Kent Harrington

Baby boomers are retiring, and many are moving to warmer climes. What better time for South Carolina to boost its economy by determining the location, skills, interests, and ambitions of this important demographic?

From the seaboard to the mountains, South Carolina has experienced a makeover in the last 20 years second to few other states.

The changes are reshaping the S.C. economy: vacationers and retirees filling new and old coastal communities are boosting tourism and real estate development; an explosion in world trade combined with a logistics revolution is transforming Charleston into an international supply chain hub and seeding new distribution facilities along the state’s major transportation corridors; and a flow of foreign investment is bringing high-tech manufacturing facilities to replace textile plants and agriculture in the Midlands and Upstate.

The story is exciting enough to warrant a reality TV show. But with recession looming this year, to put it in TV terms, will the future follow the same script?

Whatever the answer for 2008, there is good reason to examine South Carolina’s prospects for growth over the long term. The state is shifting from its old economic foundations to an economy shaped by technology and intellectual capital--the intangibles represented by education, know-how, scientific and technical skills, and management savvy. The trend is evident not only here but around the world. Indeed, in emerging as well as developed countries, scholars and policymakers are debating the same question: in a knowledge-driven economy, how do we figure out and foster what will make us grow?

In the old economy, of course, the answer symbolically was less like a reality TV show and more like the famous line spoken by Claude Raines in the Hollywood classic, Casablanca: "Round up the usual suspects." For years we knew, or thought we knew, where to find the state’s sources of intellectual capital: in its public and private universities and colleges as well as an extensive, two-year technical college system; university-associated research centers in medicine, engineering, science, technology, and agriculture; the technical and management expertise of large and small companies; primary and secondary school faculties; and the ranks of public servants in state and local government. That list is still valid and remains a good start today.

But in the twenty-first century and especially in South Carolina, the roster is incomplete. We need to identify the talent emerging because of the state’s transformation. As the state begins to absorb its share of the retiring baby boom generation, the opportunity to survey its intellectual capital is obvious. All it takes to get started is an understanding of who they are and what they bring.

Why should we try to figure out what the baby boomers have to offer? Because they bring an extraordinary resource to help the state's economy grow.

Why should we try to figure out what the baby boomers have to offer? Because they bring an extraordinary resource to help the state’s economy grow. Simply stated, they represent know-how, skills, and experience. Assessing their value economically is admittedly difficult. But in a knowledge-driven economy, it is vital to determine where the most important human resources are and how best to utilize them. Wise government investment in their further development also is critical. When it comes to budgets, whether for roads and bridges, improved back-office software, or education, the state must choose what generates the best return.

A 2006 World Bank study highlighted these "intangibles" by examining the link between economic development and the level and composition of wealth in 120 countries.¹ Its goal: to estimate in dollars-and-cents terms the assets "tangible and intangible" on which economic development depends. In a global economy that has already seen $135-per-barrel oil and massive financial flows into the sovereign wealth of the Middle East, the World Bank’s findings are counterintuitive in at least one respect. It turns out the analysis asserts that for most countries, "intangible capital"--not natural resources or traditional financial assets--represent the largest share of their total wealth.²

Specifically, the study found that in 2006 the share of total national wealth accounted for by intangible capital--human resources, an efficient legal system, and an effective government, for example--ranged from 59 percent in low-income countries to 80 percent in high-income OECD economies. In other words, whatever your natural resources, measuring the sources of national wealth--especially the "intangibles"--is a prerequisite to charting the optimum course for development and prosperity.³

The U.S. Commerce Department is examining the same information for the United States. In a January 2008 report produced by a panel of scholars and business leaders, including the CEOs of IBM and Microsoft, the Commerce Department’s blue ribbon group said that improving our data on intangible assets will help us understand innovation, the key to global competitiveness and economic growth.⁴ Simply put, to foster innovation we must track different information in our national statistics. Improve the tracking effort, the panel said, and we can better determine what policies will sharpen our competitiveness and raise growth over the long term.

