The Region 2000 Partnership and Region 2000 s Economy

Transcription

1 The Region 2000 Partnership and Region 2000 s Economy May 2010

2 Mangum Economic Consulting, LLC is a Richmond, Virginia based firm that specializes in producing objective economic, quantitative, and qualitative analysis in support of strategic decision making. Examples of typical studies include: Policy Analysis Identify the intended and, more importantly, unintended consequences of proposed legislation and other policy initiatives. Economic Impact Assessments and Return on Investment Analyses Measure the economic contribution that business, education, or other enterprises make to their localities. Workforce Information Project the demand for, and supply of, qualified workers. Cluster Analysis Use occupation and industry clusters to illuminate regional workforce and industry strengths and identify connections between the two. Environmental Scanning Assess the economic, demographic, and other factors likely to affect your enterprise in the future. Dr. Mangum earned his Ph.D. in economics at George Mason University in 1995, where he was fortunate enough to receive his training under Nobel Laureate James Buchanan and the team of colleagues Dr. Buchanan had recruited to the Center for Study of Public Choice. He has nearly two decades of experience in quantitative analysis and policy development at the federal and state level.

3 Executive Summary This report assesses the contributions that Virginia s Region 2000 Partnership makes to improve the regional economy of the greater Lynchburg area. The principle findings from that assessment are as follows: 1. Region 2000 s economy is evolving. Employment data from 2001 through 2009 show that Region 2000 is rebalancing its portfolio of industries and jobs away from an over-dependence on the Manufacturing sector and toward the high-wage/high-growth sectors Healthcare and Professional, Scientific, and Technical Services. This is an important trend that has not only had an immediate positive impact on Region 2000 s economy in terms of wage and employment growth, but is also better positioning it for future long-term economic growth, as evidenced by the region s demonstrably entrepreneurial business environment and rising standing in national indices such as the Best Performing Cities Index. 2. Region 2000 is planting the seeds that will guarantee it has the technologically-trained workforce it will require to continue to prosper in the future. The Region 2000 Partnership, through the efforts of the Region 2000 Technology Council s science, technology, engineering, and math (STEM) initiative, is working to ensure that high-wage/high-growth sectors such as Professional, Scientific, and Technical Services have the technologically-trained workforce that they will require to continue to successfully transition Region 2000 into the new economy. This report was commissioned by the Region 2000 Economic Development Council and produced by Mangum Economic Consulting, LLC. i

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5 Introduction This report assesses the contributions that Virginia s Region 2000 Partnership makes to improve the regional economy of the greater Lynchburg area. The Region 2000 Partnership is comprised of six member organizations: Center for Advanced Engineering and Research (CAER), which works to establish strategic partnerships between regional high-tech industries and major research and development centers to facilitate research projects, provide facilities, foster the commercialization of intellectual capital, and increase local technology education opportunities. Economic Development Council, which focuses on recruiting new businesses and industries to Region 2000, as well as providing support to existing firms within the region. Local Government Council, which promotes collaboration between the local governments that make up Region 2000, and provides a nexus for multijurisdictional long-range planning in areas such as telecommunications, transportation, waste disposal, and water treatment. Technology Council, which serves as an advocate for technology firms within Region 2000 and works to build the region s pipeline of future technology workers. Workforce Investment Board, which provides career training and job placement services to adults, dislocated workers, and youth. These services range from selfservice tools that assist individuals in making an effective job search to more intensive staff-assisted efforts in evaluation, training, and job placement. Young Professionals of Central Virginia, which works to attract and retain young professionals in Region 2000 by improving networking opportunities, encouraging civic involvement, and facilitating professional development. By leveraging their resources and efforts through the Partnership, these organizations seek to more effectively facilitate economic growth, enhance local government collaboration, and improve the overall quality of life within the communities that make up Region The remainder of this report is divided into six sections. The Background section provides context for the analyses that follow by illuminating key economic characteristics and trends within Region The Rebalancing the Portfolio section illuminates the 1

6 economic benefits that Region 2000 has derived from rebalancing its regional economic portfolio in recent years away from an overdependence on the Manufacturing sector and toward an increasing investment in high-wage/high-growth sectors, such as Professional, Scientific, and Technical Services. The Entrepreneurial Environment section evaluates certain characteristics of Region 2000 s entrepreneurial environment. The Best Performing Cities Index section drills down into a national index published by Milken Institute/Greenstreet Real Estate Partners to identify the specific performance characteristics that qualify Region 2000 as a best performing region. The Science, Technology, Engineering, and Math (STEM) section describes the initiatives that the Region 2000 Partnership has undertaken to ensure that the region is developing the technically-trained workforce it will need in the future and why that is important. Finally, the Conclusion section provides concluding comments. This report was commissioned by the Region 2000 Economic Development Council and produced by Mangum Economic Consulting, LLC. Background Region 2000 spans six localities: Amherst County, Appomattox County, Bedford County, Campbell County, the city of Bedford, and the city of Lynchburg. In this section, we set the stage for the analyses that follow by providing background information on some of the Region s key economic characteristics. Employment and Wage Trends Figure 1 details the change in total employment between 2001 and 2008 (the trough of the 2001 recession through the most recent year for which annual data are available) in Region 2000 (the Lynchburg metropolitan statistical area), as well as for other major regions within the state, specifically the Roanoke, Danville, Richmond, and Virginia Beach/Norfolk/Newport News metropolitan statistical areas. As this graph shows, total employment in Region 2000 demonstrated a modest gain over this period, increasing from 99,166 in 2001 to 103,511 in 2008, or 4.4 percent over the period as a whole. The employment increases for the other regions depicted were: 1) Roanoke MSA 0.6 percent, 2) Danville MSA minus 10.8 percent, 3) Richmond MSA 5.4 percent, and 4) Virginia Beach/Norfolk/Newport News 5.8 percent. 2

