By Keith Burdette
If West Virginians could glance over our collective shoulder and see how far we’ve come, we would be entitled to a glow of pride in our accomplishments. For example:
• West Virginia’s economy is well positioned relative to other states. Industry sectors such as energy and health care are performing with strength.
• The state’s exports increased by 43 percent—outperforming the United States’ export growth rate—in the first half of 2011, compared to the same time period in 2010. Leading the surge was the state’s top five export sectors: coal, plastics, machinery, medical products and organic chemicals.
• Since 2005, West Virginia has seen more than $16.8 billion in new business investments.
More, however, remains to be done.
Today’s economy is challenging for us as a state and as a nation. Moreover, shifts in the job market will have significant ramifications for workers and job seekers. These evolving changes present West Virginia with new challenges—and fresh opportunities.
Small businesses represent the overwhelming majority of West Virginia’s employers. That fact is recognized by the U.S. Small Business Administration (SBA), as you will read in this issue’s article by SBA Public Affairs Specialist Rick Haney. The SBA participates in funding the West Virginia Small Business Development Center (WVSBDC), a division of the West Virginia Development Office. In addition to the SBA and the state, WVSBDC is funded by our community colleges and the West Virginia WorkForce Investment Board.
WVSBDC recently developed the Three Step Jump Start, introducing a new training and business coaching program to help entrepreneurs and small business owners receive the right information for their stage of readiness. The first step is watching an online video on the agency’s Web site, www.wvsbdc.org. The second step is attending a workshop for either new or mature businesses, followed by an appointment with WVSBDC for one-on-one coaching sessions.
Whether start-up or expanding, businesses need equity capital. Especially in the current economy, industries in West Virginia, as well as the rest of the country, require greater access to and more sources of investment capital. In 1994, the West Virginia Legislature acted to help address that need by establishing the West Virginia Jobs Investment and Trust (WVJIT) with the mandate to invest in innovative, fast-growth companies.
WVJIT investments have added between $4 million and $9 million to the state’s economy and generated an average of 387 jobs during the last decade, according to a recent study from the University of Charleston. The impact study validates the value that venture capital contributes to the state’s business community, which WVJIT Executive Director Andrew Zulauf describes in his article in this issue.
A broader economic base provides more resilience and stability—and that’s good for all businesses, large and small. While continuing to value the contributions of West Virginia’s traditional industries such as energy, West Virginia’s governmental, business, labor and educational communities have been working together to develop a more diverse economy.
To be ready to take advantage of the opportunities presented by today’s emerging business sectors, the work force must have the requisite education and skills. The following article by James Skidmore, chancellor of the West Virginia Council for Community and Technical College Education, discusses steps the state educational system is taking to equip West Virginians with the essential skills and certifications.
The industries expected to generate the most jobs in West Virginia in the coming years are detailed in this issue in the article by Russell Fry, acting executive director of WorkForce West Virginia. One fact his article points out is that the majority of job openings in the future will be existing positions. This is a sign of the wave of retirements expected to sweep across America’s industrial landscape.
The U.S. Department of Labor reports that baby boomers make up about 47 percent of the work force. Between 2001 and 2019, the boomers will reach the traditional retirement age of 65 West Virginia experienced an 18.8 percent increase in older workers (ages 45 to 65) and an 8.6 percent drop in the prime working age (25 to 44 years) population between 2000 and 2010. Our state has long prided itself on the keen work ethic and high productivity of the West Virginia work force. As older workers begin retiring, our younger workers will have more opportunities to keep the state’s economy going strong.
West Virginia has made dramatic progress over the years, putting broader opportunities within our reach. Of course, there will always be challenges, but in rising to meet them, West Virginia will find inspiration to improve and achieve even more.
Education
By James Skidmore
When considering which education and training programs offered by a state’s colleges and universities have the greatest impact on economic development efforts, bachelor and graduate degree programs in engineering and science usually top the list. While graduates from these programs are critically important to economic development, there is increasing evidence to suggest that if states want to have a high-functioning knowledge economy, they also need to focus on recruiting and training another set of highly-skilled workers.
