Shift-Share analysis is a tool used to account for the competitiveness of local employment sectors. It is used to show how well the region’s employment sectors are performing by dividing the change in local employment into three components: national growth share, industry mix, and region share.
The Shift-Share results summarized below show the breakdown of the employment change in the Washoe County economy between 2007 and 2011. These results show important differences between the industry compositions of employment growth locally versus growth in the nation.
As discussed in the previous blog, Washoe County employment declined by approximately 37,000 jobs between 2007 and 2011 due to national growth, industry mix and regional shift.
National Growth-This component is the most straightforward. It estimates the growth in Washoe County employment that may be attributed to overall national conditions and trends. If the industry composition and growth of employment had been the same locally as nationally, then Washoe County’s employment growth between 2007 and 2011 would have matched the overall national rate of -5.01% and employment would have declined by 11,200 jobs.
Industry Mix-Jobs are not impacted only by the national factors, they are also impacted by changes within each sector, both on a national and local level. The industry mix component looks at the impact of the changes in each sector on a national level by answering the question: “Was Washoe County employment decline between 2007 and 2011 of 16.5% greater than the overall national average decline (-5.01%) because employment was more concentrated toward faster declining industries when compared to the nation?” That is, did Washoe County employment decline more than the nation simply because its employment (industry mix) is highly concentrated in sectors which performed poorly on a national level?
In this case, had Washoe County employment declined by the average industry mix percentage of -0.95%, approximately 2,100 jobs would have been lost.
Region Shift-The third Shift-Share component, shown as the “Region Shift”, estimates the gain (or loss) in local employment from an industry growing faster (or slower) than the same industry nationally. When employment in a local industry grows faster (or declines less) than its counterpart nationally, it is said to do so because of local competitive factors. The above table shows that Washoe County employment declined an additional 10.5% because a larger proportion of industries declined faster locally than nationally.
This is the most important component of the Shift-Share analysis as it takes out overall national and national sector influences on employment and compares how each sector’s employment performs based on local competitive factors only. This allows us to determine whether the sector is a leading or a lagging sector, which is important information when making public investment decisions or planning economic development strategy.
The table above shows that the Education and Health Services sector was the only sector to experience region shift growth during this period. While it grew slower than the national Education and Health Services sector (1.41% vs 12.46% respectively), it outperformed all other employment sectors in the County.
The Government and Other Services sectors were the next least impacted sectors. Though the both lost employment, their region shift rate was the second and third lowest of other Washoe County sectors. Overall, as with the previous blog, which looked at direct employment changes, the strongest performing sector during this period, the sector that created the most jobs and had the highest local region shift is the Education and Health Services sector. For economic development purposes, efforts should be focused on attracting companies from this sector, as growth in this sector is likely to have the highest positive impact on the region, at least in the short run.