7 800, , , , , , , ,000 Lynchburg MSA Roanoke MSA Danville MSA Richmond MSA VA Beach/Norfolk/Newport News MSA Figure 1: Total Employment 2001 to $950 $900 $850 $800 $750 $700 $650 $600 Lynchburg MSA Roanoke MSA Danville MSA Richmond MSA VA Beach/Norfolk/Newport News MSA $550 $ Figure 2: Real Average Weekly Wages (2009 dollars) 2001 to Data Source: Virginia Employment Commission. 2 Data Source: Virginia Employment Commission. 3

8 Importantly, Region 2000 was the only one of the five regions to post an employment gain between 2007 and 2008 (an increase of 1,036 jobs). The employment changes for the other regions depicted were: 1) Roanoke MSA decrease of 1,326 jobs, 2) Danville MSA decrease of 189 jobs, 3) Richmond MSA decrease of 1,586 jobs, and 4) Virginia Beach/Norfolk/Newport News decrease of 3,249 jobs. Figure 2 depicts the change in real wages between 2001 and 2008 (all figures are depicted in constant 2008 dollars). Over this period, inflation adjusted wages in Region 2000 grew from an average of $673 per week in 2001 to $677 per week in 2008, for a real increase of 0.6 percent over the period as a whole. Real wage increases in the other four regions depicted were: 1) Roanoke MSA 0.5 percent, 2) Danville MSA minus 1.6 percent, 3) Richmond MSA 4.6 percent, and 4) Virginia Beach/Norfolk/Newport News 6.2 percent. Employment and Wages by Industry Figure 3 provides a snapshot of employment in Region 2000 by major industry sector in the third quarter of 2009 (the most recent period for which data are available), as compared to the third quarter of As this graph demonstrates, the largest absolute change in employment over the period occurred in the Manufacturing sector. Between 2001:Q3 and 2009:Q3, Region 2000 s Manufacturing sector shed 7,231 jobs, for a 32.7 percent decline in employment. That change drove Manufacturing from a 22.3 percent share of regional employment in 2001:Q3 to a 15.1 percent share in 2009:Q3. This shift is significant because, as shown in Figure 4, at an average weekly wage of $917, in the third quarter of 2009 the Manufacturing sector was Region 2000 s 5 th highest ranked sector in terms of relative wages. These losses were offset, however, by significant gains in Healthcare, Professional, Scientific, and Technical Services, Accommodation, Educational Services and Wholesale Trade. Specifically, between 2001:Q3 and 2009:Q3: The Healthcare sector posted the largest absolute increase in employment, growing by 3,364 jobs, or 27.2 percent (see Figure 3). As a result, its share of regional employment rose from 12.5 percent to 16.0 percent. In addition, real wages in this sector increased by 5.5 percent over the period, and at $711 per week, Healthcare ranked as Region 2000 s 11 th highest paying sector in 2009:Q3 (see Figure 4). The Professional, Scientific, and Technical Services sector saw the second largest absolute increase in employment, growing by 2,245 jobs, or 75.0 percent (see Figure 3). This drove its share of regional employment from 3.0 percent to 5.3 4

9 percent. This is a noteworthy trend because, not only did this sector enjoy significant employment growth over the period, it also posted the highest growth in real wages an increase of 32.2 percent (see Figure 4). Moreover, in 2009:Q3 the Professional and Technical Services sector was Region 2000 s highest paying sector, with average weekly wages of $1,104. The Accommodation and Food Service sector saw the third largest absolute increase in employment, growing by 1,203 jobs, or 18.5 percent (see Figure 3). This increased this sector s share of total regional jobs from 6.6 percent to 7.8 percent. However, real wages within this sector declined by 0.5 percent over the period and at an average weekly wage of $238, the Accommodation and Food Service was Region 2000 s 20 th, or lowest paying sector in 2009:Q3 (see Figure 4). The Educational Services sector saw the fourth largest absolute increase in employment, growing by 962 jobs, or 12.1percent (see Figure 3). This raised its share of regional employment from 8.0 percent to 9.0 percent. In addition, real wages in this sector grew by 3.0 percent over the period and at $632 per week, Educational Services ranked as Region 2000 s 13 th highest paying sector in 2009:Q3 (see Figure 4). The Wholesale Trade sector saw the fifth largest absolute increase in employment, growing by 882 jobs, or 31.2 percent (see Figure 3). This raised its share of regional employment from 2.8 percent to 3.8 percent. Moreover, this sector experienced the second largest increase in real wages 22.5 percent and at $939 ranked as Region 2000 s 3 rd highest paying sector in 2009:Q3 (see Figure 4). Taken in combination what these data show is that, between 2001:Q3 and 2009:Q3 Region 2000 made significant strides toward rebalancing its regional economic portfolio by reducing its overdependence on the Manufacturing sector and increasing its proportion of jobs that were in high-wage/high-growth sectors, such as Healthcare, Professional, Scientific, and Technical Services, and Wholesale Trade. 5

