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Notes from Innovation Policyworks

I don't know if it's my impending 40th college reunion, or what, but I'm becoming obsessed with how the aging workforce (meaning us baby boomers) are going to impact our regions and our economies. On the one hand, we're seeing leadership transitions all around us. In every community I'm working in, major organizations are facing the retirement of a large portion of their management teams. And, there are simply not enough folks younger than us to take on all of these roles.

To me, the answer seems obvious. Who said a person has to stop contributing at age 60 or 65 or 70 or beyond? In my college reunion book, entry after entry describes folks who are still vibrant, inquisitive, creative, entrepreneurial, and committed to their communities and their families. While I'm sure that there are many physical jobs that we will no longer be able to do, even if we could ever have done them, there are lots of other ways that we can be productive. Most baby boomers are technologically capable, and so the old canard about being out of it with regard to computer and technology skills probably doesn't apply. So, it's up to organizations to figure out how to reimagine their structures to maintain the skills and knowledge of older workers. 

The Difference between Startups and Job Creation

A new OCED report sheds new light onto the confusing relationship between startups and job creation. The authors deconstruct the contribution to job creation into four elements: the startup rate; the average size at entry; the survival rate and the average growth rate of survivors. Looking at data from sixteen countries similar to the US, the authors found:
  • The survival rate equals around 60 percent after three years; 50 percent after five years and 40 percent after seven years;
  • For those startups that survive, the average job creation rate is high;
  • The probability of exiting is highest at age two;
  • The majority of surviving micro startups do not grow, but the 5 percent who do grow create a disproportionate amount of jobs.
  • The companies that do grow achieve around 3 percent annual growth.
The policy implications follow from the Kauffman finding that without startups, new job creation in the American economy would be negative. Programs that increase the survival rate, and help surviving companies grow faster can impact the overall job creation picture. 

Free Pre-School

New York City Mayor Bill de Blasio's new universal pre-school program has grown to 65,000 children across all neighborhoods. At a cost of roughly $400 million a year, this initiative isn't cheap. The benefits of early childhood education are well known, but questions are being asked about the way this is implemented. Does providing free pre-school merely get the city to pay for education that wealthier parents would otherwise pay for themselves? A related study trying to decipher education statistics to see just how big the problem is suggests that 50-60 percent of 4 year olds are already in some structured pre-school, and asks what it takes to eliminate the free-rider effect. The Mayor's answer: "A truly universal program gives folks in low-income neighborhoods more opportunity than ever before."

Ongoing Patent Legislation Fights

Patent legislation has always sought to balance intellectual property protection with creativity and innovation. Too much regulation and cost can stifle patenting, while too little leaves room for patent trolls and others who infringe on patents. The Innovation Act currently being debated by Congress proposes changes to regulations concerning patent infringement lawsuits that would require a lot more information from patent owners claiming infringement. Some critics say that this legislation goes too far, and favors larger firms over startups and inventors. A second bill being proposed is called the Patent Act, and is supposed to be a more measured approach. But some believe that the Patent Act's language would leave foreign manufacturers free to illegally use patented technologies without any recourse. For details, see this Kauffman report HERE. 

Gazelles and Unicorns

Wait, aren't unicorns supposedly a myth? The term, coined in 2013, means startups valued at $1 billion or more. In 2011 there were six; in 2014 there were 33 and there are 32 so far this year. The average age of these "startups" is between six and eight years old, and have been through multiple rounds of venture funding, but have not yet gone public. Some well-known firms are included in this rarified company, including: Airbnb, Dropbox, Pinerest, Snapchat, Square and Uber. By the way, the average employment at these Unicorns is almost 700. Read more HERE.

What Can Cities Do to Support Startups?

The Kauffman Foundation recently suggested four ways that city leaders can support entrepreneurship, a policy objective that has been found to be consistent with the number of jobs created. They found that, on average, cities that believed startups were important to the economy had early stage companies with 15 percent more employees. The tools suggested are:
  1. Build connections with events that cause entrepreneurs to think and act together.
  2. Welcome immigrants, since they are twice as likely to become entrepreneurs than native-born Americans.
  3. Support women, who are half as likely as men to start companies without help accessing capital and mentorship.
  4. Develop human capital - higher rates of education are correlated with higher rates of entrepreneurial activity. This means a higher high school completion rate, as well as college graduates.
Read MORE here.

New Incentives for Economic Development

While long-standing incentives such as loan guarantees, workforce training, and tax credits abound, the current economic development environment cries out for new incentives that are supported by research into what drives business growth. Therefore, newer incentives support entrepreneurship, human capital attraction and development, accelerating gazelle firms [and unicorns?], and create more vibrant places through brownfield remediation, rehabilitation of historic and abandoned buildings, and promote energy efficiency and smart growth. Or, if you are feeling cynical, you'd say that traditional economic development has finally caught up with long standing tech-based and community-based economic development practices.Read MORE

In This Issue - September 2015

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Quote of the Month 
"You are never too old to set another goal or dream a new dream. "

C.S. Lewis

Do You Believe Scientists and Science?

It turns out that the degree to which you trust science and scientists is related both to your education and your political bent. On topics ranging from climate change, evolution, or biomedical research on stem cells and AIDS, conservatives have taken positions at odds with a scientific consensus.A recent survey by Hamilton, Hartter and Saito about beliefs concerning both climate change and vaccines confirmed that Democrats are most likely to say they trust scientists for information and Tea Party supporters least likely. Partisan divisions tend to widen with education.  Of course, this is a scientific study, so you may not believe it. Read more HERE.

Why Students Default on their Loans


A new Brookings paper finds that the so-called student loan crisis is largely due to non-traditional borrowers, that is students that used their loans to attend for-profit and non-selective schools. These institutions have relatively weak educational outcomes and their graduates have difficulty finding jobs after completing their education. These borrowers represent almost one-half of all borrowers, but 70 percent of student loan defaults. Borrowers from thirteen schools, including the University of Phoenix and Walden University represented almost 10 percent of all student loans. "Non-traditional borrowers (those attending community college and for-profit schools) borrowed substantial amounts to attend institutions with low completion rates and, after enrollment, experience poor labor market outcomes that made their debt burdens difficult to sustain." Read the study HERE.


Is Age Discrimination a Fact of Life for Older Workers?

In 2014, the labor force participation rate for people older than 65 reached 22.1 percent for men and 13.8 percent for women, compared to 17.7 percent and 9.4 percent, respectively, in 2000. The previous generation tended to retire much earlier, but with traditional pensions giving way to 401(k) plans, there is a lot of incentive to work longer. The Great Recession pushed many to keep working, since their retirements were tied up in 401(k) plan that had lost value. While claims of age discrimination have spiked, it is increasingly difficult to win an age discrimination case. A 2009 Supreme Court ruling said that workers bear the full burden of proving that age was the deciding factor in their dismissal or demotion. Read the Pew Report HERE.

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Innovation Policyworks enables economic development officials at state, regional and local levels make better, data-driven decisions by providing expert research, analysis and recommendations. Our clients see innovation and entrepreneurship as critical elements of their economic development strategy, and are developing new programs or policies, and/or evaluating existing ones. 

Dr. Catherine S. Renault has been delivering innovation-based economic development results in rural states for 25 years, most recently as science advisor and Director of the Office of Innovation for the State of Maine. Cathy is currently working with the Industrial Resource Center Network (IRCN) in Pennsylvania in partnership with Camoin Associates and Maverick and Boutique. Our project is to help the Centers come together with the State in a state-wide network for the purposes of the national MEP recompetition.
For a list of selected projects, see www.innovationpolicyworks.com/projects.