Today, a disturbing commonality unites our nation’s high-growth regional economies. African Americans, Latinos and many women are not benefitting from the prosperity created in these economies. This economic disconnect and the resulting economic imbalance has created two separate and different societies around race, class and gender.
One society (Society No. 1) is made up of the direct beneficiaries of the economic prosperity created within the regions. It comprises a select class of highly educated white males and a small subset of equally elite minorities. This group owns the vast majority of the high-growth companies and fills the good jobs they create. The successful, high-growth companies in these regions are creating new economic development (expensive housing, high-end retail, good public schools and fine dining) that benefit the members of this society.
The other, much larger society (Society No. 2) is mostly comprised of women, Latinos, African Americans and disconnected white people. Their connection to the good jobs and high-growth entrepreneurial opportunities in Society No. 1 is insignificant. The largest job growth for Society No. 2 members is in low-wage service sector industries. Very little economic development has occurred in most of these communities. In a few instances, economic development in Society No. 1 does spread to Society No. 2, but when it does, it is often inequitable and provides few tangible benefits for the members of the latter.
Our nation’s inability to connect and expand the impact of Society No. 1 to its disconnected counterpart must be addressed. Regional economies can’t be strong or sustainable if large segments of their populations are not fully integrated into these economies. Stakeholders in high-growth regions must create clusters of high- growth entrepreneurial companies that create an economic impact that is broad, inclusive and transformational.
The year 2045, when the United States will be majority Latino and African American, is fast approaching and high-growth regions are not prepared. The regions that are successfully transforming their economies have every right to pause and celebrate wins. However, celebrations should be proportional to the size of the victory and the self-congratulation in many high-growth regions seems unnecessarily large. Confetti can obscure a region’s ability to see opportunities and threats. The demographic challenges that all regions face dictate that we move forward with a clear mind.
Creating strong high-growth regional economies is expensive and requires financial support from many sources. Best-case scenario, this work takes several decades to show substantial progress. Even then, continuous collaboration and financial support is needed to keep those economies strong. The lion’s share of public support to regions (approximately $150 billion per year) comes from different federal agencies. They provide financial support for university research and technology transfer, workforce development, economic development organizations and federal research labs. Overall, this support has successfully supported growth in most of these regional economies.
Despite this success, public funding for this work has been cut recently. Innovation advocates have a difficult time making their case to elected officials and citizens. Large segments of the population don’t understand or feel a connection to the innovation economy. They’re questioning the rationale for this support and its return on investment to the public. They’re asking: How many jobs are being created? Who is getting those jobs? What economic development has occurred and where? Who benefits? If regions across the U.S. do not come up with better answers, innovation funding will continue to be cut. The best justification for public support is regional economies that benefit both societies. The diverse stakeholders that support innovation in their regions must make this happen.
We need ecosystems that spur clusters of high-growth companies that create tens of thousands of diverse good jobs, the way America Online (AOL) did. Though long past its prime, AOL at its peak (circa 2007) employed 10,000 people. Although it was a tech company, many of those good jobs (marketing, sales, administrative assistants, lawyers, accountants etc.…) didn’t require a STEM background. Moreover, it attracted other companies to the cluster and led Northern Virginia’s celebrated economic transformation.
While it’s unrealistic to expect that many jobs from most successful startups, high-growth regions need to focus on job creation. All high-growth regions can point to successful large job creators in their ecosystems and some have large clusters of these companies. However, we need more regional ecosystems that support the entrepreneurs who could create many jobs. Too many regions appear to be working feverishly to build regional ecosystems comprised of high-growth companies that will create only a handful of high-skill jobs. The successful regional economies of the future will be the ones that fully incorporate inclusion, equity and large job creation into their definition of success.
In 2045, how will regions fare in terms of good job creation and inclusion? Will we continue to see regions split into two societies that can be identified by their race, class, gender and/or the communities they live in? The ultimate answer to both questions will determine our nation’s global competitiveness.
The successful regional economies in 2045 will be the ones that recognized the importance of economic inclusion in 2015, pivoted and took bold action. Although there is no universal solution, history can inform the approach regions take to transform their economies. In the ‘80s, many regional economies were on life support. The regions that acted boldly to revive their economies are the ones that are most successful today. Examples include Boston, Pittsburgh, Nashville and Greenville, S.C. The 30-year approach that these regions used to transform their economies should inform the approach other regions need to take.
The successful regions correctly diagnosed their economic problems and understood the consequences of not solving them. Second, they developed new definitions for economic success. Third, these stakeholders understood that the problem was too complex to be solved by one sector. They formed a diverse and committed group of public/private partners. Fourth, those partners set bold goals, took strategic action to achieve those goals, constantly monitored their progress and made changes when necessary. Despite what at times seemed to be dim prospects for success, the partners in these regions stayed the course and ultimately transformed their economies.
Fortunately, there is hope. Regions can transform their economies in 30 years. We have 30 years until 2045, for all regions to transform their economies. Some regions are already organizing and working to create new economies that benefit both societies. Their definitions for success fully incorporate inclusion, equity and large job creation. No matter where your region is in this process, your economy must do the work necessary to transform. Failure is not an option. Our nation’s economic prosperity depends upon it.
William Generett Jr. is President and CEO of Urban Innovation21, an economic development agency in Pittsburgh, and a member of the National Advisory Council on Innovation and Entrepreneurship.