10 Agriculture Mining Utilities Const. 6,580 7,609 Manuf. 14,901 22,132 Wholesale Trade 3,706 2,824 Retail Trade 12,198 13,502 Trans. & Warehousing Information Finance & Ins. Real Estate Prof. Tech. Serv. Mgmt. Of Comp. Admin & Waste erv. 2,674 3,024 1,214 1,318 3,103 3,429 1, ,240 2,995 1,919 1,512 5,191 5, :Q3 2001:Q3 Educ. Serv. 8,883 7,921 Healthcare 15,729 12,365 Arts, Ent., & Rec. 1,431 1,341 Accom. & Food Serv. 7,720 6,517 Other Serv. Public Admin. 2,888 3,192 3,166 2, ,000 10,000 15,000 20,000 25,000 Figure 3: 2000:Q3 and 2009:Q3 Employment by Major Industry Category Region Data Source: Virginia Employment Commission. 6

11 Agriculture $514 $548 Mining Utilities Const. Manuf. $714 $663 $630 $855 $1,029 $952 $917 $943 Wholesale Trade $767 $939 Retail Trade $395 $449 Trans. & Warehousing Information $721 $723 $750 $746 Finance & Ins. $922 $ :Q3 Real Estate $489 $457 Prof. Tech. Serv. Mgmt. Of Comp. $835 $803 $906 $1, :Q3 Admin & Waste erv. $341 $362 Educ. Serv. Healthcare $632 $613 $711 $674 Arts, Ent., & Rec. Accom. & Food Serv. Other Serv. $293 $317 $238 $239 $435 $403 Public Admin. $745 $728 $0 $200 $400 $600 $800 $1,000 $1,200 Figure 4: 2000:Q3 and 2009:Q3 Real Wages by Major Industry Category (2009 dollars) Region Data Source: Virginia Employment Commission. 7

12 As discussed earlier, in 2001:Q3 Manufacturing comprised 22.3 percent of Region 2000 s total employment. In comparison, at the statewide level at that time Manufacturing accounted for only 10.1 percent of total employment. This means that Region 2000 was more than twice as dependent on the Manufacturing sector than was typical for the state as a whole. That overdependence had/has significant implications since, although Manufacturing remains a high-wage sector, it is not a high-growth sector. As detailed above, between 2001:Q3 and 2009:Q3 Manufacturing employment in Region 2000 declined by 32.7 percent, and looking forward it is projected to decline further between 2006 and In contrast, three out of the five largest growth sectors in Region 2000 between 2001:Q3 and 2009:Q3 Healthcare, Professional, Scientific, and Technical Services, and Wholesale Trade are high-wage/high-growth sectors. The Healthcare sector, which posted the largest employment gain between 2001:Q3 and 2009:Q3, pays weekly wages that are above the regional average and is projected to grow by 31.1 percent between 2006 and The Professional, Scientific, and Technical Services sector, which posted the second largest employment gain over the period, pays the highest weekly wage within the region and is projected to grow by 34.0 percent between 2006 and The Wholesale Trade sector, which posted the fifth largest employment gain over the period, pays the third highest weekly wage within the region and is projected to grow by 8.7 percent between 2006 and Unemployment Figures 5 and 6 provide information on unemployment rates for Region 2000 (the Lynchburg MSA), as well as the other major regions used earlier. Figure 5 depicts annual unemployment rates for the period 1991 through 2008 (the trough of the recession through the most recent year for which annual data are available). As these data show, like other regions within the state, Region 2000 was negatively impacted by the , 2001, and 2008 recessions, with unemployment spiking in 1992, 2002, and again in It is of interest to note, however, that where Region 2000 s unemployment rate was exceeded only by the Danville MSA during the and 5 Data Source: Virginia Employment Commission, 6 Unemployment often lags economic recovery as firms initially are reluctant to hire additional full-time workers and instead increase overtime hours or hire part-time workers. 8

13 2001 recessions, 7 in the recession of 2008 its unemployment rate fell more in line with those of the Roanoke, Richmond, and Virginia Beach/Norfolk/Newport News MSAs. 8 12% 10% 8% 6% Lynchburg MSA Roanoke MSA Danville MSA 4% 2% 0% Figure 5: Unemployment Rate 1991 to Richmond MSA VA Beach/Norfolk/Newport News MSA Figure 6 focuses on more recent monthly data covering the period from January 2008 through January The most salient aspect of these data is the extent to which all the regions depicted have experienced noteworthy increases in their unemployment rates since October of Again, in contrast to the 2001 downturn however, Region 2000 s (the Lynchburg MSA s) unemployment rates have remained consistent with those of the Roanoke, Richmond, and Virginia Beach/Norfolk/Newport News MSAs. 7 In 1991, Region 2000 s average unemployment rate was 6.0 percent, as compared to 5.9 percent in the Roanoke MSA, 11.4 percent in the Danville MSA, 5.8 percent in the Richmond MSA, and 5.5 percent in the Virginia Beach/Norfolk/Newport News MSA. In 2002, Region 2000 s average unemployment rate was 5.4 percent, as compared to 4.2 percent in the Roanoke MSA, 7.7 percent in the Danville MSA, 4.2 percent in the Richmond MSA, and 4.9 percent in the Virginia Beach/Norfolk/Newport News MSA. 8 In 2008, Region 2000 s average unemployment rate was 4.2 percent, as compared to 4.0 percent in the Roanoke MSA, 8.0 percent in the Danville MSA, 4.3 percent in the Richmond MSA, and 4.2 percent in the Virginia Beach/Norfolk/Newport News MSA. 9 Data Source: Virginia Employment Commission. 9

