West Virginia lags behind in technology focused economic index

After West Virginia ranked in the last three spots for the past seven State New Economy Index reports, Ted Boettner, executive director at the West Virginia Center on Budget and Policy, said he would like to see some changes.

“While we should always be cautious about economic indexes that over simplify outcomes, it is clear that West Virginia needs to make much needed investments in research and development and to focus more of our economic development efforts to support innovation and entrepreneurism instead of inefficient tax cuts,” Boettner said. “We are failing across the board.”

The Mountain State ranked 49 in the 2014 State New Economy Index recently released by the Information Technology & Innovation Foundation, a non-profit, non-partisan think tank in Washington, D.C. focused on innovation policies and documenting how technology creates new economic opportunity worldwide.

The new economy refers to an economy that is much more globalized and knowledge and technology-based than the economy of generations ago, said Robert Atkinson, president of the Information Technology & Innovation Foundation.

The index uses 25 economic indicators that are broken down into five concentration groups: knowledge jobs, globalization, economic dynamism, the digital economy and innovation capacity. It also factors in six previous reports beginning in 1999.

The report looks to see how the structure of states’ economies match the ideal structure of the new economy.

Past index editions found a strong correlation between the overall score on the index and growth in per capita GDP, the report stated.

The only economic indicator West Virginia ranked above average was E-government. This looks at how state government make access and transactions like paying taxes or renewing a driver’s license easier by embracing technology.

“Clearly it is hard for states that rank low on the index to move up a lot, but a state like West Virginia should aspire for modest and consistent progress,” Atkinson said. “One place would be to strengthen the state’s colleges and universities, including increasing the quality of education so more students actually learn the kinds of 21st century skills needed by employers.”

Atkinson added the state might want to ensure programs that help small manufactures become more productive and innovative like the National Institute of Standards and Technology Manufacturing Extension Partnership is fully funded in West Virginia.

The state needs to make greater strides in developing its innovative capacity, Boettner said.

“This means investing in things that provide a foundation for a more innovative economy, such as broad-band, higher education, clean energy and small business incubation,” Boettner said. “For example, Ohio has invested $1.6 billion in its Third Frontier Program that invests in technology-based economic development programs such as a research scholarship program, entrepreneurial support, product development assistance and technology centers.”

“The two states whose economies have lagged behind the most in making the transition to the new economy are Mississippi and West Virginia,” the report stated.

Only Mississippi trailed West Virginia on the index.

Oklahoma, Arkansas, Louisiana, Wyoming, Kentucky, Hawaii, South Dakota and Alabama also rank in the bottom of the list.

“Historically, the economies of many of these states depend on natural resources, on tourism, or on mass-production manufacturing and relied on low costs rather than innovative capacity to gain a competitive edge,” the report stated about the bottom 10-ranking states on the index. “In the new economy, however, innovative capacity (derived through universities, research and development investments, scientists and engineers, highly skilled workers and entrepreneurial capabilities) is increasingly the driver of competitive success, while states only offering low costs are being undercut by cheaper producers aboard.”

Massachusetts ranks number one and has for all previous editions of the index.

“Boasting a concentration of software, hardware and biotech firms supported by world class universities such as MIT and Harvard, Massachusetts survived the early 2000s downturn and was less hard hit than the nation as a whole during the Great Recession in terms of job growth and per-capita income growth,” the report stated.

It notes the new economy is prospering stronger in different regions in the Northeast, mid-Atlantic, Mountain West and Pacific regions.

“If [West Virginia] does not transform its economy in the direction of the new economy the likely outcome is lagging growth, especially in per-capita incomes,” Atkinson said.

Read the full report here, and full index here.

Reach Caitlin Cook at caitlin.cook@wvgazette.com or 304-348-5113.

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