Building the “fourth economy” is all about combining traditional economic development tools with creative solutions to ever-evolving challenges. The Fourth Economy Index is our framework for thinking about what sets communities and regions up for success: investment, talent, sustainability, place, and diversity.
Elements of these indicators came up again and again throughout three “21st Century Cities and Global Leadership” discussions at the recent Thrival Festival, focusing on questions like what might attract and retain talent in Pittsburgh and how to ensure that economic growth is sustainable. And while diversity can mean many different things (and does as a metric in the Fourth Economy Index), one element of diversity that had an undeniable presence throughout the discussion was cultural diversity.
Panelists spoke in plainly economic terms about why cultural diversity is important in cities like Pittsburgh. Some recurring themes included:
- Immigrant entrepreneurs strengthen local economies because they are more likely to start small businesses than their US-born counterparts.
- If Pittsburgh hopes to both attract and retain the talent it needs to ensure economic growth in the wake of an aging workforce, a “cosmopolitan environment” that celebrates diversity should be built into our definition of quality of place.
Pittsburgh is certainly not the only city thinking about these issues – nor are only cities thinking about these issues. The demographic makeup of the US is changing, and so is the way we do business in the wake of globalization, and that means communities of all sizes must adapt.
While the discourse around diversity and inclusion is often regarded as “subjective” in nature, the empirical support for building these issues into the economic development world is not limited to entrepreneurship and talent retention.
1. Diversity is key in a knowledge-based economy.
Diverse groups are better at solving problems than groups of homogenous high performers. Because productivity is now driven by knowledge across all sectors, problem-solving and innovation are critical elements for success. In effect, firms and regions that do not value diversity as an operating philosophy risk being outperformed by those that do.
2. “Adaptability” has always been an economic survival skill.
Today, the most successful businesses are those that are “really good at learning how to do new things,” and some suggest that rapid changes in technology are forcing adaptability as the new way to achieve a competitive edge. But the ability to adapt has been critical thought history during periods of rapid technological advances. And historically, cultural diversity is already known to have set the stage for successful adaptation during those periods.
3. It’s not just about population growth.
Another recurring theme at Thrival was that economic growth in Pittsburgh may not be sustained without also addressing inequality among the city’s existing residents. In addition to an equity issue, this is also a regional economic development concern in that attracting new residents to grow the population is just one piece of the puzzle.
Fostering a “cosmopolitan environment” that is appealing to young people is certainly a valid strategy in dealing with an aging workforce. But investing (attention and money) in the diverse communities that already exist in Pittsburgh and cities like it would also help meet the needs of firms looking to locate in places with the kind of diverse workforce that drives innovation. And just as location decisions rely on work force, population growth can only stagnate without the jobs to support it.