14 16% 14% 12% 10% 8% 6% 4% Lynchburg MSA Roanoke MSA Danville MSA Richmond MSA VA Beach/Norfolk/Newport News MSA 2% 0% Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Figure 6: Unemployment Rate January 2008 to January Rebalancing the Portfolio The most striking economic characteristic presented in the previous section has to do with the significant gains that Region 2000 has made in recent years in rebalancing its regional economic portfolio away from an overdependence on the Manufacturing sector and toward an increasing investment in high-wage/high-growth sectors, particularly Professional, Scientific, and Technical Services. As we will demonstrate in this section, this is an important trend and one that has not only had an immediate positive impact on Region 2000 s economy, but is also better positioning the region for future long-term economic growth. Figure 7 compares changes in Region 2000 s (the Lynchburg MSA s) dependence on the Manufacturing sector between 2001:Q3 and 2009:Q3, to similar shifts in the other four regions. What these data show is that, although all five regions became less dependent on Manufacturing over the period, by far the largest shifts occurred in Region 2000 and the Danville MSA. The difference between the two, however, is that where total employment in Region 2000 remained fairly level between 2001:Q3 and 2009:Q3, total 10 Data Source: Virginia Employment Commission. 10

15 employment in the Danville MSA actually declined by 15.2 percent. As a result, where the shift away from Manufacturing employment in Region 2000 can fairly be construed as a rebalancing toward other industry sectors, in the Danville MSA it constituted an actual loss of regional employment. Lynchburg MSA 15.1% 22.3% Roanoke MSA 10.1% 14.1% Danville MSA 17.8% 31.8% 2009:Q3 2001:Q3 Richmond MSA 5.8% 9.2% VA Beach/Norfolk/Newport News MSA 8.7% 10.1% 0% 5% 10% 15% 20% 25% 30% 35% Figure 7: Percentage of Total Employment in Manufacturing 2001:Q3 to 2009:Q3 11 Figure 8 provides similar information for changes in each region s dependence on the Professional and Technical Services sector over the 2001:Q3 to 2009:Q3 period. As this chart clearly indicates, over this period Region 2000 (the Lynchburg MSA) experienced the largest shift in this sector of any of the five regions. Between 2001:Q3 to 2009:Q3, the proportion of Region 2000 s total employment base comprised of Professional and Technical Services nearly doubled, going from 3.0 percent to 5.3 percent. This raised Region 2000 from next to last (4 th ) among the five regions in terms of its investment in Professional and Technical Services in 2001:Q3 to next to first (2 nd ) in 2009:Q3. 11 Data Source: Virginia Employment Commission. 11

16 Lynchburg MSA 3.0% 5.3% Roanoke MSA 4.8% 4.7% Danville MSA 1.3% 1.9% 2009:Q3 2001:Q3 Richmond MSA 4.8% 4.7% VA Beach/Norfolk/Newport News MSA 6.0% 7.1% 0% 1% 2% 3% 4% 5% 6% 7% 8% Figure 8: Percentage of Total Employment in Professional and Technical Services 2001:Q3 to 2009:Q3 12 This rebalancing away from an overdependence on Manufacturing and toward increased investment in Professional, Scientific, and Technical Services has had several immediate positive effects on Region 2000 s economy. The first of these pertains to employment and wage growth. As shown in the previous section, between 2001:Q3 and 2009:Q3 employment in Manufacturing declined by 7,231 jobs or 32.7 percent in Region In contrast, employment in Professional, Scientific, and Technical Services increased by 2,245 jobs or 75.0 percent. With regard to real wages, between 2001:Q3 and 2009:Q3 inflation adjusted average weekly wages in Manufacturing declined by $26 or 2.7 percent. This dropped Manufacturing from the region s 2 nd highest paying industry sector in 2001:Q3 to its 5 th highest paying sector in 2009:Q3. In Professional, Scientific, and Technical Services, however, inflation adjusted average weekly wages increased by $269 or 32.3 percent over the period. Thereby raising Professional, Scientific, and Technical Services from the region s 6 th highest paying industry sector in 2001:Q3 to its 1 st highest paying sector in 2009:Q3. Another positive effect of Region 2000 s shift from Manufacturing to Professional, Scientific, and Technical Services is hinted at in the data from the previous section, but deserves a more detailed look. Recall that, where Region 2000 s unemployment rate was 12 Data Source: Virginia Employment Commission. 12

17 exceeded only by the Danville MSA during the and 2001 recessions, in the current recession its unemployment rate has trended more closely with those of the Roanoke, Richmond, and Virginia Beach/Norfolk/Newport News MSAs. There is a reason for this and it has to do with the region s decreased dependence on the Manufacturing sector. In the third quarter of 2009, on average there were 3,090 individuals who claimed unemployment insurance benefits each month in Region Out of that number, the Virginia Employment Commission collected data from 1,370 on the industry sector in which the individual was previously employed. Table 1 provides detail on those data. 13 What this information shows is that, far more claimants came out of the Manufacturing sector 39.2 percent than any other industry sector. And this number becomes even more significant when one recalls that Manufacturing accounted for only 15.1 percent of Region 2000 s total employment in 2009:Q3. Given this disproportionate impact of Manufacturing on unemployment, an interesting question then becomes what would Region 2000 s number of unemployment claimants have been in 2009:Q3 if it had not rebalanced its industrial portfolio from 22.3 percent Manufacturing employment in 2001:Q3 to 15.1 percent in 2009:Q3? And by using the unemployment insurance claimant data in Table 1, along with industry employment data from 2001:Q3 and 2009:Q3, we are able to provide an estimate of that number. What that calculation shows is that, all else equal, had Region 2000 remained as dependent on the Manufacturing sector as it was in 2001:Q3, its number of unemployment claimants would have been 19.3 percent higher in 2009:Q3. That would have driven Region 2000 s unemployment rate from the 7.2 percent that it actually experienced in 2009:Q3 to 8.6 percent. In short, by rebalancing its industrial portfolio away from an overdependence on Manufacturing and toward increased investment in high growth/high wage sectors such as Professional, Scientific, and Technical Services, Region 2000 appears to have decreased its economic vulnerability in times of economic downturn. 13 Data Source: Virginia Employment Commission. 13

