Economic Development

Perhaps there is no more fitting topic for Labor Day weekend than job creation. That is what economic development is all about, at its essence.  While that isn’t part of my job title, it is one of the most important focus areas of what I do, and I have been fortunate to learn by observing some of the best in the business.  One of my primary responsibilities is using the people, programs and intellectual capital of my employer to advance the economic prospects of the community, region and State of Indiana. Therefore, it is crucial that I have some understanding of economic development concepts and practices.

When I first moved home to Indiana, I heard a lot of talk in Anderson about the importance of having attracted Hoosier Park and the Nestle plant to the area. That talk often turned to speculation about the “next” Hoosier Park or Nestle, leading me to think that attracting the big employers from outside the state—or even the U.S.—was what economic development was all about.  Seems many of my new neighbors felt the same way.

Over the course of the next few years, I began to learn that attracting new firms from outside the area, while important and a cause for celebration, was not enough to keep any region economically healthy. The existing businesses needed to grow and the area needed a climate that was supportive of entrepreneurs.  As a result, a threefold concept I dubbed Economic Development 101 emerged:

• Attract new companies and jobs from outside
• Grow existing firms from within and keep them healthy
• Foster a climate of entrepreneurial growth and support

The attraction of a company from outside is often what garners the big headlines, resulting in a ribbon-cutting with the mayor and Chamber of Commerce in attendance. They are also often the ones with the biggest pricetags in terms of incentives using taxpayer dollars, with both proponents and detractors. I will leave the debates of the pros and cons to the experts, as this is too complex for a brief discussion.

Existing business owners sometimes wonder why they don’t receive the incentives (tax abatements and such) that the newcomers are granted to invest and create jobs. If they are willing to invest like amounts of capital and create a similar number of new jobs, they argue, should they not be granted the same treatment? Perhaps so, as growth from within can be some of the strongest and most sustainable growth. Combined with a strong Chamber of Commerce that serves the needs of this existing business audience, this second tier is a crucial part of the local economy and tax base.

Looking at that third tier, over the past few years there has been a surge of interest in people of all ages in starting companies. Without a robust support system, however, failure rates can be high. Some believe that failure rates are as high as 90%; however, a 2017 study shows that as many as 80% of newly launched businesses survived the first year, half survived five years and one-third were still in business after ten years (https://best4businesses.com/new-business-survival-rates-2017-sba-statistics/). This may be because we are getting smarter about how we support these entrepreneurs—everything from training to access to capital and professional services. And those no longer in business may have been sold, merged or acquired by other firms.

In recent years, the profession and practice of economic development has expanded from a focus on attracting/expanding companies along with the investment and jobs they bring. That expansion encompasses what I call “the three P’s” as outlined here:

• People
• Place
• Policy

In terms of people, as those making decisions about location and/or expansion, it must be apparent that the location has the talent available to support the hiring needs of the new and/or expanded jobs created. If not, there must be a plan for workforce development and partnerships with educational entities at all appropriate levels. Workforce development, a topic for another entire discussion, is always of concern.

Priority of place, often termed “livability,” has taken on greater focus in recent years. In fact I have even heard (although haven’t found one yet in the Purdue students I talk with) that some college grads will first decide where to live and then look for a job. This is easier to believe in an environment of very low unemployment; not so much if and when that situation reverses itself. That said, things like walkability, public transportation, cost of living, leisure amenities, quality of local schools and so forth all play a role in this evaluation factor.

All of these economic development activities and decisions play into a municipality’s, region’s, and state’s success in economic health and expansion. Even lack of specific policies will tell site selectors and those looking for areas to locate how serious an area is about working with them. Elected and appointed government officials who are the best at this, in my opinion, understand the delicate ecosystem of these piece parts and work together with the professionals in each to best effect.

Next time you, especially as a layperson, hear about an economic development project, see if this model helps. Is it:

• Bringing in a firm from the outside
• Growing a business from within
• Providing a supportive climate for entrepreneurs
• Including one or more of the three “P’s”
  • People
  • Place
  • Policy

#economicdevelopment #workforcedevelopment #boomers #millennials #entrepreneurship #entrepreneurs