The Commerce Department study essentially argues that we need to rethink our strengths. Many American corporations are already well on the way, shifting their investment strategies to enhance their intangible assets. The ten largest American companies that report R&D outlays--including ExxonMobil, Procter & Gamble, General Electric, Microsoft, and Intel--boosted their R&D spending by 42 percent, or $11 billion, between 2000-2006. In the same period, their capital spending rose only 2 percent, less than $1 billion.⁵

Globalization drives home the importance of government policies that enhance intellectual capital. China is a case in point. A study by the McKinsey Global Institute predicts that China’s economic success faces constraints because of an inadequate pool of world-class human resources. The study forecasts the Chinese will need 75,000 business leaders in the next ten years, a 15-fold increase over today’s stock of trained managers, many of whom, according to McKinsey, are not currently suitable candidates to work in a foreign company.⁶ For China the lesson is clear. Investment in education is a priority in order to produce more trained managers. There’s a message for Americans as well: we need to foster the same intangible assets to maintain our competitive edge.

The evidence is already overwhelming that many boomers are looking to transition to part-time or "encore careers".

How can South Carolina do better in a knowledge-driven global economy? When it comes to intellectual capital, the answer is obvious: find or develop the people you need.

The goal of a better-educated labor force isn’t new--South Carolina’s population has long lagged other states in educational attainment, especially at the bachelor’s, master’s, and professional degree levels.⁷ But the nature of the challenge is changing. The arrival of new residents in the state is outpacing their migration elsewhere, with many bringing experience and expertise valuable to the local economies. How can local governments best cultivate and utilize these human resources?

To their credit, state leaders are creating locales attractive to in-bound talent. Like Silicon Valley and Boston’s Route 128, the Greenville-Spartanburg corridor is drawing both capital and expertise because of its success in building a high-tech manufacturing infrastructure. Charleston’s development as a logistics hub represents a similar achievement, bringing new firms and forging a link to the world trading system. Tourism executives and government officials also are cooperating statewide, keeping the leisure industry competitive with other top vacation destinations.

New programs are enhancing the state’s intangible assets, as well. Public-private partnerships are developing technology incubators, expanding university-based research, underwriting high school classes in critical job skills, and focusing strategically on training to support the hospitality industry, the state’s leading employer. All are steps that will draw and nurture talent in order to sustain growth.⁸

But, as the state’s population and economy transform, South Carolina is still at the starting gate in targeting newly arriving intangible resources. The most important--the baby boomer generation--is on the doorstep. Figuring out their locations, skills, and interests should be the first step to discover what assets they will bring.

The oldest of the 78 million baby boomers in the United States turns 62 this year, with one reaching that age every eight seconds. According to life-expectancy forecasts, the average 65-year-old will spend 20 years in retirement; half will live past age 85.⁹ Many boomers will continue past patterns, moving to full- or part-time residences in warmer climates, including South Carolina, where their numbers will transform their locales even as they reshape their own lives.

At 4.3 million people today, South Carolina is expected to receive more than its share of new residents. Conservative estimates of the population point to 4.7 million by 2025. Other forecasts that include illegal immigration push that number a half-million higher--to 5.5 million or more--two decades from now.¹⁰ Having grown well ahead of the national average for years, the state is familiar with the effects of inbound migration. Still, the boomers will pose major challenges.

For example, the over-65 proportion of the population--currently around 13 percent--is expected to reach 20 percent, or one-in-five residents, by 2025.¹¹ The potential influx of boomers has already provoked concern, including about housing infrastructure and medical services - especially the need for more caregivers as aging takes its toll. Taxes and spending also are an issue. Given that South Carolina’s under-20 population is projected to shrink between now and 2025, fewer young entrants into the workforce will compound boomer-related problems, for instance, diminishing state tax revenues as more elderly residents raise social and medical costs.¹²

Still, whatever the uncertainties that surround the boomers’ arrival, one thing is clear. When they retire, their lives will be unlike their parents’ golden years, with work playing a much bigger role. Economic changes have altered pension plans, substituting stock market-based retirement programs for guaranteed company benefits; second and third marriages are extending once middle-aged family obligations, like kids-in-college, into retirement; corporate restructuring and outsourcing have redefined work--from consulting to telecommuting--creating new employment options; and more briefcases will sit beside golf clubs in the closet because as knowledge-workers, many boomers still enjoy and want to continue what they do.