18 Table 1: Region 2000 Average Monthly Unemployment Insurance Claimants 2009:Q3 14 Industry Sector Unemployment Insurance Claimants as % of total Agriculture, Forestry, Fishing & Hunting 6 0.5% Mining 5 0.3% Utilities 2 0.1% Construction % Manufacturing % Wholesale Trade % Retail Trade % Transportation and Warehousing % Information % Finance and Insurance % Real Estate and Rental and Leasing 7 0.5% Professional and Technical Services % Management of Companies and Enterprises 1 0.1% Administrative and Waste Services % Educational Services % Health Care and Social Assistance % Arts, Entertainment, and Recreation 3 0.2% Accommodation and Food Services % Other Services, Ex. Public Admin % Public Administration 4 0.3% TOTAL 1, % Finally, by rebalancing its regional economic portfolio, Region 2000 is also better positioning itself for future long-term economic growth. According to the Virginia Employment Commission s current official industry employment projection, employment in the Manufacturing sector is expected to decline by 7.9 percent in Region 2000 between 2006 and 2016, and 6.9 percent statewide. In contrast, employment in the Healthcare sector is projected to increase by 31.1 percent in Region 2000 between 2006 and 2016 (and 31.2 percent statewide), and employment in the Professional, Scientific, and Technical Services sector is projected to increase by 34.0 percent in Region 2000 between 2006 and 2016 (and 42.2 percent statewide.) 14 Data Source: Virginia Employment Commission. 14

19 Entrepreneurial Environment Two metrics that analysts often look at in assessing the degree to which a region exhibits an entrepreneurial environment are: 1) the percentage of small businesses (less than 50 employees) in the regional economy, and 2) the proportion of new startup businesses. Region 2000 scores very highly on both of these metrics. Because small businesses tend to be more innovative, a greater incidence of these firms is typically considered indicative of an entrepreneurial environment. 15 Figure 9 depicts small businesses employment in Region 2000 as a percentage of total regional employment in 2009:Q3, as well as for other major regions within the state. What this graph shows is that, at 42.1 percent, Region 2000 boasted a larger percentage of employment in small businesses than all but one of the comparator regions depicted. 50% 45.8% 45% 40% 42.1% 40.8% 38.9% 37.7% 35% 30% 25% 20% Lynchburg MSA Roanoke MSA Danville MSA Richmond MSA VA Beach, Norfolk, Newport News MSA Figure 9: Small Businesses Employment as a percentage of total Regional Employment (2009:Q3) A small business is defined as an establishment with fewer than 50 employees. 16 Data Source: Virginia Employment Commission. 15

20 Another generally recognized indicator of an entrepreneurial environment is the number of new businesses that a region produces. Region 2000 does well on this metric as well. Figure 10 displays new business startups in 2008 as a percentage of total business establishments for Region 2000 and other major regions within the state. What this graph shows is that approximately 4.2 percent of all business establishments in Region 2000 in 2008 were new startups. Again, this figure is higher than all but one of the comparator regions depicted. 5% 4.7% 4.2% 4% 3.7% 3.9% 3.3% 3% 2% Lynchburg MSA Roanoke MSA Danville MSA Richmond MSA VA Beach, Norfolk, Newport News MSA Figure 10: Startups as a Percentage of total Business Establishments in In combination, the data depicted in Figures 9 and 10 indicate that Region 2000 provides an environment that generally encourages entrepreneurial initiative. As will be more fully discussed in the next section, this finding is further supported by a recent study from the Milken Institute and Greenstreet Partners that ranked Lynchburg as the 60 st best performing large metropolitan city in the United States in Data Source: Virginia Employment Commission. 18 Data Source: Ross C. Devol, Armen Bedroussian, Kevin Klowden, and Candice Flor Hynek, Milken Institute and Greenstreet Partners, Best Performing Cities 2009: Where America s Jobs are Created and Sustained, November

21 Best Performing Cities Index The Milken Institute and Greenstreet Real Estate Partners annually publish a ranking of the best performing metropolitan areas in the United States called the Best Performing Cities Index. The stated purpose of the index is, to provide an objective scorecard [of] the economic vibrancy of metropolitan areas (metros) across the nation. 19 In 2009, the Lynchburg MSA (which is geographically equivalent to Region 2000) ranked 60 th among all large metros in the United States. Table 2 provides additional detail on the specific performance measures that comprise the Best Performing Cities Index and how Region 2000 scored on those measures relative to selected other large metropolitan areas in Virginia. What these data show is that, overall Region 2000 was ranked higher than either Roanoke, Richmond, and Virginia Beach- Norfolk-Newport News in both 2009 and In addition, Region 2000 s ranking has climbed steadily, rising from 110 th in 2007, to 71 st in 2008, and 60 th in 2009, a jump of 50 slots over the period as a whole. Also, looking at the specific measures that comprise the Best Performing Cities Index, it is interesting to note that in 2009 Region 2000 ranked: 1) 33 rd among all large metros in the United States with regard to job growth between 2007 and 2008, and 2) 13 th among all large metros in the United States with regard to job growth between March of 2008 and March of Table 2: Best Performing Cities Index for Overall 2009 Ranking Overall 2008 Ranking Overall 2007 Ranking Lynchburg, MSA Roanoke, MSA Richmond, MSA VA Beach, Norfolk, Newport News, MSA Ross C. DeVol, p Data for the Danville MSA are not provided in Best Performing Cities in 2009 report. 21 Data Source: Ross C. Devol, Armen Bedroussian, Kevin Klowden, and Candice Flor Hynek, Milken Institute and Greenstreet Partners, Best Performing Cities 2009: Where America s Jobs are Created and Sustained, November

