Tennessee lags in New Economy

Nov 22, 2008 (Chattanooga Times/Free Press - McClatchy-Tribune Information Services via COMTEX) -- VLKAY | Quote | Chart | News | PowerRating -- For all its success in recruiting billion-dollar investments from Volkswagen and Nissan in the past couple of years, Tennessee still trails most other states in what's needed for jobs of the future, according to a new study of state economies.

In the 2008 New Economy Index, developed to measure how well states are preparing for those upcoming jobs, Tennessee ranked in the bottom quartile of states.

"The factors for success in growing the per capita income and economic vitality of a state are much different than they were 20 years ago," said Robert Atkinson, president of the Information Technology and Innovation Foundation, which conducted the study for the Kauffman Foundation. "The old notion in the South that you would be successful simply by offering cheap labor and land no longer works when businesses are going to China or India rather than another U.S. state."

Massachusetts, which changed from a low-wage textile-producing state into one famous for its universities, biotech and software development, ranked as the top state in the New Economy Index.

Mississippi, which has some of the lowest levels of education, innovation and information-technology spending, ranked last in the index, just behind West Virginia, Arkansas and Alabama.

Success, as measured by growth in per capita income and business success, often is determined by the quality of the work force and the information technology and training support available in each state, Dr. Atkinson said. Half as many businesses relocate as they did a decade ago, he said, and most economic growth now comes from entrepreneurs and small businesses.

Among 29 business indicators measured in the New Economy Index, Tennessee ranked high in its Internet access to government services and in its entrepreneurial activity. But the Volunteer State ranked among the bottom 10 states in work force education, inventor patents and the share of population using online services.

"In both the quality and breadth of our students and faculty, Tennessee is still not where it needs to be to compete with the very best universities and research centers in the country," said Dr. William Fox, director of the Center for Business and Economic Research at the University of Tennessee in Knoxville.

Still, Tennessee recently was ranked behind only North Carolina in its business climate by Site Selection magazine, which surveys business leaders and looks at business investments to compile its list. The Volunteer State, for its size, also has been among the top 10 states in recent years in recruiting major business investments.

But Dr. Atkinson said a growing share of business growth comes today from business startups and entrepreneurs already within a state.

"To succeed in the new economy, states face a new imperative to boost competitiveness of their economies -- not just relative to each other but to other nations," he said. "If they are going to meet the economic challenges of the future, states will need to overhaul their familiar approaches to economic development."

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