attracting the green jobs of tomorrow

Tony Hutchison on the effects of brain not brawn…

In the past people went to where the jobs were, leading to the rapid growth of Victorian slums, the rookeries and stews from Dickens, or the modern equivalents the barrios and favelas, the shanty towns and worse around cities in the developing economies. Urban and economic policy has sought to mitigate the consequences of this, removing the slums or influencing the location of businesses. Increasingly jobs in the new economy depend less on brawn and more on brain.  

At the same time as improvements in communications technology allow teams to collaborate over great distances there is pressure for like-minded businesses to be close together. The most well documented are Silicon Valley and in the UK the Motor Sport Triangle where there is a cluster of businesses that cooperate, collaborate and compete to drive innovation in one of the most competitive businesses imaginable, high performance motor sport. Defining “green jobs” is very slippery, too tight a definition and the potential is understated, too loose a definition and the term becomes meaningless. Some common themes are:

• Linkages to new technologies, those that seek to reduce carbon emissions and reduce the rate at which resources are depleted;
• Information technology where the outputs are intellectual capital (computer games are an example of this category;
• Work that directly reduces carbon emissions, such as retro fitting homes with measures to reduce the energy consumed, without reducing the comfort level of occupiers.

What public bodies are seeking are jobs and associated economic activity that at best contributes directly to reducing carbon impacts or at worst are carbon neutral in their impacts. A helpful discussion can be found in “Pale or dark, it’s a green jobs bonanza” Sunday Times 22/11/2009.

Cluster theory, developed originally by Professor Michael Porter has gone a long way to explain this phenomenon and turn it into a tool for driving policy, the Local Enterprise Growth Initiative for example was based on local areas developing and supporting businesses to improve their shared activities to drive innovation. There are several projects such as Digital City in Middlesbrough, which seek to create the conditions for the formation of a cluster. 

It seems perverse at a time when jobs in the new economy are very mobile, and rely less on primary factors such as mineral deposits or climatic conditions for location that there should be this phenomenon. Today’s key economic factors—talent, innovation, and creativity—are not distributed evenly but concentrate in specific locations. In the UK, there is the Lloyds of London triangle, which is as strong as ever, life sciences clustered around Cambridge, and now media in Manchester with the BBC, Granada and others. Economic growth comes from talented and productive people collaborating, cooperating, competing and innovating.

This generates and exploits business insights, sometimes as a conscious process other times as an unintended consequence. Clustering makes individuals more productive, which in turns makes the places they inhabit much more productive, generating great increases in output and wealth. The mobility of people and increasingly business, means that it is essential for regions, cities or conurbations to actively manage the factors which differentiate their place to ensure the clusters can develop and be sustained. The menu and mix will be different for each cluster, and will range from excelling in the basics, like education and safety, to much more intangible elements like the 'buzz' or the 'soul' of the place.

What is this telling policy makers about how to seek a sustainable path to economic development?

When one is considering how to develop a region, city or conurbation it is very important to focus on development that is sustainable from a social, economic and environmental perspective, complementing the existing capabilities or attributes of an area or economy, and minimising any negative impact of future development. We set out below a framework to consider the dimensions of people, places and property and the implications for economic impact.

Cluster theory helps understand the forces that shape the development of an area. Historically physical or political factors fostered the growth of industries. Now intellectual capital drives innovation with production moving to locations that offer competitive advantage.  This means that employment opportunities break down into three broad areas:

• Research and development;
• Marketing sales and administration;
• Production.

Competitive advantage in each of these areas will determine both location of employment and the relative success of communities.

There has been considerable research into how decisions are taken by businesses to relocate. Cluster analysis and Porter’s theory of competitive advantage give valuable insight. One of the chemical factors is the availability of right talent to drive business growth. In some cases, businesses locate where there is a pool of talent, the Motor Sport Triangle in England where most Formula One teams are located means that highly skilled people can move between employers and employers can select from a broad range of talent. Equally, the presence of the skilled individuals drives innovation through sharing of knowledge, there is a further factor based on the level of investment needed to produce high performance sports vehicles. Investors are attracted to areas where those skills exist. It is also clear that within the area are outstanding schools and universities, rich and varied cultural opportunities, exceptional places to live and god communications. Cluster theory identifies the following as conditions that drive a cluster to develop:

• Factor conditions are human resources, physical resources, knowledge resources, capital resources and infrastructure.  Specialized resources are often specific for an industry and important for its competitiveness. Specific resources can be created to compensate for factor disadvantages.
• Demand conditions in the home market can help companies create a competitive advantage, when sophisticated home market buyers pressure firms to innovate faster and to create more advanced products that those of competitors.
• Related and supporting industries can produce inputs that are important for innovation and internationalization. These industries provide cost-effective inputs, but they also participate in the upgrading process, thus stimulating other companies in the chain to innovate
• Firm strategy, structure and rivalry constitute the fourth determinant of competitiveness.  The way in which companies are created, set goals and are managed is important for success. But the presence of intense rivalry in the home base is also important; it creates pressure to innovate in order to upgrade competitiveness.
• Government influences each of the above four determinants of competitiveness. Government can influence the supply conditions of key production factors, demand conditions in the home market, and competition between firms. Government interventions can occur at local, regional, national or supranational level.
• Chance events are occurrences that are outside of control of a firm. They are important because they create discontinuities in which some gain competitive positions and some lose.

The Porter thesis is that these factors interact with each other to create conditions where innovation and improved competitiveness occurs. What can therefore be done to attract talent to an area and create sustainable economic development? This needs to consider three things that contribute to quality of life. These can be characterized as:

• Hygiene factors (Safe and secure neighborhoods)
• Connectivity – physical and ITC
• Affordable homes in attractive locations
• Good primary and secondary education
• Development factors
• Attractive public spaces
• Choice of tertiary education
• Good local governance
• Actualization Factors
• Diverse cultural and leisure facilities
• Cohesive and active communities

In summary businesses use rational factors expressed through economic theory to create competitive advantage by locating in particular places. However, the people who they need to make that happen make decision based on different factors. And these are about place making and place shaping, schools, choice of homes and leisure activities, employment choices for partners and children growing up.

Economic development is an art as much as a science. Or perhaps a better analogy is the grain of sand that becomes a pearl, a naturally occurring pearl or cluster is more lustrous than a seeded pearl but each is valuable.

Tony Hutchinson(thutchinson@capita.co.uk) is Associate Director, Regeneration and Development Management, at Capita Symonds