Shields Column: Partnerships Needed to Create High-Wage Jobs

Note to Editors: Martin Shields is an associate professor of economics at Colorado State University. His research on Northern Colorado’s economy is sponsored by a partnership between the Northern Colorado Economic Development Corporation and CSU’s Office of Economic Development.

The fat lady is just about done singing the requiem for the most recent economic expansion. Now it’s time to evaluate its legacy and consider how the aftermath might shape northern Colorado’s next growth era.

By many measures, the U.S. economy performed decently after the 2001 recession. Unemployment rates were low, employment gains were steady, and GDP growth rates hovered around historical averages.

Northern Colorado followed suit. Without replicating the breakneck gains of the 1990s, regional job totals increased. Sustained growth in health care and educational services kept unemployment low. And recent job announcements by Woodward Governor, AVA Solar and Vestas are helping reverse manufacturing losses.

But a closer investigation uncovers some cause for anxiety. Foremost is that a large percentage of people have seen their living standards decline over the past 7 years.

A recent report jointly issued by the Economic Policy Institute and the Center on Budget and Policy Priorities looks at changes in US income distribution over the past 20 years. Perhaps the most startling result is the finding that average income has declined by 2.5 percent among the bottom fifth of families since the late 1990s. Put differently, about one in five US families has a lower income today than it did at the start of the decade.

And this phenomenon is not limited to low income families. Among the report’s findings is that incomes for Colorado’s "middle quintile" families averaged $55,933 in the mid 2000s, an increase of only 1.6 percent from the late 1990s.

For many, the just concluded period of economic expansion was anything but.

While there are numerous explanations one important cause is that much of the recent employment growth has been in lower paying sectors. For example, the retail sector has led job creation in Weld and Larimer Counties over the past 7 years, yet the sectors’ per worker annual earnings average less than $13,000.

Policy makers should take notice. In developing the next generation of economic development strategies, a key point of emphasis should be creating sufficient opportunities for widespread economic participation. I offer two suggestions.

First, while recognizing that innovation, entrepreneurism and education remain Larimer County’s essential economic foundations, a long-term commitment to public-private initiatives that create and retain high-wage jobs is needed.

Recent economic research shows that such partnerships can help generate and enhance competitive regional advantages in targeted economic clusters. For northern Colorado, promising sectors include bio-tech and clean energy, where local strengths line up with state and national priorities and global demand.

The second action step is to increase commitment to overall workforce development issues. The strong positive correlation between education and income is well-known. In order to raise the earnings of lower income individuals, policies should focus on increasing access to and participation in programs that enhance the productive abilities of all workers.

While economic recessions are certainly unwelcome, they do provide us with the opportunity to carefully consider what we want next.