The Brookings Economic Blueprint for Nevada - 8 News NOW

The Brookings Economic Blueprint for Nevada

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LAS VEGAS -- After Nevada lawmakers during the 2011 legislative session revamped the state's anemic economic development effort and vowed to implement a statewide plan to spur job growth, the public policy think tank Brookings Institution released a blueprint in November on how Nevada could revitalize its economy.

In partnership with UNLV and their collaborative organization, Brookings Mountain West, the Washington, D.C., think tank stated in its executive summary that "the state's heavy reliance on consumption-related sectors such as construction and real estate, tourism and gaming, and retail trade -- all of which are disproportionately affected by swings of the business cycle -- has left the state prone to extreme economic volatility and lingering malaise."

Brookings stated that Nevada can build on its strengths. They include low taxes, a business-friendly regulatory climate, historically high-growth economy, good quality of life, extensive entertainment and recreation assets, proximity to West Coast population centers, markets, transportation centers and ports, excellent airports and plentiful natural and physical resources such as for mining and energy.

Weaknesses were identified as an economy heavily oriented toward consumption-based industries, lack of a proactive and coherent economic development strategy, a low workforce skill level, an underperforming kindergarten through 12th grade educational system, underperforming health care system and relatively high energy costs. Other weaknesses include challenging land transportation connections in parts of the state, underinvestment in innovation, lack of risk capital to invest in start-ups, and the real estate bust.

Brookings identified the following opportunities in Nevada: political leadership engaged in revamping economic development activities; cost of living is attractive compared to neighboring California; relatively affordable housing and high residential, commercial and industrial vacancy rates; growing innovation districts at both ends of the state; large numbers of tourists and conventions and an opportunity to sell Nevada; infrastructure for innovation is in place at state's universities and at the Desert Research Institute; and world class Internet connectivity.

The think tank also listed these threats: extreme economic cycles and volatility; projected growth in core consumption-based industries that won't be sufficient to drive economic recovery; limited state economic development resources dispersed through fragmented regional efforts; high unemployment; underinvestment in higher education and lack of a top-tier Carnegie-ranked research university; existing image issues that can be a barrier in attracting higher-skilled workers; federal land ownership that can hinder land usage and development in much of the state; and water shortages.

The seven major industries Brookings recommended Nevada focus on include:

* Tourism, gaming and entertainment -- "Going forward the focus for this massive base industry in Nevada should be on attracting visitors from varied markets with new and diversified offerings as well as leveraging the world-class capabilities that already exist here to create new sources of growth. Target opportunities in this huge sector include: Nevada as the U.S. online gaming center; Las Vegas as the intellectual capital of global gaming; gaming manufacturing; diversifying into niche tourism markets; retirees and second home owners; and film and media development."

* Health and medical services -- "Bringing the low level of medical service production in Nevada just somewhat closer to the national average would generate substantial, stable economic activity and high-quality jobs in the state while improving health outcomes.Target opportunities here include: surgical specializations and stemming the ‘leakage' of surgical procedures out of state; geriatrics and related services; the disaggregation of medical service delivery; and leveraging a strong medical/health sector to build other emerging industries."

* Business information technology ecosystems -- "Nevada has a short-term opportunity to create numerous jobs in low-to-moderate-skill business service segments already established in the state while simultaneously capitalizing on under-recognized technology anchors and building an environment to support higher-end IT industry growth over the long term.Target opportunities include call centers/customer service and back office/BPO (business process outsourcing)/shared services; e-commerce operations/headquarters; data centers; cloud computing/high performance computing; and cyber security."

* Clean energy -- "Clean energy is a high-potential target for Nevada because it capitalizes on the state's renewable resource base, its established geothermal expertise and headquarters strength, its proximity to large energy markets, and its capabilities in construction and project management. Key opportunities include: renewable component manufacturing; export of electricity; advancing and internationalizing geothermal development; and energy efficiency upgrades."

