One Percent of Pennsylvania Businesses Contribute 74 out of 100 New Jobs
A guest editorial by Matt Zieger, President and CEO, Team PA:
When was the last time you read a headline about a company that consistently hired five people a month for two years straight?
As headlines go, much too often, so goes traditional economic development support. The success of much of the commonwealth’s existing business support networks and financing programs are measured by, and thereby biased toward, companies making large employment announcements. So we asked a very simple question—who actually created the new jobs in Pennsylvania over time?
It turns out the answer is rather startling.
Team PA commissioned an extensive study of all Pennsylvania companies to help identify the net job producers over a multi-year period of time. The report revealed that employment growth is highly concentrated among a surprisingly small number of companies, and that those companies are almost exclusively not the companies sending out press releases with big job numbers.
From 2000-2006, 74 of every 100 net new jobs created in Pennsylvania’s private sector were generated by less than 1 percent of the state’s businesses. Click here for full details on the HiGro report.
From 2000-2006, 74 of every 100 net new jobs created in Pennsylvania’s private sector were generated by less than 1 percent of the state’s businesses. These high-growth companies (or HiGros) are amazingly diverse—located throughout every region of the state and in nearly all industries—and generate the most new jobs for the widest possible range of skills and professions.
Small Percentage Contributes Greatest Impact
Only 0.3 percent of the 757,000 businesses in Pennsylvania are considered HiGros. These roughly 2,300 HiGros generated almost 60,000 new jobs from 2006-09, an average of 26.2 jobs each; conversely, the remaining 754,000 businesses averaged a mere 0.1 percent of new jobs.
More than 100 HiGros are client or alumni companies of the Ben Franklin Technology Partners. It is clear the Ben Franklin program is an important contributor to the creation of HiGros in Pennsylvania.
Pennsylvania’s economy is complex, a combination of “micro-economies” based on very distinct regional strengths. Focusing on the next great sector does little more than artificially set winners and losers. The state needs an economic development approach that supports success wherever it may be—a system that learns from successful business leaders, that takes into account the uniqueness of our communities, and the businesses that fuel them, regardless of geographical boundaries or industry clusters.
Through organizations like Ben Franklin, the commonwealth has developed a nationally recognized model that vets the most promising companies, provides leadership counsel and leverages relationships with capital markets, educational institutions and the economic development system as a whole.
Team PA supports the regional delivery system of economic development services. This regional service delivery with public input is an excellent foundation for a new approach to economic development based on Team PA’s research. This study allows economic development officials to better identify the companies that are most likely be top net new job creators over the next four to five years—based on a variety of proven attributes including management cycles, profitability and employment growth. This can be a difficult concept for traditional economic development structures, but one that should be given thoughtful consideration.
A Change in Thinking
The Department of Community and Economic Development, under the outstanding leadership of Secretary Alan Walker, has been a true partner in leading this change in thinking. We must listen to our entrepreneurs and business leaders and not dictate where they should invest nor should we arbitrarily support one industry or niche market over another. We should build on the strong existing infrastructure of organizations, networks, and leaders that have proven successes of learning from, supporting, and connecting those companies who are the true economic engines of Pennsylvania.
Rather than trying to beat the market, Pennsylvania must
become a good place for the market to grow.
Keynotes July, 2011
Click here to read the full issue