First Up -- The State(s) of Job Development

The federal government's role in bailing out the economy has been well-documented and debated, but as the focus turns to revving up the recovery, a new report showcases the vital role of the states.

April's unemployment report -- 290,000 job gains -- was encouraging news for a jittery nation still unsure of how solid the recovery will be. Manufacturing picked up 44,000 jobs, bringing the year's total increase to 101,000.

Still, April's job surge is just the beginning of a very long road back to employment and economic health. As Karen Dynan, an economist at the Brookings Institution, notes, "We have only made up a small share of the more than 8 million jobs that were lost to the recession, not to mention the jobs that we would have created for our growing population had the economy not fallen into recession." Manufacturing makes up a very substantial part of that loss -- 2 million jobs gone.

How do we help manufacturers and the rest of the private sector put Americans back to work? While much of the focus on economic recovery has been on the actions of the federal government, such as the American Recovery and Reinvestment Act, a recent report from the U.S. Chamber of Commerce, "Enterprising States," points out that the states will play a critical role in driving the nation's growth strategy and creating the "13 million new jobs that our growing nation will need in the next 10 years." In part, that is because governors and state legislatures have less latitude to engage in the kind of mindless partisanship and gridlock that has seized Washington.

The chamber report, prepared by the Praxis Strategy Group and Joel Kotkin, cautions that there is no single "silver bullet strategy" for job creation. Aside from supporting basic education and infrastructure, the report notes, the success of top-performing states depends on their "ability to execute successful initiatives." The top-performing states do share some similar characteristics: "building on momentum; delivering adequate funding for initiatives; developing strong relationships and communication strategies; enterprise-friendly tax and regulation systems; and vigorous collaboration between business, government and education."

One reason state and local agencies are so important in job creation is that they work with startups and entrepreneurs at the ground floor of business development. "Enterprising States" points out that "U.S. employment has been shifting not to mega corporations, but to individuals and smaller units." The number of self-employed individuals expanded tenfold between 1980 and 2000, and there has been a dramatic rise in the number of the smallest businesses, often termed microenterprises, to 20 million by 2006.

As we note in our feature article, "Help for Manufacturing Startups," business incubators have the relationships in their area to pair entrepreneurs with resources that they might either not know about or not be able to afford. One prominent example is their ability to utilize university and college resources to help entrepreneurs.

"Many states are locating business incubators adjacent to universities in partnership with the schools while others are building laboratory spaces and other specialized infrastructure to offer to growing companies on an a la carte basis," the "Enterprising States" report comments. Such arrangements "can reduce startup costs for new enterprises and provide students the chance for experiential learning while earning their degrees."

State approaches to economic development vary widely, but as the chamber report points out, "there is renewed focus nationwide on creating more favorable conditions for business growth." Individual states and development agencies can use their associations and the interconnectedness of the Web to seek out and share best practices. Manufacturers and budding manufacturers should demand that their legislators and economic development leaders take heed of these lessons and implement the policies and programs that will help them prosper.

Steve Minter is IW's chief editor. He is based in Cleveland.

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