"The 2002 State New Economy Index: Benchmarking Economic Transformation in the States," includes state rankings and offers an innovation-oriented public-policy framework for the states to foster success in the New Economy.
States that overhaul traditional approaches to economic development and replace them with a new approach focused on boosting skills, entrepreneurship, technology and quality of life are best prepared to prosper in the New Economy, according to the study.
Massachusetts, Washington, California, Colorado, Maryland, New Jersey, Connecticut, Virginia, Delaware and New York rank as the top ten performing states in the New Economy.
The report, by Dr. Robert Atkinson, vice president of the PPI and director of the PPI Technology and New Economy Project, examines the strengths and weaknesses of each state economy using indicators in five categories that best capture the essence of the New Economy -- knowledge jobs, globalization, economic dynamism and competition, the transformation to a digital economy, and technological innovation capacity.
The report also offers a state-level, progressive policy agenda to promote future economic development.
"The New Economy is here to stay," Atkinson said. "It brings state economies enormous potential for growth, but also introduces challenges. If states do not invest in knowledge infrastructure -- world-class education, training and technology -- companies will not have the skilled workers and cutting-edge tools needed to grow and create well paying jobs."
In the study, the PPI argues that the traditional goals and approaches to state economic development need rethinking in light of what works in the New Economy. The study also proposes eight steps states can take to better adjust to the "New Economy," including:
Focus on the quality, not just the quantity of jobs. For more than a generation, state economic development offices have been on auto-pilot, relentlessly pursuing the goal of adding more jobs, whenever, wherever, whatever. For most states the central focus should shift from adding new jobs to boosting incomes and creating better jobs for all of the state's residents.
Know your state's function in the global economy. The bottom line: form economic policy councils that bring together key leaders in business, government, labor, civic groups, and higher education to develop creative economic strategies and build widespread consensus for action.
Get smart about business incentives. The time is now for states to seriously reform incentive policy toward industry and use the savings to invest in New Economy economic development initiatives.
Co-invest in the skills of the workforce States need to adopt policies to ensure that American companies have the skilled workers they need to be productive, while simultaneously ensuring that American workers have the skills they need to navigate, adapt, and prosper in the New Economy.
Co-invest in an infrastructure for innovation. In an economy increasingly powered by technology and innovation, the ability of states to create an environment in which innovation thrives is critical to economic growth. States need to pursue strategies that enhance the ability of companies to produce knowledge, including increasing higher education funding, boosting university technology commercialization, creating research and development tax credits, and increasing tax credits for research investments at universities or federal labs.
Support industry clusters. States should reorient their economic development programs to support clusters of related industries in a particular region, allowing them to take advantage of common resources and knowledge.
Boost quality of life. In the New Economy, a skilled workforce is now the most important factor of production, and companies increasingly look to move to where knowledge workers live. States must work to provide a high quality of life to attract workers and the businesses that follow them. A key start is to reduce traffic congestion in metropolitan areas.
Help more regions succeed in the New Economy. States should see to it that all regions thrive in the New Economy not just metropolitan areas by developing balanced growth strategies, focusing on growth poles, increasing access to broadband in rural areas, and helping industries in non-metro areas become more competitive.
"States that focus their policy efforts in these areas will be well positioned to experience strong growth, particularly in the incomes of residents across all socioeconomic strata," Atkinson said. "Developing a vibrant New Economy is not an end in itself; it is the means to advance larger progressive goals: higher incomes, new economic opportunities, more individual choice and freedom, greater dignity and autonomy for working Americans, and stronger communities."
The Progressive Policy Institute