A recent report prepared for the Southern Governors’ Association points out that middle-skill jobs are essential to our state and our region’s economic growth potential. Middle-skill jobs are those skilled technical jobs that require more than a high school diploma but less than a four-year degree. These positions are found in diverse sectors of the economy such as advanced manufacturing, construction, energy, bio and nanotechnology, cyber security, information technology, telecommunications and public safety, and the necessary training is usually provided by community and technical colleges. Quite often these jobs are overlooked when discussions take place about the jobs needed in order to help drive the state’s economy, but it is in this middle-skill area that the largest gap between the needs of employers and the availability of workers exists. The report, entitled “Middle Skill Jobs in the American South’s Economy,” points out that middle-skill jobs comprise the largest segment of the nation’s economy, roughly half of all jobs, and that this trend will continue over the next 10 years. The report also points out that while 51 percent of U.S. jobs fall into the middle-skills category, only 43 percent of Americans have the skills to fill them. In West Virginia, the gap is even greater.
There are a number of strategies that states can implement to address this shortage. First, policy makers need to recognize that a serious need exists for middle-skill jobs and set bold goals to increase the number of state residents that have the technical skills to fill them. Second, employers and trade associations need to work to change the perception of these jobs by emphasizing their importance and the potential rewards in pursuing them as a career choice. Putting out the message that these jobs are smart choices and not second choices and that they often pay better than jobs requiring a four-year degree will help generate interest in these jobs and the programs that provide the training and skills necessary to fill them. Third, a sector-based approach to work force development will enable the state to work with employers and target high-demand, high-wage occupations that need an investment of training dollars. By engaging multiple firms in each major employment sector of the state, it will be possible to develop immediate strategies that address pressing work force needs as well as long-term plans to grow the skilled work force West Virginia will need in the future. Fourth, it is essential that we provide viable career pathways for working adults. Only 72 percent of the people who will be in the work force in 2025 are in the work force today. Providing opportunities for them to develop new skills throughout their careers will be critical to meeting our state’s work force needs.
The good news is that West Virginia is taking the right steps to ensure our citizens have the skills they need. The creation of a free-standing community and technical college system has led to the development of more than 100 new technical certificates and associate degree programs in the past three years. The West Virginia Department of Education is implementing a new manufacturing curriculum that will prepare high school students for entry-level jobs in that sector. In addition, the governor and Legislature have provided funding for capital bond projects and two advanced technology centers that will increase the capacity of community colleges to deliver technician-level education and training. By continuing to invest in our citizens and our infrastructure and by bringing together policy makers, business leaders and educators to emphasize the importance of these jobs, West Virginia will be able to prepare its citizens to succeed in the workplaces of the future.
Venture Capital
By Andrew Zulauf
Innovation, entrepreneurship, vision and leadership are critical factors in creating a company, but equity capital is what moves a company from the spark of an idea to successfully creating a business. Without access to capital, even businesses with tremendous growth potential may not succeed because they cannot fund their journey to profitability.
Investing in small companies to support business formation and growth and to strengthen the work force will pay dividends to the West Virginia economy for years to come. Not only do successful businesses enrich the economy by paying wages and generating income within the state but indirect effects multiply the impact. Local goods and services purchased by the company and individual workers cause additional goods and services to be purchased, creating a ripple effect throughout the economy. In this way, every dollar we invest creates additional income for the West Virginia economy beyond just the direct effect on the business.
In the absence of equity and venture capital, small businesses often have to go out of state to raise money, creating a very real risk that a West Virginia-based company will have to relocate as a condition of an investment. In these cases, we not only lose the company, jobs and tax revenue but we also lose critical and valuable human capital—the entrepreneurs who generate jobs and help us build the economy.
The state has made progress in creating a more business-friendly climate through tort and workers’ compensation reform and by reducing or eliminating some of the business taxes and fees for companies in West Virginia. The state also partners with our best universities to nurture our next generation of entrepreneurs. TechConnectWV, an entity formed to, among other initiatives, promote collaboration between all resource groups in West Virginia, including technology, capital, work force, research and business, is an example of creating the ecosystem to support innovation and entrepreneurship, but our venture capital market, which is critical to moving companies to success and sustainability, is stagnant. With just a few venture capital firms in the State of West Virginia, including the West Virginia Jobs Investment and Trust Board (WVJIT), INNOVA Commercialization Group and the Natural Capital Investment Fund, there is a lot of room to grow.