The addition of boomers to the labor pool will be vital to the national economy and the state’s future growth. By 2012, one in three American workers will be over 50, according to the American Association for Retired People.¹³ In the next decade, those who are 55 and over will increase at more than five times the rate of the overall workforce. As they retire and move, the boomers will bring intellectual capital that represents an asset for businesses, government, schools, and the nonprofit sector, as well as their own neighborhoods.

The evidence is already overwhelming that many boomers are looking to transition to part-time or ‘encore careers’. Their lives will blend employment, public service, volunteering, care-giving, and leisure. The sum of this generation’s choices will redefine both work and retirement. Irrespective of individual decisions, for South Carolina to capitalize on their potential, its approach to the boomers and the job market will require new thinking in a big way.

The need isn’t theoretical. According to a survey of 1,000 companies in 2006 by Manpower, Inc., an employment services firm, even as critical skills and experience walk out the door, only 18 percent of American employers have a strategy to recruit older workers. Slightly more--28 percent--have a plan in place to keep needed retirement age staff on board.¹⁴ From CEO forums sponsored by AARP to studies by the Conference Board, businesses are sharing views on how to retain boomers and their experience. The public sector similarly is looking at options to stem its own human resource drain.

College, university, continuing education, and learning-in-retirement programs--all magnets for boomers--are candidates for statewide collaboration.

A public-private initiative to identify the boomers’ locations and skills makes sense from a variety of perspectives, not least because similar successful programs in South Carolina--for instance, the Troops to Teachers project that moves retired military onto school faculty rolls--offer promising models.¹⁵ For the schools, the need for science and math teachers directed attention to specific skills among military personnel. But the military community represents a good test bed for a broader boomer survey, as well.

Mapping the military’s "intellectual capital"--the location, skills, interests, and ambitions of its just- or soon-to-be-retired--focuses on an accessible and talented group. According to the 2000 national census, 400,000 men and women veterans account for 14 percent of South Carolina’s population. A total of 66,000 active duty service members are stationed here, and 29,000 more claim the state as legal residence.¹⁶ Today’s pre-retirement servicemen and women also mirror the boomers because of their diversity, varied training, technical know-how, and management background.

Besides producing a valuable inventory, a pilot project could shed light on how to capitalize on the arriving boomers. As South Carolina’s under-20 population shrinks, unused college capacity will become an issue. Campuses offer great potential to serve retirees in transition. But a decision to revise curricula requires understanding the boomers’ interests and the market’s needs. Surveying the retiring military provides a start at answering questions about repurposing higher education for the boomer generation and more.

The military community is not the only test case. Colleges and universities are important in "mapping" intellectual capital in their own right. Across the country, college towns are increasingly popular as retirement sites because of their educational and health care facilities, youth-oriented cultures, entertainment, sports, and cultural attractions.¹⁷ Understanding the population’s community needs can help identify specific educational programs to offer—for example, gauging demand and creating transition paths into health care careers where trained workers are in short supply. At ten community colleges around the United States, town-and-gown pilot programs are helping boomers shift into skilled staff positions in local hospitals and social service agencies.¹⁸

The boomers represent the largest, but by no means the only, emerging source of intellectual capital. (For instance, business and government leaders should know more about legal immigrants, who are one-out-of-eight new residents, and who bring language skills, foreign area knowledge, and advanced degrees.) But a focus on boomers makes sense because of their likely economic needs and concentration in popular retirement communities, where efforts to cultivate their intellectual capital can also be concentrated.

A project to map South Carolina’s intellectual capital will have to address some tough questions. The most obvious: why would anyone sign up? Will new residents take a survey, especially if it asks for details about their background and goals? What about privacy? People already worry about the security of their personal data and unwanted intrusions by government or businesses. Why would they cooperate? And how would the project run? Who will have access to the information? Who will manage the program and foot the bill?

These and other issues will need to be addressed. But with tens of thousands of boomers coming south, business and government leaders have an incentive to understand this emerging resource. Several options are worth considering:

• A cooperative program between state government and the corporate community, perhaps including other partners such as AARP. With an online Web site for people moving into the state, the program could solicit information about new residents in return for providing personally tailored information regarding employment and other opportunities in their new home.

