If a particular suburb, for example, consists of prosperous households at the moment, the community may pretend it doesn't matter that the region is in the Rust Belt, or that their metropolitan area is among the highest in crime, foreclosure, infant mortality, or job loss in the nation.

Civic boosterism can create some positive spin-offs, but it's terrible for looking economic reality straight in the face.

A look at government research on your regional personal income and regional gross domestic product (GDP), compared to other regions, might be a good reality check. See the Bureau of Economic Analysis articles entry page for a list of available papers.

Spillover effects of problems in one part of a region eventually catch up with even highly prosperous neighborhoods. Indeed, the notion of region, as defined by the U.S. Bureau of the Census, consists of economic interdependence just as surely as geographic proximity.

In addition to employment and income numbers, though, if the perception of a region is negative, future economic competitiveness of the region is threatened.

So when you become deeply involved in your neighborhood or community that is part of a metropolitan region or mega-region broader than your area of concern, you should give some thought to where regional competitiveness, or lack of it, is taking you.

For an overview of regional competitiveness issues within the U.S., flip through the Council on Competitiveness slideshow once, and then go back and read and absorb it slowly.


What You Need to Understand about Regional Competitiveness

Step two is to draw the correct conclusions about regional competitivness. The message is that it's equally important to develop a culture of innovation and to choose the correct industries.

Regional competitiveness can be increased dramatically in some areas simply by concentrating on the innovation aspect of whatever is providing jobs right now.

It's essential to pay attention to, support, and fund education from kindergarten through higher education.

What are these states that are cutting their higher education budgets thinking? They're certainly not enhancing regional competitiveness. I know revenues are down and all, but let's try to think longer term. Sometimes it's easier to cut the budget than force tough decisions; that's my theory on why we're embracing this insanity.

So one part of innovation is education at all levels, and the second part is cultural change. Admittedly that can be a tough sell, but selling is what is required. 

It is a campaign you must launch, especially if your culture, like my native Midwestern one, is moderate and careful. That produces very substantial virtues, and a distinctive culture, but a careful infusion of just thinking about doing something differently would be very helpful.

If you're already convinced and are ready to immerse yourself in this topic, these are the books we recommend:

1. American Metro Politics

2. Citistates: How America Can Prosper in a Competitive World (bet you didn't know you live in a "citistate," did you?)

3. Local Economic Development: Analysis, Practices, and Globalization

Otherwise, you will learn enough for one day here. Keep reading.


Know Your Facts Before You Start Deciding How to Increase Regional Competitiveness

Certainly you need to understand strengths in your metropolitan area, and even in your broad region (the south of the U.S. or south of France). If you do, skip to the next section.

We suggest you do that by keeping a graph of the percentage of the region's jobs that lie in each of the major economic sectors in your mind or on the front of your file cabinet. Percentage of the region's income derived from each sector is important too.

If you want to go into depth on how you can tap into regional competitiveness trends, you might have to hire an economic development consultant, but it's a whole lot less expensive to begin with our economic base page.

To get a picture of your region's economy firmly in mind, we're simply suggesting that you go to the entry page for the County Business Patterns section of the Census Bureau website. From that page, select metropolitan or micropolitan area tables.  Next you will have to choose Add/Remove Geographies from a blue horizontal menu somewhat near the top.  Opt for selecting your geographic type, not putting in your zip code or city name.  Choose the metropolitan or micropolitan statistical area again.  From there you will be able to choose your statistical area for your region.  

A micropolitan area, in case you haven't heard that term, is an area that has at least one principal city with a population of at least 10,000 but fewer than 50,000.

For trivia night, remember that in six New England states, NECTAs (New England city and town areas) that have much the same practical meaning as the definition of metropolitan and micropolitan areas.



Let us return to describing the pull-down menu.  The Census Bureau's page has changed, but for today we will leave our previous experiment in place.  As an experiment, I selected the previous first choice, the Abbeville, LA, micropolitan area. It took me 15 minutes to complete the entire process described below.  It sounds complicated, but for those who are accustomed to using a computer, it is simple if you follow directions step by step and refuse to panic.

