The Successful Economy Index:
Defining and measuring long-term, equitable economic success for communities.
Economic success is something that every community is trying to achieve. The question is, what exactly is economic success? This is a surprisingly elusive question, and there seems to be no uniform answer. In general, the focus of most definitions of public sector economic success has been on growth, measured primarily using Gross Domestic Product (GDP).
While growth is an important part of economic success, it is clearly lacking in telling a full picture of an economy. Measuring growth with GDP focuses only on the monetary value of goods and services, which seems too narrow and too short-sighted when used by itself. It is clearly time for a better definition of economic success, one in line with planning theories of sustainability and equity.
Several years ago, Renaissance began working on an expanded definition of economic success to support our place-based economic analysis work. The definition we settled on looks at four characteristics of a community’s economy that, when all in place, create a more robust, sustainable, and we believe more “successful” version of economic success, and identifies metrics that can be used to quantify these characteristics.
The four characteristics are:
Growth - Still an important part of any economic measure, the metrics we use for this characteristic focus less on how much money is being generated and more at how the community’s residential and commercial economy is changing as a result of economic activity: is income rising or falling? Are people moving in or out of the community? Are jobs being created?
Resiliency – This characteristic focuses on economic stability. Is a community able to weather changes in larger economic forces? What role does the community play in the region’s economy – does the county lead the region’s economy, or indirectly benefit from another county’s economic strength? If one part of a community’s economy were to falter, are there are other strengths to rely on?
Identity – This characteristic focuses on a community’s economic sense of self, which can lend itself to long-term success and stability. Does a community have a defining economic element, a heartbeat of its economy that differentiates it from other places?
Inclusiveness – This characteristic is concerned with the extent to which all members of a community are succeeding. Is the community one with haves and have-nots? Are some groups seeing disproportionate benefits relative to other groups? Is the place an affordable one for residents, both homeowners and renters?
These four characteristics – Growth, Resiliency, Identity, and Inclusiveness – create a richer definition of economic success, one that expands upon a simple measure of productivity to include economic equality and sustainability for both residents and businesses.
Interestingly, the Rockefeller Foundation recently released ‘Inclusive Economy Indicators’, a report with a very similar goal of redefining successful economies. Our conclusions are very much in line with this report, and while it seems important to note that our work was done wholly independently of the Rockefeller Foundation, their work serves as strong confirmation that our efforts are on the right track. The Inclusive Economy Indicators report can be found here.
How is a Successful Economy measured?
Back to our index. With this new, four-characteristic definition in hand, we identified data that quantified these measures. The data comes from a mix of sources, some publicly available like income and employment growth, and some proprietary metrics created in-house on regional job accessibility and job diversity. We ran the numbers we collected on all 3,143 counties in the U.S., ranking each county from best to worst, creating what we call a Successful Economy Index (SEI). Most of these measures can be updated annually, so scores can be monitored over time.
So where are the successful economies?
Let’s start right at the top- congratulations Santa Clara County, California, you are the winner! As the home of Silicon Valley, Santa Clara County is in the nation’s top 100 counties in growth and identity metrics, top 250 in resiliency, and top 400 in inclusiveness. The growth and identity findings are not surprising, but the resiliency and inclusiveness findings may be. Despite home affordability – a key metric of resiliency –being among the very worst in the nation, Santa Clara County still exhibits the kind of diverse job market that suggests long-term sustainability. There are a lot of great jobs in the county, and they go beyond computer science. Additionally, Santa Clara has a relatively low poverty rate, a huge number of $100,000 earners, and a surprising amount of disposable income even after factoring in that home affordability issue. Add to this the strong growth rates in in-migration and income increases over the last 5 years, and you have a county that has every reason to be viewed as an economic success.
Here are the top 25 counties per our SEI measurement:
This list represents a real mix of places, with counties as small as 5,000 (Wheeler County TX) to over 1 million (Santa Clara County CA, Allegheny County PA, Montgomery County MD, and Fairfax County VA), 15 different states represented, covering every region in the U.S. And all four categories of indicators are represented as the highest-ranking indicator for the county. While these are very different places, they all share the quality of being well-scored in all four characteristics – Growth, Resiliency, Identity, and Inclusiveness – and usually being in the top 100 in at least one characteristic. These are all very well balanced economies that have beneficial economic qualities for residents and businesses. They also show that there is more than one way to be successful. The index also shows that even the best economies have things to improve upon, whether it be more inclusiveness, better resiliency, or stronger identity.
Zoom in on the interactive map below to find your county's SEI score:
Using the SEI allows us to better explain to our client communities how economic success can be defined, and where their community currently sits relative to the rest of the country. Having this information provides communities context and an understanding of how their economy stands. Using it, they can identify economic strengths and weaknesses and factor those into their planning work. Because sustainability and equitability are considered in the index, the results will lead to better planning results.
While the SEI as currently constructed is at the county level, much of the data can be replicated at smaller scales, allowing individual cities or even neighborhoods a chance to do their own self-assessment. Unfortunately, not all metrics are consistently updated, so the findings are a mix of different years (from 2010-2015). In the future we hope to identify or create ourselves a more reliably updated set of data.
For more information on the SEI, including additional detail on metrics or methodology, feel free to contact us. We hope the Index helps in your efforts to lead your communities toward economic success.