Charles I Plosser: Reinventing older communities - bridging growth &
opportunity
Speech by Mr Charles I Plosser, President and Chief Executive Officer of the Federal
Reserve Bank of Philadelphia, at the 2014 Reinventing Older Communities biennial
conference, Philadelphia, Pennsylvania, 12 May 2014.
* * *
The views expressed are my own and not necessarily those of the Federal Reserve System or the FOMC.
Highlights
1. President Charles Plosser welcomes participants to the 2014 Reinventing Older
Communities biennial conference.
2. President Plosser highlights emerging trends in the labor market, demographics,
and educational system and discusses how understanding them can help prepare
communities for growth and prosperity.
3. President Plosser says it is important to think about how we can continue to upgrade
the skills and productivity of young people and the workforce more broadly to
successfully reinvent our communities.
Introduction
It is my pleasure to welcome you to the Reinventing Older Communities conference. This is
the sixth biennial conference hosted by the Federal Reserve Bank of Philadelphia. It has
grown to become an important event for the Federal Reserve System as we bring together a
rich and diverse mix of stakeholders who are interested in understanding the interaction
between older industrial communities and the broader economy.
The Federal Reserve System, which is marking its centennial year, is a decentralized central
bank, with 12 individual Reserve Banks throughout the country that are overseen by a Board
of Governors in Washington, D.C. As Theresa Singleton mentioned, we are delighted that
seven of those Federal Reserve Banks are partnering with us to sponsor this year's
conference. I thank them and the other sponsors who have helped us create what promises
to be an outstanding event.
I also want to thank you for taking the time to join us for this conference. Your participation
here and your ongoing work in communities around the nation demonstrate your commitment
to bridge growth and opportunity. In that way, we can reinvent our communities to ensure
they are places where people can lead fulfilling and successful lives. But this work requires a
creative forward-looking approach.
Maybe it's the fact that the Stanley Cup playoffs are still going on in mid-May, but I'm
reminded that Wayne Gretzky was once asked about his success in hockey. The Great One
responded by saying, "I skate to where the puck is going to be, not to where it has been." He
scored many goals with this strategy, and I believe his philosophy can be helpful in many
disciplines. For example, I have talked about the need for monetary policy to be forward
looking. But I believe this approach also applies to the revitalization of older communities.
Now, I am by no means a community development expert or a hockey player. During my
lifetime, I have lived in several older communities, including Rochester, NY, and Birmingham,
AL, where I was born. I attended college in Nashville, TN, and graduate school in Chicago. I
have lived and worked in New York City, as well as in and around Los Altos, CA, near the
heart of Silicon Valley, and for almost eight years now, I have lived here in Philadelphia.
It occurs to me that often older communities seek to turn back the clock to restore their past
glories. A variation is to chase the puck. But in so doing, they find themselves perpetually in
the past, never quite catching up and usually falling further behind. These are unlikely to be
successful strategies. It is appropriate to learn from the past. But trying to restore the past is
not a strategy for success. As most of you are aware, rebuilding and revitalizing our older
cities is not about the past but our ability to seize the future.
The Philadelphia of tomorrow will not the Philadelphia of the past, nor should it be. There are
many opportunities for productive transitions and improvements. Indeed, we should seek to
exploit the latest innovations to make Philadelphia, like many of our postindustrial cities
represented here today, wonderful places to live, work, and play. We have to acknowledge
that our world has changed, and it continues to change at a very rapid pace. Embracing that
change in order to reinvent the future of our cities is hard work, but it can pay off
handsomely.
The extent to which we are able to see where emerging trends are headed - where the puck
will be, if you will - gives us the chance to take advantage of the opportunities they present.
That will allow our communities to be more successful and more effective.
I want to spend the remainder of my brief time discussing a few emerging issues for you to
consider over the next few days, as you participate in the conference workshops and plenary
sessions.
Emerging trends
My comments will focus on the labor market and the importance it plays in shaping the future
of our nation, but more relevant for this group, how it is shaping the future of our cities. The
financial crisis and Great Recession led to severe dislocations in many sectors of our
economy, including the housing sector, financial markets, and the labor market. Monetary
and fiscal authorities responded in myriad ways to help the economy and our nation recover.