• Ignore the two left columns with buttons, and then highlight (select) from industry code column on over to the last column on the right, as far down as the first time industry code 99 is shown.

• Select Save As a .csv file at the bottom, opened that file in my spreadsheet program, telling it that the columns were separated by commas. Presto, you have a spreadsheet.

• Tell the spreadsheet to delete the first quarter payroll and the total establishments columns.

• Add a column that I labeled Employment % as the fourth column, and a column I labeled Income % as the last column.

• Shorten the relevant column headings to simply "Employees" and "Annual Income." Note that Annual Income is shown in thousands, so add three zeroes to the end of the number to show dollars.

• Tell the spreadsheet to calculate the percentage of total employment in the first industry code, code 11. A hint is to use the actual total number of employees (9829 in greater Abbeville) as the divisor (number you divide by) in the formula. Copy and paste the formula for the rest of the column.

• Do the same percentage calculations with income.

• Format the employment % and income % columns to read as a percentage, with no decimal places.

Industry CodeIndustry Code DescriptionEmployeesEmployment %Annual IncomeIncome %
------Total9829--286576--
11----Forestry, fishing, hunting, and agriculture support260%4250%
21----Mining3413%175516%
22----Utilities470%23051%
23----Construction108111%4856917%
31----Manufacturing95510%3636713%
42----Wholesale trade5005%190707%
44----Retail trade215022%4595616%
48----Transportation & warehousing4445%212147%
51----Information1632%67502%
52----Finance & insurance4214%144065%
53----Real estate & rental & leasing861%33431%
54----Professional, scientific, & technical services2683%80483%
55----Management of companies & enterprises711%26861%
56----Admin, support, waste mgt, remediation services1822%45342%
61----Educational services1041%18401%
62----Health care and social assistance160816%3751813%
71----Arts, entertainment & recreation771%6950%
72----Accommodation & food services9189%83743%
81----Other services (except public administration)3824%68632%
99----Unclassified establishments50%620%

Remember that this particular set of listings doesn't include agricultural or government employment, so you have to go different places to find those numbers and add them in.

But right away, if I know nothing about Abbeville, I can predict some things. It still has some manufacturing, it's not where tourists stay and eat (only 3% accommodation and food services), even though I know it to be a worthy day trip, and it's fairly blue collar (low sum for the white collar categories 51-55).

I see that construction accounts for considerably more of the income (17%) than the number of jobs (11%). So if Abbeville loses construction jobs, that's bigger trouble than if it loses healthcare and social assistance jobs. The household dimension of unemployment would feel the same, but the economic impact would be lesser.

If you have agriculture as a significant component of regional competitiveness, here's the starting point for county-level data from the 2007 Census of Agriculture, where you can select farm demographics and other information. Why they recently made this data more difficult to find, we can't say.

County or metro level data on government employment is critical to completing your snapshot of your local economy; we are chasing down apparent changes in those collection and reporting methods for you right now.

If you want to compare your economy over time, break down economic sectors into greater detail, or compare your economy to the state or the nation, go to the link at Metro Business Patterns and start playing with the Compare buttons.

In another 15 minutes you can format your state's economy into the same chart, and another 15 for the nation.

But if you're going to compare your region to the state or the nation, trek over to the economic base page, learn that theory, and take advantage of the government-sponsored calculator for something called a location quotient.

What's important now is to get a picture of regional competitiveness in your mind, because it's too easy to think about your region's largest employers as your most visible private companies.

Remember that utilities, hospitals, universities, and local governments are major economic players. If your community or neighborhood hosts a concentration of the region's strengths, revise your idea of who it's really important to please.


The Cluster Analysis Idea

So some economists started thinking about the fact that metropolitan areas differ in their regional competitiveness edges. Indeed, specialties are essential to maintain regional competitivness.

Industry clusters are wider groupings of businesses (not necessarily manufacturing--it's just that you'll hear the word "industry" used) than have been traditionally used by the Census Bureau and other government data agencies. There is no one standard methodology for a cluster analysis, but here are a few key ideas:

• A cluster should be a specialty of the region, and therefore it should be an economic base activity, as defined on this website. That means that the businesses produce a net import of money and wealth into the region, there are sales to outsiders, and not all production is consumed locally.

