Slide1: Community Development Core Competencies for Extension Professionals in the North Central Region


Foundations of Practice: Foundations of Practice The Foundations of Practice: Community Development Core Competencies for Extension Professionals is composed of three major components: Understanding Communities and their Dynamics Developing Successful Community Initiatives Areas of Specialization and Emphasis


Understanding Communities and their Dynamics: Understanding Communities and their Dynamics Basic Understanding of Community Community Demographics Community Economics Community Power Structure Natural Resources and Sustainability Community Situational Analysis Community Development Process


Community Economics: Community Economics This presentation has been adapted from an original presentation developed by Bill Pinkovitz Professor University of Wisconsin Extension Center for Community Economic Development


Learning Objectives: Learning Objectives Define local economy and learn how money and resources flow into and out of a community, and circulates within a community. Learn the meaning, and importance of a community’s economic base and and how to identify and analyze basic industries.


Learning Objectives: Learning Objectives Learn how to use traditional economic analysis tools to gain insights into local economies Learn new innovative ways to use existing data sources to analyze local economies from a different perspective. Learn how to access and use new powerful web based tool to analyze local economies


A Few Definitions: A Few Definitions com.mu.ni.ty a group of people in a physical setting with geographic, political, social, and economic boundaries, and with discernable communication linkages. Shaffer, et al e.con.o.my A system of human activity directed toward meeting human needs and wants by the deliberate allocation of scare resources (land, labor, raw materials, and capital).


A Few Definitions: A Few Definitions e.con.o.mic growth more jobs, more income, more sales, more customers. e.con.o.mic de.vel.op.ment social, environmental, and economic change to enhance quality of life Shaffer, et al


Some PerspectiveEmployment: Some Perspective Employment


Some PerspectiveIncome: Some Perspective Income


The Local Economy: The Local Economy Local Production Land Local Consumption Labor Raw Materials Capital


Dollars flow into and out of the local economy:: Local Production Land Local Consumption Labor Raw Materials Capital Dollars flow into and out of the local economy: $ $ $ $


Dollars flow into the local economy in several ways:: Dollars flow into the local economy in several ways: Local goods and services sold outside community $ $ Raw Materials Manufactured Goods Labor Insurance Transportation Financial Services Capital


Dollars flow into the local economy in several ways:: Dollars flow into the local economy in several ways: Local goods and services sold outside community $ $ Visitors purchasing Local goods and services Tourists Regional Mall University Health Care Second Homes


Dollars flow into the local economy in several ways:: Dollars flow into the local economy in several ways: Local goods and services sold outside community $ $ Visitors purchasing Local goods and services Public dollars flowing into community AND other “non-earned income” Social Security Gov. Purchases Federal Grants Government Offices Military Bases Dividends Interest


Dollars leak out of the local economy in several ways:: Dollars leak out of the local economy in several ways: Local businesses purchasing goods and services outside the community Raw Materials Inventory Equipment Labor Capital Professional Services Financing Investments $ $


Dollars leak out of the local economy in several ways:: Dollars leak out of the local economy in several ways: Local consumers purchasing goods and services outside the community Regional Malls Internet Sales Travel Transportation Financial Services Investments/Savings $ $ Local businesses purchasing goods and services outside the community


Dollars leak out of the local economy in several ways:: Dollars leak out of the local economy in several ways: Taxes and Social Security Payments Federal/State Taxes Soc.Security Payments $ $ Local businesses purchasing goods and services outside the community Local businesses purchasing goods and services outside the community


Dollars leak out of the local economy in several ways:: Dollars leak out of the local economy in several ways: Taxes and Social Security Payments Natural Resources Inefficiencies Opportunity Costs $ $ Local businesses purchasing goods and services outside the community Local businesses purchasing goods and services outside the community Waste/Inefficiencies


How Does the Local Economy Grow?: How Does the Local Economy Grow? Increase INFLOWS Decrease OUTFLOWS Increase the TRADE AREA


Strategies to Grow the Economy: Strategies to Grow the Economy Attract new basic employers Improve the efficiency of existing firms Improve ability to capture dollars Encourage business formation Increase aids from broader governments Glen Pulver


Basic Employersa.k.a Export Employers: Basic Employers a.k.a Export Employers A basic employer is a business that brings money into the community. Businesses that sell most of their goods/services to non-local markets. A business where the inflow of dollars into the community exceeds the outflow of dollars from the community. Typically, basic employers include: Manufacturing Universities/Colleges Farming Hospitals Mining Insurance Companies Tourism Transportation


Non-Export Businesses: Non-Export Businesses Businesses that primarily serve the needs of the local consumers are called non-export businesses.


Why the FOCUS on Export Businesses?: Why the FOCUS on Export Businesses? Basic (Export) businesses provide the best opportunity to create additional jobs and income in a community. Unless a community is growing rapidly, or its trade area is expanding significantly, increasing the number of non-export businesses simply means that the pie (market) will be cut into smaller slices, or existing businesses will disappear as new ones emerge.