• A partnership among business groups that matched newcomers’ skills and interests with job possibilities across the state. Like online employment services, registration on a Web site could be voluntary, but also offer continuing value, such as regular updates about job or public service opportunities in exchange for information on experience and goals.

• College, university, continuing education, and learning-in-retirement programs--all magnets for boomers--are candidates for statewide collaboration. Their campuses are ideal platforms for collecting information and providing assistance. A focus on boomers would help them better design courses that also could provide students with information about full- or part-time work or more training.

A program could also connect to other organizations. Professional and business groups, from medical societies to local chambers of commerce, attract new arrivals who want to work or stay abreast in their fields. Industry associations offer access to information that suits the interests and goals of boomers looking to continue to work.

Mapping the state’s intellectual capital will be a challenge, but the talents represented by the boomers are a lynchpin in the state’s economic future. The good news is that what South Carolina needs to compete and prosper is hiding in plain sight. ¨

Endnote

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1  Where Is the Wealth of Nations? Measuring Capital for the 21st Century, The International Bank for Reconstruction and Development/World Bank (2006).

2  The World Bank study defines "intangible cap-ital" as "all those other assets that are not accounted for elsewhere. It includes human capital, the skills and know-how embodied in the labor force. It encompasses social capital, that is, the degree of trust among people in society and their ability to work together for common purposes. It also includes those governance elements that boost the productivity of the economy. For example, if an economy has a very efficient judicial system, clear property rights, and an effective government, the result will be a higher total wealth and thus an increase in the intangible capital residual." Where Is the Wealth of Nations? Measuring Capital for the 21st Century, The International Bank for Reconstruction and Development/World Bank (2006): 87.

3  Ibid., p. 4.

4  "Innovation Measurement: Tracking the State of Innovation in the American Economy," A Report to the Secretary of Commerce by the Advisory Committee on Measuring Innovation in the 21st Century, Department of Commerce (January 2008). Also see "A Better Way to Track the Economy," BusinessWeek (Jan. 28, 2008).

5  "Why the Economy Is a Lot Stronger than You Think," BusinessWeek (Feb. 15, 2006).

6  "Capturing Talent," The Economist (Aug. 18, 2007).

7  "Educational Attainment" Demographics, South Carolina Indicators Project, Institute for Public Service and Policy Research, College of Arts and Sciences, University of South Carolina, http:///www.ipsr.sc.edu/scip/demographics/educatioin.asp.

8  Initiatives across South Carolina are contributing to important improvements in the state’s human resources, as well as creating the knowledge-based infrastructure to enhance its competitiveness. Among recent examples, in 2007 the University of South Carolina’s (USC) partnership with the Columbia city government has attracted several new technology firms, including an Italian company, to the new USC "Innovista" facility at the downtown campus. Last December in Spartanburg, USC Upstate revealed its plans for a business and economics school facility to support, among other things, start-up firms in the city center. This year, Clemson University’s new Innovation Center has gained final construction approval. Located at its Advanced Materials Center and underwritten by a public-private partnership with the state, county, city, and Duke Energy, the Clemson program promises to expand materials research and manufacturing R&D. Local businesses are making similar contributions; in January 2008 Southeast Toyota and Greenville Technical College agreed to create a training center for skilled automobile technicians as part of the college’s two-year degree programs. In the Lowcountry in February, New Carolina, a statewide nonprofit business partnership, announced the formation of the Advanced Security Technology Research Alliance. The initiative, in cooperation with the Charleston Defense Contractor Association, seeks to develop the skills of a technologically trained workforce in defense contracting. The South Carolina Tourism Alliance, a public-private partnership to double the size of the tourism industry by 2020, is building on an action plan by developing a coordinated marketing program for the state.
Jim DuPlessis, "USC’s Innovista Attracts First Foreign Company," The State (Nov. 9, 2007), http://www.thestate.com/business/224509.html.
Nan Lundeen, "USC Upstate to Build Facility," Greenville News (Dec. 19, 2007), http://greenvilleonline.com/business/712190384.
"Clemson University Innovation Center to Start Construction," South Carolina Business
News (Feb. 4, 2008), http://www.scbiznews.com/content/view/60572/88.
"New Carolina Announces Newest Industry Cluster," Charleston Regional Business Journal (Feb. 1, 2008), http://www.charlestonbusiness.com/dailyjournal/3_73/full-issue.html.
Jenny Munro, "Greenville Tech, Toyota to Create Training Center," Greenville News (Jan. 23, 2008), http://www.greenvilleonline.com/Business/801230367/.
Jim Faber, "Public-Private Partnership to Promote Tourism Across the State, Here," Hilton Head Island Packet (Feb. 13, 2008), http://www.islandpacket.com/news/local/story/225257.html.
Shelia Watson, "State’s Tourism Action Plan Highlights ‘Blooming Potential’, " South Carolina Business News (May 7, 2007), www.scbiznews.com/content/view/14114/1/.

