Mayor Dan Horrigan and his team are rethinking the city’s strategy for economic development. No doubt they are weighing a variety of perspectives, assessing what to keep and where to proceed in new directions. One valuable viewpoint comes from the Brookings Institution in Washington. Mark Muro and colleagues at the Metropolitan Policy Program have revisited the landscape of advanced industries across the country, mapping strengths and weaknesses, providing insights for cities to chart a path forward.
What are advanced industries? Brookings identifies 50, 35 in manufacturing, three in energy and 12 in services. They include auto, medical devices, power generation, telecommunications and software. They share two traits. Research and development spending per worker ranks among the top 20 percent of industries, and the percentage of workers with a high level of STEM (science, technology, engineering and math) knowledge exceeds the national average.
Advanced industries employ 80 percent of the country’s engineers. They generate 81 percent of the country’s patents, an essential component to sustained prosperity. Brookings counts nine advanced industries in Akron, employing 47,000 people directly or indirectly.
What makes these industries so important? They help to address two problems with the economy, lagging productivity and deepening income inequality.
Brookings notes that since 1980, advanced industries have increased their productivity by 2.7 percent annually. For the rest of the economy, the rate has been 1.4 percent. That gap is significant because productivity drives wage increases.
Thus, it follows that advanced industries pay well. Brookings points out that in 2015, the average worker in the sector earned $95,000 in total compensation. That’s compared to $53,000 in other sectors. More, the pay premium extends to all education levels. A worker with an associate’s degree earns an average $58,000 a year, considerably above the $38,000 outside the sector.
Factor into the equation, too, that one-half of the work force in advanced industries lacks a college degree. So, here is an avenue of “inclusion,” or greater sharing in what has been reaped.
Brookings looked at the state of advanced industries from 2013 to 2015, a period that Mark Muro describes as something of a “new normal,” beyond the deep recession and stimulus package, the recovery steady but uninspired. The analysis finds a slowing of the sector, or more dependence on the strength of autos and high-tech services. (And now auto is showing signs of softening, as Muro indicates.)
Encouraging for Akron is that the past two years, its advanced industries picked up pace as a whole, among a minority of the top 100 metros to do so. The city ranked 23 in annual job growth (4.03 percent) in the sector. If the city’s output lags behind the national average, the 1.5 percent increase doubled the rate of the previous three years.
In many respects, the gains were predictable, auto parts, for instance, with double-digit increases in output and job growth. Muro highlights something less expected perhaps, a healthy surge (albeit from a small base in some cases) in high-tech services, the likes of data processing and hosting, internet publishing and computer systems design.
Computer systems design actually employs 2,770 people in Akron, and it reflects what Muro sees as the valuable “diffusion” of high-tech across the economy. He explains this isn’t the Google arena, the invention of the next, new, new things. Rather, it includes installing, maintaining and upgrading technology, manufacturers and others digitizing operations, tapping big data, machines converging with sensors and the internet.
Muro stresses that advanced industries are no economic cure-all. They do deserve priority and attention. They typically have long supply chains, reinforcing the concept of inclusion through a ripple effect of business and work. Brookings calculates the sector buys $236,000 in goods and services per worker from other businesses compared with $67,000 by others.
Brookings has provided metros with a picture of what they have with the idea that they will be stronger as the advanced industry sector becomes more dense and diverse. For its part, Akron has much upon which to build. It includes the recent arrival of Stark State College and the new Conexus project, linking businesses with workers who have the appropriate skills.
Hard to miss the important role of a University of Akron devoted to real quality and engagement. Did someone say biomaterials? For a mayor thinking about economic development, about enhancing what is here, there must be a focus on advancing advanced industries.
Douglas is the Beacon Journal editorial page editor. He can be reached at 330-996-3514 or emailed at email@example.com.