The Knowledge Economy with Professor Todd Gabe
(Jan. 26, 2009)
Jim McConnon, Professor of Economics, Cooperative Extension
Specialist: "Since the release of Richard Florida's book The
Rise of the Creative Class in 2002, there's been a lot of
discussion nationally and in Maine about the role of the
creative economy and economic development. Todd Gabe, associate
professor of economics at the University of Maine has conducted
research on the creative economy and he's here with us today to
share some of his cutting-edge research. Todd, welcome."
Todd Gabe, Associate Professor of Economics: "Thank you, Jim. I
would also like to thank the other people that are involved in
the conference, both the other presenters and people from around
the state that are joining us online."
Jim McConnon: "Todd, can you give us your recommendation for
Vibrant Maine Economy?"
Todd Gabe: "Yes, Jim. I believe that the state needs to bolster
its knowledge economy. By this I mean the state needs to invest
in its people to build the knowledge and skills that are needed
to use the types of technology that can move the state forward."
Jim McConnon: "In a nut shell, Todd, how did you come up with
this recommendation?"
Todd Gabe: "Well, keeping with the theme of the Vibrant Maine
Economy, I started thinking about some of the economic develop
initiatives that have been used around the state over the last
few years. And as you mentioned a moment ago, state local
officials of Maine have been really interested in this idea of a
creative economy for some time now. There was the original Blain
House Conference held back in 2004, and then just earlier this
year there was the Juice Conference held in Camden. Of course,
between these two conferences there have been a lot of other
local and state efforts on the creative economy. So, we really
saw that there was interest in policymakers among this idea. So,
we've created several research projects on various aspects of
the creative economy. What we've really generally found is that
a lot of the economic development benefits that are attributed
to the creative economy actually come from technology based
occupations. So, what we have been doing over the last year or
so is we've actually narrowed this focus down from this broad
concept of a creative economy and started looking at more
specific type of knowledge areas.
Jim McConnon: "Let's go back to the first thing you said, Todd,
and tell us a little bit more about your research on the
creative economy."
Todd Gabe: "Okay, well, as you mentioned Jim, there's certainly
a lot of the interest in the creative economy as it has been
generated by Richard Florida's book, On the Creative Class. So,
here I am actually going to reproduce a table that is directly
from Florida's book. Here I show the earnings, annual and both
hourly earnings, of creative workers compared to some of the
other occupational categories that Florida uses in his book. I
want you to actually focus on the information shown in the box.
What this shows is that members of the creative economy earn
about $20,000 more than any of the other broad occupational
categories that Florida uses. I think that when policymakers see
this information, they start to get excited and say, "Hey, what
can we do in our region to help build and develop the creative
economy?"
Jim McConnon: "So, then it seems to me, Todd, that in terms of
enhancing earnings, the creative economy is a good strategy for
developing the Maine economy."
Todd Gabe: "Well, yes and no. The way Richard Florida defines
it, the creative economy is a fairly broad collection of
occupations and they are all similar in one respect in that
they're occupations that rely pretty heavily on creative and
idea generation. But on other levels, the jobs that are included
in the creative economy are quite different. So, here I am
actually going to show you the types of occupations that Florida
has in his creative class. You have computer and mathematic
occupations. You have architecture and engineering. Life,
physical and social sciences, education training in the library
and then a final fairly broad category which is called arts
design entertainment sports and media. I should mention that I
didn't come up with these categories, nor did Richard Florida.
These are categories that some of the U.S. government agencies
use to compile and disseminate employment information. But at
any rate, if you actually remove educators just for a moment,
what you're left with are these categories: computer and
mathematical; architecture and engineering; life, physical,
social sciences; and then you have that group arts, design,
entertainment, sports and media. So, if you really think about
it, you can combine those top three categories into like a
sub-set of this creative core and these are occupations that
rely pretty heavily on the use of technology--they're the more
scientific and engineering based occupations. And then you have
this second category under the creative economy which is the
art, the more artistic types of workers."
Jim McConnon: "So, do these occupations have different impacts
on the economy?"
Todd Gabe: "Well yeah. What we did in our research is we
attempted to isolate the exact occupations in this creative core
that provides some of the economic development benefits. This
work was done with Kristen Colby, who is a graduate student in
our department, she's actually from Maine. Then, Kathleen Bell
is a colleague of mine in the School of Economics. And what we
tried to do is look at how employments in these various parts of
the creative core affect county level earnings; this was
analysis that was done across the entire United States. In this
figure right here, some rises are key results. Along the
vertical, kind of up and down axis, we show additional county
level average earnings in increments of $500. When I say,
"average earnings," this is average per capita or per person
earnings in the county. And then along the horizontal, kind of
side-to-side axis, I'm showing some occupations categories that
are included in Richard Florida's creative core. The first set
of results we are going to focus on are computer and
mathematical occupations, and the affect they have on county
earnings. If you increase the proportion of employment in a
county in these types of occupations by one percent each point,
you actually see an increase in average earnings in the county
of about $1,500. The bar next to it that says, "all L's", those
are the other occupational categories in the creative core. If
you actually increase employment in those categories by one
percent each point you actually see a reduction in average
wages. The next two bars show a very similar affect when you
focus on engineers. When you increase county level employment in
architecture and engineering occupations, again by one
percentage point, you see a pretty substantial impact of about
$2,000 of additional earnings per person at the county level.
