Report: Iowa is productive, but low population growth is a concern

DES MOINES − Iowa's major industries are highly productive and have seen competitive job growth, but the state's low population growth could hurt its future work force, according to a report released Thursday.

The report, issued by Battelle Memorial Institute, detailed the state's strengths and weaknesses when it comes to economic development and discussed how Iowa has fared in advancing innovation, job attraction, and retention since the last strategy was developed in 2004-2005.

'After hard work and tough decisions, Iowa is back on track,” Gov. Terry Branstad said Thursday at the Greater Des Moines Botanical Garden during an event announcing the study's release. Roughly 120 state business leaders attended the event. 'We had a very focused effort and we had a plan, and we stuck to it.

'That's why today is so important because this (study) is about a plan for the future and assessing what we've done and celebrating it, but also looking to the future and how we can even do better.”

The Iowa Partnership for Economic Progress, a state advisory board made up of chief executive officers, commissioned the Columbus, Ohio-based research group to study Iowa's existing industries and growth opportunities in 2013.

During the yearlong study, it found that, over the past decade, Iowa has outperformed the nation when it comes to the growth of middle- and high-skilled jobs while the number of low-skilled jobs has declined.

The state's economic output was 5.9 percent higher than pre-recession levels in 2007 - outpacing the national growth of 4.7 percent during the same period.

Iowa also is doing well when it comes to producing science, technology, engineering and math (STEM) graduates. From 2009 to 2012, the state saw a 31 percent increase in the number of STEM-related degrees.

'When you get a chance to look at the study, it's going to tell you that the state does a lot of things really, really well,” said Bill Fehrman, president and chief executive officer of MidAmerican Energy and a member of the Iowa Partnership for Economic Progress board.

However, Iowa is well below the national average in the share of total degrees awarded in STEM-related fields. Only 10.1 percent of its postsecondary degrees were awarded in these STEM-related fields compared with the national average of 14.8 percent.

In addition, the state's low population growth could severely hurt Iowa's future work force. From 2000 to 2012, Iowa's population grew just 5.1 percent compared with 11.5 percent for the United States as a whole, the report said.

What's more, Iowa saw nearly flat growth in population among its youngest population group - those 24 years old and younger, which grew 0.5 percent from 2001 to 2012.

However, Greater Des Moines and the Cedar Rapids-Iowa City Corridor saw growth in population across all age groups, with the Corridor growing 12.5 percent during that same time period.

Debi Durham, director of the state's economic development board, said Iowa must do a better job retaining its college graduates. She proposed working with colleges to better identify graduates and market available jobs, and touted a program that incentivizes businesses that hire veterans.

'I think it's just about we've done a really poor job of telling the (state's) story, but that's changing,” Durham said.

Iowa's 12 major industry clusters - areas of economic growth that include industries such as biosciences and insurance - are outperforming national growth in their sectors. Nearly all of Iowa's top 50 employers fall within these major industry clusters.

Iowa's clusters are highly productive and have seen competitive job growth, the report found.

Eight of the 12 clusters have a higher level of output per worker compared with the same clusters nationally. Nine of them performed better in terms of job creation than the U.S. average from 2007 to 2012.

While some of Iowa's leading clusters saw declines from pre-recession job levels, the report stated that, in general, those declines were less than peer industry clusters nationally.

The industry clusters also have seen the number of high-skilled jobs grow faster than the nation in recent years. But these jobs still remain below the U.S. average in the overall number of jobs - with 23 percent of Iowa's work force employed in high-skilled jobs compared with 26 percent for the nation in 2013.

Average wages also are below national levels for high-skilled workers. Iowa's average earnings for private sector workers stood at $40,489 in 2013 - 23 percent below the national average of $49,700.

Furthermore, Iowa's clusters are not projected to be strong job generators over the next 10 years, which the study noted was of 'particular concern.” Ten of its industry clusters are expected to see job growth nationally of less than 1 percent per year from 2012 to 2022.

'If we continue to just focus on those 12 traded clusters, we're not going to see the kind of growth that we need,” Durham said. 'So you have to delve down and say, we know bio is one of those clusters. We know we do biofuels from feedstock. That is low value, to be honest.

'We need to go to the building block chemicals, to the secondary chemicals, and then you get all the way through that chain, you're at pharmaceuticals.”

Durham said a biochemical production tax credit − which she said would be the first of its kind in the nation − would be one example of a way for the state to address that concern. Durham plans to recommend the tax credit to state lawmakers in the upcoming legislative session.

'So the more that we can do that processing here, the more that we can bring on the higher added value,” she said.