What will the future economy look like, and what will cities need to do to compete in it? In addressing this question at the recent International Economic Development Council conference, economist Richard Florida described a nation of megaregions, with economic activity centered around bustling downtown cores populated by innovative firms and entrepreneurial networks.
At the Nashville Chamber of Commerce and Partnership 2020 Annual Meeting recently, Amy Liu, co-director of the Metropolitan Policy Program at Brookings Institution, shared a similar vision, which she described as the coming “metrocentury.”
Half of the world’s population lives in cities, Liu noted — and that percentage is expected to rise to 60 percent by 2030 and 70 percent by 2050. Economic power is already shifting to cities, with the top 100 U.S. metros attracting 94 percent of venture capital, producing 75 percent of service exports and handling 82 percent of air freight.
According to Liu, cities that hope to remain competitive in the future must cultivate three key assets: strong industry clusters, innovative ecosystems and diverse talent bases. The economy is already being shaped by several new realities that will define growth in the future, she said, including:
Reality No. 1: In metro areas, minorities are becoming the majority.
Already in 22 of the largest U.S. metros, minorities make up more than half of the population – up from 14 percent in 2000 and 5 percent in 1990 – and this trend is expected to grow. Over the past decade, non-whites, particularly Hispanics and Asians, accounted for 92 percent of population growth, according to figures from the U.S. Census. This shift to a “majority minority” will continue, Liu said, with minorities expected to encompass an estimated 53 percent of the total U.S. population by 2050. For states, cities and regions, that means it will be “important to maintain an open, friendly place where people feel welcomed and accepted,” Liu said.
Reality 2: Global competition is getting more fierce, shifting away from U.S.
Though the U.S. still accounts for 20 percent of the global GDP, BIC countries (Brazil, India and China) are slightly gaining at 21 percent — and their share is expected to surpass the U.S. at 29 percent by 2016. While slowing overall since the recession, many world markets are rebounding faster than the U.S., particularly China at a rate of 9 percent. Most of the top 20 global metros for economic performance in 2010-2011 were from Asia, Middle East or South America, while Houston, TX was the only U.S. city to make the list.
Reality No. 3: Strong, tradeable sectors will drive future economic growth.
Jobs in tradeable sectors are still the most powerful because of their multiplier effect: one job in a traded industry supports nearly three local jobs, according statistics presented by Liuw. In the past two decades, the economy has created few jobs this way — just 2 percent on average — but doing so is becoming even more important to compete globally, Liuw said. Exports represent just 13 percent of the GDP in the U.S., but account for 30 percent in China, 22 percent in India and 15 percent in Europe. Despite their smaller share of the GDP, exports drove nearly half of GDP growth between 2010-2011, and their value in U.S. service trade outweighed imports by $153 billion. For every $1 billion in exports, an additional 5,400 jobs are created, according to International Trade Administration estimates.
Keys to Staying Competitive
If these are the realities, what do cities need to do to navigate them and best position themselves for growth? First of all, cities should focus on being strong exporters, Liu said, and seizing a larger share of the clean economy, which currently accounts for $53.9 billion in exports and $4.3 billion in investment, and is expected to be valued at $2.2 trillion by 2020.
More innovation in manufacturing is also crucial, Liu stressed. The ability to generate patents for new products and processes is fast becoming a key differentiator for manufacturing firms, along with their capability for R&D and hiring STEM (science, technology, engineering and mathematics) workers.
Cities that work toward goals like boosting wages and closing skill gaps among workers will be at an advantage, Liu noted. While 43 percent of jobs in metro areas require at least a bachelor’s degree, only 32 percent of adults have earned one, according to Brookings. Cities must also tackle achievement gaps among ethnic groups, she added. Though 50 percent of Asians earn bachelor’s degrees, for example, the percentages are much lower for African-Americans (18 percent) and Hispanics (13 percent).
Along with bringing more jobs to the downtown core, cities will also need to invest in mass transit to stay competitive, especially with 49 percent of metro jobs are already accessible by transit, Liu said.
In light of these statistics, what do you think cities should be doing to stay competitive? What successful strategies has your city adopted for future growth? Please share your thoughts below.