Remarks by Angel Gurría, OECD Secretary-General
Chicago, March 9th, 2012
(As prepared for delivery)
Ladies and Gentlemen,
It is a great pleasure to launch the OECD Territorial Review of the Chicago Tri-State metropolitan area. This is the 23rd territorial review that the OECD has conducted, but it is the first such study of a US metropolitan region.
I would like to congratulate and thank both the Chicagoland Chamber of Commerce and the Economic Development Administration of the US Department of Commerce for taking the initiative and working with us to make this review happen.
In this particularly challenging economic climate, policies to promote territorial development are more important than ever. Not only are they vital for boosting regional competitiveness and economic performance, but they are also essential for underpinning the recovery on a national level and they play a key role in promoting inclusive and sustainable growth.
The Chicago Tri-State metropolitan review aims to support the region in this effort, by benchmarking its performance against that of other cities – from Toronto and Munich, to Boston and Paris – and sharing best practices to foster more effective development. Let me share some of the review’s conclusions and findings with you, starting with the good news.
The Chicago region is a core economic powerhouse in the US
What happens in the Chicago tri-state metropolitan region affects the entire US economy: it is America’s third largest metro-region in terms of both population and GDP. This prosperity originally came from Chicago’s role as the country’s most important transportation hub.
Today, however, the region’s economic power emanates mainly from its leadership in advanced manufacturing and innovation, in areas like nanotech, biotech, ICT and green engineering. To give you an idea of its importance, the region ranks twelfth among the 90 largest OECD metro-regions for patent applications and fourth for those in nanotechnology.
At the same time Chicago is a major cultural centre – home to a thriving music scene, world-class architectural heritage, remarkable art collections and some of the continent’s greatest sports franchises. It is an attractive place to live, with ample green space including Millennium Park, which gave the waterfront back to its citizens.
Chicago boasts yet another enviable strength: an amazing human capital. The region is home to almost 10 million people. Many of them are young, ethno-culturally diverse and highly educated. Indeed, about one-third of the region’s population aged over 25 has at least a Bachelor’s degree – well above the OECD average of 21%, and above both the US national average and the average for large US metropolitan regions.
Yet, Chicago cannot rest on its laurels. The region will need to address a number of challenges to preserve its international standing and prosperity. Let me sum up the challenges and recommendations presented in the review.
The first key challenge is to tackle high levels of unemployment
Despite tremendous assets, Chicago’s economy displays a worrying lack of dynamism which needs to be reversed quickly. Since 1995, the region’s unemployment rate has been above the average for US metro-regions. And since 2009, unemployment has been hovering around 10%.
These persistently high levels of unemployment stem from a significant skills mismatch: low-skilled workers can’t find jobs while advanced manufacturing employers struggle to fill job vacancies. In the high-end, knowledge-intensive sectors, companies are attracting talent from outside the region, while local university graduates are leaving for jobs elsewhere.
Even more worrying is that this mismatch is closely linked to a racial divide. At 24%, the unemployment rate for African-Americans is nearly four times that of whites. Minorities are also more likely to drop out of high school and live in distressed neighbourhoods where access to basic services such as transit, day-care, health care and quality education is poor.
Joblessness translates into a waste of human talent and potential. This is not just a social loss, it is an economic opportunity forgone. This is something that Chicago can ill afford in an increasingly competitive world economy, where its principal rivals are no longer just Milwaukee or St-Louis, but also London, Stockholm, Rio and Shanghai.
Chicago’s future competitiveness thus depends on its capacity to upgrade its workforce. All stakeholders – training providers and educational institutions, governments and businesses – must work together to ensure that training reflects and addresses the region’s business needs more clearly and gives them greater potential to compete on global markets.
One useful example is the “prime contractor” model being rolled out in the United Kingdom, to incorporate local actors into a system-wide programme. It facilitates programme unity by bringing together several different employment support services, while also introducing elements of competition between providers and a considerable degree of local flexibility in designing and delivering services targeted to local needs. This is a model Chicago could indeed consider.
To further enhance its competitiveness, the Chicago region also needs to extend its productivity frontier
Another key challenge for Chicago is to boost the productivity of its labour force. From 2001 to 2007, Chicago only ranked 46th out of 76 OECD metro-regions in terms of average annual labour productivity growth. Milwaukee ranked 29th. In fact, the Tri-State Region’s GDP growth rate has lagged since 2000.
This may come as a surprise. The region is home to a number of world-class universities and research centres, and scores high in the OECD for the sheer number of patent applications, but Chicago needs to focus more on translating its excellence in academic performance and innovation into a driver of productivity growth.
The region needs to keep building on its blossoming strengths: for instance, the Windy City’s green-tech sectors are becoming world-renowned in building-retrofit technologies. But Chicago also needs to bolster its support for start-ups and SMEs: innovators need access to finance and human capital, along with tech-transfer capacity.
One example of support for placing highly skilled workers into SMEs is the UK’s Knowledge Transfer Partnership. This initiative maps recent graduates against job vacancies in high-tech firms and in emerging, innovation-driven business clusters more generally. Such a scheme could help address the common complaint by employers in the tri-state region that they find it difficult to attract and retain skilled workers.
Moreover, as it pursues green growth, Chicago needs to focus on its strategic infrastructure – particularly in transportation. Effective, efficient and affordable public transit represents a terrific opportunity to pursue economic efficiency, social equity and environmental sustainability simultaneously.
Transit connects people in distressed neighbourhoods to schools, services and jobs, while curbing emissions and reducing congestion. Indeed, congestion alone costs the region an estimated 1% of its GDP annually. While transportation investment can be costly, many cities have found innovative ways to raise funds. London, Oslo, Singapore, Milan and Stockholm have all shown that congestion charges can reduce traffic while also raising revenue for public transportation.
Success also calls for concerted planning and greater policy coherence
To unleash its full potential and become a more effective global player, the Chicago Tri-State Metro Area requires concerted planning and greater policy coherence. The region needs to act more like a bloc, a unified area.
Yet, as it stands, your different states and municipalities tend to lure businesses from one part of the region to the other instead of focusing on the creation of new firms or the growth of those already there. This zero-sum approach to competition often relies on old-fashioned financial incentives, whose impacts are short-term at best.
And when it comes to the development of transport infrastructure – crucial to Chicago’s future – state lines seem to remain remarkably “thick”. The failure of the “KRM” proposal to extend Chicago’s North Line commuter rail service from Kenosha to Racine and Milwaukee is just one example of this trend.
This challenge is common to many of the metro-regions we’ve studied. Some of these regions have generated experience that you can draw on. Let me give you just three examples:
The Chicago Tri-State metropolitan area can profit from these experiences and region-wide solutions. The institutions for such co-operation already exist, not least among the region’s planning agencies, but public and private actors from across the region must commit to working together in such a tri-state framework.
Ladies and Gentlemen,
The region of Chicago has remarkable assets: its people, its educational institutions, research labs and high levels of creativity. But to unleash their full potential, the region must address the challenges I outlined: employment, productivity, innovation capacity, and infrastructure. The OECD Territorial Reviews and the comparison with other regions around the globe give you the opportunity to combine your knowledge with the experience of your peers.
Let me close with a quote from Daniel H. Burnham, the author of your first city plan. He advised the Chicago City Council to “make no little plans” when debating future directions for the region. This spirit is just as vital today as it was in 1909. I would therefore like to encourage you today to “think big, think tri-state”! Your ability to compete in the world may depend on it.