‘Economic Development’ —weasel words or action verb?
By Mark Lautman
Nothing is more important right now than finding ways to create new jobs.
It might make a good sound bite for public officials, but just spouting the words “jobs, jobs, jobs” is not an economic development strategy. Unfortunately, that’s as close as most places get to having one. The ratio of talk to action is worse in the economic development business than in any other area of civic endeavor.
One reason is that we’ve made weasel words out of the term itself.
Economic development used to be a succinct way to express a strategy to grow a community’s economy. Now it’s a term of art that allows people and organizations to sound knowledgeable and committed without having to articulate a plan or even have any insight.
Economic development is a relatively simple concept if you are using it as an action verb. Doing economic development is the act of growing the local economy faster than the population. Think of it as an equation, E > P.
If your economy is growing faster than the population, the community’s tax-dependent institutions, businesses and households will have more money per person to serve than they had the year before. That means everyone has extra money to invest. When the economy doesn’t grow faster than the population (E
On the economy side of the equation, you want to manage three things: the economic base, service sector and the net worth of residents and businesses. The economic base is crucial because it’s what brings in all the new money. Without an economic base, your community has no economic reason to exist.
The service sector is important because it’s the source of most of the jobs, tax revenue and amenities driving quality of life. But you can’t solve all your unemployment problems by opening 10,000 laundromats.
Local homeowners’ equity and their 401(k)s combined, and the balance sheets of local businesses and institutions are other factors to watch. Sudden windfalls or losses in the community’s net worth dramatically affect spending, investment and assessed valuations and tax revenue.
Size matters when it comes to population, because it drives how big the local economy needs to be and how many jobs it should have. Any strategy discussion should start with an assumption about the total population and the breakdown of workers and dependents. You’ll want to know what’s happening to the relative proportions of those too old or too young to work and qualified and unqualified workers.
How can you tell if someone is serious about economic development? They’ll sound something like this:
“We have 10,000 people unemployed. We are going to need to create another 5,000 jobs to replace natural attrition, and we’ll need another 5,000 to support the new population we are projected to have in five years. That’s 20,000 new jobs.
“To create 20,000 new jobs, we have to create 8,000 new economic base jobs [those that export goods and services and bring new money into the community] in order to bring in the extra money to trigger the 12,000 new service sector jobs. If we get 4,000 economic base jobs, there will only be 6,000 new service jobs and we will be 10,000 jobs short.
“We expect our economic development program to recruit at least half, or 4,000, of those economic base jobs by focusing on five target sectors we’ve chosen to build our economy around: alternative energy, digital media, financial services, tourism and an additional mission at our Air Force base. The other 4,000 we expect to come from expansions of existing economic base employers.
“We are fine-tuning an investment plan that calls for developing the capital, infrastructure, facilities, labor force and business climate needed to make it happen. Go to our website and you will see the specific role of each community organization and institution under the plan, who is on the hook and how they are doing.”
Your economic development program must be excellent just to be adequate. Competing for and holding on to economic base employers is a winner-take-all game. Second place is the same as last.
It has never been more important to get economic development right. Stop using it as a weasel word.