West Virginia needs to foster a robust climate for all stages of investment, from angel, seed and early-stage capital to later-stage venture capital. In particular, we need to create or attract venture capital companies that can focus on current and emerging technologies such as energy, chemicals, health care, information technology and biosciences—high-growth industries that can drive our state’s economy.
To multiply the economic benefit, some socially focused funds such as Calvert, Edison and the Sustainable Jobs Fund not only work to maximize financial returns on investment but also create socio-economic benefits to the state through job creation and retention, wages, tax revenues and health care benefits. These funds are aligned with WVJIT’s investment mission and should be part of the access to capital solution.
In addition, West Virginia can look to other states for proven models of programs that encourage investment and improve economic development. Some states use tax credits to spur angel investing, which helps start companies and augments seed and early-stage investments. Connecticut, Georgia, Maryland, Massachusetts, Michigan, Minnesota and Wisconsin have all recently passed incentives for angel and early-stage equity investment. Others have created successful economic development and business acceleration/commercialization initiatives, such as Ohio’s Third Frontier Program, Cleveland’s JumpStart and Pittsburgh’s InnovationWorks. Modeling incentive and support programs that cater to West Virginia’s economic strengths will give us the best chance of success.
It’s time for us to act—to create the environment that nurtures innovation, attracts investment and helps entrepreneurs grow that spark of an idea into a business that benefits West Virginia.
The Work Force
Even in today’s challenging economic climate, there are great jobs available in West Virginia—if you have the right education, training and experience.
Consider this:
• Eighty-seven percent of all job openings in West Virginia through 2018 will be existing positions. The remaining 13 percent will be new jobs.
• Nearly 60 percent of these new jobs will require at least a two-year degree.
• Some jobs that require on-the-job training will disappear.
• The best return on investment in education may be a two-year associate degree.
• Occupations that typically require a minimum of a two-year degree pay a salary equivalent to 85 percent of the salary of those occupations that require a bachelor’s degree.
West Virginia’s total employment in all industries is projected to grow from roughly 789,000 in 2008 to 815,000 in 2018, which equals approximately 26,000 more jobs. Jobs in the arts, entertainment and recreation sectors are expected to increase almost 13 percent, from 116,066 in 2008 to 131,084 in 2018. The job sectors expected to have the largest increase in West Virginia from 2008 to 2018 are health care and social assistance, from 9,018 jobs to 10,261, and construction, from 39,103 jobs to 43,549.
Recently, Gallup, the national polling firm, reported that West Virginia is third in the nation in job growth. According to the Gallup survey results, this is the third year for West Virginia to be ranked in the top 10 for job growth. West Virginia’s fastest-growing jobs include biomedical engineers, data communications analysts, financial examiners and petroleum engineers. Environmentally-friendly fields are also expected to require an influx of workers. West Virginia was 19th in a recent report ranking states based on their wind energy capacity. In response to this, the state’s community college system is offering an associate’s degree program in wind technology, which will prepare graduates to construct, repair and maintain wind turbines. It’s one of several ways the educational system in West Virginia is evolving to make sure today’s students are prepared to become tomorrow’s workers.
“It is clear that higher education will continue to play a vital role in preparing the state work force to compete in the global economy,” says George Hammond, associate director of the West Virginia University Bureau of Business and Economic Research. “Human capital plays a vital role in stimulating local innovation and productivity growth, which are key drivers of a rising standard of living for the state’s residents.”
Business executives who are already successful in West Virginia give much of the credit to the state’s dedicated workers. They cite a strong work ethic, low turnover rates and high productivity among workers as key reasons for maintaining a business here. For example, the typical turnover rate at distribution centers around the country is 25 percent, while Coldwater Creek’s distribution center in Mineral Wells has a turnover rate of just 5 percent. Craig Hartzell, the CEO of Azimuth, Inc. in Morgantown, calls the West Virginia work force a secret weapon and the main reason his company has been able to expand and thrive.
