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Nothing is Constant Except for Change

30 Oct, 2017

By: Christopher D. Lloyd

In spite of all the excitement in the economic development world regarding the new FoxConn manufacturing facility and the proposed Amazon HQ2, these projects, both with projections of significant capital investment and job creation, run counter to one of the emerging trends in economic development – and that’s the death of jobs.

No, we don’t face a future of unlimited leisure being attended to by our robot servants, but increasingly, economic development professionals are seeing more projects with significant capital investments but few, if any, new jobs being created. Take data centers, for example.  These facilities represent significant capital investments, often in the hundreds of millions to billions of dollars, but can be operated by 25-50 people. Many manufacturing facilities are becoming increasingly automated. Even call centers and distribution facilities, formerly home to hundreds of people, are now turning to computer technology that reduces headcount.

Because success in economic development is often measured through job creation (and success leads to program funding), this trend creates many challenges. The first is that we have to work to educate elected officials and the public about the importance of capital investment to the economy. Just because a project will create few jobs does not mean that it does not have a positive impact. The installation of equipment and the construction of the facility will certainly have local job impacts. The equipment has to be manufactured somewhere, so there are opportunities to attract those companies that act as suppliers instead of relying on imports. Large capital investments are often very lucrative, from a tax standpoint, for local governments, thus providing funds to support essential public services such as education and public safety. Further, the jobs that are created will be at higher wages than those jobs that are displaced because of new investment, thus raising spending in the local economy and supporting other jobs in the service sector. As economic development professionals, it is our duty to explain these facts and that there are benefits to such projects beyond job creation.

Next, this shift to capital intensive development will force changes in how we approach workforce development and talent retention. An emphasis on middle skills and earning industry recognized credentials, often delivered in cooperation with community colleges and technical training schools, is essential. And we cannot wait until children are about to graduate from high school to encourage them to look into these career paths. The education of students must begin in middle school and be coordinated with teachers, guidance counselors and most important, parents, to gain a full appreciation of technical careers. Identifying ways to leverage and commercialize research and development emerging from these facilities can also lead to new economic opportunities for an area.

Finally, the way such projects are incentivized has to change. Economic benefits coming from such projects should be looked at far more broadly than just direct job creation. As already noted, large capital investments also bring large fiscal impacts that can be leveraged as part of an incentive package. Developing incentives that count contractors that are dedicated full time to operating and maintaining a project should be considered. Opportunities to encourage the location of suppliers nearby should be part of the incentives strategy. 

By embracing, instead of resisting, these trends, communities can propel economic growth forward. It is up to us to better tell the story and collaborate through public-private partnerships to achieve success.   T&ID

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