What’s the relationship, if any, between economic development and inclusion? A study from the Brookings Institution (Metro Monitor 2018) suggests that for large metropolitan areas, there may be one. (I’ll not try to fit these data into a local container. That’s why there’s no ‘The Scene from Whitewater Wisconsin’ logo attached to this post.)
Here’s a summary of the report’s findings on the relationship between economic development and inclusion:
Over the 10 years from 2006 to 2016, however, changes in inclusion track more closely with changes in growth and prosperity than changes in growth or prosperity track with each other, as the charts in Figure 1 depict [link to Figure 1].
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Over this longer term, progress on inclusion seems to stand out even despite the unevenness noted above. Of the 38 metro areas that achieved above-average performance on growth from 2006 to 2016, 28 also achieved above-average performance on inclusion. Twenty-five (25) of the 38 also performed above average on prosperity. Of the 45 metro areas that achieved above-average performance on prosperity during that period, 32 also achieved above-average performance on inclusion. Twenty-five (25) of the 45 also performed above average on growth.
This admittedly wonkish analysis thus points to a simple insight that should guide regional economic development efforts: although it may be elusive from year to year, in the long run, inclusion may provide the key to true economic success.
See the full study, METRO MONITOR: An index of inclusive economic growth in the 100 largest U.S. metropolitan areas.
These large areas don’t, needless to say, center on small towns like Whitewater. The study data cannot – at least reasonably & honestly – be manipulated to infer conclusions about Whitewater.
The study’s three defined measures, however, might apply to different places, of different sizes.
Here’s how the authors define growth, prosperity, and inclusion:
Growth indicators measure change in the size of a metropolitan area economy and the economy’s level of entrepreneurial activity. Growth creates new opportunities for individuals and can help a metropolitan economy become more efficient. Entrepreneurship plays a critical role in growth, creating new jobs and new output; entrepreneurial activity can also indicate investors’ confidence in future growth and prosperity.[1]
Prosperity indicators capture changes in the average wealth and income produced by an economy. When a metropolitan area grows by increasing the productivity of its workers, through innovation or by upgrading workers’ skills, for example, the value of those workers’ labor rises. As the value of labor rises, so can wages. Increases in productivity and wages are what ultimately improve living standards for workers and families.
Inclusion indicators measure how the benefits of growth and prosperity in a metropolitan economy—specifically, changes in employment and income—are distributed among individuals. Inclusive growth enables more people to invest in their skills and to purchase more goods and services. Thus, inclusive growth can increase human capital and raise aggregate demand, boosting prosperity and growth.
Thinking about these three measures, it’s fair to ask: despite so very much government-generated crowing, and so many proud headlines and subject lines, how much has Whitewater really achieved in amount of growth, prosperity, and inclusion?