• The industries and businesses should be inter-related and interdependent in some fashion. For example, a contemporary automobile manufacturer relies on "just in time" parts delivery from the manufacturers of the various sub-components of a car.

So the whole car manufacturing, car parts, replacement car parts, and car repair industries might be interdependent. If industries are interdependent within your region, they are selling to one another in a major way, in addition to selling to outsiders.

That's actually a good thing to the extent that the interdependencies make the entire cluster enhance regional competitiveness. (By the way, interdependence studies are called input-output analysis; don't try that at home.)

• The example above illustrates a third consideration, which is whether the cluster members could or could not survive without each other in your particular location. Obviously, car repair may not really be part of the cluster, because car repair somehow happens in every city, whether any dealer-authorized or after-market car parts are manufactured there or not.

However, the way auto manufacturers have chosen to manufacture their product in recent years does rely on modest transport costs from the various sub-manufacturers they have chosen to rely on. So auto manufacture is fundamental to this cluster.

In contrast to the do-if-yourself quick analysis for employment and income by industry, cluster analysis is a very sophisticated art requiring many educated judgments and extensive data collection that is beyond the capability of most individual communities.

Just be aware that the largest public regional organization or private business attraction organization may have commissioned such a study. If so, read it and take it to heart.


Target Industries and How They Impact You at the Community Level

Sometimes if a metro area performs a cluster analysis, they take the next logical step to enhance regional competitiveness, which is to formulate a policy to target certain industries over others. If you unearth a cluster analysis but no target industry statement or study, you can certainly draw your own conclusions.

Anything that builds on the existing clusters or emerging clusters usually is a better bet for regional competitiveness than an unrelated business.

Yes, some company is first in a region, but I'm just trying to increase your probability of long-run and medium-run success.

But--and it's a huge "but"--it's important to distinguish between simply "existing" clusters and those that seem to be growing or changing.

In fact, as the entire Rust Belt can tell you, relying on last century's regional competitiveness too much is a recipe for disaster. So make sure someone responsible for economic development is scanning constantly for new information about regional competitiveness trends.

In the late 1980s and early 1990s it was fashionable to chase technology-based industries everywhere and to try to create technopoles (communities or areas that were science-based, research-intensive, and geographically concentrated) to re-make regional competitiveness.

The problem is that everyone was using the same study from the Battelle Institute! The moral of the story is don't chase the same new remedy for regional competitiveness as everyone else is chasing.


Should You Follow Regional Economic Development Trends?

So this leads to a major statement:

The point of this entire page is to emphasize that your local economic development folks need to examine whether riding the coattails of your metropolitan trends and mega-regional tendencies (Rust Belt/Sun Belt) is a good idea.

Usually and historically, it's been the best idea, but the pace of change and technological innovation call that strategy into question. So take a sharp look at the outlook for the industries in which your region's economy is clustered.

If you don't like what you see, kick your entrepreneurship program into high gear. Unless...you truly are in a region that is "too far gone."

Only you can determine what that is. But if you decide as a community that your region is dragging you down further than you can stand, the next section is for you.


What to Do in a Regional Competitiveness Emergency

All right, you're in Detroit, or 50 miles from Detroit, and things aren't going well. You're in Braddock, Pennsylvania, and houses are $6,000, and your population is down from 20,000 to 3,000. (I admire that mayor for getting himself and his town out there, don't you?)

If you want to stay, you have to think out of the box at a whole new level. Emphasize your asset-based community development approach. What asset do you have? Abandoned steel mills? Start listing the fundamental characteristicss of those spaces. Do they have big enclosed spaces? Who needs big enclosed spaces? Do you have a huge empty parking lot? Who needs a large paved surface? Do you have a loyal blue collar workforce? What other workforce traits did their years on the job demonstrate or cultivate?

But it's going to be hard, very hard, to counteract bad trends in regional competitiveness. And you must have really superior levels of thinking if you're in an economic emergency community or one of the so-called shrinking cities.

Here's an idea. Invite the best and the brightest college students there for spring break next year. It's going to be a really big party.