Community Economic Analysis: Community Economic Analysis Defining a Community’s Trade Areas Identifying Export Businesses in a Community Identifying the Competitive Sectors in a Community Estimating the Total Impact of Economic Activities


Community Economic Analysis: Defining a Community’s Trade Areas Identifying Export Businesses in a Community Identifying the Competitive Sectors in a Community Estimating the Total Impact of Economic Activities Community Economic Analysis


Defining Trade Areas:Traditional Methods: Defining Trade Areas: Traditional Methods Reilly’s Law: Method for determining a community’s retail trade area. Based on the premises that 1) People are attracted to larger communities to shop. 2) Peoples willingness to travel to shop is influenced by time and distance.


Defining Trade Areas:Traditional Methods: Defining Trade Areas: Traditional Methods Trade Area Capture: A method for estimating the number of customer equivalents who shopped in community for a specific product type (i.e. furniture). Based on state per capita spending for the product adjusted by local per capita income. Most often utilizes Census of Retail Trade data. Most useful when comparing TAC over time.


Defining Trade Areas:Traditional Methods: Defining Trade Areas: Traditional Methods Pull Factors: A method for estimating the number of customers a community attracts from outside the community for a specific product or service (i.e. furniture). Simply estimated by dividing the Trade Area Capture by the municipal population. Most often utilizes Census of Retail Trade data. Most useful when comparing Pull Factors over time


Defining Trade Areas:Using GIS: Defining Trade Areas: Using GIS Trade Area Analyst LT: An easy-to-use application utilizing Geographic Information Systems (GIS) software that enables users to easily map variety of markets by ZIP Code. Customers Employees Patients Visitors


Community Economic Analysis: Defining a Community’s Trade Areas Identifying Export Businesses in a Community Identifying the Competitive Sectors in a Community Estimating the Total Impact of Economic Activities Community Economic Analysis


Identifying Export Businesses Location Quotients: Location Quotient: A simple index that helps identify export and import industries by comparing the percentage of local employment in a specific industry to the percentage employed nationally in the same industry Identifying Export Businesses Location Quotients % of local employment in industry A % of national employment in industry A LQ =


Location QuotientEmployment by Sector: Location Quotient Employment by Sector http://www.BLS.gov Total Employees (2004)


Employment by Sector: Employment by Sector Percentage of Total Employment (2004) Source: BLS.gov


Location Quotientby Sector: Location Quotient by Sector Source: BLS.gov


Location Quotients : Location Quotients Manufacturing Employment (2004) Source: BLS.gov


Interpreting LQs: Interpreting LQs


Location Quotients A simple tool to help identify local:: Location Quotients A simple tool to help identify local: Export and import industries Existing and potential industry clusters Economic strengths Development prospects


Calculating LQsThe Good News: Calculating LQs The Good News U.S Department of Labor Bureau of Labor Statistics Quarterly Census of Employment and Wages http://www.bls.gov


http://www/bls.gov : http://www/bls.gov


Location Quotientshttp://www.seta.iastate.edu/takecharge/: Location Quotients http://www.seta.iastate.edu/takecharge/ Take Charge


Location Quotientshttp://www.seta.iastate.edu/takecharge/: Location Quotients http://www.seta.iastate.edu/takecharge/


Community Economic Analysis: Defining a Community’s Trade Areas Identifying Export Businesses in a Community Identifying the Competitive Sectors in a Community Estimating the Total Impact of Economic Activities Community Economic Analysis


Why employment changes: Why employment changes Growth or decline in the national economy Growth or decline in the industry sector Relative strength of the local industry/economy


Shift Share Analysis: Shift Share Analysis Shift Share Analysis provides an estimate of the impact of these three factors by separating the increase or decrease in local employment in specific industry sectors into three components: 1. National Growth Share 2. Industrial Mix Share 3. Local Share


Shift Share Analysis: Shift Share Analysis National Growth Share: The increase or decrease in local employment that is attributable to the growth or decline in the national economy. Industrial Mix Share: The increase or decrease in local employment that is attributable to the growth or decline in a specific industry sector. Local Share: The increase or decrease in local employment that is attributable to the relative strength or weakness of the local industry/economy.