But we should resist the temptation to implement programs with the goal of recreating the
past.
The unemployment rate has slowly recovered and is now 6.3 percent from its peak of 10
percent in October 2009. Some are skeptical, though, because the decline in the
unemployment rate reflects not only increases in employment but declines in labor force
participation. Many interpret such declines in the participation rate as representing
discouraged workers who have stopped looking for work. Yet, labor force participation rates
can also decline for demographic reasons. Indeed, we have seen steadily declining
participation rates since 2000, and we can account for about three-quarters of this decline in
participation since the start of the recession in December 2007 because of increased
retirements and movements into disability.
Demographic trends, driven largely by an aging baby boomer generation, are altering the
age distribution of our population. More specifically, we are getting older, and the size of the
working age population is shrinking relative to those over 65. It is widely recognized that this
fundamental shift will require major changes in the structure of Social Security and Medicare
programs.
Yet even as we solve such fiscal challenges associated with an aging population, we have to
face up to the changing skills that employers are seeking. We are seeing a mismatch of skills
in the workforce and the jobs that are being created. Many employers I have spoken to
around the country talk about the fact that while they are hiring new workers, they are hiring
a new type of worker: a worker who is more technologically sophisticated and productive.
Going forward our educational system needs to be upgraded to prepare young people for
this changing labor market. We are simply not keeping pace.
More specifically, business leaders I have met talk repeatedly about having trouble finding
qualified candidates in the areas of science, technology, engineering, and math, or so-called
STEM jobs. As you know, the increasing needs for STEM-trained workers is one of the
trends that will drive labor demand and productivity growth in our future. The Department of
Commerce estimates that STEM employment grew at three times the rate of non-STEM
employment in the previous decade and is projected to grow at twice the rate of non-STEM
jobs through 2018.
Sadly, we are not doing an adequate job of preparing our workforce for these jobs.
Manufacturing is one sector in which firms have implemented new production technologies
and are in need of STEM workers. The Philadelphia Fed's April Business Outlook Survey of
manufacturers included a special question about the factors influencing their decisions to
remain in the region. Respondents identified the availability of skilled labor as the most
important factor. They also ranked the availability of skilled labor as becoming a more
important factor in recent years.
These concerns highlight the importance of our educational system in equipping our young
people with the skills necessary to improve their own lives and improve the communities in
which they live and work. Better wages accrue to a more productive employee. Firms will not
locate in communities where they cannot find workers with the right skills and work ethic. For
our older communities, successful revitalization will mean seeing to it that the workforce is up
to the task.
The standard of living in our nation as well as our communities is inextricably tied to the
productivity of our workforce. As we look to the future, we have to think about how we can
continue to upgrade the skills and productivity of young people and the workforce more
broadly. If we are to successfully reinvent our communities, we must focus on preparing our
workforce for the future.
Conclusion
Let me conclude by reminding you that the theme of this year's conference is Bridging
Growth and Opportunity. And I can think of no better bridge to opportunity than education.
Education is a bridge for our young people and a bridge for our local economies. As
someone who has spent over three decades in the teaching profession, I firmly believe that
education is one of our most important investments. It is critical for the long-term health and
prosperity of our nation. Education expands opportunity, leads to more innovation, and
enhances productivity. In the end, this leads to better economic outcomes.
I am excited that this year's conference will highlight the critical role that education and
workforce development play in reinventing older communities. We are honored to host a Sit
Down with the Superintendents, a panel session that will give you an opportunity to engage
in a dialogue with school superintendents from several older industrial cities. This is your
chance to discuss how community development and educational leaders can work together
to connect people with the right skills to the jobs ahead. This is another example in which
those of you who think about workforce development can get ahead of the puck. And score a
goal for all older communities.
The work that you do - building these bridges to opportunity - is about creating a better
future for all of us who live in these special places. It will not be easy, and there is no quick
fix, but it will be one of the most important things we can do. Thank you for participating in
our program this year.