The fundamental challenge in this recession is that the growth that preceded it was a mirage. Bubble era borrowing created a network of financial jobs, real estate jobs and construction jobs that collapsed with the end of the bubble. Many of those jobs will never return.
An extremely high proportion (75%) of job losses in this recession are permanent rather than temporary. States will need to nurture completely new industry sectors and the infrastructure to support those jobs, while the jobless will need retraining in new skills to participate in those sectors.
As we described last week in State Job Creation Strategies Part I: Finding the Money and Investing in Human Capital and Physical Infrastructure,
competing globally for jobs starts with policy makers instituting
fundamental investments in education, human capital and physical
infrastructure that make their state a productive environment for
economic innovation. The next step, as this Dispatch will describe, is helping the private sector leverage opportunities for job creation and technological innovation.
Many state venture funds arepart of policy programs aimed at encouraging university research to spin-offinto business startups and jobs in surrounding communities. As a NationalScience Foundation study recently emphasized, even smaller universities areplaying a vital role in local job creation. Technology transfer licenses havedoubled in the last 10 years and universities have had $1.6 billion in incomefrom licenses to corporations and startups in 2005.
These localuniversity ties can create businesses loyal to the local economy far moreeffectively than typical tax giveaways. States are using a number of tools toencourage technology transfer on a more regular basis, from creating dedicatedtech transfer investment vehicles, to encouraging university research parks, tospecial tax credits related to technology transfer.
Florida Governor Charlie Crist recently signed an economic stimulus plan for the state that redirects $1.95 billion of the state's pension fund
into direct investments in Florida's economy. The amount is limited to
1.5 percent of the state's pension money, but even that limited
percentage can add up to massive investments in jobs for the state's
In creating the program,
legislators and the Governor pointed to the success of similar programs
in other states, particularly the California Public Employees' Retirement System (CalPERS), the nation's largest pension fund. A recent study
found the California fund's in-state investments had fed an estimated
$15.1 billion into in-state economic activity in 2006 and created
124,000 jobs, more jobs than the construction or motion picture