But if you increase other areas of the creative economy, again
not including these technical occupations, you once again see a
reduction in county wages."
Jim McConnon: "So it looks like the higher earnings associated
with the creative economy are actually associated with computer
programming and engineering."
Todd Gabe: "Yeah, things like that are exactly what we found.
So, if you want to promote, if you want to think about a good
way to enhance economic developmen, I think promoting the
creative economy is a good way to go. However, I really believe
that emphasis needs to be on enhancing the use of technology and
the skills and knowledge that can be used to contribute to
greater technology use."
Jim McConnon: "So I see how this fits in with your overall
research on the knowledge economy. Can you tell us a little bit
more about your research?"
Todd Gabe: "Yeah, no problem. Over the past couple of years or
so, we've been involved in several studies on the knowledge
economy. The first project looked at the affects of knowledge
about a wide range of topics, I will go into more detail in a
moment. But anyway, we looked at how knowledge in these areas
affects individual level earnings. I should mention this
research is different than what we did on the creative economy.
You know the creative economy, we were looking at the affects of
these creative occupations on county level or average earnings
per person in these counties. This first study we did on the
knowledge economy, we're looking at how knowledge affects a
person's own earnings. Then there was a second study, where we
started trying to assess spill over affects associated with the
knowledge economy. Here the emphasis is on how a person's own
knowledge affects the earnings of people around them. I think
this is kind of interesting because it gets at one of the key
benefits of clustering. If you have a high concentration of
activity in a particular area, whether it's an industry cluster
or in our case a cluster of one of these high-knowledge workers,
you would expect to find spill over benefits. In other words,
you have these knowledge or information spillovers where if
you've got a lot of people in the same industry, they're sharing
information and everybody is more productive. Again, we are
trying to get the same thing in these knowledge workers. If you
think about it that's kind of one of the main reasons why people
like to support industry clusters. Then there has been a third
research study, which we have just started working on more
recently. This is some work I have been doing with a colleague,
Jason Abel, who's actually at the Federal Reserve Bank of New
York. What Jason and I have done is we've tried to look at the
affects of knowledge on regional productivity. But the basic
idea of all these studies is the same. What we try to do is we
actually take a person's occupation of a job that they hold to
get a sense of the types of knowledge that they posses. And then
the next step in the analysis is to match these types of
knowledge to some key economic indicators, things like wages and
regional productivity."
Jim McConnon: "What type of knowledge areas do you look at?"
Todd Gabe: "Wow! Actually the research covers a pretty wide area
of knowledge. And I should note, I didn't come up with these
knowledge categories myself--this list was developed by
occupational psychologists and others involved in a project with
the U.S. Department of Labor. At any rate, I'm actually going to
highlight some of the area just to give you a general sense of
the types of knowledge that we looked at. You have
administration and management, engineering and technology,
physics, areas like therapy and counseling, fine arts and then
public safety and security. Again, I'm just highlighting some of
these areas just as an example. In our work, we looked at all 33
of these areas."
Jim McConnon: "So what types of knowledge tend to promote
economic development?"
Todd Gabe: "Well as a mentioned a moment ago, we've actually
been in several studies on the knowledge economy. I'm not going
to go into the nitty-gritty details on each of these studies.
Instead, I thought I would just summarize some of our key
results across the three studies. What I'm actually going to do
here is I'm going to highlight the areas that were important in
at least two of the three studies that we looked at. Again, one
of the studies looked at the affects of knowledge of individual
level earnings. The second study looked at the spill-over
affects associated with knowledge. Then, the third study has
looked at knowledge on regional productivity. So, here I am
going to show you knowledge areas that seem to be important in
at least two of those three studies. Here I am going to through
these areas. You have computers and electronics, engineering and
technology, mathematics and telecommunications. These knowledge
areas are all very similar, they're all related to technology
us. Here's a second group of knowledge areas, again these were
knowledge areas important in at least two of the three studies.
You have administration and management, economics and
accounting, sales and marketing and law and government. I
grouped these together because they are all similar in that they
all contribute to the provision, producer and business services.
Of course, our results related to this first set of knowledge
areas confirms, kind of supports, our work from the creative
economy where we found that a lot of the economic development
benefits associated with the creative economy were actually
coming from these technology-based occupations. The second set
of results is consistent with other research that is out there
that's found that producer business services enhance regional
productivity and are important to the economy."
Jim McConnon: "So, how does Maine stack up in these areas?"