22 Table 2: Best Performing Cities Index for 2009 (continued) 22 Lynchburg, MSA Roanoke, MSA Richmond, MSA VA Beach, Norfolk, Newport News, MSA 5-yr job growth Rank yr job growth Rank yr wages & salaries growth Rank yr wages & salaries growth Rank Job growth (Mar 08 to Mar -0.26% -1.69% -3.61% -0.84% 09) 27 Rank Data Source: Ross C. Devol, Armen Bedroussian, Kevin Klowden, and Candice Flor Hynek, Milken Institute and Greenstreet Partners, Best Performing Cities 2009: Where America s Jobs are Created and Sustained, November Metropolitan area job growth relative to the United States average between 2003 and U.S. average = Metropolitan area job growth relative to the United States average between 2007 and U.S. average = Salary and Wage growth relative to the United States average between 2002 and U.S. average = Salary and Wage growth relative to the United States average between 2006 and U.S. average = Percentage job growth/decline between March 2008 and March

23 Table 2: Best Performing Cities Index for 2009 (continued) 28 Lynchburg, MSA Roanoke, MSA Richmond, MSA VA Beach, Norfolk, Newport News, MSA 5-yr relative High-Tech GDP growth Rank yr relative High-Tech GDP growth Rank High-Tech GDP Location Quotient in Rank Number of High- Tech GDP Location Quotients over one in Rank Data Source: Ross C. Devol, Armen Bedroussian, Kevin Klowden, and Candice Flor Hynek, Milken Institute and Greenstreet Partners, Best Performing Cities 2009: Where America s Jobs are Created and Sustained, November High tech sector output growth relative to the United States average between 2003 and U.S. average = High tech sector output growth relative to the United States average between 2007 and U.S. average = Combined Metropolitan area high tech location quotient during Location Quotient (LQ) is a measure of high tech concentration. A metro with an LQ higher than 1.0 is said to be more concentrated than the United States and vice versa (U.S. = 1.0). 32 Measures the number of high technology industries with a location quotient (LQ) that is greater than the U.S. average. 19

24 Science, Technology, Engineering, and Math (STEM) One of the many ways in which the Region 2000 Partnership is working to fuel the longterm growth of high wage/high growth sectors such as Professional, Scientific, and Technical Services is by taking steps to ensure that the region is developing the technically-trained workforce that those sectors demand through enhanced programs in science, technology, engineering, and math (STEM) education. The Region 2000 Technology Council s STEM initiative has taken the lead in that effort. Among the programs that the Region 2000 Technology Council has developed to raise the profile of STEM education among the region s K-12 students are: Lego League a global robotics competition for 9 to 14 year olds, Vex Robotics a robotics competition for high school students, Technology Fair a technology competition event held each May at Central Virginia Community College, Summer Middle School Academies a program of week-long technology camps for middle-school students, Get Set a regional technology magazine for the region s 8 th and 9 th graders, Discovery Challenge Science Fair an annual May science fair for 5 th through 8 th graders that is affiliated with the Discovery Channel s Young Scientist Challenge, Future Focus Career EXPO an annual October event that brings together students and industry representatives in a trade show environment, Partners in Education a partnership with the Lynchburg City School s Computer Systems Technology Program, Tech Prep Career Pathways a consortium of industry representatives and educators that provides local students with technology oriented educational opportunities, and Customized Training Classes a partnership with Central Virginia Community College that provides customized technology training classes to local companies. There is a growing concern that the U.S. is not preparing enough students in the areas of science, technology, engineering, and math to remain competitive in the global economy. That concern is fueled by a number of international benchmark studies that show the U.S. falling behind other nations. According to the International Association for the Evaluation of Educational Achievement s 2003 Trends in International Mathematics and Science Study (TIMSS), U.S. 8 th and 12 th graders ranked below their international counterparts in math and science abilities. In addition, the Organization of Economic 20