* Mining, materials and manufacturing -- "Given Nevada's wealth of mineral resources, its history and knowledge base in mining operations, and its existing materials and manufacturing activities, this target industry provides a strategic opportunity for growth, diversification and innovation. Nevada's mining, materials and manufacturing industries have common technical expertise and resources that are exchanged between their component sectors and also have synergies with the state's renewables and defense industries. Areas of focus include: expanding participation in upstream mining activities; medium-value mineral supply chain development: manufacture of advanced composite materials; and organizing and marketing Nevada's manufacturing base."

* Logistics and operations -- "Nevada can be a West Coast hub of transport, distribution and operations because of its locational and geographic advantages for easily reaching the entire Western U.S. Solid infrastructure, lower costs and regulatory hurdles (relative to neighboring states), lower congestion, and overall ease of doing business add to the value proposition. Focus opportunities include: warehousing and distribution; advanced logistics; air cargo; integrated manufacturing-distribution, assembly manufacturing and food processing operations; and freight transportation."

* Aerospace and defense -- "Nevada has a solid base of defense expertise, with a particular focus on testing and training, and the state's geographic characteristics and low population density enable extensive testing operations. The state can build on this base of infrastructure and expertise to solidify an important role for the aerospace and defense industry in its economic future. Target opportunities include: unmanned aerial vehicle supply, assembly and testing; and maintenance, repair and overhaul of aircraft systems."

In addressing the fact that Nevada was hit particularly hard by the Great Recession, Brookings reported that the state lost 10.4 percent of its jobs -- nearly 170,000 -- from 2007 through 2011 and that 2011 employment was just above 2004 levels.

"The recession in short exposed an economy dangerously out of balance," Brookings stated. "Nevada has experienced such a wrenching recession exactly because the downturn disproportionately impacted the very industries on which the state is overly reliant."

That's because Nevada relies heavily on consumption-oriented industries -- construction, real estate, tourism, gaming and retail trade -- that account for nearly 47 percent of all jobs in the state, compared to less than one-third of all jobs nationally. These industries rely on consumer spending and disposable income, things in short supply during the Great Recession.

"Essentially, growth itself became a Nevada industry," Brookings stated. "Population and consumption growth fueled the housing bubble, and the housing bubble fueled even more population and consumption growth. Ultimately, these industries accounted for 83 percent of the state's job losses from 2007 to 2011. Over 55 percent of the jobs lost were in the construction and real estate sector alone."

Brookings also concluded that sparse innovation in Nevada contributed to its lack of economic diversity. Nevadans earn fewer than one-fourth the national per capita average of doctorate degrees, have only one-fifth the national average of science and engineering research space, and spend only one-ninth the U.S. per capita average on university research and development.

"An undeveloped innovation capacity results in fewer new products and processes being brought to market, products and processes that, when commercialized by Nevada firms, could form a new base for growth in Nevada's non-core industries and serve to diversify and strengthen the economy."

To help Nevada diversify its economy, Brookings recommended the state: recruit star researchers for its academic institutions; build stronger collaboration between university and industry research; boost industry research and development through tax incentives; assist small businesses in winning federal grants for innovation projects; turn research and development into business opportunities; and increase access to venture capital.

"Between 2005 and 2010, for example, the state averaged only six venture capital deals annually (for an average of $38.8 million in funding each year), which garnered only 0.2 percent of all venture capital investments in the nation each year," Brookings stated.

The think tank advocated completing the proposed Interstate 11 from Las Vegas to Phoenix, connecting McCarran International Airport to rail lines to help move freight, and relieving congestion along Interstate 15.

Brookings also recommended greater investment in Nevada's educational system from kindergarten through college. It noted that among the six states with 2 milllion to 3 million residents -- the others being Arkansas, Kansas, Mississippi, New Mexico and Utah -- Nevada had by the far the lowest amount of public financial support for higher education.

The think tank estimated that 31 percent of adults older than 25 in Nevada will have at least an associate's degree in 2018 but that 54 percent of all jobs by then will require post-high school training. Brookings said that means "there will be a large shortfall of qualified candidates to fill Nevada's future employment opportunities."

 

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