BAY AREA’S ECONOMIC HOMOGENEITY SUGGESTS NEED FOR REGIONAL STRATEGY
While economic development planning done at local levels within the Bay Area is important, it may not be as productive or effective in maximizing growth and job creation as approaching the region as a single economic unit, according to a first-of-its-kind study released this week by the Bay Area Council Economic Institute. Chief Economist Jon Haveman presented the study at a meeting of the regional Joint Policy Committee. The study, which was funded through a public private partnership, finds that the Bay Area is highly interconnected economically, with a highly mobile workforce whose decisions about where to live and work may not be at all related to local economic development strategies designed to create jobs or provide housing in a particular community. Indeed, those individual strategies may be at odds with each other. According to the report, “a cooperative and coordinated approach to job creation would take into consideration the benefits to the region as a whole of job creation in a specific location, likely increasing the returns from economic development efforts throughout the entire region.”
The study also addressed the notion that Bay Area job creation has much of anything to do with companies coming here or leaving. What the study finds is that start-up companies are the biggest driver of job growth, accounting for 55 percent of job creation. Expansion by existing companies accounts for 42.6 percent of job creation, while just 2.3 percent of new jobs come from businesses moving into the area. Similarly, companies leaving the Bay Area account for just 3.7 percent of job losses, while the death of existing businesses accounts for 66 percent of job losses. This could be a lesson for those outside the region or California who think there’s much to gain from trying to recruit or lure businesses away.
The study identified high housing costs, a cacophony of state, local and regional business regulations and a shortage of qualified workers as among the biggest obstacles to job growth. And contrary to some perceptions of growth in the Bay Area, the study finds that the rate of new home construction has slowed to a relative trickle over the past 30 years, a trend that may be the biggest culprit for the region’s high housing costs.
It’s a fascinating examination of the region’s economic dynamics, and concludes with several recommendations that a public private partnership between the business community and regional planning agencies could provide a strong platform for the development of a regional economic strategy. To read the study, visit A Regional Economic Assessment of the San Francisco Bay Area.