25 Cooperation and Development s more broadly targeted 2003 Programme for International Student Assessment (PISA), ranked the U.S. 25 th out of 30 participating countries in the STEM abilities of its 15 year olds. These findings have led a variety of organizations, such as the American Electronics Association, 33 National Academy of Sciences, 34 National Governors Association, 35 National Science Board, 36 and President s Council of Advisors on Science and Technology, 37 to issue calls for a greater national focus on education in science, technology, engineering, and math. But, what does STEM education mean to Region 2000 specifically and why is it important? One way to answer that question is to identify those jobs within Region 2000 that require training in science, technology, engineering, or mathematics and the types of industries that depend heavily upon those jobs. To accomplish that task, we first use a crosswalk developed by the National Crosswalk Service Center to map occupations into the prerequisite education and training program(s) necessary for entry into that occupation. 38 Through that process, we are able to identify those occupations that are associated with a STEM-related instructional program. 39 Table 3 details the results of that analysis. Overall, 43 STEM occupations were identified using this method. 33 American Electronics Association, We are Still Losing the Competitive Advantage. Now is the Time to Act, March National Academy of Sciences, National Academy of Engineering and Institute of Medicine of the National Academies, Rising Above the Gathering Storm: Energizing and Employing America to a Brighter Economic Future, October National Governors Association, Innovation America: Building a Science, Technology, Engineering and Math Agenda, The National Science Board, America s Pressing Challenge - Building a Stronger Foundation; A Companion to Science and Engineering Indicators, 2006, and The National Science Board, A National Action Plan for Addressing the Critical Needs of the U.S. Science, Technology, Engineering, and Mathematics Education System, October 30, President s Council of Advisors on Science and Technology, Sustaining the Nation s Innovation Ecosystem: Maintaining the Strength of Our Science and Engineering Capabilities, March The National Crosswalk Service Center (NCSC) is funded by the U.S. Department of Labor, Employment and Training Administration. The specific NCSC crosswalk used in this analysis is the 2000 Standard Occupational Classification Crosswalk to 2000 Classification of Instructional Programs. This crosswalk identifies the prerequisite instructional programs (classified according to the National Center for Educational Statistics 2000 Classification of Instructional Program, or CIP, code) necessary for employment in 1,364 specific occupations (classified according to the Bureau of Labor Statistics 2000 Standard Occupational Classification, or SOC, code). Often, these are many-to-many relationships where a given instructional program can serve as an avenue into one of many jobs, or one of several instructional programs can serve as a prerequisite for a given job. 39 Specifically, we identify those occupations that require a degree in any of the following instructional programs: 1) Computer and Information Sciences and Support Services (CIP 11), 2) Engineering (CIP 14), 3) Engineering Technology/Technicians (CIP 15), 4) Biological and Biomedical Science (CIP 26), 5) Mathematics and Statistics (CIP 27), 6) Physical Sciences (CIP 40), or 7) Science Technologies/Technicians (CIP 41). 21

26 Table 3: Occupations Associated with a STEM-Related Instructional Program Occupation Computer and Information Systems Managers Computer Programmers Computer Software Engineers, Applications Computer Software Engineers, Systems Software Computer Support Specialists Computer Systems Analysts Database Administrators Network and Computer Systems Administrators Network Systems and Data Communications Analysts Computer Science Teachers, Postsecondary Graphic Designers Computer Operators Data Entry Keyers Word Processors and Typists Engineering Managers Cost Estimators Operations Research Analysts Civil Engineers Electrical Engineers Electronics Engineers, Except Computer Environmental Engineers Health and Safety Engineers, Except Mining Safety Engineers and Inspectors Industrial Engineers Construction Managers Cartographers and Photogrammetrists Associated STEM-Related Instructional Program Computer and Information Sciences, General Computer Programming, Specific Applications Information Technology Information Technology Data Processing and Data Processing Technology/Technician Web/Multimedia Management and Webmaster Computer and Information Sciences, General System, Networking, and LAN/WAN Management/Manager Computer Systems Networking and Telecommunications Computer Science Web Page, Digital/Multimedia and Information Resources Design Data Processing and Data Processing Technology/Technician Data Entry/Microcomputer Applications, General Word Processing Chemical Engineering Mechanical Engineering Operations Research Civil Engineering, Other Electrical, Electronics and Communications Engineering Electrical, Electronics and Communications Engineering Environmental/Environmental Health Engineering Environmental/Environmental Health Engineering Industrial Engineering Construction Engineering Technology/Technician Surveying Technology/Surveying 22

27 Table 3: Occupations Associated with a STEM-Related Instructional Program (continued) Surveyors Occupation Architectural and Civil Drafters Electrical and Electronics Drafters Mechanical Drafters Electrical and Electronic Engineering Technicians Industrial Engineering Technicians Mechanical Engineering Technicians Engineering Technicians, Except Drafters, All Other Surveying and Mapping Technicians Occupational Health and Safety Specialists Automotive Service Technicians and Mechanics Heating, Air Conditioning, and Refrigeration Mechanics and Installers Water and Liquid Waste Treatment Plant and System Operators Inspectors, Testers, Sorters, Samplers, and Weighers Biological Science Teachers, Postsecondary Mathematical Science Teachers, Postsecondary Chemistry Teachers, Postsecondary Chemical Technicians Associated STEM-Related Instructional Program Surveying Technology/Surveying Civil Drafting and Civil Engineering CAD/CADD Electrical/Electronics Drafting and Electrical/Electronics CAD/CADD Mechanical Drafting and Mechanical Drafting CAD/CADD Electrical, Electronic and Communications Engineering Technology/Technician Industrial Production Technologies/Technicians, Other Mechanical Engineering/Mechanical Technology/Technician Mining Technology/Technician Surveying Technology/Surveying Quality Control and Safety Technologies/Technicians, Other Automotive Engineering Technology/Technician Solar Energy Technology/Technician Water Quality and Wastewater Treatment Management and Recycling Technology/Technician Quality Control Technology/Technician Biological and Biomedical Sciences, Other Mathematics, General Analytical Chemistry Chemical Technology/Technician 23

28 Figures 11 through 13 provide some additional background on the characteristics of these STEM occupations. Figure 11 uses Region 2000 specific data from the Virginia Employment Commission to compare the average annual salary for these occupations in 2008 to the average annual salary for all occupations in Region 2000 that year. As this chart shows, the average annual salary for the STEM occupations listed in Table 3 was significantly higher $54,334 per year as opposed to $34,530. $60,000 $54,334 $50,000 $40,000 $34,530 $30,000 $20,000 $10,000 $0 STEM Occupations All Occupations Figure 11: 2008 Average Annual Salary Region In a similar fashion, Figure 12 uses the Virginia Employment Commission s current 2006 to 2016 occupational employment projection for Region 2000 to compare the average projected growth for the STEM occupations listed in Table 3 to the average projected growth for all occupations in Region Here again, the STEM occupations perform much better. As shown in this chart, where the average growth across all occupations in Region 2000 is projected to be 11.4 percent, the average growth for the STEM occupations is projected to be 13.2 percent. 40 Data Source: Virginia Employment Commission. 24

