Novel Metrics Incorporated into 2008 Version of State New Economy Index

Two weeks ago, SSTI reviewed the TBED strategies states are advised to pursue as presented in the 2008 State New Economy Index released by the Information Technology and Innovation Foundation (ITIF) and the Kauffman Foundation (see the Nov. 19, 2008 issue of the Digest). The report compares numerous indicators that concentrate on the economic structure of states and the characteristics of new waves in the economy, opposed to measuring only state economic performance or state policies. As in previous editions of the Index, the measures are divided into five categories: knowledge jobs, globalization, economic dynamism, the digital economy, and innovation capacity.

An example of an innovative metric is the Index's measure of IT jobs, defined not by counting employees working at information technology companies, but as the "employment in IT occupations in non-IT industries as a share of total jobs."  That is, gauging how IT is permeating various fields within the state economies, which in turn improve productivity and push along the development of new products and services. As compared to the 2007 version of the Index, this year's report drops the "package exports" indicator due to data availability, and adds the four new measures described below - bringing the 2008 total to 29 indicators.

The first of these four new indicators is the "U.S. Migration of Knowledge Workers," which uses data from the census' latest American Community Survey to follow people moving from state-to-state, and the average years of attained education of those moving. For example, people moving into Massachusetts have been educated an average of 14.6 years, whereas in Arkansas this value is 11.5 years. The average U.S. value of someone moving from one state to another is 13.1 years of schooling. As the country's labor force has become more mobile, especially for those seeking tech-based employment that requires higher levels of education, this measure is particularly interesting because education is tied to per-capita income growth. Besides Massachusetts, Vermont, New York, Hawaii, and Connecticut lead the nation in the measure.

Another new metric attempts to gauge the level of IT incorporated into the state's health sector. In this case, the percentage of medical prescriptions routed electronically from the total number of prescriptions is used as a proxy of overall IT health adoption. Massachusetts tops the country with 13.4 of prescriptions routed electronically, but then these percentages drop quickly, with only five states having a percentage larger than 4.0 percent and 18 states having a percentage lower than 1.0 percent. The Index contends the incorporation of IT will improve the quality and efficiency of the health care sector.

A third new metric for this year is measuring "Movement Towards a Green Economy," which uses energy consumption data from the Department of Energy's Annual Energy Review. Specifically, the Index creates a score that bundles the change in each state's energy consumption per capita and the change in each state's renewable energy compared to total energy expended. Washington, Vermont, New Hampshire, Oregon and Maine lead the country in this category. The report states that as the likelihood of some type of emissions regulations move forward on a national scale, the states leading this category may be better positioned economically for these standards.

Finally, the Index this year uses NSF data to track R&D funding from non-industry sources as a proportion of state GDP. This non-industry R&D intensity was highest in New Mexico at 7.3 percent (10 times the U.S. average) and 4.6 percent in Maryland, due to the large presence of federal laboratories in those states. The third highest state was Massachusetts, but the level of non-industry R&D funding was lower, at 1.3 percent. Non-industry R&D funding was seen in the report as preparing a state for future private-sector research.

For more information on the variety of indicators used in the 2008 Index, the report is available at:
http://www.itif.org/files/2008_State_New_Economy_Index.pdf.