State Must Remain Ready to Adjust to Change (Jeff Collins Market Forecast)

After my last column regarding the changing nature of economic development I received an email asking me what I meant by the following:

“Simply put, education is economic development. Integrating our educational institutions with our economic development institutions is a strategy worthy of exploration.”

I think this is an excellent question.

What I am advocating is that a comprehensive economic development strategy be developed for the state that both incorporates educational institutions and asks if the current configuration of educational institutions in the state is optimal to achieve our economic development goals.

If not, then the plan should make recommendations for the incremental transformation of Arkansas institutions of education (pre-K through higher education and workforce training) into robust partners for economic development.

If we examine communities across the United States that have been successful at recreating themselves over and over again, they invariably have some common characteristics. What I mean by recreating is that every local economy experiences ebbs and flows in its economic success.

These are often a function of circumstances beyond the control of policymakers.

For example, Detroit, Michigan was a highly successful regional economy based on automobile manufacturing and home to what was at one time the world’s largest corporation, General Motors.

International competition and outsourcing of automobile manufacturing to Mexico, Canada and even the southeastern U.S. eroded regional wealth and led to relatively high local and statewide unemployment rates.

Further, Detroit has struggled to adjust to this new economic reality.

It is our ability to adjust that is within our control.

Other metropolitan areas have also experienced declines in major industries within the U.S.

Denver, Colo., my hometown, has weathered the storm of oil booms and busts, the savings and loan crisis, and the tech bubble.

What is amazing is that after each economic debacle, the area found something new to propel its economic fortunes.

Denver is certainly not unique; Boston, San Francisco, and even Pittsburgh also come to mind.

What each dynamic local economy invariably has in common is an educated workforce, a strong innovation sector, an entrepreneurial culture, and quality of life.

Moreover, educational institutions, particularly colleges and universities, play a central role in each of these factors.

The ability to recreate wealth once a downturn in a dominant industry takes place is central to regional and statewide economic success.

In today’s global economy, competition such as that experienced by Detroit’s major industry, and therefore its workforce, can erode a local or state economy’s strength in a matter of years rather than decades.

The lesson to take away is we must be nimble and adaptive. We must be in a position to quickly re-educate our workforce to take advantage of new opportunities, and we must be able to recruit those workers we cannot create in a timely way.

My central point is that we must create the basic characteristics of a dynamic economy to take advantage of the best opportunities available, which hopefully include a substantial number of high-wage and high-skill jobs.

A criticism I often receive is that not everyone can go to college or should go.

I have interpreted this to mean that we need our share of workers with high school and good technical training. Absolutely.

But what type of worker are we creating?

If we examine Arkansas’ K-12, some obvious conclusions can be drawn.

First, there are a large number of school districts in the state.

Next, the educational outcomes resulting from the efforts of Arkansas schools are too often insufficient to create a workforce that is highly competitive nationally or globally.

If you need evidence, I point to the remediation rate of Arkansas high school graduates who attend college.

That is, the percentage of high school graduates who apply to and are admitted to higher education institutions require additional coursework to be competitive at the college level.

That rate is approximately 50 percent.

Half of the students who go to college from Arkansas high schools require remediation. That is a big number, especially when you realize that it is usually the best students who decide to attend college.

What does this say about the embedded skill level, the ability to learn of those that choose not to go to college?

Moreover, statistics like these also impact our ability to recruit those people we cannot create.

Talented people have choices about where to live. If our schools are perceived to be inadequate, it reduces the likelihood of their willingness to relocate.

In economics there is a concept called “revealed preference.” Basically it means that actions speak louder than words.

Although we as a society talk about the importance of quality K-12, and many, many people are working diligently to either maintain or improve the quality of K-12 in the state; one can’t help but notice that many of our choices seem to contradict our stated goals.

If we look at how much effort and expense goes into athletics for example, whether funded through tax dollars or private dollars, the rank order of our preferences seems fairly obvious.

I recall a statistic that appeared in a column by George Will stating that Arkansas colleges and universities had turned out more than a thousand graduates who were credentialed to teach physical education while only a couple during the same period were credentialed to teach physics.

Those statistics speak volumes.

We have to ask ourselves:

“What is the purpose of a system of primary and secondary education?”

Is it to prepare our children to be economically and socially successful adults, or is it to provide entertainment for us, their parents?

Finally, to be fair there are many issues regarding the structure and role of higher education in the state as well, but I will save that for another time.

(Jeff Collins is director of the Center for Business and Economic Research in the University of Arkansas’ Sam M. Walton College of Business. You can e-mail him at [email protected].)