Rather than focusing on massive corporate attraction projects, local economic developers should instead put their efforts behind homegrown entrepreneurial talent. That’s according to Greg LeRoy, executive director of Good Jobs First, a Washington, D.C. policy organization that tracks economic development deals around the country.
What’s led you to be critical of large economic development deals such as what we’ve seen in the last year with companies like Amazon and Foxconn?
In my opinion, it always made more sense to grow your own, so to speak, and to tune out border wars and tune out buffalo hunting. Now more than ever, that’s extremely true. I think the Amazon HQ2 thing is off the charts exceptional in so many respects. It’s a public auction, which is unusual. It’s unusually large, which is unusual. It’s a corporate headquarters, which is rare. It’s just so untypical of the average deal in America today, but it’s obviously got an enormous amount of press and therefore I think it confused people about the state of affairs of economic development.
What should states and municipalities be doing rather than hunting for massive deals?
You should really be focusing much, much more on entrepreneurship, which is to say your mentoring programs, your subordinated debt programs, your innovation programs, your networks of inventors and entrepreneurs working together with each other, and other things to help your existing employer base expand.
What would be the impact of focusing more on entrepreneurs and inventors?
It’s always true — in every year and every state — that the number of jobs created by companies moving into the state is never more than low single digits even in states that enjoy a net in-migration. But most states, they lose some, they gain some. It’s mostly a wash, but even for states where they’re net gainers, (attraction projects are) pocket change compared to 97 percent or whatever of jobs that are created either by startups or by expansions.
What else concerns you about this rise of large economic development deals?
The other issue here is that there’s this very interesting data coming out now. It’s been consistent for years now especially since the recession, but it’s remaining true. That is, people are less mobile than ever. There’s competing theories about why it’s true, but it is true.
How does that affect companies trying to attract talented workers?
That means that companies have less ability to attract people to new places, and means it’s a smarter business strategy for more companies to try to figure out how to stay put, and improve the skills base of their existing workforce, and make better use of the local labor market, and partner more intentionally with local customized training, or graduate engineering programs, or whatever it is. (They should focus on) whatever kind of talent they need rather than starting over and trying to attract people who might not want to move in the first place.
Regardless of which municipality gets the Amazon HQ2 project, what would you see as the line between getting a good economic development deal or a bad one?
Do existing taxpayers in that city break even or not on the deal? That is, does Amazon get such a lucrative incentive package that it bears little or none of the costs of the growth that it induces when it arrives and creates a lot of public sector costs by virtue of its growth? Or does the community get some taxes from Amazon to help break even on the deal in terms of a fiscal cost benefit point of view? To us, that’s central.
What else concerns you about the Amazon HQ2 proposals?
A very predictable issue — which many people from many different places have raised now, looking at the company’s history in Seattle — is gentrification. That is if … your city is already having a housing affordability problem, and then you pop tens of thousands of highly paid people into that housing market without some very intentional bumpers to help absorb the effect of that, you’re going to make your housing affordability problem much more acute.
In West Michigan, a variety of public and private partners came together to get the Amazon bid in place. Can that element of regionalism change the equation in your mind?
To their credit, Amazon said, ‘We prefer a metro area bid.’ I always emphasize … that’s exactly right. That’s the one honest thing about this auction is that Amazon’s reminding us all that the meaningful unit of competition in economic development is not a city or a suburb or a state. It’s a metro area. It’s a labor market and Amazon is recognizing that because they’re going to hire people from every place in whatever labor market they choose.
What do you see as the key takeaways for people in the economic development community?
I think the two new normals are stay put, grow your own, focus on startups and expansions, and on improving the skills base of your incumbent (companies), either your existing workforce that you employ now or work more intentionally with institutions that are going to generate graduates you might want to hire.