29 14% 13.3% 12% 11.4% 10% 8% 6% 4% 2% 0% STEM Occupations All Occupations Figure 12: 2006 to 2016 Projected Occupational Employment Growth Region Finally, Figure 13 employs data from the U.S. Bureau of Labor Statistics on the average degree level required for specific occupations, in combination with the Virginia Employment Commission s 2006 to 2016 occupational employment projection for Region 2000, to compare the proportion of STEM jobs that are likely to require a baccalaureate (BA) degree or above to the proportion of all jobs that are likely to require a BA degree or above. As this chart shows, STEM occupations generally have much higher educational requirements. Where on average 40.2 percent of estimated STEM jobs in Region 2000 required a BA degree or above in 2006, only 14.2 percent of all jobs did. And looking forward to 2016, on average 42.9 percent of projected STEM jobs will require a BA degree or above, where only 15.5 percent of all jobs will. 41 Data Source: Virginia Employment Commission. 25

30 50% 45% 40% 40.2% 42.9% 35% 30% 25% 20% 15% 14.2% 15.5% % 5% 0% STEM Occupations All Occupations Figure 13: Percentage of Region 2000 Jobs requiring a Baccalaureate Degree or above 2006 to In the next step of the analysis, we use a Virginia-specific staffing matrix developed by the Virginia Employment Commission to map the identified STEM occupations into the industries that employ those occupations. Table 4 provides the results of that analysis. Specifically, it ranks the top 10 industries within Region 2000 in terms of the proportion of individuals that those industries employ in STEM related jobs. In addition, it also provides information on the average 2008 weekly wage and projected 2006 to 2016 employment growth for those industries. 43 What these data show is that a significant number of the top 10 industries in terms of STEM-related employment fall within the Professional, Scientific, and Technical Services sector (i.e., Computer Systems Design and Related Services; Architectural, Engineering, and Related Services; and Management, Scientific, and Technical Consulting Services), and the Manufacturing sector (i.e., Computer and Electronic Product Manufacturing; and Chemical Manufacturing). 42 Data Source: Virginia Employment Commission. 43 Data Source: Virginia Employment Commission. 26

31 Table 4: Top 10 Industries in Region 2000 in terms of Employment in STEM-Related Occupations Industry Computer Systems Design and Related Services Architectural, Engineering, and Related Services Computer and Electronic Product Manufacturing Management, Scientific, and Technical Consulting Services % of Industry Employment in STEM Occupations Average Weekly Wage in 2008 Projected 2006 to 2016 change in Employment 64.1% $1, % 50.3% $1, % 26.7% $ % 24.9% $1, % Repair and Maintenance 24.7% $ % Telecommunications 24.3% $1, % Motor Vehicle and Parts Dealers 17.8% $ % Chemical Manufacturing 14.8% $ % Management of Companies and Enterprises 13.9% $ % Utilities 10.8% $1, % Another thing that these data reveal is that these industries tend to be high wage/high growth. Where in 2008, the average weekly wage across all industries in Region 2000 was $677, among these 10 top STEM industries the average weekly wage was $981 (see Figure 14). 27

32 $1,200 $1,000 $981 $800 $677 $600 $400 $200 $0 Top 10 STEM Industries All Industries Figure 14: 2008 Average Weekly Wage Region In addition, where overall in Region 2000 industry employment is projected to grow by 11.4 percent between 2006 and 2016, among these 10 top STEM industries average projected employment growth is projected to be 20.9 percent (see Figure 15). 44 Data Source: Virginia Employment Commission. 28

33 25% 20% 20.9% 15% 11.4% 10% 5% 0% Top 10 STEM Industries All Industries Figure 15: 2006 to 2016 Projected Occupational Employment Growth Region Conclusion The Region 2000 Partnership serves the greater Lynchburg metropolitan area and is comprised of six member organizations, the: 1) Center for Advanced Engineering and Research (CAER), 2) Economic Development Council, 3) Local Government Council, 4) Technology Council, 5) Workforce Investment Board, and 6) Young Professionals of Central Virginia. Employment data from 2001 through 2009 show that Region 2000 is rebalancing its portfolio of industries and jobs away from an over-dependence on the Manufacturing sector and toward the high-wage/high-growth sectors Healthcare and Professional, Scientific, and Technical Services. This s an important trend that has not only had an immediate positive impact on the region s economy in terms of wage and employment growth, but is also better positioning it for future long-term economic growth, as evidenced by Region 2000 s demonstrably entrepreneurial business environment and rising standing in national indices such as the Best Performing Cities Index. In addition, based on unemployment data from the current recession, this rebalancing of the region s industrial portfolio appears to have also decreased its economic vulnerability in times of economic downturn. 45 Data Source: Virginia Employment Commission. 29

34 The Region 2000 Partnership, through the efforts of the Region 2000 Technology Council s science, technology, engineering, and math (STEM) initiative, is also working to ensure that these high-wage/high-growth sectors have the technologically-trained workforce that they will require to continue to grow and succeed in the future. Through programs such as the Lego League, Vex Robotics, Technology Fair, Summer Middle School Academies, Get Set, Discovery Challenge Science Fair, Future Focus EXPO, Partners in Education, Tech Prep Pathways, and Customized Technology Training Classes, the Technology Council is planting the seeds that will guarantee that these sectors have access to the human capital that they will need to continue to move Region 2000 into the new economy. 30