Considering challenges, problems, and crises as opportunities is a well-known entrepreneurial strategy. The current financial, health, and economic crises present such an opportunity for Wyoming to step back, reconsider, pivot, and pursue more aggressively alternative paths to economic diversification and development. The opportunity lies in the so-called “Fifth Pillar” identified by the ENDOW task force and the new economic sectors targeted in the latest Wyoming Business Council strategy offer one. More broadly defined as knowledge-based or technical professional services industries and jobs, they are the heart of the knowledge economy. They are one of four broad categories of jobs and firms defined by industry and labor statistics codes. Knowledge-based services (KBS) include information, financial, insurance, business, professional, scientific, technical, educational, healthcare, social sciences, architecture, engineering, legal, and arts, design, and entertainment services jobs and firms. These jobs and firms produce no physical product or service. They differ in many respects from physical production, which include manufacturing, mining, construction, and agriculture, physical services, which include food service, wholesale and retail trade, facility maintenance, and janitorial services, and managerial administrative, which includes managerial, clerical, and sales.
The Knowledge EconomyKBS businesses represent approximately 44% of all non-farm business establishments in the US. They generate 30% of all non-farm revenue, employ 46% of all non-farm workers, and pay 54% of all non-farm payroll. The relative fraction of the workforce in KBS services has been growing while the physical production workforce has been decreasing over the last century. [The figure illustrates this.] In 1930, the percentage of the workforce in physical production occupations was 60% while knowledge-based workers represented only 7%. By 1980 those percentages were 34% and 16%, respectively. By 2015 KBS workers outnumbered physical production workers, 25% to 22%. It is important to differentiate KBS from physical service jobs and firms, which are provided physically and which are much lower paying.
Projected growth in KBS jobs is 9.6% versus 3.0% for physical production jobs. Average salaries for KBS jobs have been in the low $60,000s versus the low $30,000s for physical production and high $20,000s for physical service jobs. Net job creation in 2015 in KBS industries was 79% of all non-farm industry job creation.
These differ from physical product and service businesses in other ways, too. Based on a study of more than 4000 startup firms, they create intellectual property in greater proportions (12% versus 6%), generate higher margins, and take less capital to start up. However, they tend to take longer to evolve, in part due to reasons that can be addressed through more attention and better management.
Furthermore, the outputs of these businesses and professions are highly exportable and produce significant positive contributions to the balance of trade. KBS exports contributed $438 billion positive ($150 billion net) in contrast to the $500 billion negative overall trade balance in goods and services in the US is 2015. This suggests that KBS businesses and workers can be located anywhere and create value globally. Obviously, they will increasingly benefit from telecommunications, information, and virtual meeting technology, increasing the opportunity to fulfill service and employment opportunities without physical presence or relocation. The current crises are accelerating and highlighting these trends. Knowledge workers can live, work, and enjoy the lifestyle in Wyoming while doing business globally. They are also less affected by crises such as the current ones. They can easily work remotely.
The Gig EconomyThere is an intersection of this opportunity with another—the growth of the so-called gig, or free-lance, economy. Here again, it is important to differentiate knowledge-based services from physical services such as ridesharing and food delivery. Many states, such as California are making free-lance work less welcome because of their focus on the latter and are missing the opportunity with the former. 35% of American workers freelance at one time or another. 30% of all Fortune 500 companies use them, often for very large projects. Many freelancers not only acquire projects on markets like Upwork, but also subcontract on them in order to assemble teams for larger projects. At nearly $1 trillion per year, the impact of freelance earnings is nearly 5% of US GDP; activity is growing at 14% per year.
Freelancers are most likely to be skilled professionals, not ridesharing, delivery, and other physical service providers. 45% of freelancers provide skills such as programming, marketing, IT, and business consulting. 46% of freelancers say they could not have a traditional job due to personal circumstances (such as health, caregiving duties, or other reasons).
What to DoWyoming has the opportunity to create a haven for knowledge-based and freelance work and thereby diversify the economy and workforce, at a time when many states are discouraging it. This is a bit like the opportunity to position Wyoming as a haven for blockchain, but with much greater potential for employment and revenue. However, the state must be innovative and proactive. Some measures include the following.
- Create a state public bank as proposed by US senate candidate Yanna Ludwig, to support these types of businesses, in particular.
- Develop forms of business and associated regulations that will make it easier for these types of firms to form, thrive, and collaborate to pursue larger projects. Gustave Anderson, a candidate for House District 14, has researched and experimented with coop legal structures for this purpose.
- Consider establishing a Wyoming freelance marketplace or partnering with a marketplace like Upwork to promote this economy in the state.
- Continue improving broadband, obviously.
- Explore establishment of associations to make it easier for individual or small firms to aggregate and obtain health insurance.
- Provide greater training and support for these types of businesses. The Wyoming Small Business Development Center hosted a webinar last year about gig/freelance work. They need to do more to focus on these types of businesses in addition to their more typical main street businesses.
- Provide more support for startups in these fields from the university. It started more than a dozen initiatives in support of startups last year that were shutdown pending an organizational study by the Office of Research and Economic Development. The study has been underway for more than a year with no tangible results yet. The study needs to be completed and actions taken to launch new and more dramatic actions to support these and other new businesses.
- Position the university more dramatically as source of knowledge and innovation in support of these jobs and firms.
- Promote Wyoming as a haven for these types of workers and firms with its enjoyable lifestyle, outdoor environment, and favorable business climate.
- Many of these actions fit within the latest strategy of the Wyoming Business Council. They need to accelerate experimentation with some of them.
Of course, the perennial Wyoming budget crises with revenue versus services must be resolved in a compromise that can pay for all this while maintaining competitive positioning for the state.