You can have heated tents, free beer and barbecue, and free concerts. And during the day they're going to brainstorm, interview, collect information, draw, tweet and text constantly about your place, deconstruct old factories that are too far gone, and generally help you re-invent the place.

Invite artists too; they can take your visual environment to a whole new level, and they appreciate free food, drinking, and sleeping bags almost as much as college students.

Let's say, though, that you've done everything right, you have every kind of philanthropic and government assistance, you've promoted till you're blue in the face, you've consulted every expert and made your spreadsheets, and still it doesn't look pretty. There’s one more option.

Maybe you should relocate en masse. When I was young, about 20 people from my small town relocated together at the same time to an Arizona retirement community. They'd been friends for years, planned this move for a few of those years, and it eased the transition in a huge way.

Next I worked in Florida, and I noticed that one of the ways that younger couples found their way to Florida was that they came down to visit their parents in January, figured out that coats, boots, and heating cost a lot of money, and moved. I noticed that often not just one couple moved, but often the whole sibling group.

Also there's some experience with moving an entire community to get out of the floodplain, although that's slightly different because the motivation was something other than regional economics.

If you get up the nerve to look at your regional competitiveness situation beyond a superficial level, and there's nothing redeeming about the picture, have a community meeting to discuss where you could move to have your skills be marketable. The shock value of such a topic will create a buzz that's useful.

If you have the nerve to go through with this somewhat tongue-in-cheek exercise, I predict that it might lead to conversations such as:

• It's our skills that need upgrading; we can't move away from the problem, because the only thing we know how to do is make steel and we can't find another industry with a better future that uses those same skills.

(Or maybe you'll conclude that your culture doesn't exactly encourage change, innovation, and risk-taking. It doesn't attract young knowledge workers who can live anywhere they want. Study Richard Florida's work on the creative class.)

• We love this place so much we'll stay no matter what. We're retired, tied to family, or whatever, and we'll reinvent ourselves. Those of us who are young enough we still need to work can figure out how to make money on the Internet, start our own telemarketing firm, or become an entrepreneur in some other field that doesn't require specific geography.

• We really could move to another place where our skills would pay us well and where we could get a fresh start. We'll hook onto someone else's more positive regional competitiveness picture.

• We need to combine forces. Maybe 80 small towns of 200-2,000 population aren't viable in this part of the state, but if those of us who already have jobs in town moved together to just a few locations, suddenly we would have small micropolitan areas and form a new basis for regional competitiveness.

Historically cities create wealth, so form some small towns into a few larger towns. If you take more really small town folks along with you, the culture shock of a town of 10,000 or 100,000 won't be jolting.

America was founded on innovation and desperation. You can do this. Groups of struggling Rust Belt urban friends, get together and move to relatively prosperous Chicago. If you always wanted to live in a warmer city, plan a group move.

If you and some friends want to live in a small town, research which ones have an economic future, a friendly spirit, and a progressive government. Get a group together and move there.

If you live in prosperous places but want to be do good, by the way, move your clan to an area struggling for regional competitiveness that's not in the "emergency" category. Start some businesses that will bring in money from people outside the community.


A Final Thought on Regional Competitiveness

Remember that this page is about a hard-nosed look at what regional competitiveness is doing to your local community, and we want you to be a realist. If you've read this far, you're ready for that step.

The message at the community or neighborhood level is that you're hooked to your metropolitan or micropolitan area's economic bandwagon whether you want to be or not.

If you need a contrarian economic policy, you'll have to research and implement it with confidence, even if you seem out of step with your neighbors at the time.

At the same time, you'll need to try to convince the rest of your metropolitan area that regional competitiveness does matter, and that innovation-promoting networks and habits can be created.

For an excellent, deep, and understandable resource on regional competitiveness, see the Harvard Business School regional competitiveness materials developed by Michael Porter and colleagues.

That site explains more about promoting innovation, which is what leads to higher wage jobs in developed countries.

And of course, it's not all about financial returns. For an economic analysis method featuring what its owners call a social accounting matrix, see a now-commercial software and data package called IMPLAN.

Economic Development Topics:


> > Regional Competitiveness


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