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Report says key to Austin’s economic success is staying on top

Friday, February 14, 2014 by Jimmy Maas

Austin’s economy – if statistical rankings can be believed – is currently among the best in the country. Judging by those rankings, the city is at or near the top of many publications’ lists for job creation, business environment, places to go to school, live, work, socialize and retire.


In their annual Economic Development report to the City Council Thursday, the city’s Economic Development Department and the Greater Austin Chamber of Commerce said that while the city may be riding high now, the real work will come in keeping it there.


The report said that in order to maintain that momentum, Austin must develop programs that enhance economic recruitment and at the same time, retain the businesses that are key to the city’s current success. The report also listed factors such as developing better-paying jobs for the city’s low-income workers, creating jobs for the hard-to-employ and narrowing the income disparity gap as critical in maintaining and growing the city’s economic vitality.


The report pointed out that despite Austin’s booming economy, its economic and political leaders still face the challenge of overcoming poverty. As of 2012, more than one in four children lives in poverty in the city. Between 2000 and 2011 when the city was topping lists for job creation, department data show the area had the second fastest increase of poor people living in suburbs.


Council members were supportive of the change in focus to the impoverished, but some were wondering where business and civic leaders were before.


“I appreciate that we’re now putting (an emphasis on) it, but where was it between 2004 and 2012?” asked Council Member Mike Martinez.


One solution stressed by both the city and chamber reports is improving education.


“We need a dramatic increase in the number of children and of individuals who are moving into our high-tech industry cluster,” said Kevin Johns, the city’s director of Economic Development. “That means more STEM (science, technology, engineering and math). It means more recruitment that is targeted.”


According to Johns, only 7 percent of the city’s STEM jobs are filled by Hispanics; women only account for 25 percent of the jobs.


The report also recognized Austin’s affordability problem. Its population growth has put a real estate price squeeze on an area where real income growth has only increased 1 percent annually from 2001 to 2010.


Another hurdle for Austin is its “hard to employ” citizens. The city estimates there are 10,000 people in this category, due to reasons such as a lack of education, a criminal record, language difficulties or homelessness.


One area in which the city and the chamber see potential job growth is in manufacturing.


“General manufacturing is becoming more interested not only in coming back to the United States, but looking at Texas.” said Michael Rollins, president of the Austin Chamber of Commerce. “And we’ve had a larger increase in general manufacturing interested in Central Texas. Of course, we’re focused on advanced manufacturing, which is the higher end in that.”


“We actually have over 250 advanced manufacturing companies here in Austin,” said Michele Skelding, senior vice president of innovation and global technology with the Chamber. “We’re, I think, surprised to find we have such a strong base here.”


Johns, Skelding and Rollins see manufacturing expansion and perhaps the recruitment of a logistics business (think warehouse or distribution, like UPS or Amazon) as a way to lift up those left behind by tech jobs.


Diversification was a major theme in the Chamber’s report.


“Every time I hear the Chamber mention diversification, it makes me feel good,” said Council Member Bill Spelman. “We (Texas) are the second most volatile economy of any city in the United States – the  first most volatile being our big brother in California, which is even worse than we are. I think evening out that boom and bust cycle is going to make our jobs up here easier and in the long run make your jobs easier, as well.”


To further its diversification strategy, the Chamber is actively seeking a life sciences research company to feed off the development of the University of Texas Medical School.


“The life science-biotech anchor tenant will help speed up development,” Skelding told the Council. “Defining life sciences in terms of research and product development will be crucial as we add to the medical school development.”


Another area for potential growth of the economy is in entrepreneurship and companies spurred by venture capital.


“Although we capture more than 67 percent of the venture capital dollars for Texas here in Austin … it’s still just 1.2 percent of the VC dollars nationwide.” said Skelding. “So, we’re just a blip on the radar, nationally.”


Development officials also said that a new incentive program for the film and TV industry is on the drawing board for city. Officials say that despite it being a business that is temporary in nature and has difficulty fitting into the current structure for more permanent businesses, attracting and developing a vibrant entertainment industry can pay major dividends for the city’s image.

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