It makes headlines when we celebrate economic development wins that create hundreds of jobs and millions in capital investment. For many reasons, job creation and capital expenditures have been viewed as cornerstones of impactful, sustainable economic growth. Such headlines are often linked to a story that articulates the incentives offered to the business that has committed to creating the jobs and investing the capital.
As an economic development professional, I’ve had the privilege of working with hundreds of businesses over several decades across five states. As the newest member of the Springfield region’s eco devo team, I’d like to share my perspective on an important emerging issue that is impacting how we measure economic development success – not just here, but across the nation.
I’d propose that it might be a good time for us to consider adding other measures to those traditionally used as the core tenets that underpin successful economic development project wins. While jobs and investments are important indicators, today’s reality indicates there may be other benchmarks worth considering.
Business profitability is key to keeping folks employed and continuing to invest in the growth of the business. Profitability is tied to many factors, including, but not limited to, the ability to get the product out the door in a cost-efficient manner. When a business can’t find the talent needed to get the product out the door, their ability to turn a profit is impacted.
Every industry sector is struggling with labor shortages. From ordering your favorite meal at the drive-thru, to buying a new car and monitoring your health, you see evidence of businesses working around a lack of labor. The work-around is commonly investments in technology and automation.
A recent article from the Congressional Research Service finds that technologies such as robotics, machine learning, artificial intelligence and similar tools are being used with increasing frequency in a range of industries and occupations. The article goes on to highlight how these investments are continuing to create opportunities for upskilling of existing workers, which of course leads to rising household income levels.
The post-pandemic fallout has exacerbated the challenges that companies have been tackling for years, primarily labor shortages, operating cost increases and a shifting economy. Area Development magazine recently highlighted the need for state and local incentive programs to evolve as the business environment evolves, to help U.S. companies mitigate risks and continue to remain viable and profitable.
The formula for incentivizing a project and ensuring accountability in the system is tied to investment and head count, i.e., the number of jobs impacted by a proposed new investment. That is certainly one common-sense measure.
However, in many cases, only the creation of new jobs is deemed incentive-worthy. This gives me pause in the current landscape of historic worker shortages. And this approach, while not the intent of the incentive formula, can be viewed by business as government not valuing the workforce the business currently employs.
The important question is, if a lack of workers is forcing businesses to make significant investments in technology and automation to retain existing workers and to continue to turn a profit, shouldn’t we be thinking of expanding incentive indicators beyond counting jobs created?
Many eco devo professionals and policymakers are starting to examine the possibility of providing incentives for investments that enhance productivity and efficiency which will sustain the business over time and help them retain their current workforce. Our nation, state and community need viable, profitable businesses. Data clearly suggest that our workforce has shrunk and will continue to do so for many years going forward.
Expanding our considerations and criteria for incentives to factor in this reality is an important conversation we need to have at the local, state and federal levels. This will be critically important to both profitability and talent retention in the future.
Vicki Pratt is the senior vice president of economic development for the Springfield Area Chamber of Commerce. She can be reached at email@example.com.
417 Cocktails LLC moved; 7 Brew Coffee added its first shop in Lebanon; and Branson outlet store for Baltimore, Maryland-based sports apparel retailer Under Armour relocated.