Economic Dynamism
« Data & IndicatorsIn an economic environment of profound structural change and deeply-distressing transformation, the capacity to adapt to change is absolutely essential. Such adaptation is often evidenced by "churn" in the workforce as new jobs replace old jobs, and new enterprises are created and aging enterprises transform themselves (or failed to survive).
The State New Economy Index developed by Rob Atkinson of the Innovation and Information Technology Foundation (Atkinson & Andes, 2008) employs six indicators of economic dynamism at the state level: 1) jobs in fast-growing firms (so-called gazelle firms defined as 20% growth per year for five consecutive years); 2) degree of job churning; 3) number of Deloitte Technology Fast 500 and Inc. 500 firms; 4) value of companies' IPOs (initial public offerings); 5) number of entrepreneurs starting businesses; and 6) number of individual inventor patents issued.
Current data for gazelle firms, Fast 500, Inc. 500, and IPOs shows no activity in Northern Michigan. Patent data is used for one of our Innovation Capacity indicators. Project resources precluded obtaining regional data from unsorted paper files in state records on entrepreneurial start-ups.
The indicators of Economic Dynamism at the regional level include Job Turnover Rates and Certified Business Parks.
Economic Dynamism: Job Turnover Rates
Given the rapid changes that characterize the knowledge economy, "job churn" provides an important indicator of Economic Dynamism. Job churn results from existing businesses downsizing or going out of business as new businesses are created and more successful businesses expand. Many factors contribute to job churn with both positive and negative social and economic impacts on local communities.
Job Turnover Rates
One measure of churn is the change in the number of businesses (as opposed to individual jobs). However, regional data is difficult to obtain for this measure. A high rate of change in the turnover of businesses (as opposed to changes in employment) is considered beneficial in the knowledge economy. The benefit is attributed to creating greater numbers of more innovative companies as less efficient companies go under.
Regional data is available for job turnover rates. These rates are based on the number of hires and separations in the workforce. Higher rates indicate a greater number of people starting new jobs and leaving existing jobs compared to workers remaining in existing jobs.
We define job turnover as: (1/2) * (full-quarter hires + full-quarter separations) / employment stable jobs, based on Census Bureau definitions. Job turnover rates are given as a percentage of total employment.
Job Turnover Rates: All Industry Sectors (2007)
To obtain job turnover rates for all industry sectors in each region, data based on two-digit NAICS codes is used.
| Northeast MI1 | Northwest MI2 | Eastern UP3 | Michigan | |
|---|---|---|---|---|
| Job Turnover Rate | 9.6% | 10.3% | 11.2% | 9.2% |
Low job turnover rates tend to be associated with high-wage jobs, and high job turnover rates with low-wage jobs. Higher job turnover rates are also associated with the positive upward movements of young workers in the labor market. High job turnover rates are also found in job sectors with seasonal hiring practices, like tourism and construction. Low turnover for young workers can also mean that job opportunities are restricted, and workers cannot gain important skills. High turnover for older workers may signify chronic unemployment.
Job Turnover Rates: Health Care Sector (2007)
As health care is an important economic sector in the three regions, that sector's turnover rate was also calculated. Health care jobs are defined as those in NAICS codes 621, 622, and 623.
| Northeast MI1 | Northwest MI2 | Eastern UP3 | Michigan | |
|---|---|---|---|---|
| Job Turnover Rate | 7.8% | 8.0% | 10.5% | 7.5% |
Within a single industry sector, the job turnover rate measures the upward movement of workers in that sector. Higher rates, then, are positive. However, this indicator should be paired with other labor market data to provide greater clarity to the meaning of the job turnover rate.
Economic Dynamism: Certified Business Parks
Certified business parks are parcels of land or districts dedicated to manufacturing and/or high-tech industrial facilities. Business parks are "lightweight" versions of industrial parks, the latter being more associated with heavy industry. Certified parks provide basic utility services, including telephone service, parking, water and sewer lines that businesses can tap into immediately (reducing start-up lead time). They also have appropriate zoning, prior plat approval, and protective covenants to assure long-term site quality. Certified Business Parks provide certain advantages not available in other parks, including the potential to capture property taxes for public infrastructure improvements (in qualified local units of government) and being marketed by the Michigan Economic Developers Association. In the dynamics of the knowledge economy, new businesses are rapidly created on an ongoing basis. Locating a business in a business park reduces lead time and the level of capital formation necessary to get business startups "up and running" and business parks also support facility maintenance.
Certified Business Parks (2009)
This data on Certified Business Parks was obtained from the Michigan Certified Business Park Program.
| Northeast MI1 | Northwest MI2 | Eastern UP3 | Michigan | |
|---|---|---|---|---|
| Certified Business Parks | 0 | 2 | 0 | 48 |
| Per 1,000 sq mi | 0.00 | 0.42 | 0.00 | 0.85 |
Certified Business Parks represent a fraction of all business parks in the three regions as many business parks do not participate in the Certified Business Parks program.
Definitions
- Northeast Michigan corresponds to the Northeast Michigan Council of Governments (NEMCOG) region of eight counties in the Lower Peninsula: Alcona, Alpena, Cheboygan, Crawford, Montmorency, Oscoda, Otsego, and Presque Isle.
- Northwest Michigan corresponds to the Northwest Michigan Council of Governments (NWMCOG) region of ten counties in the Lower Peninsula: Antrim, Benzie, Charlevoix, Emmet, Grand Traverse, Kalkaska, Leelanau, Manistee, Missaukee, and Wexford.
- The Eastern Upper Peninsula corresponds to the Eastern Upper Peninsula Regional Planning and Development Commission (EUPRPDC) region of three counties: Chippewa, Luce, and Mackinac.