Todd Gabe: "Well, as it turns out, Maine seems to lag behind the
rest of the country in these key knowledge areas. As part of my
research, I have actually constructed a regional knowledge score
for both states and cities around the country. So, the score is
just a number we assign to regions based on the amount of
knowledge they have in each of these areas. So, since I have
done this for all the states and the U.S. as a whole, what I'm
able to do is calculate a kind of a proportion or where we are
ahead or where we are behind the rest of the country. As you can
see, I'm actually going to show you these first few groups of
knowledge that are more related to technology use, we lag behind
in each of these areas. As an example, if you look at computers
and electronics, we are a little more than 6 percent in our
knowledge score below the knowledge score calculated for the
entire United States. Again for each of these areas
unfortunately, we tend to lag behind the national average. Now I
am going to actually highlight two areas, computers and
electronics and telecommunications. The reason I am showing you
these two areas together is that when you think of computers and
electronics and telecommunications, what you really have is
knowledge that supports this field of information technology,
which is particularly important in the new economy, as you can
see we lag behind the rest of the U.S. in terms of IT types of
knowledge. Note this next slide I'm going to show you how Maine
compares to the rest of the U.S. in some of the areas related to
business and producer services. Just as an example, the state's
knowledge score in the area of economics and accounting is about
7 percent below the knowledge score for the entire U.S. and
again in each of these areas, knowledge areas, we lag behind the
rest of the country."
Jim McConnon: "So Todd, how can we enhance Maine's knowledge
economy?"
Todd Gabe: "Well unfortunately there is no easy answer. We are
talking about a pretty major change to the types of occupations
and jobs that are present in the Maine economy. But I do want to
emphasize that I'm not saying that we need to make really costly
investments overnight. I think we will find our greatest return
and greatest benefits through sustainability and gradual
efforts. And I think we really need a combination of supply-side
and demand-side approaches to try to enhance the state's
knowledge economy. By supply-side, I mean building the knowledge
and skills, basically in workers. By demand-side, I mean
providing a place, a good climate, attracted to businesses that
are going to in turn employ these types of workers."
Jim McConnon: "So, by supply-side approaches, do you really mean
education and training programs?"
Todd Gabe: "Yeah, sure. This table actually shows you kind of
the importance of college education or education in general to
these key knowledge areas. In my research, I have actually
identified occupations that require a particularly high level of
knowledge about each of the 33 knowledge areas. The numbers
shown in the table are the percentages of high-knowledge
workers, again in each of these areas that happen to have at
least a four-year college degree. So as an example, if you think
of occupations that require high knowledge about computers, I'm
sorry about engineering and technology, you actually see that 79
percent of these workers have a degree. Again that's engineering
and technology workers about seventy nine percent have a college
degree. From these figures, you can see across the board that a
college education is kind of key to each of these knowledge
areas."
Jim McConnon: "So, besides the approaches you just outlined, is
there anything else we can do as a state?"
Todd Gabe: "Well, I think things like this conference can help
raise the visibility, the state's knowledge economy, and try to
point out some areas where more work is needed. As I mentioned
at the beginning of our remarks, which we have kind of
discussed, there has been a lot of interest in this idea, the
creative economy, for the last five years or so. It'd be nice to
see a few years down the road that we see some people have taken
some interest in the state's knowledge economy. I think more
generally it's really important in Maine to start focusing on
what people do in their jobs as much as what people make. If you
think about or look at economic development initiatives, this is
across the whole U.S. Over the last two decades or so, a lot of
the focus has really been on what people are making. Kind of on
a fairly large scale, you have states competing to attract an
automobile manufacturer or a computer manufacturer. Here the
emphasis is on, "we want to make cars" or "we want to make
automobiles." Again, the focus is on what people make. But I
think a real positive aspect that has come out of Richard
Floor's work on the creative economy is that we have started
thinking more about what people do. Of course in the example of
the creative economy it is this idea that people are using
creativity and idea generation in their jobs to create new
innovations, things like that. It's the same thing with the
knowledge economy. When you look a these knowledge areas, again
we are looking at it based on the types of occupations and jobs
that are present in the economy. You're really beginning to
focus on what Mainer's do in their jobs, not the types of
products they make. Which I think is important because we really
don't know what types of industries in this state, or anywhere
for that matter, 20, 50 years down the road. If you'd asked me
or asked somebody 20 years ago or 50 years ago what they'd be
making in Maine at this point and time, I don't think people
really would have had a great idea. Again, looking forward, it's
the same thing--we just really don't know. But what's nice about
focusing on what people do is, let's just give you an example of
say computer and technology use. Let's just say as a state we
decide we want to make it our emphasis to increase the types of
skills that people have in using computers and technology. We
haven't said anything about the products they are going to make
or the types of services they are going to deliver, which is
nice because if you have knowledge in information technology,
you are going to enhance the productivity of any business.
Whether it's a farm, a boat builder, a bed and breakfast, or say
some large biotechnology company. So again, I think it is key to
focus on what people do."
Jim McConnon: "Well thanks, Todd, for a very interesting and
enlightening discussion. Could you share with us once again your
recommendation for a vibrant Maine economy?"
Todd Gabe: "Yeah, I think this state really needs to focus on
enhancing and bolstering its knowledge economy."
Jim McConnon: "Great, thanks."