Several programs within WorkForce West Virginia are designed to set workers on the path to future success. Among them is On-the-Job Training (OJT). OJT provides unique opportunities for participants to learn as they earn. By participating in training as an employee, the participant not only acquires new skills and knowledge but also receives the same wages and benefits as current employees in same or similar positions. The employer benefits by being reimbursed for part of the participant’s wages during the training period while having the services of a full-time employee.
In a time when America’s financial picture is in recovery mode, many workers feel uncertain about their future. Having the skills to adapt and change can bring peace of mind that is invaluable. West Virginia’s work force and its employers can rest assured that the opportunities for learning and training are available, both for homegrown small businesses and international corporate operations.
Small Business Administration
By Rick Haney
West Virginia’s small businesses are key to the state’s economy. According to the U.S. Small Business Administration, small businesses make up 96.2 percent of West Virginia’s employers and have a presence in every West Virginia industry. The largest industrial sectors in West Virginia include health care and social assistance, retail trade, accommodation and food service, manufacturing and construction.
We at the SBA realize, as does most of the country, the significance small business plays in our everyday life. U.S. Senator Joe Manchin refers to West Virginia’s small businesses as being “the engine of our economy, creating jobs and economic growth throughout our great state.” With 53 percent of all private sector jobs accounted for by small business, one can see just how important the small business sector is to West Virginia’s economy.
SBA Administrator Karen Mills has visited small businesses in nearly every state, including West Virginia, and has seen first-hand the impact they have in their local communities and throughout the country. SBA has helped companies like Azimuth, Inc. in Morgantown, Professional Services of America in Parkersburg, HMS Technologies, Inc. in Martinsburg and The Water Store in Beckley create jobs as they grow and strengthen the economic security for our working families.
How does the SBA help small businesses? First, we have supported more than $23 billion in SBA lending to small businesses across the U.S., with our highest-ever lending record in the first quarter of fiscal year 2011. This includes 150 businesses in West Virginia and nearly $43 million thus far this fiscal year.
Second, the SBA has traveled across the country talking to small businesses. More than 1,000 have participated in forums where we listened to their concerns and suggestions in our effort to identify the biggest barriers they face, including a session in August in Lewisburg.
From these sessions, five key areas emerged:
• People: identifying, hiring, retaining and developing a strong American entrepreneurial work force.
• Money: fostering an environment in which promising U.S. start-up and high-growth firms can access the kinds of capital they need.
• Ideas: transforming more of America’s discoveries and breakthroughs into commercial success.
• Customers: ensuring America’s small firms can compete for customers, including U.S. government contracts and export business.
• “Lean” Government: making the U.S. government itself more customer-centric and nimble in serving our own entrepreneurs and high-growth firms.
As a result, we have uncovered new ways to make government more responsive to their needs and to connect more small business owners with the right workers, tools and customers.
Third, the SBA is partnering with more investors who want to help start-up and high-growth firms in emerging industries and underserved areas, including rural communities. This $1 billion Impact Investment Fund is based on a long-standing matching fund program that played a key role in the formative years of great American firms like Intel and FedEx and is subsidy-neutral, so there’s no additional cost to taxpayers.
Other small business initiatives put into action in the past two years include more federal contracting opportunities. Beginning in October 2008, an increasing percentage of federal contracting dollars have gone to small businesses, totaling approximately $221 billion. This increase can be attributed to recovery act incentives and implementation of the Woman-Owned Small Business Certification Program. The National Export Initiative exported $1.83 trillion in goods and services, supporting 10.3 million jobs in its first year. President Barack Obama’s recent QuickPay Initiative cut the amount of time it takes federal agencies to pay small businesses for the products and services they deliver to the federal government from 30 days to 15.
Through efforts like these, even more of America’s small businesses are being put on a firmer path to creating good jobs. In turn, these job generators will provide stronger economic security for hardworking people—both employers and employees of West Virginia’s small businesses.
