12 things to know about the big new Brookings report on RI’s economy

PROVIDENCE, R.I. (WPRI) – With its 198 pages of sometimes dense statistics and jargon, nobody would mistake the new Brookings Institution report on Rhode Island’s economy for a beach read.

Still, Rhode Islanders should pay attention to the findings and recommendations in the study, which was commissioned by Gov. Gina Raimondo and released Tuesday – because it’s likely to influence state leaders’ thinking about policy moving forward.

The study is entitled “Rhode Island Innovates: A Competitive Strategy for the Ocean State,” and it combines an extensive analysis of what’s ailing the local economy with a slate of 36 proposals that the authors think would improve the situation. Here’s a rundown of some of the key parts of the report.

1. The Brookings team is closely connected to Governor Raimondo’s office.

Technically, the Brookings report is a privately funded effort, backed by $1.3 million from foundations and individuals with a connection to the state (The Fascitelli Foundation; The Rhode Island Foundation; The van Beuren Charitable Foundation; Mark Gallogly and Lise Strickler; Stephen and Kristin Mugford; and Thomas R. Wall and his wife).

In practice, though, the report itself says Governor Raimondo “invited” the Brookings team to undertake an analysis of Rhode Island’s economy last spring, and the study released Tuesday is the outcome of six months of work. While the Brookings researchers said they were not directed to reach any specific conclusions by the governor’s office, their views are generally in line with hers, and they were given space by Commerce Secretary Stefan Pryor to carry out their work. Therefore it’s reasonable to assume the study gives an idea of where Raimondo wants to take economic policy in the state going forward – which is why it’s gotten so much attention. Still, skeptics rightly note there have been a lot of reports done on Rhode Island’s economy over the last six decades, and question whether this one will have a different impact.

2. Rhode Island’s economy has been having a tough time since the 1970s.

The Brookings report traces the start of the state’s current economic malaise back at least four decades. In a section noting the importance of industries that trade outside of Rhode Island (as opposed to mostly doing business inside the state), the authors say: “The state’s trade sectors – its most critical sources of prosperity – have been losing jobs since the 1970s and are only now stabilizing, much reduced.”

One sign of that is in a reduced standard of living: in 1980 the average Rhode Islander’s personal income was 92% of the average Massachusetts resident’s; by 2013 it was only 82%, according to the report.

The study places a lot of the blame for that on the “calamitous job losses” the state has experienced since 1980 in its advanced manufacturing industries, whose productivity has grown far less than the national average. A striking statistic on that front: “Total advanced industry employment dwindled at a faster rate in Rhode Island than in any other state from 1980 to 2013.”

Why? The authors cite the same issue flagged in an important 2011 study: Rhode Island’s manufacturing mix, in industries such as toys and jewelry, was relatively labor-intensive and low-value-added, making it hugely vulnerable to the rise of China.

Brookings advanced manu industry 1980 2013

3. Rhode Island’s economy has been having a tough time since 2006, too.

It won’t come as news to anyone in Rhode Island that the Great Recession took a huge toll on the state. But the Brookings study notes this wasn’t what observers were probably expecting in 2006, writing: “In the early 2000s, Rhode Island’s economy was a leader in New England and enjoyed relatively strong performance across economic measures relative to the United States.” Want contemporary evidence? Look no further than this October 2006 Boston Globe story on Massachusetts envying its southern neighbor: “The smallest state in the land is in the midst of a giant-size comeback.” Within three months, Rhode Island started losing jobs – and didn’t stop for years.

“Within New England, the state has slipped from leadership on productivity growth, output, and employment gains in the early 2000s to middling status since 2010, after a recession that started earlier and lasted longer than in peer states,” the Brookings report says. “Prior to the recession, the economies of New England states largely moved together. Coming out of the recession, performance has diverged, with Massachusetts and New Hampshire pulling away, Connecticut and Maine falling behind, and Rhode Island drifting in between.”

Brookings RI NE post-recession

4. Rhode Island’s economy is in so-so shape now.

The actual state of the Rhode Island economy “is less dire than middling,” in the Brookings researchers’ view. The state has gone from a regional leader before the recession (see #3 above) to a middle-of-the-pack performer now.

As evidence, they point to the state of the job market:

Brookings RI job market

“Basically, the collapse of the state’s legacy advanced industries combined with the too-slow emergence of new ones has left the state without a growth engine,” they argue. “Erosion of the state’s advanced industry base and the failure to nurture new advanced industries has left the state adrift.” (Then they pivot to a pitch for their recommendations: “In order to get back on track, Rhode Island needs to build more resilient, future-oriented industry specializations capable of securing prosperity for the next generation.”)

