If there is a silver lining to layoffs and the ongoing financial crisis, it is that the knowledge economy is inching forward, thanks to an increasing number of people returning to school and seeking advanced education, according to an Upstate economic expert.
"This tough recession is slowing all kinds of activities, but it accelerates others," said Bruce Yandle, dean emeritus of the College of Business and Behavioral Science at Clemson University and director of the Strom Thurmond Institute Economic Outlook Project.
Applications for applied graduate programs rise at times like this, meaning that educational attainment gets a positive nudge, Yandle said
"The new economy continues to form in South Carolina, even in tough times," Yandle said.
Yandle noted that research by The Kauffman Foundation found that the state’s overall standing in the new knowledge economy has risen from 39th out of 50 states in 2007 to 34th in 2008. This index measures indicators like a state’s number of knowledge jobs and fast-growing companies, direct foreign investment, and the degree of technology used in schools, government, health care and farming.
In addition, this is a time when entrepreneurship moves forward, Yandle said. In his June report of "The Economic Situation," Yandle wrote, "When large layoffs occur and major financial firms experience shutdown, large numbers of bright, experienced people take the opportunity to start a small, highly specialized firm. Then these firms band together to take on larger projects. They stimulate the economy."
Despite these few bright spots, Yandle said South Carolina’s economy has weakened, with the unemployment rate hitting double digits. Yandle said he expects this measure of economic well-being to worsen over the next six months, and not improve much until the first quarter of 2010.
Along with the state’s overall economy, the public sector also is suffering. Yandle said South Carolina’s general fund revenue has fallen due to the recession and the state’s tax base is not performing well in producing revenue. He said this is related to a sales tax exemption applied to groceries this year and the ongoing effects of substituting sales taxes for property taxes. Income and capital gain taxes also fall during a deep recession, he added.
Yandle and Clemson graduate student Kristine Koutout are working on building a knowledge-economy index for metropolitan areas in the South. The index will focus on the role of research universities in explaining migration patterns and the rise of the knowledge economy, Yandle said. It will look at an area’s education levels, as well as the number of fast-growth firms and industrial research and development spending.
Cities with an expanding knowledge economy also need to focus on providing an attractive lifestyle for those professionals who make up the workforce. Successful areas are diverse, with a strong commitment to the performing arts, and access to universities and higher education opportunities. Yandle also said it is important for these young professionals to have an active voice in city policy discussions.