Business

Regional areas are in trouble, revival lies in ‘brain hubs’

OPINION: On the road while taking a little leave, I have been able to observe how some of our regions are faring.

No rocket science is required to recognise that regional Australia is doing it tough.

In places like Byron Bay and Port Macquarie, businesses are doing it tough.

Retail especially is suffering, from seasonal factors certainly but also from the fragile economy generally.

Businesses that have been around for decades are closing.

There are empty shops. Consumers are super cautious. Tourists are staying away.

A friend who owns a bookstore in Sydney also filled me in on the impact of the revolution that is shopping online.

She said this really reached a tipping point in 2011 and that the bulk of those switching to online shopping, often purchasing overseas, had only ever known a high dollar.

People probably assume low priced overseas goods are the new normal.

She also told me about the great new consumer activity, "showrooming".

That is, many people just visit shops to find what they want then go home and buy it online.

People are in the shops but not buying.

Online shopping is not new.

But if it has reached a tipping point, when combined with the GFC that some are saying is only now hitting Australia as our China driven mining boom fades, and all the other difficulties we face (high costs, skills gaps, falling commodity prices), it makes for sobering reflection, about how we revive our regional economies and create more good jobs.

With these things in mind, while on the road I have also been dipping into a recent book by the Californian economist Enrico Moretti, The New Geography of Jobs.

This is the best book I have read on economic development for quite some time, and every economic developer worth his or her salt should have a copy on the bedside table. (And yes, I bought mine online!)

Moretti's focus is the USA but the lessons apply equally here.

He finds the answer in the story of the emergence of a couple of dozen "brain hubs".

These are the regions at the cutting edge of what we all know as the knowledge economy.

They are the places where the highly educated congregate, where innovation occurs, where productivity is highest, and where incomes are greatest.

Places need educated workers but also innovators that are highly interconnected.

The places doing best are those which invest in the innovation sector and which build the ecosystem.

Innovative firms create kick-on local jobs that are far better paying than those created by non-innovative firms in mature industries, and at a far higher rate.

They create indirect service industry jobs at far higher rates.

People will want to locate there because that is where the good jobs are.

Low-paying jobs are now done overseas.

The USA's brain hubs are doing the high-end stuff.

Designing the ipods and ipads whereas the Chinese now are assembling them.

And places like Cupertino where Apple is located is one of those brain hubs.

There the wages are high and high wage indirect jobs are also in abundance.

We need, then, to be an ideas factory if we too want to be a place of highly paid, plentiful jobs.

Certainly, let's reduce our costs and make doing business easier.

Cut red and green tape. Kill jobs destroying taxes.

We can try to attract "the right people" to our region till we are blue in the face.

But they will only come if there are plenty of good jobs in high-paying firms.

High-paying firms will be those in the business of innovation.

Moretti also says a lot about my old hobby horse, mobility.

He wants to encourage regional mobility.

Paul Collits is an associate professor at USQ Fraser Coast.

Topics:  opinion paul collits regional university of southern queensland usq


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