One interesting side note: the Brookings researchers say it’s hard to analyze Rhode Island’s competitive situation compared with other states. For many places, doing so just means looking at “the core needs of two or three larger industries” – but Rhode Island has “a complicated, fine-grained industry structure made up of many small industries that lack the scale to drive economic prosperity on their own.” Brookings counts 33 “distinct industry clusters” that “comprise the state’s economic base,” with 24 of them employing fewer than 5,000 people.

5. Rhode Island has issues in the innovation department.

At first glance, the Brookings statistics would suggest Rhode Island is in strong shape in terms of innovative research – the state’s universities plus the Naval Undersea Warfare Center spend a lot of money on it, as this chart shows:

RI R and D

“Overall, the state’s university research platform is quite strong,” the Brookings researchers write, “but its commercialization enterprise remains uneven. … What is surprising is how much Rhode Island trails on university technology transfer.” That is, surprisingly little of that money spent on research in Rhode Island leads to the sort of innovative startup activity associated with, say, MIT and Cambridge.

The study also finds Rhode Island lagging on entrepreneurship generally:

RI entreprenruship

“Rhode Island’s mixed position in innovation is at once promising and in need of improvement,” the study argues. “The state’s solid and growing university and federal research enterprise provides an important base on which to grow, and the ability of some companies to secure venture funding suggests Rhode Island startups could secure funding if there were more of them. With that said, the limited investment in innovation by industries and the state’s weak commercialization activities point to an urgent need for more industry research and industry-university partnerships while better leveraging the state’s university and federal laboratory complex.”

Also of concern: “Rhode Island’s middling-quality talent stocks are coming under stress.” There aren’t enough people finishing the training necessary to supply a work force for STEAM industries (Science, Technology, Engineering, Arts and Math), according to Brookings, despite a growing demand for such skills among local businesses.

6. Rhode Island still has issues with the business climate, too.

Another finding that’s unlikely to shock people – the Brookings researchers find various examples of how Rhode Island is still hampered by a “suboptimal” business environment. Among the issues they single out are the unemployment insurance and property taxes as well as extensive red tape at the state and local levels. They also point out that with Quonset running out of land, the state lacks sizable “pad-ready commercial-industry building sites.”

7. The outlook for Rhode Island’s economy is worrying.

“Without a change of its economic trajectory,” the Brookings researchers argue, “Rhode Island will continue to see its standard of living decline, its available resources erode, and its ability to connect its diverse population to sustaining opportunities weaken.”

8. Brookings sees seven “growth areas” for Rhode Island.

Brookings is big on the economic potential of “advanced industries,” which its team defines as “industries that invest heavily in R&D and STEM workers, prize innovation, and demonstrate high productivity, strong exports, and higher pay.”

While the Rhode Island study’s authors emphasize that they don’t think state government should pick specific “winners and losers” among different industries to invest in, they do offer a list of seven industries they think have particularly strong potential – five advanced industries, and two “opportunity industries” (meaning they provide opportunities for workers without college degrees.)

Here’s the list:

RI growth areas

9. Brookings has a trio of initiatives for Rhode Island.

The study has three dozen different recommendations for state government and the private sector to undertake, which it organizes as three initiatives: “Rhode Island Innovates,” “Rhode Island Competes” and “Rhode Island Acts.” The researchers argue the various proposals, as a group, will help encourage the growth of advanced industries and “shore up the broad platform for growth” of all businesses in Rhode Island.

So what are they? Rhode Island Innovates would “invest in the state’s innovation capacity, quality of place, and skilled workforce.” Rhode Island Competes would “upgrade the state’s business environment.” And Rhode Island Acts would “increase the state’s capacity for business-led civic engagement.”

10. Rhode Island train service gets some attention.

Among the 36 Brookings recommendations are a group of three big-money items that reflect the ongoing discussion locally about how to do a better job connecting Rhode Island with the thriving economy of Boston.

The study recommends new rail subsidies and the creation of a “Rhody Pass” app-based ticket option; the establishment of express commuter rail service between Providence and Boston; the expansion of intercity rail service in Rhode Island; and the building of a new Pawtucket/Central Falls commuter rail station as part of a broader investment in transit hubs. (Notably, Governor Raimondo had expressed skepticism about the latter idea just last year.)

11. Local CEOs are knocked for lack of coordination.

One somewhat outside-the-box idea from Brookings is the creation of a new Partnership for Rhode Island, modeled on the Partnership for New York City, that would bring together the chief executives of the state’s major businesses and universities. (The Bay State has a somewhat similar entity that’s growing increasingly powerful, the Massachusetts Competitive Partnership.)

