How to ‘turbo-charge’ New Jersey’s economy for next 10 years
After a decade in which New Jersey’s economy grew at only around one-fifth the national pace, a management consulting firm with an office in Summit is out with a report suggesting ways to keep up over the next 10 years.
McKinsey & Company says its suggestions, drawn from an analysis of economic data and surveys of businesses, including interviews with 70 business leaders, would “turbo-charge” the economy – helping the state add more than 250,000 jobs over the next 10 years and expand the economy by nearly 30 percent.
Senior partners Steve van Kuiken said New Jersey needs to make changes but has reasons to be optimistic – a dynamic economy, good colleges, global businesses, a talented and well-educated workforce and a premier location in the Northeast Corridor.
“There’s just many natural advantages the state has, so we came away from these interviews and from the analysis feeling incredibly optimistic about where the state can go,” van Kuiken said.
Van Kuiken says the state should organize efforts around growing industries where it already has strengths, including biotechnology and pharmaceuticals, computer services and cyber-security and warehousing and distribution.
“Forty percent of the U.S. population is within a day’s drive of New Jersey, and with the increasingly short delivery times that consumers are looking for, we think that’s a huge opportunity in the state,” van Kuiken said.
Despite its advantages, growth in New Jersey has lagged.
For instance, New Jersey has about as many startups as other states, but fewer of them grow to become large ones. Just 5 percent of companies in the state with 500 or more employees are 10 years old or younger, compared with 11 percent nationally.
Van Kuiken says New Jersey lacks the incubators, innovation hubs and incentives aimed at growing young businesses other states have.
“Net job creation is being driven by these young companies. We need more companies that are 500 employees going to 2,000,” he said.
Van Kuiken says young businesses need access to capital, mentorship, networking with established businesses and research partnerships with colleges. Incentive programs should emphasize stimulating young businesses, the report said. Supporting them could alter New Jersey’s changing demographics.
“That can be a key element of stemming the outflow of millennials from the state, by creating opportunities to work in these new, young and growing businesses,” said van Kuiken, who said millennials are often the entrepreneurs starting the types of businesses McKinsey recommends.
The report said a second key is improving the state’s transportation infrastructure – and not just upgrading what it has, but expanding it, which would seemingly require a change from the “fix-it first” philosophy that has guide the Transportation Trust Fund for many years.
McKinsey & Company’s report said the state’s transportation shortcomings rank second only to the cost of doing business as the reason companies cite for not location or expanding in New Jersey.
Citing an American Society of Civil Engineers report card, it says congestion and poor road conditions cost New Jersey motorists over $5 billion a year in wasted time, fuel and repairs.
“Creating an infrastructure of the future is critical, so shifting from not only maintenance of existing of existing infrastructure but building new infrastructure,” said van Kuiken, who said that some changes would cost money, such as prioritizing rail spending, but that others would not.
The report said New Jersey has an oversupply of highly educated workers and low-skilled workers but a shortage of those in between – with more than a high school education but less than a college degree.
“These are the health technicians, the construction service workers, heavy vehicle maintenance, retail managers that are the lifeblood of an economy, and that’s also holding back growth in the state,” van Kuiken said.
The report recommends expanding vocational training and partnering with companies to tailor college curricula to address the imbalance.