As we assess where we need to focus our economic recovery, Upstate Jobs believes now is the time to look to a new approach with greater potential for creating more good jobs throughout Upstate. Our prior post recommended corrective measures to stop repeating our failed economic development policies of the past. As we look to the future, however, we believe the innovation economy presents far greater opportunities for sustained growth.
Embracing policies and approaches that support entrepreneurs and the innovation economy capitalizes on Upstate’s current assets, while embracing the future of the U.S. economy. As has been demonstrated in other innovation economy hub cities, a connected Upstate region has the potential to be creating tens of thousands of new jobs each year that will power a growing economy for the future.
UJP advocates an all-out sprint to start scaling up startups and job opportunities in the innovation economy because:
- Innovation economy jobs have a multiplier effect for growing jobs across other industries in the same community; and;
- These are the jobs that many young people leave Upstate seeking. Let’s develop those jobs and keep that talent here.
By definition, startups leverage an innovation not yet widely adopted in the marketplace, with the goal of commercializing that innovation to a national or global audience. These companies may start with only a few eager employees, but don’t fit the model of the traditional small business that most government programs seek to support.
The internet has democratized innovation – it’s easier to start a company today with just an idea and small team than ever before. And taking the innovation of that startup to go well beyond the local community or region creates opportunity that can blossom into a job generating machine much quicker than at any time in history. Startups work on tomorrow’s industries – many of which have not yet even been defined – and are the very direction our economy is already going. By making this a more focused effort in Upstate, we can support an economy built upon jobs relevant today and increasingly vital tomorrow.
Startups multiply local jobs – but we’re waving goodbye to the talent needed to create them
Beyond the importance of the technology and products that startups and innovation economy companies develop is how these companies work for us. Data shows innovation-based companies have a much higher job multiplier than any other industry.
Documented by economist Enrico Moretti, for every job created in an innovation based company, more than 5 jobs are created in the local community – this is triple the job multiplier of the manufacturing industry. Moretti’s research, profiled in his book “The New Geography of Jobs,” also shows that cities with high concentrations of innovation based companies will drive up the average wage levels for other industries in that same local area.
In Upstate New York, we already have the biggest key ingredient for startups in these newer industries – next generation, college educated talent! We have more than 100 colleges enrolling more than a half million college students in Upstate – giving us a huge advantage as a constantly renewing talent factory. Beyond sheer numbers, that talent is drawn into our Upstate colleges for technical degrees providing us with one of the strongest bases of STEM programs in the country to go alongside the $3+ billion of corporate and academic R&D investment each year going on right here.
Unfortunately, not enough of that college talent we produce choose to stay Upstate after graduating. Whether these students grew up here or came here for their studies, far too many leave following graduation. One study conducted by the Pew Research Center showed that Buffalo suffered the biggest outflow of certain college grads in the entire country, with Upstate cities like Syracuse and Rochester not far behind. Where did they go? Across these three university metro areas, the Pew data says out-migration went to the same top four destinations: New York City, San Francisco Bay Area, Boston, and the Washington DC/Northern Virginia metro area. These are not coincidently the top 4 areas in the country for growing innovation companies, startups and jobs.
Upstate has Startups – we need more of them
The 2018-2019 Upstate CEO Report prepared by nonprofit Upstate Venture Connect reports on job growth rates of small innovation economy businesses seeking to scale to national or global markets. With 117 innovation economy companies participating in the survey, the report found that these scalable companies:
- Currently employ more than 6,000 people and collectively plan to add more than 6,000 additional employees over the next five years.
- The average salary paid at these companies was approximately $78,000, which is 67% higher than the average salary for major Upstate metro area residents.
- Over 100 respondent firms needed to fill more than 650 entry level positions in 2019; 62% were looking for candidates with a college degree. Two thirds of the companies offer internships, but only half of them recruit on any college campus.
We’ve got a solid base of innovation economy startups, we’ve got great talent factories, we just need to focus our efforts to connect our existing resources to drive greater economic success.
Building government and community support for innovation economy jobs
Recalibrating our economy to focus on supporting startups and entrepreneurs in the innovation economy just makes sense. Here are four areas to put concentrated effort:
- Promote existing tax incentives to spur more private capital investment into startups. New York State has a Qualified Emerging Technology Company (QETC) program that allows investors to see a tax credit for up to 20% of their qualifying investment in startups – but the program is rarely used as too few investors even know about it. As detailed in testimony provided before the NY State Assembly, with no resources allocated to inform investors or administer the QETC program, we miss the opportunity get more private investors taking the lead in supporting startups in their communities. Should the State really want to get the engines firing, a greater percentage of tax credit could be offered if the QETC is located in Upstate.
- Make program investments that advance collaboration across boundaries. With the billions of dollars we invest in economic development each year, pitifully few resources are allocated to the core reason our best high growth entrepreneurs leave Upstate to launch startups elsewhere: their perceived difficulty in getting connected to the people willing and able to help them here. New York State’s penchant for doling out grants with beneficiaries limited to specific zip codes or institutions have the unintended consequence of programs having too narrow a constituency and organizations battling for grants with a zero sum game mentality – all of which impede the region wide collaboration we need to accelerate startup progress. Better to tie grants to initiatives that explicitly advance collaboration across the region’s institutions by connecting entrepreneurs to people who can help them.
- Research innovation economy and commit to economic development transparency. Some people evolve their thinking about innovation economy startups after stumbling into a friend, relative, or colleague sharing an example of a young company growing from nothing to a major employer in a much shorter time period than traditional businesses. Just think about how much better we could make decisions on public policy, resource allocation, and even private investment if we were to know more precisely things like: Where are innovation economy companies located? What do their hiring, job growth, and salary trends look like? Where are entrepreneurs transitioning from college campuses to start new innovation economy companies? What sources of private capital are helping these companies grow? And as profiled in our last policy post, our government has to be totally transparent with both the data and the tracking of outcomes once our tax payer funds are being used to benefit private companies.
- Use power to convene to get input – then do something with it. One of the most powerful tools of elected leadership is the ability to convene. Elected leaders in Upstate New York should be seeking out investors, entrepreneurs, and innovation economy executives to learn what they need, and also bring together the diverse stakeholders that can make a difference. True leadership comes from seeking a diversity of input and adjusting as needed to ensure forward progress. With our existing base of innovation economy employers and a vast array of STEM universities, there is no shortage of smart people Upstate who can contribute, but no leaders are asking them to do so. We need public officials who are proactive in reaching out to innovation economy leaders to get that input – and then actually do something with it.