Why is this needed? The Brookings researchers think Rhode Island is suffering due to the lack of “a central high-powered CEO organization that can mobilize money and organize at a decisive scale.” They argue, “Rhode Island’s leadership class has historically punched below its weight in delivering large-scale transformation initiatives in the economic development sphere.” Clearly, part of the reason for this recommendation is that some of the other recommendations contained in the study could be funded and carried out in part or in full by this new organization. The report also emphasizes that such an organization could act independent of government.

12. Here are all 36 proposals in the Brookings report.

The Brookings study groups the estimated cost of its various proposals, listed below, at three levels: zero to under $1 million a year ($); $1 million to $5 million a year ($$); or $10 million and up a year ($$$). Note that the following descriptions are Brookings’ terminology. More details about each proposal are in the full report.

Rhode Island Innovates

  • Launch a multi-dimensional initiative to spur Rhode Island technology innovation
    • Recruit and support impact faculty at Rhode Island universities ($$$)
    • Support proof-of-concept grants for new advanced-industry products ($)
    • Prioritize matching funds for industry-university technology development (n/a)
    • Support a Rhode Island Global Innovation Challenge ($$)
    • Create a Rhode Island Entrepreneurs in Residence Program ($$)
  • Strengthen several innovation districts or neighborhoods around the state by targeting them for place-based technology collaboration centers and strategic placemaking
    • Create one or two industry-university-laboratory tech collaboration centers ($$$)
    • Offer priority access to collaborative innovation centers to a range of state innovation programs (n/a)
    • Targeted Rhode Island Innovates! place-based tax incentives ($$)
    • Incorporate placemaking into the planning of major innovation districts or neighborhoods (n/a)
    • Bolster Main Street RI program to support enhanced placemaking ($$)
      • Ensure state marketing targets young professionals and brands “hipness,” especially with regard to food and design (n/a)
      • Partner to deliver “pop-up” urbanism ($)
      • Establish a state-level New Urban Mechanics (NUM) team ($)
  • Complement a strong statewide STEAM education and training agenda with RI Codes – a coding initiative to prepare more Rhode Islanders for careers in tech
    • Designate a STEAM Champion ($)
    • Roll out a large-scale statewide marketing campaign ($-$$)
    • Invest in ongoing, high-quality professional development by bringing UTeach to URI and/or RIC ($)
    • Establish a STEAM Workforce Challenge grant program ($$)
    • Scale up Wavemaker ($$)
    • Provide free access to online learning platforms like Treehouse, Thinkful, or Bloc to teach coding skills ($$)
    • Make short-term training available at CCRI (negligible)
    • Expand LaunchCode’s Partnership for Real IT Jobs to help firms create tech apprenticeships that lead to promising jobs ($)
    • Create an RI Diversity Initiative to cultivate a more diverse tech workforce ($)
    • Incorporate computer science into the P-12 curriculum (negligible)
    • Encourage more students to sit for the AP computer science exam ($)

Rhode Island Competes

  • Continue improving the state’s suboptimal tax and regulatory structure
    • “Plus up” Rhode Island’s underperforming R&D tax credit by raising the cap on deductions and making the credit refundable ($$)
    • Reform the unemployment insurance payroll tax by reducing its incidence on young firms (neutral)
    • Create the nation’s first-ever “A-Corp” corporate designation ($$)
    • Modernize permitting regulations and processes to make it easier for businesses to start and grow (n/a)
    • Take Rhode Island’s e-permitting initiative statewide to cover all municipalities and permit types ($$)
    • Reform occupational licensing requirements to make them competitive with neighboring and peer states (n/a)
    • Reduce or eliminate restrictions of the state’s non-compete agreements (n/a)
  • Build on success to create a statewide land assembly and site management body
    • Assemble and prepare more pad-ready commercial-industrial building sites ($$$)
  • Improve Rhode Island’s rail connections to Boston and beyond to strengthen regional economic links
    • Target new rail subsidies and spearhead the development of a new app-based “Rhody Pass” ticket option ($$)
    • Establish new express commuter rail service between Providence and Boston and expand intercity rail service ($$$)
    • Drive new station improvements and transit hub developments, highlighted by a new Pawtucket/Central Falls commuter rail station ($$$)

Rhode Island Acts

  • Develop a Partnership for Rhode Island
    • Establish a Partnership for Rhode Island to facilitate strategic action among private, civic, and public sector leaders (n/a)
    • Create a small implementation unit to oversee implementation of the new strategy ($)

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He hosts Executive Suite and writes The Saturday Morning Post. Follow him on Twitter: @tednesi

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