National Growth ShareEmployment Trends by Industrial SectorLaGrange County, IN (1994 to 2004): National Growth Share Employment Trends by Industrial Sector LaGrange County, IN (1994 to 2004) local employment in industry A year 1 x average national total employment growth rate for the period = National Growth Share 302 jobs x


National Growth Share% Change in Employment by Industrial Sector LaGrange County, IN (1994 to 2004): National Growth Share % Change in Employment by Industrial Sector LaGrange County, IN (1994 to 2004) local employment in industry A year 1 x average national total employment growth rate for the period = National Growth Share 302 jobs x .149 = 45 jobs


Industry Mix Share % Change in Employment by Industrial Sector LaGrange County, IN (1994 to 2004): Industry Mix Share % Change in Employment by Industrial Sector LaGrange County, IN (1994 to 2004) local employment in industry A in year 1 x (national industry growth rate – national average growth rate) = Industry Mix Share 302 x (.378 - .149) = 302 x .229 = 69 jobs


Local Share% Change in Employment by Industrial Sector LaGrange County, IN (1994 to 2004): Local Share % Change in Employment by Industrial Sector LaGrange County, IN (1994 to 2004) local employment in industry A in year 1 x (local industry growth rate – national industry growth rate) = Local Share 302 x (.460 - .378) = 302 x 0.082 = 25 jobs


Employment Trendsby Industrial SectorLaGrange County, IN (1994 to 2004): Employment Trends by Industrial Sector LaGrange County, IN (1994 to 2004) 45 jobs (NGS) + 69 jobs (IMS) + 25 jobs (LS) = 139 jobs


Slide53: http://www.seta.iastate.edu/takecharge/ Tippecanoe County, Indiana


Shift Share http://www.rcr.uga.edu/guide/sshare1.html: Shift Share http://www.rcr.uga.edu/guide/sshare1.html


Caveats: Caveats Shift Share is: Descriptive, not diagnostic Does not tell you WHY Does not identify comparative advantages Minimizes the impact of business cycles


Multiplier Effect: Q: Why is the arrival of a new business or the expansion of an existing business a welcome event in most communities? A: Jobs and Income Multiplier Effect


Multiplier Effect: More GOOD NEWS: A new export business or business expansion usually creates more jobs and generates more additional spending and income than the jobs, spending, and wages directly attributable to the business. This is called the Multiplier Effect Multiplier Effect


Multiplier Effect: The Multiplier Effect is comprised of three components: Direct Effects: Labor, goods and services purchased by the business Indirect Effects: Increase in local spending by firms that supply the business Induced Effects: Increase in local spending by employees of the business Multiplier Effect Total Impact = Direct + Indirect + Induced


Multiplier Effect: Multiplier Effect Output Multiplier Total increase in local spending that occurs to produce one dollar of output. Employment Multiplier Total increase in local employment (direct, indirect, and induced) that results from each additional employee at the firm. Income Multiplier Total increase in local income related to each dollar paid in wages, salaries, and profits to local employees and owners of the firm.


Multiplier Effect: Multiplier Effect Source: Western Rural Development Center


Multiplier EffectWhich has the larger multiplier?: Multiplier Effect Which has the larger multiplier? Wal-Mart Supercenter with annual sales of $81 million that employs 400 people A cheese factory that employs 10 people and has annual sales of $20 million


Multiplier Effect: Multiplier Effect Inventory Labor Transportation Supplies Utilities Accounting services Marketing Financing Repairs Maintenance Legal Services What does Wal-Mart buy locally?


Multiplier Effect: Multiplier Effect Raw Materials Labor Inventory Transportation Supplies Utilities Marketing Accounting services Legal Services Financing Repairs Maintenance What does a cheese factory buy locally?


Multiplier Effect: Multiplier Effect Raw Materials Labor Inventory Transportation Supplies Utilities Marketing Accounting services Legal Services Financing Repairs Maintenance What do cheese factory suppliers buy locally?


Multiplier Effect: Multiplier Effect Raw Materials Labor Inventory Transportation Supplies Utilities Marketing Accounting services Legal Services Financing Repairs Maintenance What do Wal-Mart suppliers buy locally?


Worker FlowWhere people live and work: Worker Flow Where people live and work 67,731 ÷ 73,345 = 92.35% Source: U.S. Census Bureau


Labor Participationhttp://www.uwex.edu/ces/cced/indicate.html: Labor Participation http://www.uwex.edu/ces/cced/indicate.html


Bibliography: Bibliography Community Economic Analysis: A How to Manual, Hustedde, Shaffer, and Pulver, http://www.ncrcrd.iastate.edu/pubs/contents/186.htm Using Employment Data to Better Understand Your Local Economy, Martin Shields, http://cecd.aers.psu.edu/pubs/using_employment_ data_to_better.htm SETA Office of Social and Economic Trend Analysis, Iowa State, http://www.seta.iastate.edu/ Location Quotient Calculator, Bureau of Labor Statistics http://data.bls.gov/LOCATION_QUOTIENT/servlet/lqc.ControllerServlet Shift Share Calculator, University of Georgia, http://www.rcr.uga.edu/guide/sshare1.html


Next Session: Next Session Community Power Structure March 2, 2006 1:30 to 3 p.m. The ability to identify who the decision makers are in the community, the resources they affect, and the power structure is crucial in gaining access to a community, gaining trust and credibility, and being effective in educational programs.