9 "Aging Baby Boomers," CQ Researcher (Oct.19, 2007), http://agingandwork.bc.edu/documents/Boomers.pdf.

10 Population projections all agree that South Carolina’s growth will continue to outpace national rates. According to the U.S. Census Bureau, state population estimates and studies by various advocacy groups suggest internal migration, i.e., movement from other states, as well as illegal migration will continue to figure prominently in the trend. "South Carolina 2006 Population Estimates," Population Division, U.S. Census Bureau, http://www.ors2.state.sc.us/population/estimates/scpop06/php. Protagonists in the immigration policy debate provide different projections based on their estimates of illegal populations and options for reform. For example, one analysis by the Federation for American Immigration Reform (FAIR), a policy advocacy group, asserts that without immigration policy changes, South Carolina’s population in 2025 could exceed 5.7 million. "South Carolina: Population Projection Data, 2005-2050," FAIR, http://www.Fairus.org.

11 Demographics, South Carolina Indicators Project, Institute for Public Service and Policy Research, College of Arts and Sciences, University of South Carolina, http://www.ipsr.sc.edu/scip/demographics/age.asp. Also see "South Carolina’s Population Projections: 1995-2025," Negative Population Growth, www.npg.org/states/sc/sc_stats.htm.

12 The problem posed by a shrinking workforce that must support a growing retired population is by no means local. One business columnist sums it up well: "The Congressional Budget Office projects that Social Security spending, absent changes, will grow from 4-to-6 percent of the U.S. economy in the next 25 years, while Medicare and Medicaid will grow from 4-to-8 percent. By 2050, programs for the elderly are likely to eat up as big a share of the economy as the entire government does today—forcing working Americans to face a possible 50 percent increase in their taxes." Alan Murray, "The Market Braces for Boomers," The Wall Street Journal (Jan. 6, 2008).

13 Erin White, "The New Recruits: Older Workers," The Wall Street Journal (Jan. 14, 2008).

14 Marc Freedman, "No Country for Old People?" The Washington Post (Jan. 27, 2008).

15 Troops to Teachers, a cooperative project between the U.S. Department of Education and the South Carolina Department of Education, is a federally funded program to assist retired and separated members of the Armed Forces and Guard and Reserve personnel to obtain certification and employment as teachers. It provides support to personnel who are making the transition to teaching and to the districts who hire them. http://www.scteachers.org/Troops/index.cfm).

16 Alex Frangos, "McCain Courts South Carolina Military Vote," The Wall Street Journal (Jan. 17, 2008).

17 Fred Brock, "A Place in the Sun (and Close to Campus)," The New York Times (Oct. 23, 2007). South Carolina appears to fit a similar pattern. According to an October 2006 demographic study, five of the eight counties with the highest percentages of advanced degree holders in their populations coincide with or adjoin the eight counties in the state classified as retirement destinations based on the growth in their residents who are 60 years or older. "Demographic and Economic Profile: South Carolina (Updated October 2006)," Rural Policy Research Institute, Truman School of Public Affairs, University of Missouri-Columbia, http://www.cdktest.com/rupri/forms/southcarolina.pdf.

18 Marc Freedman, "No Country for Old People?" The Washington Post (Jan. 27, 2008).